Chapter 3 - Property Insurance Basics

Question 1

A fire that burns outside of its intended boundaries or becomes uncontrollable

Answer 1

Hostile Fire

Question 2

Fire that stays within its intended boundaries

Answer 2

Friendly Fire

Question 3

The broadest definition a policy could use, and it includes any act of stealing, including burglary and robbery

Answer 3

Theft

Question 4

The taking of property from inside the premises, a locked safe, or a locked vault by a person who forcibly enters or exits the property

Answer 4

Burglary

Question 5

The taking of property from the care and custody of a person who has been threatened with bodily harm or has been harmed.

Answer 5

Robbery

Question 6

Sometimes property goes missing and the cause of loss is not known.

Answer 6

Mysterious Disappearance

Question 7

A property that contains personal property, but has no occupants.

Answer 7

Unoccupied

Question 8

Refers to property that contains no personal property and has no occupants.

Answer 8

Vacancy

Question 9

A person or organization that has taken the property of another into their care, custody, or control for servicing, repair, or storage

Answer 9

Bailee

Question 10

The person who retains the ownership of the property that has been taken into a bailee’s care, custody, or control

Answer 10

Bailor

Question 11

The primary cause of a loss.
If only one peril caused the loss, the __________ ___________ is the first event in the unbroken chain of events

Answer 11

Proximate Cause

Question 12

When two perils simultaneously cause a loss (in other words, both perils are the proximate cause), the insurer must pay for the loss even if one of the perils is the:

Answer 12

Concurrent Causation

Question 13

A quality within property that causes it to damage or destroy itself, such as spoiled food, rusting, or wear and tear.

Answer 13

Inherent Vice

Question 14

A loss that is the immediate result of a peril.

Answer 14

Direct Loss

Question 15

Also known as consequential loss, is a consequence of a direct physical loss.

Also refer to financial losses, such as loss of income or additional expenses incurred while property is being repaired.

Answer 15

Indirect Loss

Question 16

A type of coverage that only provides insurance for the causes of loss that are listed in the policy. If the peril is not named in the policy, no coverage applies for loss or damage caused by that peril

Answer 16

Named Perils

Question 17

Also called all-risk coverage, provides insurance for all causes of loss that are not specifically excluded under the policy

Answer 17

Open Perils

Question 18

The policy will pay for the cost to repair or replace the damaged property at the time of loss, minus depreciation.

Answer 18

Actual Cash Value(ACV)

Question 19

The cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.

Answer 19

Replacement Cost

Question 20

The insurer will pay the cost of replacing the property with its functional equivalent

Answer 20

Functional Replacement Cost

Question 21

Insure covered property for an agreed-upon policy limit that is paid in the event of a total loss, regardless of the actual cash value of the property at the time of loss. sometimes called valued policies.

Answer 21

Agreed Value

Question 22

The insurer bases the policy premium on the insured’s statement of the property’s value. However, the insurer will pay the lesser of the stated amount and the actual cash value at the time of the loss

Answer 22

Stated Value

Question 23

The price a willing buyer would pay for property purchased from a willing seller under fair market conditions.

Answer 23

Market Value

Question 24

The amount for which property can be sold at the end of its useful life is the _______ _______.

Answer 24

Salvage Value

Question 25

Insures a single item of property for a single limit of insurance

Answer 25

Specific Limit

Question 26

Insures more than one property for a single amount of insurance that applies to all covered properties. The properties could be located at different locations (such as two buildings at separate locations), different types of property (such as the building and the personal property it contains), or both.

Answer 26

Blanket Limit

Question 27

Insure multiple items on a single policy with a different limit applying to each item, as scheduled in the Declarations.

Answer 27

Scheduled Limit

Question 28

A specified amount of each loss that the insured must bear as a way to share the cost of a loss, often applicable to each occurrence.

Answer 28

Deductible

Question 29

To encourage insureds to purchase and maintain insurance to value. This provision requires an insured to carry a certain percentage of the property’s total valuation (usually 80%) in order for losses
to be paid in full. Only applied to partial losses!

Answer 29

Coinsurance