Chapter 3 - Property Insurance Basics Flashcards
A fire that burns outside of its intended boundaries or becomes uncontrollable
Hostile Fire
Fire that stays within its intended boundaries
Friendly Fire
The broadest definition a policy could use, and it includes any act of stealing, including burglary and robbery
Theft
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
Burglary
The taking of property from the care and custody of a person who has been threatened with bodily harm or has been harmed.
Robbery
Sometimes property goes missing and the cause of loss is not known.
Mysterious Disappearance
A property that contains personal property, but has no occupants.
Unoccupied
Refers to property that contains no personal property and has no occupants.
Vacancy
A person or organization that has taken the property of another into their care, custody, or control for servicing, repair, or storage
Bailee
The person who retains the ownership of the property that has been taken into a bailee’s care, custody, or control
Bailor
The primary cause of a loss.
If only one peril caused the loss, the __________ ___________ is the first event in the unbroken chain of events
Proximate Cause
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:
Concurrent Causation
A quality within property that causes it to damage or destroy itself, such as spoiled food, rusting, or wear and tear.
Inherent Vice
A loss that is the immediate result of a peril.
Direct Loss
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.
Indirect Loss
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
Named Perils
Also called all-risk coverage, provides insurance for all causes of loss that are not specifically excluded under the policy
Open Perils
The policy will pay for the cost to repair or replace the damaged property at the time of loss, minus depreciation.
Actual Cash Value(ACV)
The cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.
Replacement Cost
The insurer will pay the cost of replacing the property with its functional equivalent
Functional Replacement Cost
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.
Agreed Value
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
Stated Value
The price a willing buyer would pay for property purchased from a willing seller under fair market conditions.
Market Value
The amount for which property can be sold at the end of its useful life is the _______ _______.
Salvage Value
Insures a single item of property for a single limit of insurance
Specific Limit
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.
Blanket Limit
Insure multiple items on a single policy with a different limit applying to each item, as scheduled in the Declarations.
Scheduled Limit
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.
Deductible
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!
Coinsurance
