Chapter 7 Miscellaneous PL Coverage Flashcards
Personal Inland Marine Insurance
Personal Inland Marine coverage can be attached by endorsement to a Homeowners or Dwelling Policy; it may also be written as a separate policy. Personal Inland Marine Insurance is a form of coverage used to insure moveable property against direct loss. Since moveable property is known as floating property, the word floater is often used.
Personal Articles Floater (Scheduled Article Floater)
The basic form used to insure “individual” items of personal property on a scheduled basis. Claims are normally settled on an “actual cash value basis” with some exceptions.
Coverage is provided worldwide, with some exceptions.
Coverage is provided on an open perils basis with very few exclusions. Typical exclusions are wear and tear, insects or vermin, intentional loss, and war. Specific classes of property have additional exclusions. For example, a collection of glassware may have specific exclusions for breakage caused by certain perils.
Coverage may be provided for classes of property consisting principally of the following:
Jewelry
Furs
Cameras
Musical Instruments
Silverware and Goldware
Golfer’s Equipment
Fine Arts
Stamp Collections
Coin Collections
China and crystal
Personal Jewelry Floater
– Coverage may be written on a valued or actual cash value basis. The floater contains a “Pair and Sets Clause”. If a covered loss occurs to an item that is part of a set, the value of the remaining item(s) is reduced based on the difference between the value of the total set and the value of each item individually. This is because each item is worth more as a “set” than on its own. For example, if a pair of diamond earrings is valued at $2,000, and a loss occurs to one earring, the value of the pair drops by more than 50%. If one earring by itself is valued at $800, the total loss is $1,200. The “Pair and Sets Clause” specifies the conditions and the policy limit should this type of loss occur.
When insuring most items on a floater, the insured must submit an appraisal that documents both a description of the property to be insured and its value. Some insurers require appraisals for all insured items; others only require appraisals for items insured in excess of a certain amount, such as $2,500. An appraisal is usually required at or before the time insurance is bound.
Newly acquired items are automatically insured if they are the same class of property already insured by the floater. The limit of coverage is no more than a specific percentage of the value shown on the schedule. Automatic coverage for newly acquired items is only provided for 30 days.
Which of the following statements about the Personal Jewelry Floater is correct?
Automatic coverage for newly acquired items is only provided for 30 days
The Pair and Set Clause applies. Coverage is written on a valued or actual cash value basis and appraisal is required.
Personal Effects Floater
This floater provides open peril coverage for items worn or carried by tourists and travelers. The coverage applies worldwide, but not at the insured’s home.
Fine Arts Floater –
This floater covers such items as paintings, etchings, pictures, tapestries, rare manuscripts, and antiques. The floater provides automatic coverage for 90 days for newly acquired items.
Coverage is usually written on a valued, or agreed, basis. Additional exclusions include:
Loss caused by the restoration or repairing process.
Breakage that is not caused by fire, lightning, explosion, aircraft, collision, windstorm, earthquake, flood, malicious mischief, theft, or derailment or overturn of a conveyance.
Mysterious disappearance.
Cameras Floater –
The insured items are scheduled, with the exception that blanket coverage is provided on items such as shades, filters, etc. Automatic coverage is provided on newly acquired items for 30 days at a limit of insurance up to 25% of the limit designated on the schedule.
Musical Instrument Floater
No coverage is provided if the covered instruments are played for remuneration, or a fee. Anyone playing for hire must purchase an endorsement and pay an additional premium. The insured must report newly acquired items within 30 days.
Which of the following types of property are covered by the Personal Effects Floater?
Personal property carried by travelers
This floater covers a traveler’s personal property on an open perils basis anywhere in the world EXCEPT at the insured’s home. (The types of property listed in the other answer choices would require the Personal Articles floater.)
Personal Watercraft Insurance
Boatowners Policy
The Boatowners policy is a package policy that provides both property and liability coverage and is similar in design to the homeowners policy. The coverage it provides is similar to that provided by the personal auto policy. The policy is generally used to insure boats that can be towed by a car.
Section I of the policy provides open perils coverage for the hull, motor, trailer, equipment, and accessories manufactured for marine use. Losses are settled on an actual cash value (ACV) basis.
Section II provides Watercraft Liability, Medical Payments for passengers, and Uninsured Boaters coverages. (Does not include Personal Injury Liability.)
Yacht Policy
A Yacht policy is designed for larger vessels, many of which have crew members. Larger vessels are normally insured under the complete package of yacht coverages, which includes in addition to Hull Insurance, Protection and Indemnity and Medical Payments.
A “Lay Up Warranty” applies when the insured boat is in storage and allows for a return of premium due to the reduced risk of the boat not being used when laid up. If the insured operates the yacht during the lay-up period (or lives on it), no coverage is provided. Each yacht policy contains a navigation territory that states where the boat will be navigated, such as on inland lakes and waterways. The insured does NOT have coverage if the boat is navigated outside the designated territory. If the insured wishes to change or broaden the navigation territory, the insurer must issue an endorsement.
In addition to providing property and liability coverage, a yacht policy also offers the following coverages:
Protection and indemnity coverage for the insured’s legal liability for bodily injury and damage to property of others.
Personal property coverage for property on the yacht.
Coverage for fuel spills, commercial towing, and dinghies.
Section I of the Boatowners policy provides what type of coverage for the hull?
Open perils
The hull, motor, trailer, equipment, and marine accessories are covered on an open peril basis.
Difference in Conditions (DIC)
DIC insurance requires the use of a special form designed to fill in the coverage gaps contained in a property policy. There is no standard policy form. Coverage is generally written on an open perils basis, excluding losses by perils that are covered under standard property forms (such as fire, lightning, windstorm, hail, etc.).
The form does not contain a Coinsurance or Pro Rata Clause, and the form may be written for an amount of insurance different from the limit of insurance provided by the policy it complements. When written to supplement an underlying policy, DIC coverage normally carries a high deductible, such as $10,000 or more. The form is often written to provide coverage in the event of earthquake, flood, collapse, and subsidence.
Which of the following is correct about Difference in Conditions (DIC) Insurance?
Flood is a peril that can be covered by this policy
This policy fills in insurance gaps and covers perils that are excluded under standard property policies (such as flood), and excludes perils that are covered under standard property policies.
Match each coverage with its corresponding description
Yacht Policy
Insures large vessels and includes Hull insurance, Protection and Indemnity and Medical Payments coverage and a Lay Up Warranty
Boatowners Policy
Packaged policy for boats that can be towed by a car and provides open perils coverage for the hull, motor, trailer and equipment as well as watercraft liability, medical payments, and uninsured boaters coverage
Personal Effects Floater
Provides open perils coverage for personal property worn or carried by tourists and travelers anywhere in the world except the insured’s home
Personal Articles Floater
Insures individual personal property on a scheduled basis with open perils coverage worldwide
Difference in Conditions Insurance
An open perils policy with a high deductible used to fill coverage gaps in a property policy for certain perils, such as earthquake, flood, collapse and subsidence
Earthquake Endorsement
The peril of earthquake, or earth movement, is excluded on virtually all property policies. It may be added to most homeowners policies by endorsements and, in some jurisdictions, such as California, may also be purchased as a separate policy.
Included in the peril of earthquake are earth movement, land shock waves or tremors, landslide, mudslide, mudflow, sinkhole, and the rising, sinking, or shifting of the earth. All earth movements occurring within a 72-hour period are considered a single occurrence of earth movement.
In order to be considered a single occurrence, the Earthquake endorsement covers all earth movement that occurs within what time period?
72 Hours
Earth movement includes earthquakes, land shock waves or tremors, landslides, mudslides, mudflows, sinkhole, and the rising, sinking, or shifting of the earth, and must occur within 72 hours.
National Flood Insurance Program (NFIP)
A federal program that enables certain property owners to purchase flood insurance. The Federal Insurance Administration administers the program under the Federal Emergency Management Agency (FEMA). The federal government makes payment for, or subsidizes, all flood losses.
Flood policies are available from participating private insurers who participate in the Write Your Own (WYO) Program, and directly from the NFIP. Agents do not have authority to bind coverage with the NFIP, but all licensed agents and brokers may write flood insurance with the NFIP.
Communities in flood-prone areas must have established an approved flood control program in order to participate in the NFIP and are called participating communities. If a property owner lives in a community that is not a participating community, the property owner CANNOT purchase flood insurance, regardless of the degree of flood risk.
Flood policies provide protection for direct loss to insured property such as a dwelling and its contents. Flood is defined as a general and temporary condition of partial or complete inundation of land. The land MUST be normally dry land and the flood must involve:
2 or more acres of the insured’s land, OR the insured’s entire piece of property AND an adjacent piece of property
The inundation of land may be the result of:
Overflow of inland or tidal waters, such as a tidal wave generated by a hurricane
Unusual and rapid accumulation or runoff of surface waters
Mudflow caused by accumulation of water
Collapse or destabilization of land along a shoreline resulting from erosion or the effect of waves or water currents exceeding normal, cyclical levels
Dwellings eligible for coverage must have 2 or more rigid outside walls, a fully secured roof, and be affixed on a permanent foundation. Coverage is available for both the building and personal property, however, NO coverage is provided for personal property in basements.
Exclusions include personal property located in basements, loss of profits, loss of access to property, business interruption, additional living expenses, ordinance or law, earth movement, theft, fire, explosion, wind, freezing, and damage to lawns, trees, shrubs, plants and growing crops. The NFIP also does not cover money, securities, livestock, wharves, piers, bridges, docks and other structures on or entirely over water.
The National Flood Insurance Program (NFIP) sells flood insurance in which of the following types of communities?
Participating communities
Communities in flood-prone areas must have an approved flood control program in order to benefit from the NFIP.
NFIP Eligibility, Limits and Conditions excess
Coverage is provided on/for:
1- to 4- family dwellings under the (Dwelling Form).
Other residential buildings and non-residential buildings under the General Property Form.
Buildings owned by a residential condominium association under the Residential Condominium Building Association Form (RCBAP).
Under FEMA regulations, in order to obtain, renew, or change a federal loan, a property owner must purchase flood insurance if the property is located in a special flood hazard area (SFHA).
Two separate programs of coverage are available: the Emergency Program (for communities in the earliest stage of participation in the NFIP) and the Regular Program. Maximum limits of insurance apply to property insured under both programs.
- The Emergency Program offers a $35,000 maximum amount of coverage on 1- to 4-family dwellings and a maximum $100,000 on other residential and non-residential buildings. The maximum amount of coverage for contents in a single-family dwelling is $10,000 and $100,000 on other residential and non-residential buildings.
- The Regular Program offers a $250,000 maximum amount of coverage on residential buildings and $500,000 on non-residential buildings. The maximum amount of coverage for contents in a residential building is $100,000 and $500,000 on non-residential buildings.
Coverage becomes effective on the 30th calendar day after the applicant completes the application and pays the premium. Property is insured on an actual cash value basis, except 1- to 4-family residences and residential condominiums may be insured on a replacement cost basis. Property removed to protect it from flood is covered for 45 days at other locations.
Coverage up to $30,000 applies to the increased cost of compliance with flood plain management ordinances or laws that regulate the repair or rebuilding of property damaged in a flood.
Each type of property loss is subject to a deductible. The $500 loss deductible applies separately to the building and to personal property, including any appurtenant structure and debris removal expense.
Example
A loss that involves damage to both the building and contents would result in a $1,000 deductible (2 x $500 = $1,000).
A single-family dwelling may purchase up to what amount of flood insurance in the NFIP’s Emergency program?
$35,000
The Emergency NFIP program covers up to $35,000 on a single-family dwelling.
Write Your Own (WYO Program)
The WYO Program is a cooperative effort involving FEMA and the private sector that allows existing property and casualty insurance companies to write, issue, and service flood insurance under their own names. It is estimated that over 90% of the flood insurance policies in force are maintained by WYO companies. The remaining policies are written and maintained directly by FEMA.
WYO companies, according to guidelines and regulations of the NFIP, may structure their flood insurance business within their existing personal lines business. This provides incentive for producers or agents to place their flood business with the WYO companies they represent.
Match each Flood Insurance term with its correct definition
Write Your Own Program
Insurance available from private insurers that write, issue and service flood insurance under their own names
National Flood Insurance Program
A federal program administered under FEMA that enables certain property owners to purchase flood insurance that is subsidized by the federal government
Regular Program
Protection for communities that have established an approved flood control program
Emergency Program
Protection for communities in the early stages of participation in the NFIP
Fair Access to Insurance Requirements (FAIR)
Most states have established a Fair Access to Insurance Requirements program, called a FAIR plan, to provide basic property insurance to property owners who are unable to secure coverage in the standard property marketplace. Most FAIR plans operate in a similar fashion.
FAIR plans are utilized when existing homeowners or dwelling property coverage is being cancelled or non-renewed due to loss history or the property owner or the property fail to meet other underwriting guidelines of an insurer. Insurance may also be purchased from a FAIR plan when a dwelling is currently uninsured, and no carrier in the standard marketplace will write coverage.
In some states, the insured must certify the inability to secure coverage elsewhere. Farm property isn’t eligible for coverage, though certain types of incidental business use may be allowed. Agents don’t have binding authority, and coverage is usually bound only after the receipt of the application and first premium payment by the insured.