chapter two - property basics Flashcards
The primary cause of loss. If only one peril causes the loss, this is the first event in the unbroken chain of events that resulted in loss.
Proximate cause.
A quality within property that causes it to damage or destroy itself. Ex. rust or fading paint. Not covered under a property policy.
Inherent vice
A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy.
Binder
The maximum amount of days that a binder can be issued.
60 days.
If the insured does not agree with the insurer’s decision regarding a claim, what process helps decide the outcome?
Arbitration.
During this, a neutral third party decides the outcome of a claim.
Arbitration.
What is attached to the policy to alter or add to the policy provisions?
Endorsement.
A written amendment to the policy that also broadens or restricts the policy provisions and takes precedence over the original policy language.
Endorsement.
The existence of two or more policies covering the same exposures, having the same policy period, and the same coverage triggers.
Concurrency/Concurrent Policies.
A principle holding that when two perils simultaneously cause a loss, the insurer must pay the loss even if one of the perils is excluded by the policy.
Concurrent Causation.
A person or any organization to which property has been entrusted, usually for repairs, servicing, or storage. They are legally responsible for the property in their care, so property insurance policies specifically exclude coverage for property in their care.
Bailee.
A person who takes possession of another person’s property in order to repair it.
Bailee.
A property that contains personal property but has no occupants.
Unoccupancy.
A provision in a property policy that eliminates or limits coverage for buildings that don’t contain sufficient personal property to support intended occupancy or use.
Vacancy.
Provides coverage after primary insurance is either exhausted or does not apply. Umbrella liability policies provide this.
Excess insurance.
A condition of a building whereby it has contents but no occupants.
Unoccupancy.
A condition of a building whereby it contains insufficient personal property or furnishings to support its intended occupancy or use. This type of office building wouldn’t have enough furnishings to conduct business.
Vacancy.
A loss that causes direct damage to property without an intervening cause.
Direct loss.
A loss that is not the direct result of a peril.
Indirect Loss / Consequential Loss
Loss of Income is an example of what type of loss?.
Indirect.
The cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.
Replacement Value.
The cost to repair or replace property at its replacement value, minus depreciation.
Actual Cash Value.
What calculation is used to determine the actual cash value of a loss?
Replacement Cost - Depreciation = ACV
Buildings with exterior walls of masonry or fire-restive construction rated for not less than one hour and with combustible floors and roofs.
Joisted Masonry
The entire building and roof are constructed or reinforced concrete and steel. Must have an at least 2 hour fire resistance rating.
Fire resistive.
What insures several items on a policy, like a house for a certain amount and personal property for a different amount?
Scheduled coverage.
Insures multiple items of property on a single policy.
Scheduled limit
Standardized policy structure (four parts)
Declarations, Insuring Agreement, Conditions, Exclusions (DICE to remember)
What is on the Declarations Page? (five things)
Who, what, where, when, how much
The duties and obligations of the insured are found under what part of the insured policy?
Conditions
If the insurer broadens coverage with no increase in premium …
The coverage applies to existing policies automatically.
States that the insured must transfer to the insurance company its right of recovery against any party causing a loss after it accepts payment from the insurer for a loss.
Allows the insurer to recover from the arty that caused a loss any amounts paid to an insured.
Subrogation.
Common property exclusions
Ordinance or Law Earth movement War Water perils that are NOT covered by the policy are listed in the exclusions section. Utility failure that originates off-premises Neglect Intentional loss Nuclear hazard, war, and military action Governmental action Fungus, wet rot, dry rot, and bacertira
Who has the broadest coverage under the insurance policy?
Named insured.
The higher the coinsurance percentage purchase, the ____ rate the insured pays.
Lower.
What four things to binders specify?
The insurer providing the coverage
The effective date of coverage
The amount of coverage
The perils covered
The taking of property from inside the premises by a person committing forcible entry
Burglary.
The promise to indemnify an insured for a covered cause of loss can be found in what part of the policy?
Insuring Agreement.
When the insurance company and insured cannot agree upon the amount of the loss, the person selected to help the two hire appraisers is called a(n)
Umpire.
An insured owns a home with a replacement value cost of $300,000 and a market value of $250,000. What is the most a valued policy will pay in the event of a total loss without a deductible?
The policy limit.
A total loss under a valued policy is payable based on the ____ listed on the declarations page.
Policy limit.
In property and casualty insurance, when a form is attached to alter or add to policy provisions or conditions, it is known as
An endorsement.
Today’s current price, minus depreciation.
Actual Cash Value.
A building with no physical contents and no occupants is said to be which of the following?
Vacant.
Helps reduce the number of frivolous or small claims.
Deductible.
What is the term for a dwelling that is uninhabited, but has household furniture inside?
Unoccupied.
Which term describes coverage that applies only to loss by perils stated in a policy?
Named Peril.
A spark that jumps from a fireplace and ignites a nearby rug would be deemed a
Hostile fire
Which policy provision omits certain risks from coverage?
Exclusions
Any act of stealing.
Theft
Which of the following clauses protects the interests of the loss payee?
Loss settlement clause
Loss payable clause
Mortgagee clause
Abandonment clause
Loss Payable Clause.
What clause protects the interests of a person or business with insurable interest in the insured’s property (known as a loss payee), such as a financial institution who finances an auto loan?
The Loss Payable Clause.
All of the following are insured’s duties after a loss under a property policy, except:
Abandoning the property to the insurer
Giving notice of loss as soon as possible
Submitting to examination by insurer
Furnishing inventory of damaged property
Abandoning the property of the insurer.
The insured may not abandon property to the insurer
All of the following statements regarding a property policy are correct, except:
The Insuring Agreement personalizes the policy, specifying the exact property being insured
A deductible is a portion of a loss that an insured must bear
An indirect loss is an additional loss that results from a direct loss
The Conditions describe the responsibilities and obligations of the insurer and the insured
The Insuring Agreement personalizes the policy, specifying the exact property being insured.
(The Declarations personalize the policy. The Insuring Agreement is written without regard to the precise location and value of the insured property)
The concealment and fraud condition in a property insurance policy states:
The insured must cooperate with the company in the investigation of a claim
The company will not grant any coverage that benefits a bailee
The policy will be voided if there is material concealment, misrepresentation, or fraud on the insured’s part
Making a false statement regarding a claim does not constitute fraud
The policy will be voided if there is material concealment, misrepresentation, or fraud on the insured’s part.
A property purchased 10 years ago for $100,000 has a replacement value today of $200,000. It has depreciated 3% each year. What is today’s actual cash value?
$70,000
$200,000
$100,000
$140,000
$140,000.
Current replacement cost of $200,000 minus 30% depreciation = $140,000.
Which insurance provision prevents the insured from collecting twice for the same loss?
Other insurance
Liberalization
Subrogation
Appraisal
Subrogation.
(Subrogation may take place when a negligent third party if the cause of a loss. Once the insurance company has paid the loss, it receive the insured’s right of recovery from the third party, preventing the inured from collecting from both the insurer and the culpable party).
When property is valued on a replacement cost basis, losses will be paid:
At today’s costs, without any deduction for depreciation
At the cost to replace with functionally equivalent property
At an amount previously agreed upon by the insured and insurer
At market value of the damaged property
At today’s cost, without an deduction for depreciation.
