CPCU 551 Flashcards
A policy that combines, in one form and associated endorsement, all or most of the commercial property coverages that the insured organization needs, and uses a flexible rating plan.
Output policy
A package policy that combines most of the property and liability coverages needed by small and medium-size businesses.
Businessowners policy (BOP)
Policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts.
Commercial package policy (CPP)
A fire that leaves its intended place, such as a spark that escapes a fireplace and sets the carpet on fire.
Hostile fire
Property that has no physical form.
Intangible property
All tangible or intangible property that is not real property.
Personal property
Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.
Real property (realty)
A required component of the commercial property coverage part that contains conditions applicable to all commercial property coverage forms.
Commercial property conditions
A required component of the commercial property coverage part that specifies perils covered.
Causes of loss form
A commercial property coverage part component that can be any of several commercial property forms containing an insuring agreement and related provisions.
Commercial property coverage form
A required commercial property coverage part component that provides basic information about the policyholder and the insurance provided.
Commercial property declarations page
Factors that are applied to the regular policy premiums for certain coverage parts of a CPP that includes both property and liability coverages, resulting in premium discounts for those coverage parts.
Package modification factors
Policy that covers only one line of business
Monoline policy
Commercial package policy (CPP) coverage component that provides a broad range of coverages to ‘middle-market’ or larger firms to insure buildings and business personal property.
Commercial property coverage part
A statement of facts about a loss for which the insured is making a claims.
Proof of loss
Cost to replace property with new property of like and kind quality less depreciation.
Actual Cash Value (ACV)
Optional coverage that suspends the coinsurance condition if the insured carries the amount of insurance agreed to by the insurer and the insured.
Agreed value optional coverage`
Coverage for the effects of inflation that automatically increases the limit of insurance by the percentage of annual increase shown in the declarations.
Inflation Guard optional coverage
Coverage for losses to most types of property on a replacement cost basis (with no deduction for depreciation or obsolescence) instead of on an actual cash value basis.
Replacement Cost optional coverage
The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.
Subrogation
A property outside the area owned or controlled by the insured that increases the probability of loss to the insured’s building and its contents.
External Exposure
Insurance that covers each building for a specific limit of insurance and personal property at each building for a specific limit of insurance.
Specific insurance
Insurance that covers either of the following with one limit of insurance; (1) one type of property in one or more seperatly rated buildings or (2) two or more types of property in one or more seperately rated buildings.
Blanket insurance
Endorsement that covers the fluctuating values of business personal property by providing differing amounts of insurance for certain time periods during the policy period.
Peak Season Limit of Insurance Endorsement
A commercial property form that bases the insured’s premium for business personal property on the values that the insured reports to the insurer periodically during the policy period.
Value Reporting Form
A real estate development consisting of a group of units, in which the air apace within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners.
Condominium
The portion of a condominium owned solely by a unit owner.
Condominium unit
An entity composed of the unit owners in a condominium to manage the condominium and to own the common elements.
Condominium association
Areas of a condominium that are jointly owned by all unit owners, including the land on which the buildings are located.
Common elements
A document that describes what each condominium unit owner has purchased and clarifies the rights and responsibilities of the unit owner and the association.
Condominium association agreement
A concept of condominium ownership in which the association has no ownership interest within the bare walls of each unit.
Bare-walls concept
A concept of condominium ownership in which the association is considered to be the owner of all property contained in the unit as sold to the original purchaser or replacements of such property if the replacements are of like kind and quality.
Single-entity concept (original specifications coverage)
A concept of condominium ownership that is similar to the single-entity concept except that the all-in concept includes improvements made by the unit owner, not just the original installations or replacements of like kind and quality.
All-in concept (additional installations coverage)
A form of real property ownership in which the real property is owned by a corporation whose shareholders are the tenants of the property.
Cooperative corporation
A real estate development in which each occupant has exclusive ownership of its own unit and the land that the structure occupies and a homeowners’ association composed of all the unit owners jointly owns the surrounding land and structures.
Planned development unit (homeowners association)
Form that covers business personal property and building property exposures of commercial (nonresidential) condominium units.
Condominium commercial unit-owners coverage form
Coverage for a commercial condominium unit-owner’s share of any assessment made by the association against all unit owners because of physical loss to condominium property caused by a covered cause of loss.
Loss assessment coverage
Coverage for real property (such as a storage shed or garage building) that pertains only to the named insured’s condominium unit or real property that the named insured has a duty to insure according to the condominium association agreement.
Miscellaneous real property coverage
A commercial property policy form for covering buildings and business personal property on restricted terms.
Standard Property Policy (SPP)
A commercial property coverage form that provides legal liability coverage on buildings or personal property of others in the insured’s care, custody, or control.
Legal Liability Coverage Form
A commercial property coverage form for insuring a tenant’s financial losses resulting from the cancellation of the tenant’s lease because of damage to the premise by a covered cause of loss.
Leasehold Interest Coverage Form
A program allowing private insurers to write flood insurance under the National Flood Insurance Program (NFIP)
Write Your Own (WYO)
Initial phase of community’s participation in the National Flood insurance Program in which property owners in flood areas can purchase limited amounts of insurance at subsidized rates.
Emergency Program
Second phase of the National Flood Insurance Program in which the community agrees to adopt flood-control and land-use restrictions and in which property owners purchase higher amounts of flood insurance than under the emergency program.
Regular Program
The version of the National Flood Insurance Program (NFIP) Standard Flood Insurance Policy that is used for insuring commercial building and contents.
General Property Form
A version of the National Flood Insurance Program (NFIP) Standard Insurance Policy that is used for insuring residential condominium buildings, as well as contents that are owned either by the unit owners in common or by the condominium association solely.
Residential Condominium Building Association Policy (RCBAP)
An insurance-to-value provision in many property insurance policies providing that if the property is underinsured, the amount that an insurer will pay for a covered loss is reduced.
Coinsurance
National Flood Insurance Coverage that pays for compliance costs related to floodplain management for qualifying structures.
Increased Cost of Compliance (ICC)
Policy that covers on an ‘all-risks’ basis to fill gaps in the insured’s commercial property coverage, especially gaps in flood and earthquake coverage.
Difference in Conditions (DIC) policy, or DIC insurance
A large property whose construction meets high standards of risk mitigation and control characteristics and whose management maintains best practices loss control and risk mitigation techniques for the specific occupancy.
Highly protected risk (HPR)
Two or more property policies arranged in levels of coverage; the policies in the second or higher levels provide coverage only when the loss exceeds the coverage afforded by the lower-level policies.
Layered Property Coverage
The dollar amount above which the reinsurer responds to losses.
Attachment point
Insurance that covers the reduction in an organization’s income when operations are interrupted by damage to property caused by covered peril.
Business income insurance
The difference between revenues (such as money received for goods or services) and expenses (such as money paid for merchandise, rent, and insurance)
Net income
Net income that results when revenues exceed expenses.
Profit
Net income that results when expenses exceed revenues.
Net loss
Expenses that continue to be incurred during business interruption.
Continuing Expenses
Expenses that will not continue during a business interruption.
Non continuing expenses
Expenses, in addition to ordinary expenses, that an organization incurs to mitigate the effects of a business interruption.
Extra Expenses
The possibility of incurring business income loss because of physical loss occurring on the premises of an organization that the insured depends on for materials, products, or sales.
Dependent property exposure
The sum of the insured’s estimated net income and operating expenses for the twelve months following policy inception, minus only those exposures listed in the business income worksheet.
Coinsurance basis
A worksheet for calculating the amount of insurance necessary to comply with coinsurance condition of business income insurance forms, for reporting business income values to the insurer, or for providing underwriters with information they need to evaluate an organization’s business income loss exposure.
Business income worksheet
The largest loss that an insured is likely to sustain.
Probable Maximum Loss (PML)
Endorsement that limits coverage for payroll expenses to a specified number of days or excludes expenses altogether, allowing the insured to satisfy coinsurance requirement with a lower amount of insurance.
Payroll limitation or exclusion endorsement
An endorsement that extends business income forms to cover payroll expenses for specified job classifications or employees regardless of whether such expenses are necessary to resume operations.
Discretionary Payroll Expense endorsement
Endorsement that eliminates power, heat, and refrigeration expenses from coverage and from the coinsurance calculation, allowing the insured to satisfy the coinsurance requirement with a lower limit of insurance.
Power, Heat and refrigeration deduction endorsement
An endorsement that modifies business income coverage forms to make them more appropriate for covering the business income loss exposures of schools.
Business Income Changes - Educational Institution endorsement
An endorsement that covers loss of business income or extra expense at the insured premises caused by the interruption of utility services to or from the insured premises.
Utility Services - Time Element endorsement
Endorsement that covers business income loss during the additional time required to comply with building ordinances or law.q
Ordinance or law - Increased Period of restoration endorsement
Insurance that covers many different classes of property that typically involve an element of transportation.
Inland Marine Insurance
Insurance that, in the US, includes both ocean and inland marine coverage and, in the rest of the world, is limited to insurance for vessels and cargo.
Marine Insurance
Statement of types of property that may be insured on inland marine and ocean marine insurance forms.
Nationwide Marine Definition
A policy designed to cover property that floats, or moves, from location to location `
Floater
A valuation basis that values covered property at its invoice value, including freight.
Invoice value
A method of valuing property in which the insurer and the insured agree, at the time the policy is written, on the maximum amount that will be paid in the event of a total loss.
Agreed Value Method
The person or organization shipping goods. often the seller of the goods.
Shipper
The person or organization that receives property being transported by a carrier.
Consignee
Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services.
Common carries
Carries that furnish transportation services to shippers with whom they have contracts
Contract carries
A natural and unavoidable catastrophe that interrupts the expected course of events.
Act of God
A quality of a condition within a particular type of property that tends to make the property destroy itself.
Inherent vice
A document acknoledging receipt of goods from the shipper, given by the carrier, which includes the terms of the contract of carriage for the goods.
Bill of lading
A travel contract in which transportation is temporarily hired for a specific trip.
Charter
Policy that covers all shipments made or received by the insured throughout a one-year policy period.
Annual transit policy
Policy that covers all shipments made or received by the insured during the policy’s term; comparable to an inland marine annual trip transit policy, but without a set policy expiration date.
Open cargo policy
In ocean marine policies, the party named as the insured.
Assured
Partial loss that must, according to maritime law, be shared by all parties to a voyage (cargo owners and vessel owner).
General average
Clause that covers the cost of reasonable measures that the insured is required to take to protect property from damage at the time of loss.
Sue and labor clause
Clause in open cargo policies that covers the insured cargo during the ordinary course of transit (including land transit) form the time the cargo leaves the point of shipment until it is delivered to its final destination.
Warehouse-to-warehouse coverage
A warranty that excludes loss caused by war, privacy, virtually any lawful or unlawful taking of the vessel, a nuclear weapon, a min, or a torpedo.
Free of capture and seizure (FC&S) warrenty
A warranty that excludes loss caused by strikes, labor disturbances, riots, vandalism, sabotage, or malicious acts.
Strikes, riots, and civil commotion (SR&CC) warrenty
A clause that excludes coverage for loss caused by delay, such as loss of market, spoilage, and business interruption.
Delay clause
A clause that adds coverage to an ocean marine cargo policy for loss resulting from bursting , breakage of shafts, latent defects of vessels, or faults or errors in the navigation or management of the vessels
Inchmaree clause
An exceptive warranty that excludes particular average unless the loss is actually caused by the stranding, sinking, or burning of the vessel or its collision with another vessel.
FPA/AC (free of particular average/American conditions) warranty
Partial loss that is borne by only one party to voyage (such as a cargo owner)
Particular average
A clause in open cargo policies that doubles the policy limit when, for reasons beyond the control of the assured, shipments accumulate at some point in transit.
Accumulation clause
Policy that covers a particular shipment of goods specified in the policy.
Trip transit policy
Form that covers a financial institution against loss of securities and other negotiable instruments while in transit through specified types mail.
Mail coverage form
Inland marine policy that provides broad coverage on parcel post shipments.
Parcel post policy
Policy that covers a trucker’s liability for damage to cargo of others being transported by the trucker.
Motor truck cargo liability policy
A type of motor truck cargo policy that covers any type of organization (not just a trucking company) for damage to its own cargo while being transported on its own truck.
Owner’s goods on owners’ trucks policy
An endorsement that insurers must attach to motor truck cargo liability policies of interstate carries stating that the insurer will pay cargo claims for which the insured is liable, up to the limits required by the US department of transportation, even if such claims are not covered under the policy.
BMC 32 - An endorsement for Motor Common Carrier Policies of Insurance for Cargo Liability
A category of inland marine policies covering various types of equipment, wherever it may be located in the policy period.
Equipment Floaters
A policy that covers mobile equipment or tools while located anywhere in the coverage territory
Contractors equipment floater
The cost to replace covered equipment with the latest comparable state of the art equipment available; can be used as a valuation basis in an EDP floater
Upgraded value
Coverage, in an EDP equipment floater, for perils such as mechanical failure, electrical disturbance, and damage to electronic data when covered equipment breaks down.
Breakdown coverage
Policy that covers a contractor’s interest in building supplies or fixtures that the contractor has been hired to install
Installation floater
The party temporarily possessing the personal property in a bailment.
Bailee
The owner of the personal property in a bailment.
Bailor
Policy that covers warehouse operators against liability for damage to the property of others being stored in operator’s warehouses.
Warehouse operators legal liability policy
A policy that covers damage to customer’s goods while in the possession of the insured, regardless of whether the insured is legally liable for damage.
Bailee’s customers policy
A policy that covers the insured’s patterns and dies while located at the premises of others and also while in transit to and from those premises
Pattern and die floater
A policy that covers the insured’s goods while being worked on at a subcontractor’s or processor’s premises and while in transit and from those premises
Processing floater
A policy that covers the inventory and other property of any of the types of dealers that qualify for inland marine coverage (such as jewelers, equipment dealers, fine arts dealers, and furriers).
Dealers policy
A dealers policy, particularly one written for a jeweler or furrier.
Block Policy
Form that covers neon, fluorescent, automatic, or mechanical signs.
Signs Coverage Form
Insurance that covers the sums the insured is unable to collect when records of accounts receivables are destroyed by a covered cause of loss.
Accounts receivable insurance
Insurance that covers direct physical loss to valuable papers and records, such as architect’s blueprints and plans.
Valuable papers and records insurance
A fired pressure vessel constructed of cast iron or steel in which water is heated to produce steam or hot water
Boiler
A closed container that is heated by the direct fire of burning fuel and can withstand internal pressure.
Fired pressure vessel
A closed vessel that can withstand internal pressure or vacuum but is not heated by the direct fire of burning fuel
Unfired pressure vessel
Expenses incurred to speed up the repair or replacement of covered property
Expediting expenses
Condition that allows the insurer to immediately suspend equipment breakdown insurance on an item of equipment that the insurer determines to be in dangerous condition.
Suspension condition
Condition that addresses claim situations in which the insured’s equipment breakdown insurer and the insured’s commercial property insurer disagree on which insurer covers a loss; each insurer pays half the loss to quickly indemnify the insured; insurers then resolve their differences.
Joint or Disputed Loss Agreement
A condition in equipment breakdown policies that provides that the insurer will perform required inspections of boilers and other equipment on the insured’s behalf
Jurisdictional inspections condition
In general, the tendency for people with the greatest probability of loss to be the ones most likely to purchase insurance.
Adverse Selection
A provision commonly included in BOP that addresses fluctuating personal property values by automatically increasing the amount of insurance.
Seasonal increase provision
Insurance offered by private insurers that covers crops against loss caused by hail and often other perils.
Crop hail insurance
Insurance offered by the federal government that covers unexpected crop production losses due to natural causes such as drought, excessive moisture, hail, windstorm, and flood.
Multiple Peril Crop Insurance (MPCI)
Insurance that covers loss of valuable animals by (1) death resulting from accident, injury, sickness, or disease or (2) theft, subject to exclusions.
Animal morality insurance
A specialized type of livestock coverage that covers animals while in the custody of a commercial feedlot operator
Feedlot insurance
A policy that covers the crime loss exposures of financial institutions such as banks, savings, and loan institutions, and insurance companies.
Financial institution bonds
A policy that enables a financial institution to cover loss of or damage to its costumers’ property in the insured’s safe-depository facilities and damage to the insured’s premises.
Combination Safe Depository Policy
Insurance that protects a lending institution or mortgage servicing agency against losses arising out of the insured’s failure to maintain insurance protecting mortgage property, as well as other exposures connected with servicing mortgages.
Mortgage impairment insurance
Insurance that protects a mortgage holder from loss if the borrower fails to repay the mortgage loan.
Mortgage guarantee insurance
Insurance that protects against loss resulting from defects in a title to real property.
Title insurance
A written contract that expresses one party’s promise to answer for another party’s failure to do something as promised.
Surety bond
The party to a surety bond whose obligation or performance the surety guarantees.
Principal
The party to a surety bond that receives the surety’s guarantee that the principal will fulfill an obligation or perform as promised.
Obligee
The party (usually an insurer) to a surety bond that guarantees to the obligee that the principal will fulfill an obligation or perform as required by the underlying contract, permit, or law.
Surety
The obligation of one entity to answer for the debt, default, or miscarriage of performance of duties.
Suretyship
A surety bond guaranteeing the fulfillment of obligations under construction contracts or other types of contracts.
Contract bond
A contract bond guaranteeing that a contractor bidding on a construction or supply contract will enter into the contract and will provide a performance bond if the bid is accepted.
Bid bond
A contract bond guaranteeing that a contractor’s work will be completed according to plans and specifications.
Performance bond
A contract bond guaranteeing that the project will be free of liens.
Payment bond
A contract guaranteeing the work will be free from defects in materials and workmanship for a specified period after the project is completed.
Maintenance bond
A contract bond guaranteeing a local government authority that a subdivision developer will complete the subdivision in accordance with approved proposals at the developer’s expense.
Subdivision bond
A contract bond guaranteeing that a supplier will perform the designated supply contract according to specifications.
Supply contract bond
Surety bonds that provide payment to the obligee (the state, city, or other public entity) for loss or damage resulting from violations of the duties and obligations imposed on the licensee or permit holder.
License and permit bonds
A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully and honestly.
Public official bond
A classification of surety bonds guaranteeing that a person or a organization will faithfully perform certain duties prescribed by law or by a court or will demonstrate financial responsibility for the benefit of another until the final outcome of a court’s decision.
Court bonds
A judicial bond guaranteeing that, if the court decides against a plaintiff who has requested attachment of the defendants property. the defendant will be paid any damages that result form the property attached.
Attachment bond
A bond that guarantees that the insured will pat any damages and court costs if the court should decide in the claimant’ favor.
Release of attachment bond
A judicial bond guaranteeing that a plaintiff who appeals an adverse decision to a higher court will pay all costs of the appeal
Appeal bond
A judicial bond guaranteeing that a defendant who appeals an adverse decision to higher court will pay the entire judgement, plus court costs and interests, should the higher court sustain the initial judgement for the plaintiff.
Defendant’s appeal bond (supersedeas bond)
A court bond guaranteeing that a person appointed by a court to administer the property or interest of others will faithfully performs his or her duties.
Fiduciary bond
Any bond that does not fit well under the other primary categories of surety bonds formulated by the surety and Fidelity Association of America
Miscellaneous bonds
