Exam 1 Part E

Question 1

What Types of Property does Building & Personal Property Coverage Form (BPP ) cover?

Answer 1

"1) Building itself
2) Attached structures
3) Permanent fixtures
4) Personal Property (contents)
"

Question 2

What type of business is a BPP best suited for?

Answer 2

A business that cannot have needs satisfied by a BOP

Question 3

What does BPP Coverage Include?

Answer 3

“1) Pollution Cleanup

2) Preservation of Property
3) Fire department service charge
4) Debris removal
5) Abandonment
6) After Loss Duties
7) Vacancy”

Question 4

Pollution Cleanup

Answer 4

”- 1980s and 1990s industry paid large losses

• More exclusions today
• Most come from covered peril”

Question 5

Pollution Cleanup Limit and Why

Answer 5

”- $10,000 limit - aggregate basis

- Because of adverse selection”

Question 6

Preservation of Property

Answer 6

”- Covers up to $1,000

- No deductible applies”

Question 7

Debris Removal

Answer 7

”- If a property suffers a loss coverage is 25% of the sum of the direct loss payment plus the deductible

• Additional $10,000 is afforded if:
  1) Direct Loss plus debris removal expenses exceeds limits of coinsurance
  2) Exceeds the 25% limitation of direct losses”

Question 8

Abandonment

Answer 8

”- Insured cannot abandon property

• Insurer has right to take damaged property after loss payment
• It is insurer’s decision - not insured’s”

Question 9

After Loss Duties

Answer 9

”- Notify police if crime if suspected

• Prompt noiceps to insurer
• Take reasonable steps to protect proptery
• Submit a proof of loss within 60 days”

Question 10

What should be inlcuded as proof in a statement of loss?

Answer 10

“Statement of facts concerning loss

- Insurer provides form”

Question 11

Vacant Property Exclusions

Answer 11

“1) Vandalism

2) Sprinkler Leakage (Unless freezer proctected)
3) Water damage
4) Broken glass
5) Theft”

Question 12

What if peril is not included in vacancy exclusion?

Answer 12

The loss is reduced by 15%

Question 13

Actual Cash Value (ACV)

Answer 13

”- The cost to replaced property with new property

• Commonly used for most property
• Unless specified as a certain percentage or replacement cost, always defaults to ACV
• Subtract deprectaion: Wear and tear, age, obsolesce”

Question 14

Coinsurance Clause

Answer 14

”- Requires a certain amount of coverage set to a percentage of ACV
- If the amount is not greator, or equal to the clause amount, the payout is less
“

Question 15

What happens if a buyer purchases more than the required coinsurance amount?

Answer 15

”- The buyer will not collect more than the loss

- The payout cannot be higher than policy limit”

Question 16

Agreed Value

Answer 16

Suspends the coinsurance clause

Question 17

What does Agreed Value remove?

Answer 17

Uncertainty

Question 18

Where is the Agreed value located?

Answer 18

In the declarations- entered for proptery such as a building

Question 19

Replacement Cost

Answer 19

”- Substitutes for ACV

- Insurer must pay to replace or repair the asset - without factoring depreciation”

Question 20

Moral Hazard Issue in Replacement Cost?

Answer 20

No, houses appreciate in value so incentive is not there

Question 21

Value Reporting Form

Answer 21

”- Protocol for reporting fluctuating values of property to the insurer
- Most common period is at the end of the month”

Question 22

Will an insurance company cover total mount of policy if it differs from last reported value?

Answer 22

Yes, as long as the reports are accurate and timely

Question 23

Peak Season Endorsement

Answer 23

”- Provides different amounts of property coverage for different periods of time
- Major fluctualions in inventory”

Question 24

What types of Businesses would use Peak Season Endorsement?

Answer 24

Seasonal types- summer, holiday, etc.

Question 25

Deductible

Answer 25

”- Amount of loss retained before insurance kicks in
- Retained portion of loss
- Comes off of loss
“

Question 26

Cause of Loss Form (Basic)

Answer 26

• Covers least amount of perils - Cheapest

Question 27

Cause of Loss Form (Basic) Covered Perils

Answer 27

”- Fire (half of property losses are due to fire), hostile and friendly

• Lightning: naturally occuring electrical element
• Explosion
• Windstorm/Hail (Not frotst, cold weather, ice, snow or sleet)
• Smoke
• Aircraft or vehicles: caused by these items
• Riot or civil commotion
• Vandalism
• Sprinkler Leakage
• Sinkholes
• Volcanic Eruptions”

Question 28

Cause of Loss Form (Basic) Exclusions

Answer 28

”- Ordinace or law: after a loss
- Earth Movemens: Earthquake (Fires caused by ok), landslide, govt action, nuclear hazard, war and military actions (not fortuitous), Water (flood, mudslide,title waves, sewaer backup)”

Question 29

Covers Of Loss Form (Broad)

Answer 29

”- Covers everything that Basic covers plus some additional coverage
- Name perils policy”