Exam 1 Part E Flashcards
What Types of Property does Building & Personal Property Coverage Form (BPP ) cover?
"1) Building itself 2) Attached structures 3) Permanent fixtures 4) Personal Property (contents) "
What type of business is a BPP best suited for?
A business that cannot have needs satisfied by a BOP
What does BPP Coverage Include?
“1) Pollution Cleanup
2) Preservation of Property
3) Fire department service charge
4) Debris removal
5) Abandonment
6) After Loss Duties
7) Vacancy”
Pollution Cleanup
”- 1980s and 1990s industry paid large losses
- More exclusions today
- Most come from covered peril”
Pollution Cleanup Limit and Why
”- $10,000 limit - aggregate basis
- Because of adverse selection”
Preservation of Property
”- Covers up to $1,000
- No deductible applies”
Debris Removal
”- 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”
Abandonment
”- Insured cannot abandon property
- Insurer has right to take damaged property after loss payment
- It is insurer’s decision - not insured’s”
After Loss Duties
”- Notify police if crime if suspected
- Prompt noiceps to insurer
- Take reasonable steps to protect proptery
- Submit a proof of loss within 60 days”
What should be inlcuded as proof in a statement of loss?
“Statement of facts concerning loss
- Insurer provides form”
Vacant Property Exclusions
“1) Vandalism
2) Sprinkler Leakage (Unless freezer proctected)
3) Water damage
4) Broken glass
5) Theft”
What if peril is not included in vacancy exclusion?
The loss is reduced by 15%
Actual Cash Value (ACV)
”- 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”
Coinsurance Clause
”- 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
“
What happens if a buyer purchases more than the required coinsurance amount?
”- The buyer will not collect more than the loss
- The payout cannot be higher than policy limit”
Agreed Value
Suspends the coinsurance clause
What does Agreed Value remove?
Uncertainty
Where is the Agreed value located?
In the declarations- entered for proptery such as a building
Replacement Cost
”- Substitutes for ACV
- Insurer must pay to replace or repair the asset - without factoring depreciation”
Moral Hazard Issue in Replacement Cost?
No, houses appreciate in value so incentive is not there
Value Reporting Form
”- Protocol for reporting fluctuating values of property to the insurer
- Most common period is at the end of the month”
Will an insurance company cover total mount of policy if it differs from last reported value?
Yes, as long as the reports are accurate and timely
Peak Season Endorsement
”- Provides different amounts of property coverage for different periods of time
- Major fluctualions in inventory”
What types of Businesses would use Peak Season Endorsement?
Seasonal types- summer, holiday, etc.
Deductible
”- Amount of loss retained before insurance kicks in
- Retained portion of loss
- Comes off of loss
“
Cause of Loss Form (Basic)
- Covers least amount of perils - Cheapest
Cause of Loss Form (Basic) Covered Perils
”- 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”
Cause of Loss Form (Basic) Exclusions
”- 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)”
Covers Of Loss Form (Broad)
”- Covers everything that Basic covers plus some additional coverage
- Name perils policy”
