Insurance 3- Property, Casualty, & Liability Insurance

Question 1

declaration page

Answer 1

part of an insurance policy containing representations of the applicant (name, address, etc)

Question 2

section 1 coverage includes

Answer 2

dwelling, other structures, personal property, loss of use

Question 3

section 2 coverage includes

Answer 3

personal liability, medical payments

Question 4

coverage a: dwelling

Answer 4

insures dwelling and any structures attached to the dwelling like a garage, decks, or fences located on or next to the premises *land is specifically excluded from coverage

Question 5

coverage b: other structures

Answer 5

other structures are set apart from the dwelling by a clear space. like outdoor swimming pools, detached garages, patios or detached living spaces

Question 6

coverage c: personal property

Answer 6

personal property is covered anywhere in the world. The policy usually has special internal limits of liability (sublimits)- i.e. silverware, watercraft, jewelry, money

Question 7

personal property that is specifically excluded

Answer 7

animals, birds, fish, property of boarders, property in an apartment rented to others, motor vehicles/aircraft

Question 8

coverage d: loss of use

Answer 8

coverage applied for additional living expenses arising from damage to the insured property. coverage ONLY pays for the necessary increase in living expenses incurred by the insured to continue as nearly practical the normal standard of living. i.e. normal living expenses are 2500, house burns down, then expenses are 4000, insurance will cover the difference of 1500

Question 9

coverage e: personal liability

Answer 9

provide coverage if a claim is made or a suit is brought against an insured because of bodily injury or property damage arising from a covered occurrence. note that there are exceptions like liability arising from business activities, usage of motorized land vehicles except recreational ones like golf carts used ON insured property, liability arising from usage of watercraft that has more than 50 horsepower or a sailboat that is more than 26 feet, aircraft, or bodily injury to another person that is eligible for workers comp.

Question 10

coverage f: medical payments

Answer 10

covers limited amounts (1,000/5,000) for medical expenses of person OTHER than the insured who are injured ON the insured location- NOT liability coverage

Question 11

Perils for Basic Form. What included and what do you memorize?

Answer 11

WHARVES/FLT:
Windstorm, Hail, Aircraft, Riot, Vandalism, Vehicles, Explosion, Smoke
Fire, Lightening, Theft

Question 12

Perils for Broad Form. What included and what do you memorize?

Answer 12

Everything in basic WHARVES/FLT plus RAF, which is Rupture of system, artificially generated electricity, falling options, freezing of plumbing.

Question 13

Open form

Answer 13

Insurer agrees to pay for damage by any peril except those specifically excluded

Question 14

HO- 2 versus HO-3

Answer 14

HO-2 is broad form for all coverages, HO-3 is open perils for coverages A, B, and D. HO-3 is more comprehensive

Question 15

HO-4

Answer 15

renters policy- provides NO coverage for structures since the property is owned by others. covers loss of use, contents, and comprehensive personal liability

Question 16

HO-6

Answer 16

condo policy- has open perils coverage for contents and broad coverage for loss of use.

Question 17

General Exclusions that apply to ALL homeowner forms. (8)

Answer 17

OPEN WIF

ordinance of law, power failure, earthquake, neglect, nuclear hazard, war, intentional loss, flood. sometime sinkhole.

Question 18

Which value is used for coverage of dwelling (structure) vs. coverage of personal property (contents)

Answer 18

dwelling (structure)- Replacement cost coverage less deductible (no deduction for depreciation)
personal property (contents)- Actual Cash Value (ACV) which is replacement costs minus depreciation less deductible. original cost here is irrelevant

Question 19

When amount of the insurance is LESS than 80% of the dwellings replacement cost, the insurer pays the greater of what?

Answer 19

• ACV
  OR
  Step 1) -replacement cost x coinsurance percentage= amount of insurance requires
  Step 2) (insurance carried/insurance required) X Loss minus deductible= Amount paid by insurance

Question 20

When the amount of the dwelling insurance is GREATER THAN or EQUAL to the replacement cost, then..

Answer 20

ACV is not used. the other two formulas to find the amount of insurance required, and the amount paid by insurance are used.

Question 21

What is the required percentage for homeowners policy?

Answer 21

80% the replacement value

Question 22

What is the required percentage for commercial buildings policy?

Answer 22

90% the replacement value

Question 23

covered auto/three categories of coverage

Answer 23

any vehicle in the policy declarations. there are three categories of covered for vehicles–> 1) newly acquired vehicles, 2) trailers, & 3) temporary substitutes.

Question 24

newly acquired autos

Answer 24

if the new automobile replaces an existing vehicle, it is automatically insured for parts A (liability), B (medical payments), and C (uninsured motorist/liability). For Part D (damage to your auto), there is no automatic coverage unless the insurance company is notified within 14 days of acquisition.

Question 25

In order for spouses or a family member to be covered they must live in the same household. If an spouse stops being a resident of the same household, they are still covered, but for how long?

Answer 25

The earliest of:

1) the end of 90 days following the spouses change of residency
2) the effective date for the spouses own policy
3) the end of the policy period

Question 26

Part A- BI/PD

Answer 26

Liability Coverage- provides protection against judgments and covered exposures resulting from bodily injury and property damage liability deemed to have caused by the insured. Single Limit per each accident for all bodily injuries = $300,000

Question 27

Part A Split Limits

Answer 27

This breaks down the limits for coverage:

• 100k is the max one person can be covered
• 300k is max coverage for all bodily injury claims
• 50k is the aggregate of property damage claims

Question 28

Part B

Answer 28

Medical Payments/ Med-Pay- provides for the reasonable and necessary medical expenses of an insured as a result of an automobile accident. Only medical services within THREE years of the accident are covered

Question 29

Part C

Answer 29

Uninsured Motorist/UM- Insurer agrees to pay compensatory damages that the insured is legally required to from the owner of the uninsured vehicle. This includes claims with medical expenses, lost wages, and pain and suffering but NOT punitive/exemplary damages.

Question 30

Part D

Answer 30

Coverage for your own auto- Collision, & comprehensive coverage which is like an open perils types of property coverage except for auto. Depending on circumstance, towing is covered under collision/other than collision.

Question 31

Part D Perils That are “Other than Collision”

Answer 31

These are COVERED under Part D in the Other Than Collision Category:
breakage of glass
loss caused by missile
falling objects
fire, theft, larceny
flood
earthquake
windstorm, hail
vandalism, riot
contact with bird/animal
explosion

Question 32

Replacement Option

Answer 32

Option Insurer has in Settling Claims-
Insurer MAY repair or replace damaged property with that of like kind of quality rather than paying the replacement cost or ACV

Question 33

Abandonment/Salvage

Answer 33

Option Insurer has in Settling Claims-
The insured MUST surrender ownership of the lost or damaged property to the insurance company so that a total loss can be claimed

Question 34

Pair or Set

Answer 34

Option Insurer has in Settling Claims-
the insurer MAY repair or replace any part to restore a part or set to its value before the lost, or they can pay the difference between ACV before and after the loss

Question 35

Exclusion for Umbrella Liability Coverage that is not covered:

Answer 35

• any act committed with intent to cause harm or injury
• damage to property owned by the insured (cant sue yourself)
• Business pursuits
• failure to provide a professional service (malpractice)
• directors/officers activities
• workers compensation obligations

Question 36

Business Owners Policy (BOP)

Answer 36

This is commercial property insurance for small to medium sized business. Provides coverage to real property, contents, and liability protection. Excluded= professional liability.
PREMIUM- DEDUCTIBLE to the business

Question 37

E & O Policy

Answer 37

Error and Omissions policy- protects you and your business from claims if a client sues for negligent acts, errors or omissions committed during business activities that result in a financial loss

Question 38

Usage

Answer 38

For Commercial Prop Insurance. this is for Excess personal property not covered. It is a personal articles floater for the person without a HO policy, or the person with a HO policy that will not cover certain items, or certain value. This is for items that float like camera, jewelry, sporting equipment.

Question 39

Personal Property Floater

Answer 39

For Commercial Prop Insurance- This floaters is designed to provide “open perils” coverage for unscheduled personal property on a worldwide basis

Question 40

Difference of Professional Liability v. Malpractice insurance v. E & O insurance

Answer 40

• -Professional Liability covers liability arising from failure to use due care and skill expected from a profession. The premium is deductible.
• -Malpractice ins. is approp. where substandard conduct may result in bodily injury, i.e. doctors and dentists.
• -E &O insurance is appropriate where substandard conduct may result in property damage, which would include loss of money. E&O insurance is a lot of times for lawyers, stockbrokers, and financial planners.

Question 41

Workers Comp Taxation

Answer 41

Compensation benefits are received TAX-FREE. Premiums that the employer pays are DEDUCTIBLE