Insurance Lesson 3 Flashcards by Lindsay Adams

Insurance is appropriate for financial protection against losses due to __ and due to __?

Loss frequency

Potential for very high severity of loss

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3 Types of Homeowners Policies:

Basic
Broad
Open

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Basic HO Coverage:

12 named perils:

Fire
Vehicles
Lightning
Smoke
Windstorm
Vandalism or malicious mischief
Hail
Explosions
Riots or civil commotion
Theft
Aircraft
Volcanic eruptions

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Broad HO Coverage:

12+6 named perils:

All from basic
Falling objects
Weight of ice, snow, sleet
Accidental discharge or overflow of water or steam
Sudden & accidental cracking, burning, bulging of appliances
Freezing of plumbing, heating, air conditioning, fire sprinkler system, or appliance
Sudden & accidental damage from artificially generated electrical currents

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Open Perils HO Coverage

Protection from all losses except those specifically excluded
More comprehensive than basic & broad

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General Exclusions from most HO Policies:

Movement of ground
Ordinance/law regulating construction, repair, demolition of building or structure
Damage from rising water
War
Nuclear hazards
Power failure caused by uninsured peril
Intentional acts
Neglect

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Generally, covered losses must result from something:

Sudden & accidental

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Endorsements:

Supplement existing policy
Sink hole collapse, earthquake, seats backup, refrigerated property coverage
Flood from National Flood Insurance Program

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Example Exam Question:
Home covered by open perils policy. Which would be covered?

A. Termite damage
B. Angry neighbor throws brick through glass door
C. Flood damage
D. Earthquake damage

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Section 1 Coverages:

A: Dwelling
B. Other structured
C. Personal property
D. Loss of use

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Coverage A: Dwelling

Pays for repair/damage to house & attached structures as well as building materials on premise.
Most require coinsurance: formula:
(Amount of insurance/coinsurance requirement) x amount of loss [and minus deductible!]
Replacement cost

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Coverage B: Other Structures

Limits typically 10% of coverage a limit
*Used for business not covered
Replacement cost

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Coverage C: Personal Property

Tangible, movable property
50% coverage a
Actual cash value

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Limits on personal property:

$200 money
$1500 securities, bills, airline tickets
$1500 theft of jewelry, gems, metals, furs
$1500 watercraft including trailers & equipment
$2500 theft of firearms
$2500 theft of silverware/gold ware etx

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Typical Exclusions:

Animals
Separately described & specifically insured
Motorized land vehicles off premise use
Property of renters not related
Aircraft & parts
Furnishings rented out to others
Property held as samples, for sale, or sold but not delivered
Business data, credit cards, fund transfer cards
Business property held away from residence premises

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Coverage D: Loss of Use

Additional living expenses when unable to occupy
May also pay for lost rental income
30% coverage a (unless ho6 (50%) or ho8 (10%))

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Section 2 Coverages

E. Personal liability

F. Medical to others

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Personal Liability (E)

Minimum $100,000 per occurrence

Also pays legal defense/settlement costs

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Medical Payments to Others (F)

All medical expenses without regard to liability (within 3 years or accident)
Typical limit: $1,00-$5,000; $10,000 upper limit for some
Not for medical expenses of insured family/household unless employee

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Exclusions:

Expected or intended by insured
Resulting from business or professional activities
Out of non insured locations
Out of ownership/use of watercraft, motor vehicles, & aircraft
Cause by War/nuclear weapons
Caused by transmission of communicable disease
Arising out of sexual molestation, corporate punishment, or abuse
Arising out of use of controlled substance other than legal prescription drugs

HO Policy Forms:

HO2: Broad (18 named perils)
HO3: Special (open perils/all risks)
— personal property still on named perils
HO4: Renters (not dwelling/structures, provides personal liability, personal contents on broad perils basis-min $6000, loss of use of premises-30% personal property coverage)
HO5: Comprehensive (same as special HO3 except covers personal property on broad perils basis)
HO6: Condominium Owners (same as HO2/4 except for condo owners - broad, does not cover bustling other than additions/alterations, loss of use limited to 50% coverage c limit)
HO8: Modified (provides repair cost coverage, typically for older homes)

Automobile Insurance (PAP) Parts

A. Liability
B. Medical payments
C. Uninsured motorists
D. Damage to insured’s auto
E. Duties after accident/loss
F. General provisions

Part A: Liability (bodily injury/property damage)

Insured deemed responsible
Split limit ex (50/100/50)
50k bodily injury per person
100k bodily injury per accident
50k property damage coverage 
Combined has fixed amount of coverage

Part B: Medical Payments Coverage

Medical sustained from accident
Injured insured or occupants of insured’s car
Not for passengers in non-owned vehicle insured driving
Limits significantly less than liability

Part C: Uninsured Motorist Coverage

Pay property & bodily injury if insured

Part D: Coverage for Damage to Insured’s Automobile

Comprehensive & Collision coverages repair or replace insured’s auto when damaged Collision if in accident with other vehicle or object or ice/rain on road Comprehensive if stolen/damaged not a collision (also fire, theft, vandalism, weather, animals, riots, falling objects)

Financed vehicles required to have both part _ & part _ coverage

C & D

Part E: Duties After Accident or Loss

Give notice immediately Protect auto & equipment from further loss File written proof of loss

Part F: General Provisions Where covered? Exclusions: Premiums:

Covers insured driving in US & Canada Exclusions: intentional acts, normal wear & tear, losses from law violations, catastrophic losses to insurer, named driver (only covers named), excluded driver (excludes specific named), racing, fewer than 4 wheels Premiums affected by: age, marital status, credit score, driving record/claims history, location where car is kept, type of car, use of car & mileage, credit score, policy coverages & deductibles

Legal Liability Categories

Torts - covered by liability Breach of contract Criminal offenses

3 General Types of Torts

Intentional interference (slander & libel covered, others not) Strict & absolute liability (result of legislation where one party legally liable) - strict has few defenses, absolute has no defenses Negligence (failure to act with appropriate care & damage results from action or inaction) - direct: acts or omissions directly to individual - vicarious liability: individual held partially responsible for acts by someone else

Act Speaks for Itself: | Negligence Per Se:

The mere fact that it happened | Act itself constitutes negligence relieving need for burden of proof

Property damage measured by: | Bodily injury could be:

Actual monetary loss | Special damages for measurable losses (limbs), intangible losses (pain & suffering), punitive damages (punishment)

``` Defense to Negligence: Assumption of Risk Contributory Negligence Comparative Negligence Last Clear Chance Rule ```

Fully understood & recognized dangers & voluntarily chose to proceed Injured party did not look out for own safety Amount adjusted to reflect injured’s proportion to contribution of cause of injury Had last clear chance to avoid accident & failed to do so

``` Personal Liability Umbrella Policy (PLUP) Factors: Requirement: Supplement amount: A client without a policy: ```

Earning power & net worth (both assets & earning power are at risk) Most hold certain levels of underlying liability coverages for both home & auto Supplements usually $1M+ Is considered to have a deficiency in their plan that needs addressed

Commercial Package Policy (CPP): Commercial Liability Umbrella Policy (CLUP): Manufacturers May need __? Professionals need both asset & general liability protection. Also consider adding __?

Covers loss of assets from various perils & some liability Excess liability coverage Products liability insurance Malpractice/Error & Omission Insurance

Lesson 3 Review: Under HO3, all perils covered with some exceptions. All are excluded from HO3 except: A. Termite damage B. Flood C. Earthquake D. Tornado

Lesson 3 Review: Retired to Miami. Purchased condominium on the beach. Which would be most appropriate to purchase? A. HO3 B. HO4 C. HO5 D. HO6

Lesson 3 Review: Loved by self. Rents 1 bed apartment. Which would be most appropriate to purchase: A. HO3 B. HO4 C. HO5 D. HO6

Lesson 3 Review: Section 2 of HO3 policy provides what type of protection to homeowner? A. Dwelling B. Damage to others property C. Loss of use D. Personal property

Lesson 3 Review: Lived in New Orleans during hurricane Katrina. Home destroyed by wind. Forced to live in hotel for 3 months. Which section of HO policy would reimburse for increased living expenses associated with hotel stay? A. Dwelling B. Other structures C. Loss of use D. Personal property

Lesson 3 Review: Which offers identical coverage for all forms of HO insurance policy? A. Section 1 B. Section 2

Lesson 3 Review: Which of the following would not be considered an insured person for purposes of part a for personal auto policy? A. You B. Any family member C. Any person using covered auto with permission D. Any person using covered auto without permission

Lesson 3 Review: Family members are covered for purposes of part a for personal auto policy when operating all of the following except: A. Your covered auto B. Rented auto C. Borrowed car D. Replacement car after 31 days

Lesson 3 Review: Has split limits on personal auto policy of 100/300/50. Which describes coverage? A. $100k per person bodily, $300k per occurrence bodily, $50k property B. $100k per covered auto, $300k per occurrence covered auto, $50k uninsured motorist C. $100k per person bodily, $300k per occurrence property, $50k uninsured motorist D. $100k property, $300k per person bodily, $50k property

Lesson 3 Review: All of the following statements are correct regarding personal auto policy part b except: A. Payment for medical expenses of insured due to auto accident B. Medical payments if struck as pedestrian C. Medical expenses for household pets if struck by covered auto D. Medical expenses of anyone occupying insured’s covered auto

Lesson 3 Review: All of the following statements are correct regarding personal auto policy part c except: A. Property damage B. Lost wages C. Pain & suffering D. Punitive damages

Lesson 3 Review: All of the following statements are correct regarding personal auto policy part d except: A. Collision with other vehicles B. Comprehensive: fire, theft, vandalism C. Collision to borrowed/rented vehicle D. Collision contact with animal or bird

Lesson 3 Review: All of the following statements are correct regarding personal umbrella liability policy except: A. Provides protection above & beyond liability limited of HO & PAP B. Requires insured to carry certain levels of underlying minimum amounts for HO & PAP C. Insurer provides legal defense to insured D. Only appropriate for individuals with high net worth