Insurance Lesson 3 Flashcards
Insurance is appropriate for financial protection against losses due to __ and due to __?
Loss frequency
Potential for very high severity of loss
3 Types of Homeowners Policies:
Basic
Broad
Open
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
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
Open Perils HO Coverage
Protection from all losses except those specifically excluded
More comprehensive than basic & broad
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
Generally, covered losses must result from something:
Sudden & accidental
Endorsements:
Supplement existing policy
Sink hole collapse, earthquake, seats backup, refrigerated property coverage
Flood from National Flood Insurance Program
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
B
Section 1 Coverages:
A: Dwelling
B. Other structured
C. Personal property
D. Loss of use
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
Coverage B: Other Structures
Limits typically 10% of coverage a limit
*Used for business not covered
Replacement cost
Coverage C: Personal Property
Tangible, movable property
50% coverage a
Actual cash value
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
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
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%))
Section 2 Coverages
E. Personal liability
F. Medical to others
Personal Liability (E)
Minimum $100,000 per occurrence
Also pays legal defense/settlement costs
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
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
D
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
D
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
B
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
B
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
C
Lesson 3 Review:
Which offers identical coverage for all forms of HO insurance policy?
A. Section 1
B. Section 2
B
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
D
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
D
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
A
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
C
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
D
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
D
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
D
