Insurance/Property And Liability Insurance

Question 1

What are the basic forms of homeowners insurance coverage?

Answer 1

Basic coverage
Broad coverage
Open coverage

Question 2

What are the characteristics of basic coverage?

Answer 2

Protects the homeowner from losses associated with 12 named perils:
Fire
Vehicles
Lightning
Smoke
Windstorm
Vandalism or malicious mischief
Hail
Explosions
Riots or civil commotion
Theft
Aircraft
Volcanic eruptions

Question 3

What are the characteristics of broad coverage?

Answer 3

Provides protection from losses associated with 18 named perils. The 12 perils covered in basic coverage post coverage for losses associated with:

Falling objects
The weight of ice snow sleet
Accidental discharge or overflow of water or steam
Sudden and accidental cracking, burning, bulging of appliances
freezing of plumbing, heating, air conditioning, fire sprinkler system, or appliance
sudden and accidental damage from artificially generated electrical currents

Question 4

What are the characteristics of open perils coverage?

Answer 4

Provides protection from losses associated with all perils, except those that are specifically excluded. And open perils policy provides more comprehensive coverage than the basic and broad policies.

Question 5

What is the general rule regarding insurance policies?

Answer 5

Basic and broad policies are “named peril” policies. Losses resulting from perils not specifically named are not covered. And “open perils” or “all risks” policy covers all perils except those that are specifically excluded

Question 6

What are general exclusions for most homeowners policies?

Answer 6

Movement of the ground (earthquake, mud / landslide, and sinkhole)

Damage from rising water

War

Nuclear hazards

Power failure caused by uninsured peril

Intentional Acts

Neglect

Question 7

What is the rule of thumb for covered losses?

Answer 7

Covered losses must result from something that is “sudden and accidental”. Losses associated with neglect and intentional Acts of the insured are not covered

Question 8

What is an endorsement?

Answer 8

A supplement to an existing policy that provides additional coverage for perils excluded by a policy:

Sinkhole collapse
Earthquake
Sewage backup
Refrigerated property coverage
Floods, by purchasing a separate insurance policy from the national flood insurance program

Question 9

What is coverage A?

Answer 9

Dwelling
Pays for repair and replacement for damage to the house and any attached structures

Losses are paid on a replacement cost basis (with materials of the same or similar quality at current material prices) no depreciation is taken

Question 10

What happens if a homeowner doesn’t carry enough homeowners insurance?

Answer 10

Insured receives payment for partial losses, calculated as follows:

Amount of insurance carried / coinsurance requirement X amount of loss = insurance payment

Typically 80% of replacement cost

Question 11

What is coverage B?

Answer 11

Other structures
Detached structures on the property, examples:

Detached garages
Greenhouses
Storage buildings

Typically the limit of this coverage is 10% of coverage A. Losses are insured on a replacement cost basis

Question 12

What is coverage C?

Answer 12

Personal property

Includes tangible personal property (furniture, clothing, etc)

Typically coverage is 50% of coverage A

Losses insured on an actual cash value basis

Replacement cost endorsement can be purchased to enhance coverage

Question 13

What is coverage D?

Answer 13

Loss of use

Pays for additional living expenses incurred when insured is unable to occupy the dwelling due to damages caused by an insured peril

Question 14

What is covered in section II of most insurance policies?

Answer 14

Liability and medical payment coverage

Question 15

What is coverage E?

Answer 15

Personal liability

Pays for claims from bodily injury and property damage to others arising out of the insured’s activities, premises or animals

Minimum coverage typically $10000 per occurrence

Will also pay for legal defense and settlement costs associated with claim

Question 16

What is coverage F?

Answer 16

Medical payments to others

All necessary medical expenses without regard to liability for others arising out of the insured’s activities, premises or animals

Expenses must be incurred within 3 years of the accident

Limits vary, $1000 - $5000, $10000 upper limit

Doesn’t pay for anyone in insured’s household unless they are a residence employee

Question 17

What sure limits and exclusions if coverage E and F?

Answer 17

Do not pay for injuries or damages:

That are expected it intended by the insured

From the insured’s business or professional activities.

From rental of the premises

Watercraft, motorized vehicles and aircraft

War/nuclear weapons

Transmission of communicable disease

Sexual molestation, corporal punishment, physical or mental abuse

Controlled substances other than legal Rx drugs

Question 18

What is HO-2 broad form?

Answer 18

Provides coverage on a broad perils basis (18 named perils)

Question 19

What is HO-3 special form?

Answer 19

Provides coverage on an “open perils” it “all-risks” basis?

Special form of homeowners insurance

If peril not excluded, then losses covered

Personal property/still provided on a named perils broad form basis

Question 20

What is an HO-4 policy?

Answer 20

Renters

Provides coverage for renters or tenants

No dwelling/structure coverage

Provides:

personal liability

Personal contents (coverage C) on a broad perils basis

Min amount sold is $6000

Loss of use of the premises (equal to 30% of personal property coverage)

Question 21

What is an HO-5 policy?

Answer 21

Comprehensive form

Provides coverage on an “open perils” or “all risks” basis

Comprehensive homeowners insurance

Similar to HO-3, with one major change, provides personal property protection on an open perils, instead of broad perils basis.

Question 22

What is an HO-6 policy?

Answer 22

Condominium owners form

Provides coverage for condos

Coverage for inside structure of their unit and all its contents (outside structure owned by association)

Broad perils coverage, similar to HO-2 and HO-4

Amount of personal property coverage is 6000

Loss of use (coverage D) limited to 50% if the coverage C limit

Question 23

What is an HO-8 policy?

Answer 23

Modified coverage form

Modified form policy

Provides repair cost coverage (instead of replacement)

Provides “functional replacement cost” coverage

Typically insures older homes that may be quite expensive to repair if insurance is required to use original construction materials and workmanship

Question 24

What is after insurance Part A?

Answer 24

Liability coverage (bodily injury and property damage) to others where insured is responsible.

Minimum coverage varies from State to State

Split limit policy:. Bodily injury per person, bodily injury per accident and property damage are all separately listed (50/100/50)

Combined single limit:. Fixed amount of coverage regardless of type, max coverage per accident

Question 25

What is part B auto insurance?

Answer 25

Medical payments coverage

Extends to injured insured or occupants of the insured’s car, regardless of who caused accident

Two groups of insured persons:

Insured and family members of insured - medical payments coverage if hurt while driving a covered auto, or as passenger in covered auto, it if insured as pedestrian when stuck by auto

Other person’s who occupy insured’s covered vehicle - medical payments coverage, does not extend to a non-owned auto driven by insured

Part B coverage limits are significantly less than liability limits

Question 26

What is part C auto insurance?

Answer 26

Uninsured motorist coverage

Referred to as be UM/UIM coverage

If uninsured/underinsured party at fault, pays for property damage/bodily injury of insured

Question 27

What is part D auto insurance?

Answer 27

Coverage for damage to the insured’s vehicle

Collision: pays if with auto damaged in accident with another vehicle or an object (fence, tree, etc). Also covers single car accident involving rollover

Comprehensive: pays to repair/replace a vehicle that is stolen or damaged in an incident that is not a collision. Defined as “other than collision coverage”

Question 28

What perils are not considered collisions?

Answer 28

Fire
Theft
Vandalism
Weather related
Running into animals
Riots
Falling objects

Question 29

What is part E auto insurance?

Answer 29

Duties age an accident or loss

Insured contractually required to:

1) give notice immediately to insurance company: time, place, circumstances and names and addresses of claimants and witnesses
2) protect auto/equipment from further loss
3) . File written proof of loss with insurance Co within policy time constraints

Question 30

What is part F auto insurance?

Answer 30

General provisions

Insured is covered driving in sent US state and Canada, not covered in Mexico

Question 31

What are the categories of legal liability?

Answer 31

Torts (civil wrongs)

Breach of contract

Criminal offenses

Question 32

What does liability insurance cover?

Answer 32

Certain classes of torts, does NOT cover breached of contract or criminal offenses

Question 33

What are the types of torts?

Answer 33

Intentional interference: intentional criminal acts are not covered. Slander (defamation/harm caused by verbal statement) and libel (defamation by written statement) ARE usually covered under personal liability polices

Strict and absolute liability: occurs as a result of legislation, one party legally liable regardless of who is responsible for injury. (Ex workers compensation). Strict liability has few defenses, absolute liability the responsible party has no defense

Negligence: an act or failure to act with appropriate care and bodily injury or property damage results, “prudent man” standard met if reasonable person in same situation would have performed same acts

Direct negligence: directly attributable to an individual

Vicarious liability: individual held responsible for negligent acts performed by someone else (parents/children or employer/employees)

Question 34

What is the concept Res ispa loquitor?

Answer 34

The act speaks for itself

A doctrine of the law of negligence, ex a plane crash, permits for the use of reasonable evidence when a specific explanation is not available. It does not have to be proven

Question 35

What is negligence per se?

Answer 35

The act itself constitutes negligence, thereby relieving burden of proof (drunk driving)

Question 36

What is the burden of proof?

Answer 36

Initially born by injured party, standard of proof in most civil cases is the preponderance if evidence (more than 50%)

Question 37

What forms can tort damage take?

Answer 37

Bodily injury: may lead to medical expenses, loss of income, pain and suffering, mental anguish and/or loss of consortium (marriage)

Property damage: usually measured by the actual monetary loss caused by the act

Question 38

What are the damages for bodily injury?

Answer 38

Special: compensate for measurable losses (loss of limbs)

General: intangible losses (pain and suffering)

Punitive: punishment for the act

Question 39

What are the defenses available for negligence?

Answer 39

Assumption of risk: not available in all states; injured party fully understood and recognized dangers involved and voluntarily chose to proceed

Negligence on the part of the injured party; Contributory (evidence that injured party did not look out for his own safety, often results in entire action failing) Comparitive negligence (amount of damage adjusted to reflect injured party’s proportion of contribution to the cause of injury

“Last clear chance” rule:. Claimant who is endangered by his own negligence may recover if the defendant has a “last clear chance” to avoid accident and failed to do so

Question 40

What are two important factors when deciding on personal liability insurance?

Answer 40

Earning power and Net Worth; judgements can be perfected by levy and seizure