Key Point Review Questions Study 7

Question 1

1) What is the purpose of an extension?

Answer 1

Extensions enhance the coverage offered in property policies. They are written directly into the standard policy wording rather than added to it by underwriters.

Question 2

2) What is an endorsement and how does it work?

Answer 2

An amendment added to a written document, particularly an agreement between parties, altering its provisions.
Endorsements override specific terms in the policy by:
• Removing coverage for certain property or perils
• Adding warranties or additional conditions
• Altering ore moving policy conditions or limitations
• Offering permission for activities, occupancy, or parties that may not otherwise be covered.

Question 3

3) What is a free-form endorsement?

Answer 3

An endorsement specifically written to address particular circumstances of a risk.

Question 4

4) What is manuscript wording?

Answer 4

Policy wording that does not conform to the standard wording in general use within the insurance industry and that is unique to the policy involved.

Question 5

5) What is covered under a Sewer Backup Endorsement?

Answer 5

It covers against damage caused by escape of water from a sewer, sump or septic system.

Question 6

6) What is covered under a flood endorsement?

Answer 6

Covers damage from flooding.

Question 7

7) What is covered under an Earthquake endorsement?

Answer 7

Earthquake endorsements include coverage for mudslide, landslide, volcanic eruption, or other earth movement that occurs at the same time as an earthquake and include aftershocks for the period specified in the policy.

Question 8

8) What is liquefaction?

Answer 8

A phenomenon in which earthquake shaking temporarily reduces the strength and stiffness of a soil that is both composed of unconsolidated sediments and saturated with water.

Question 9

9) What is a Vacancy Permit, and how is it used?

Answer 9

If an insurers agrees to maintain coverage on a vacant building, it must grant permission for the vacancy by way of a Vacancy Permit, for which additional premium is usually charged.

Question 10

10) What is covered under Section 1 of a By-Laws endorsement?

Answer 10

• Under Section 1, the By-Laws endorsement will pay:
• The cost of demolition and removal of undamaged areas of the building and detached structures.
• The increased costs of repair to comply with the minimum code requirements of as of the date of loss.

Question 11

11) What is covered under Section 2 of a By-Laws endorsement?

Answer 11

Under Section 2, the By-Laws endorsement will pay:
• The increased costs of installation or repair to comply with minimum requirements for the installation of a sprinkler system.

Question 12

12) What are the two primary arrangements for working from home?

Answer 12

Telecommuting – working from home via the internet.

Home-Based Business – An enterprise operated from a residence.

Question 13

13) What is telecommuting?

Answer 13

Working from home via the internet.

Question 14

14) What is a home-based business?

Answer 14

An enterprise operated from a residence.

Question 15

15) What is covered under the Home-Based business endorsement?

Answer 15

Whether the business exposure arises from telecommuting or from a home-based business, a Home-Based business endorsement may be added to the policy to enhance property limits or perils and ensure proper coverage for property, liability and consequential losses.

Question 16

16) What is covered under an Identity Theft Endorsement?

Answer 16

It covers the costs associated with restoring an insured’s identity:
• Legal costs to notify the appropriate authorities
• Liaison between the insured and credit bureaus, credit-card companies, and other financial institutions
• Lost wages as a result of time off work to mitigate the loss; coverage limited to a dollar amount, usually $500 per week.
• Loan application fees
• Legal fees to defense against lawsuits as a result of identity theft.
• Long-distance phone charges
• Some insurers will also provide a credit-monitoring service for a specified period after the identity theft

Question 17

17) What is a floater and how does it work?

Answer 17

Additional coverage for movable items, such as jewelry or antiques, beyond what is included in the Homeowners policy. A policy designed to cover property that floats or moves form location to location. Covers property in transit.

Question 18

18) What is a schedule of insurance?

Answer 18

A list of items individually covered by a policy – for example a list of jewels under a jewelry floater or a list of buildings under a fire policy.

Question 19

19) What is covered under a Personal Articles Floater?

Answer 19

Personal articles floater offers additional coverage for those who need it.

Question 20

20) What coverage is provided under a Scheduled Personal Property Endorsement?

Answer 20

Coverage for scheduled property is not restricted to the principal residence premises.

Question 21

21) How is Personal Computer defined?

Answer 21

The Central processing unit and auxiliary equipment including but not limited to central processing unit (CPU), monitor, speakers, modems, keyboards, printers, disk and tape drives, cassette tape recorders, and word processing equipment, media, comprising materials on which data are electronically recorded such as not limited to magnetic tapes, diskettes, disk packs, and cassettes, and software comprising of programs or instructions stored on media.

Question 22

22) Which TWO (2) ways can an underwriter enhance coverage on certain property?

Answer 22

• Offer endorsements on floater, which attach to the primary policy but provide independent coverage, for example, on watercraft and accessories
• Increase the special limits of insurance without amending perils or deductibles, as might be done for property of students living away from home.

Question 23

23) Why would someone want to purchase a Watercraft Floater?

Answer 23

Homeowner’s forms include a modest amount of coverage, against named perils only, for watercraft and their furnishings. For insures with motorized boats, that coverage is often not enough.

Question 24

24) What is covered under a Vacation or Recreational Trailer Floater?

Answer 24

Vacation or Recreational Trailer floaters provide coverage for certain vehicles excluded under Coverage C of homeowner’s forms. If a loss renders the unit tenantable, some vacation or recreational trailer floaters may cover additional living expense.