Misc Personal Lines Coverage Flashcards
Personal Inland Marine Insurance
Can be attached by endorsement to a HO or DP; may also be a separate policy. It’s a form of coverage used to insure movable property against direct loss. “Floater”
Personal Articles Floater (Scheduled Article Floater)
Basic form used to insure individual items of personal property.
Claims settled on ACV basis (with some exceptions)
Worldwide coverage (some exceptions)
Open perils basis (very few exclusions: wear & tear, insects/vermin, intentional loss, war) (Specific classes of property have additional exclusions)
Coverage may be provided for:
Jewelry, Furs, Cameras, Musical Instruments, Silverware/Goldware, Golf Equipment, Fine Arts, Stamp/Coin Collection, China/Crystal
Personal Jewelry Floater Coverage
May be ACV or valued basis
Pair & Sets Clause
If a covered loss occurs to an item that is part of the set, the value of the remaining item is reduced based on the difference of the value of the total set and the value of each item individually.
(EXAMPLE: if a pair of diamond earrings is valued at $2,000, and a loss occurs to one earring, the value of the pair drops by more than 50%. If one earring by itself is valued at $800, the total loss is $1,200)
Appraisals
Must document a description of the item and its value. Some insurers require all insured items to be appraised, some only require items with value of $2500 or more, etc. Usually required at or before the time insurance is bound. Newly acquired items (if they are of same class of property already insured by the floater) are automatically insured for a specific percentage of the value shown on the schedule for 30 days.
Personal Effects Floater
Open peril coverage for items worn or carried by tourists and travelers, coverage applies worldwide but NOT at home.
Non-specific belongings.
Fine Arts Floater
Covers paintings, etchings, tapestries, rare manuscripts, and antiques. Automatic coverage for 90 days for newly acquired items. Usually written on a valued basis. Exclusions include:
Loss caused by a restoration/repairing process
Breakage that is not caused by fire, lightning, explosion, aircraft, collision, windstorm, earthquake, flood, malicious mischief, theft, or derailment/overturn of conveyance
Mysterious disappearance
Cameras Floater
Insured items are scheduled, exception that blanket coverage is provided on shades, filters, etc. Automatic coverage for new items is 30 days at a limit of 25% of the limit designated on the schedule.
Musical Instrument Floater
No coverage is provided if the covered instruments are played for remuneration (a fee). Anyone playing for hire must purchase an endorsement and pay an additional premium. Insured must report new items within 30 days.
Boatowners Policy
A package policy that provides property and liability coverage, similar in design to a HO policy. Coverage provided is similar to personal auto policy. Generally used to insure boats that can be towed by a car.
Section I provides open perils coverage for the hull, motor, trailer, equipment, and accessories manufactured for marine use. Losses are settled on ACV basis.
Section II provides Watercraft Liability, Medical Payments for passengers, and Uninsured Boaters coverages (does NOT include personal injury liability)
Yacht Policy
Designed for larger vessels usually with crew members. Large vessels are normally insured under the complete package of yacht coverages, which includes Hull Insurance, Protection and Indemnity and Medical Payments. Provides property, liability, protection and indemnity coverage for the insured’s legal liability for bodily injury and damage to property of others, personal property coverage for property on the yacht, and coverage for commercial towing, fuel spills, and dinghies.
Lay Up Warranty
Applies when the insured boat is in storage and allows for a return of premium due to the reduced risk of the boat not being used when laid up. If the insured operates the yacht during lay-up period (or lives on it), NO coverage is provided. Each yacht policy contains a navigation territory that states where the boat will be navigated, such as inland lakes and waterways. The insured does NOT have coverage if the boat is navigated outside the designated territory. Endorsement is available to broaden navigation territory.
Difference in Conditions (DIC)
requires a special form designed to fill in coverage gaps contained in a property policy. No standard policy form. Coverage is generally written on an open perils basis excluding losses that are covered under a standard property form (fire, lightning, wind, hail)
Form does not contain Coinsurance or Pro Rata Clause and form may be written for an amount of insurance different from the limit of insurance provided by the policy it complements. If supplementing an underlying policy, DIC coverage normally carries a high ($10,000+) deductible. Often written to provide coverage in the event of earthquake, flood, collapse, or subsidence.
Earthquake Endorsement
Earthquake (earth movement) is excluded on virtually all property policies. It may be added to most homeowners policies by endorsement and in some jurisdictions (CA) may be purchased as a separate policy. Includes earth movement, land shock waves or tremors, landslide, mudslide, mudflow, sinkhole, and the rising, sinking, or shifting of the Earth. All earth movements occurring within a 72 hour period are considered a single occurrence or earth movement.
National Flood Insurance Program (NFIP)
federal program that enables certain property owners to purchase flood insurance. Federal Insurance Administration administers the program under the Federal Emergency Management Agency (FEMA). The federal government makes payment for, or subsidizes, all flood losses.
Flood policies are available from participating private insurers who participate in the Write Your Own (WYO) Program, and directly from the NFIP. Agents do not have authority to bind coverage with the NFIP, but all licensed agents and brokers may write flood insurance with the NFIP.
Communities in flood-prone areas must have established an approved flood control program in order to participate in the NFIP and are called participating communities. If a property owner lives in a community that is not a participating community, the property owner CANNOT purchase flood insurance, regardless of the degree of flood risk.
Exclusions and Rules for Flood Policies
provide protection for direct loss to insured property such as a dwelling and its contents. Flood is defined as a general and temporary condition of partial or complete inundation of land. The land MUST be normally dry land and the flood must involve:
2 or more acres of the insured’s land, OR the insured’s entire piece of property AND an adjacent piece of property
The inundation of land may be the result of:
Overflow of inland or tidal waters, such as a tidal wave generated by a hurricane
Unusual and rapid accumulation or runoff of surface waters
Mudflow caused by accumulation of water
Collapse or destabilization of land along a shoreline resulting from erosion or the effect of waves or water currents exceeding normal, cyclical levels
Dwellings eligible for coverage must have 2 or more rigid outside walls, a fully secured roof, and be affixed on a permanent foundation. Coverage is available for both the building and personal property, however, NO coverage is provided for personal property in basements.
Exclusions include personal property located in basements, loss of profits, loss of access to property, business interruption, additional living expenses, ordinance or law, earth movement, theft, fire, explosion, wind, freezing, and damage to lawns, trees, shrubs, plants and growing crops. The NFIP also does not cover money, securities, livestock, wharves, piers, bridges, docks and other structures on or entirely over water.
NFIP Eligibility, Limits, and Conditions
Coverage is provided on/for:
1 to 4 family dwellings under the Dwelling Form
Other residential buildings and non-residential buildings under the General Property form
Buildings owned by a residential condo assn under the Residential Condo Building Assn Form (RCBAP)
Under FEMA regulations, in order to obtain, renew, or change a federal loan, a property owner must purchase flood insurance if the property is located in a special flood hazard area(SFHA)
Emergency Flood Program
offers a $35,000 max amount of coverage on 1 to 4 family dwellings and a max of $100,000 on other residential and non-residential buildings. Max amount of coverage for contents in a single family dwelling is $10,000 and $100,000 on other residential and non-residential buildings.
Regular Flood Program
offers a $250,000 max amount of coverage on residential buildings and $500,000 on non-residential buildings. The maximum amount of coverage for contents in a single residential building is $100,000 and $500,000 on non-residential.
Coverage for Emergency and Regular Flood Programs
becomes effective on the 30th calendar day after the applicant completes the application and pays the premium. Property is insured on ACV basis EXCEPT 1 to 4 family residences and residential condos may be insured on replacement cost. Property removed to protect is covered for 45 days at other locations.
Coverage up to $30,000 applies to the increased cost of compliance with flood plan management ordinances or laws that regulate the repair or rebuilding of property damaged in a flood.
Each type of property loss is subject to a deductible. The $500 loss deductible applies separately to the building and to personal property, including any appurtenant structure and debris removal expense.
WYO - Write Your Own
cooperative effort involving FEMA and the private sector that allows existing property and casualty insurance companies to write, issue, and service flood insurance under their own names. Over 90% of the flood insurance policies in force are maintained by WYO companies and the rest are by FEMA.
WYO companies may structure their flood insurance business within their existing personal lines business. Provides incentive for producers or agents to place their flood business with the WYO companies they represent.
Fair Access to Insurance Requirements (FAIR)
Provides basic property insurance to property owners who are unable to secure coverage in the standard property marketplace. Utilized when existing homeowners or dwelling property coverage is being cancelled or non-renewed due to loss history or the property owner or property fail to meet other underwriting guidelines. FAIR plan may also be purchased when a dwelling is currently uninsured, and no carrier will write coverage.
Personal Umbrella Policy
liability insurance provided on an excess basis. Each contract is unique and may contain provisions and language not found in other umbrella policies. Personal umbrella coverage may be issued as an endorsement added to a homeowners policy or as a standalone policy.
It provides an additional layer of liability insurance after the limits of underlying primary policies are exhausted due to paid claims.
It provides coverage on a broader basis than the primary policies.
It drops down to provide first-dollar coverage when the underlying primary policies don’t provide coverage.
Coverage is usually written in increments of $1 million, with a single limit per occurrence covering claims for both Bodily Injury/Property Damage, and Personal Injury in excess of the insured’s underlying policy limits.
Insurance companies issuing umbrella coverage require their insureds to have underlying primary insurance in place. “Primary” insurance pays before the umbrella pays and “underlying” insurance provides coverage for the same risks that are insured under an umbrella policy. For example, every umbrella policyholder must also have personal auto and personal liability insurance in place. If the insured owns recreational vehicles, watercraft, or rental property, those exposures must also be insured on underlying primary policies.
The umbrella acts as excess coverage over the limits of these underlying primary policies. If the coverage in an umbrella is broader than the underlying policy—meaning the primary policy doesn’t insure a loss—the umbrella will “drop down” and cover the entire loss. When an umbrella policy drops down and acts as a primary policy, the insured pays a self-insured retention, which is a method of loss cost-sharing. The only time the insured must pay a self-insured retention is when the umbrella drops down. If the primary policy pays its limit, and then the umbrella policy makes payment, the insured does NOT pay the self-insured retention.
Umbrella Exclusions
The personal umbrella policy is generally designed to provide coverage on a worldwide basis to third parties and does not pay benefits directly to an insured. Common personal umbrella liability exclusions include:
Losses arising from bodily injury and property damage if the insured fails to maintain the required underlying insurance.
Intentional injury
Damage to property in the care, custody, or control of an insured
Aircraft
Business pursuits
Professional Liability
Directors and Officers Liability
Discrimination
Mobile Home Insurance
Endorsement to a HO policy, can be separate. When it’s a separate policy, it will include Section I Property & II Liability. Under a mobile HO policy, Coverage A (Mobile Home) insures the mobile home itself; property installed on a permanent basis, such as appliances, floor coverings, dressers, and cabinets, attached structures, utility tanks. Coverages B, C, & D are same as HO except Coverage C - Personal Property is generally written at 40% of Coverage A instead of 50%. The Additional Coverage, Property Removed, is generally expanded to include up to $500 for reasonable expenses incurred while moving the mobile home when threatened by a covered peril.
May be written on an open perils basis with losses to the mobile home valued on a replacement cost basis with other items of property valued on ACV basis. Same endorsements available as HO policy. Unique to mobile homes are Transportation/Permission to Move Endorsement and the Mobile Home ACV Settlement Endorsement.
Transportation/Permission to Move Endorsement Coverage
provides coverage for collision, upset, stranding, or sinking for up to 30 days while the mobile home is being moved to a new location.
Mobile Home Actual Cash Value Settlement Endorsement
may be used when the insured does not desire to insure the mobile home to 80% of replacement cost
Crop, Hail, and Windstorm Insurance
specialized policy that protects the insured against reduced yield because of a covered loss to crops before they are harvested
Crop/Hail Insurance
This is private insurance, not reinsured by the federal government. This policy provides named perils coverage. Other perils that may be included in addition to hail are:
Fire, lightning, wind.
Freezing, drought, insects and disease.
The rates for crop hail insurance are developed by the Crop Hail Insurance Actuarial Association (CHIAA). Crop-hail insurance is rated on an acreage basis and the insured can choose a wide variety of coverage options. Typically, coverage begins at 12:01 a.m. following the date the application is signed, provided the crop is clearly visible above the ground. However, this will vary by insurer and state. Changes will be addressed in the state law chapter if applicable.
The policy is typically written with deductibles (normally a 5% yield reduction). Policies can be written to cover a percentage of expected yield, such as 50% or 100%. If a crop is expected to yield 10,000 bushels but yields only 5,000, the policy will cover the unrealized 5,000 bushels. The coverage ceases when the crop is harvested (1 growing season) and the payment of an insured loss reduces the total amount of available insurance. The policy includes a replanting provision designed to reduce both the insured’s and the insurer’s losses. The insurer may reimburse the insured up to 20% of the amount of insurance. The reimbursement does not reduce the amount of insurance available for the crop.
Crop/Hail Insurance Exclusions
These may vary by company, but common exclusions include:
Until normal visible (crop must be above ground)
Failure to harvest a mature crop
Non-owned property (share crop)
Loss from injury to buds, blossoms or blooms, unless the crop is affected
Injury to leaves, vines, etc unless crops are also damaged or affected
Injury to trees, bushes, fruit or nut crops
Multi-Peril Crop Insurance (MPCI)
written by private insurers and is reinsured by the Federal Crop Insurance Corporation (FCIC). Coverage may be provided for approximately 200 different types of crops, but 5 major crops account for 90% of the liability assumed (corn and maize, cereal grains, soybeans, tobacco, and cotton). Covered causes of loss include: adverse weather conditions, fire, insects, plant disease, wildlife, earthquake, and volcanic eruption.
Windstorm Insurance Coverage
Covered as the peril of wind in standard property insurance policies. In some states, exclusionary endorsements may be added to property policies to exclude coverage for the peril of wind or windstorm. These states are Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, South Carolina, and Texas. Because these states are at high risk for wind loss caused by hurricane, they have established wind and/or wind and hail associations that provide a marketplace of last resort for those who are unable to purchase insurance for the peril of wind on their primary property policies. In these and other states, some insurers require mandatory wind deductibles of a certain dollar amount, such as $2,500 or higher, based on the geographic location of property (such as within a certain distance of the sea coast) or prior wind losses.
