Property and Liability Insurance Flashcards
3 basic forms of coverage offered by homeowners policies
- basic coverage
- broad coverage
- open coverage
basic coverage for a homeowners policy
protects the homeowner from losses associated with 12 named perils
what are the 12 named perils of basic coverage for a homeowners policy
- fire
- vehicles (damage caused by vehicles)
- lightning
- smoke
- windstorm
- vandalism
- hail
- explosions
- riots
- theft
- aircraft
- volcanic eruptions
broad coverage for a homeowners policy
provides protection from losses associated with 18 named perils
what are the 18 named perils of broad coverage for a homeowners policy
- fire
- vehicles (damage caused by vehicles)
- lightning
- smoke
- windstorm
- vandalism
- hail
- explosions
- riots
- theft
- aircraft
- volcanic eruptions
- falling objects
- the weight of ice, snow, sleet
- accidental discharge or overflow of water or stream
- 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
open perils coverage for a homeowners policy
provides protection from losses associated with all perils, EXCEPT those that are specifically excluded
what perils are generally excluded from most homeowners policies?
- movement of the ground
- ordinance or law regulating the construction, repair, or demolition of a building or structure
- damage from rising water
- war
- nuclear hazards
- power failure caused by an uninsured peril
- intentional acts
- neglect
what is an endorsement?
a supplement to an existing policy that provides additional coverage
what are the Section 1 coverages for property insurance?
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Coverage A: … (fill in the blank)
Coverage A: Dwelling
Coverage A: Dwelling (definition)
pays for repair and replacement for damage to the house and any attached structures
covers building materials on the premises
what cost method is used for Coverage A losses?
replacement cost
what is replacement cost?
the amount necessary to repair or replace the dwelling with materials of the same or similar quality at current material prices (no deduction for depreciation)
what is the formula to figure out how much the insured receives payment for when there is a loss?
[(amount of insurance carried) / (coinsurance requirement)] x amount of loss
Coverage B: … (fill in the blank)
Coverage B: Other Structures
Coverage B: Other Structures (definition)
detached structures on the property are covered by homeowners insurance
examples of “other structures” for Coverage B
- detached garages
- greenhouses
- storage buildings
what cost method is used for Coverage B losses?
replacement cost
Coverage C: … (fill in the blank)
Coverage C: Personal Property
Coverage C: Personal Property (definition)
covers losses to tangible, moveable property owned by the insured
examples of “personal property” for Coverage C
- furniture
- entertainment equipment
- music collections
- videos
- paintings
- lamps
- books
- clothing
what cost method is used for Coverage C losses?
actual cash value
what types of personal property are excluded from coverage?
- animals, birds, fish
- articles separately described and specifically insured
- motorized land vehicles used off premises
- property of roomers or boarders not related to the insured
- aircraft and parts
- furnishing on property rented out to others
- property held as samples, for sale, or sold but not delivered
- business data, credit cards
- business property held away from the residence premises
Coverage D: … (fill in the blank)
Coverage D: Loss of Use
Coverage D: Loss of Use (definition)
pays for additional living expenses incurred when the insured is unable to occupy the dwelling due to damages caused by a covered peril
may also pay for lost rental income during the period in which the property is uninhabitable
what are the Section 2 coverages for property insurance?
Coverage E: Personal Liability
Coverage F: Medical Payments to Others
Coverage E: … (fill in the blank)
Coverage E: Personal Liability
Coverage E: Personal Liability (definition)
pays for claims that result from bodily injury and property damage to others, when the insured or members of the insured’s resident family are responsible
Coverage F: … (fill in the blank)
Coverage F: Medical Payments to Others
Coverage F: Medical Payments to Others (definition)
pays all necessary medical expenses without regard to liability for others arising out of the insured’s activities, premises, or animals
what are the exceptions to injuries or damages covered by Coverage E and Coverage F?
injuries or damages…
- that are expected to intended by the insured
- resulting from the insured’s business or professional activities
- resulting from the rental of the premises
- arising out of premises the insured owns, leases, or rents to others that have not been declared an insured location
- arising out of ownership or use of watercraft, motorized vehicles, and aircraft
- caused by war or nuclear weapons
- caused by the transmission of a communicable disease
- arising out of sexual molestation, corporal punishment, or physical/mental abuse
- arising out of the sale, use, manufacture, delivery, transfer, or possession of a controlled substance
what are the forms of homeowners insurance policies?
- HO-2 Broad Form
- HO-3 Special Form
- HO-4 Renters Policy
- HO-5 Comprehensive Form
- HO-6 Condominium Owners Form
- HO-8 Modified Coverage Form
HO-2 … (fill in the blank)
HO-2 Broad Form
HO-3 … (fill in the blank)
HO-3 Special Form
HO-4 … (fill in the blank)
HO-4 Renters Policy
HO-5 … (fill in the blank)
HO-5 Comprehensive Form
HO-6 … (fill in the blank)
HO-6 Condominium Owners Form
HO-8 … (fill in the blank)
HO-8 Modified Coverage Form
HO-2 Broad Form (definition)
provides coverage on a broad perils basis (18 named perils)
HO-3 Special Form (definition)
provides coverage on an open perils basis
personal property coverage under an HO-3 policy is still provided on a named perils broad form basis
HO-4 Renters Policy (definition)
provides coverage for renters and tenants
HO-5 Comprehensive Form (definition)
provides coverage on an open perils basis
personal property protection is also on an open perils basis
what is the main difference between an HO-3 and an HO-5?
with an HO-3, personal property coverage is a named perils broad form basis
with an HO-5, personal property coverage is an open perils basis
HO-6 Condominium Owners Form (definition)
provides coverage for condominiums (coverage for inside structure of their unit and all of its contents)
does not provide building coverage other than for additions and alterations
outside structure is owned, maintained, and insured by the condo association
HO-8 Modified Coverage Form (definition)
provides repair cost coverage (instead of providing replacement cost coverage) for damage to property
typically insures older homes that may be quite expensive to repair if the insurance is required to use original construction materials and workmanship
what are the parts of auto insurance?
- Part A: liability coverage
- Part B: medical payments coverage
- Part C: uninsured motorist coverage
- Part D: coverage for damage to the insured’s automobile
- Part E: duties after an accident or loss
- Part F: general provisions
Part A: … (fill in the blank) (auto insurance)
Part A: liability coverage
Part B: … (fill in the blank) (auto insurance)
Part B: medical payments coverage
Part C: … (fill in the blank) (auto insurance)
Part C: uninsured motorist coverage
Part D: … (fill in the blank) (auto insurance)
Part D: coverage for damage to the insured’s automobile
Part E: … (fill in the blank) (auto insurance)
Part E: duties after an accident or loss
Part F: … (fill in the blank) (auto insurance)
Part F: general provisions
Part A: liability coverage (auto) (definition)
liability covers bodily injury or property damage to others for which the insured driver is deemed to be responsible
most states have split limit policies, while some have combined single limit policies
what does each section of a 50/100/50 split limit mean?
$50k of bodily injury coverage per person
$100k for bodily injury coverage per accident
$50k of property damage coverage
what is a combined single limit policy?
has a fixed amount of coverage that the insurance company pays, whether the loss is attributable to bodily injury or property damage
Part B: medical payments coverage (auto) (definition)
provides coverage for medical expenses sustained in an accident
coverage extends to the injured insured or occupants of the insured’s car, regardless of who caused the accident
Part C: uninsured motorist coverage (auto) (definition)
coverage for uninsured or under-insured motorist
if an uninsured or under-insured party is at fault, this coverage will pay the property damage or bodily injury of the insured who carries this type of coverage
Part D: coverage for damage to the insured’s automobile (auto) (definition)
comprehensive and collision coverages are designed to repair or replace the insured’s automobile when it is damaged
what is collision coverage (part of Part D)?
collision coverage pays if the automobile is damaged in an accident with another vehicle or an object such as a fence, tree, garage door, lake, etc.
also covers damage resulting from a single-car accident that involves the automobile rolling over (which might be due to ice on the road or heavy rain)
what is comprehensive coverage (part of Part D)?
comprehensive coverage helps pay to repair or replace a vehicle that is stolen or is damaged in an accident that is not a collision
Part E: duties after an accident or loss (auto) (definition)
upon the occurrence of a loss to the insured’s property, the insured is contractually required to fulfill a number of obligations before the loss can be settled
what are the obligations an insured must fulfill under Part E auto insurance?
- give notice immediately to the insurance company of the time, place, and circumstances of the occurrence, including names and addresses of any claimants and witnesses
- protect the auto from further loss
- file written proof of the loss with the insurance company consistent with the time constraints set forth in the policy
Part F: general provisions (auto) (definition)
an automobile insurance policy covers the insured driving in any US state and in Canada
it does NOT cover in Mexico
what are some examples of what might affect an individual’s auto insurance premiums?
- age
- marital status
- credit score
- driving record
- location where the car is kept
- type of car
- use and mileage of the car
- policy coverages and deductibles
what are the categories of legal liability to which individuals are exposed?
- torts (civil wrongs)
- breach of contract
- criminal offenses
what are the 3 general types of torts related to liability?
- intentional interference
- strict and absolute liability
- negligence
what is intentional interference (type of tort)?
an intentional act committed against another that causes injury
is intentional interference covered under a liability insurance policy?
no, with the exception of slander and libel
what is slander?
defamation or harm caused by a verbal statement
what is libel?
defamation caused by a written statement
what is strict and absolute liability?
occurs as a result of legislation in which one party is held legally liable regardless of who is responsible for the injury
what is an example of strict and absolute liability?
workers compensation laws
what is negligence?
an act or failure to act with appropriate care, and bodily injury or property damage results from such action or inaction
what does “res ispa loquitur” mean?
“the act speaks for itself”
permits the use of reasonable evidence when a specific explanation of negligence is not available (negligence does not have to be proven)
example: if a plane crashes, there is negligence, it does not have to be proven
what does “negligence per se” mean?
the act itself constitutes negligence, thereby relieving the burden to prove evidence (example: drunk driving)
what are some defenses to negligence?
- assumption of risk
- negligence on the part of the injured party (contributory and comparative negligence)
- “last clear chance” rule
what does assumption of risk mean?
the injured party fully understood and recognized the dangers that were involved in an activity, and voluntarily chose to proceed
what is contributory negligence?
there is evidence that the injured party did not look out for his own safety
what is comparative negligence?
the amount of damage is adjusted to reflect the injured party’s proportion of contribution to the cause of the injury
what is the “last clear chance” rule?
this rule states that a claimant who is endangered by his own negligence may recover if the defendant had a “last clear chance” to avoid the accident and failed to do so
what does PAP stand for?
personal auto package
what does PLUP stand for?
personal liability umbrella policy
what is a PLUP?
provides an additional layer of protection after the underlying liability limits on a homeowner policy or personal auto policy have been exhausted
what does CPP stand for?
commercial package policy
what is a CPP?
covers loss of assets from various perils and some liability
what does CLUP stand for?
commercial liability umbrella policy
