Property And Liability Insurance Flashcards
What is property insurance?
Property insurance provides financial protection for losses on houses, condominiums, automobiles, boats, and other property assets.
What is liability insurance?
Liability insurance protects individuals against the financial loss associated with legal action, generally due to propert damage, personal injury, or loss of income.
Homeowners insurance: three basic types
- basic coverage
- broad coverage
- open coverage
Basic coverage
Protects the homeowner from losses associated with twelve (12) named perils:
- Fire
- Vehicles (damage caused by vehicles)
- Lightning
- Smoke
- Windstorm
- Vandalism or malicious mischief
- Hail
- Explosions
- Riots or civil commotion
- Theft
- Aircraft
- Volcanic eruptions
Broad Coverage
Provides protection from losses associated with eighteen (18) named perils. This includes the twelve (12) perils covered in basic coverage, plus coverage for losses associated with these additional six (6) named perils:
- 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
Open perils coverage
Provides protection from losses associated with all perils, except those that are specifically excluded.
More comprehensive coverage than the basic and broad policies.
What perils are generally excluded from most homeowners policies?
Movement of the ground (earthquake, ground movement from volcanic eruption, mud/landslide, and sink hole)
Ordinance or law regulating the construction, repair or demolition of a building or structure
Damage from rising water (including floods; surface and tidal water; waves; water below the surface that exerts
pressure on buildings, structures, and improvements; and water backing up through drains and sewers)
War
Nuclear hazards (including radiation or radioactive contamination)
Power failure caused by an uninsured peril (such as spoilage due to a freezer thawing out)
Intentional acts
Neglect
What is an endorsement?
An endorsement is a supplement to an existing policy that provides additional coverage.
Used to cover perils that are excluded from coverage.
What is covered in section 1?
Property Insurance is covered in section 1 of most policies
Coverage A: Dwelling
Coverage B: other structures
Coverage C: personal property
Coverage D: loss of use
Coverage A: Dwelling
- pays for repair and replacement for damage to the house and any attached structures.
- losses are paid on a replacement cost basis.
- some policies require the insured to carry homeowners insurance of at least 80% of the replacement cost of the home to be fully covered for partial loss. (Co-insurance requirement.)
- if less than 80% of replacement cost is carried, the insured receives a payment for partial loss. (SEE IMAGE for example)
Coverage B: other structures
- Detached structures on property are covered by homeowners insurance.
Examples include:
- detached garages
- greenhouses
- storage buildings.
Typically the limit of this coverage is 10 percent of the coverage A (dwelling) limit.
- insured on a replacement cost basis
- other structures used for business are not covered
Coverage C: Personal Property
- tangibles (furniture,paintings, books, etc…)
- typically limit of coverage is 50% of dwelling coverage (Part A)
- losses are insured on an actual cash value basis. (see image for example)
- replacement cost can be purchased to enhance personal property coverage.
Limits on personal property items - Coverage C
$200 - money, bullion, coin collections, and bank notes
$1,500 - securities, bills, evidence of debt, airline tickets, and manuscripts
$1,500 - theft of jewelry, watches, gems, precious metals, and real furs
$1,500 - watercraft, including trailers (not boat affiliated) and equipment
$2,500 - theft of firearms
$2,500 - theft of silverware, gold-ware, pewter-ware, and similar property
- you can purchase additional protection in these items through endorsements or separate insurance policy
What types of personal property are excluded from coverage on a homeowners policy?
- Business related Property
- Property of Roomers/renters
- property of apartment rented to others
Coverage D: Loss of use
- coverage pays for additional living expenses incurred when the insured is unable to occupy the dwelling due to damages caused by a covered peril.
- also can pay for lost rental income during the period the property is uninhabitable.
War are the limits on coverage D coverage?
30% of coverage A limit for - Ho-2, HO-3, HO-4, and HO-5 policies
10% of coverage A for HO-8 policies
50% of coverage C for HO-6 policies
What is covered is Section II coverages?
Coverage E: Personal Liability
Coverage F: Medical Payments to Others
Coverage E: Personal Liability
- 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.
- Minimum coverage is typically $100,000 per occurrence
- The insurer will also pay for legal defense and settlement costs associated with a claim
Coverage F: Medical Payment to Others
- Coverage F pays all necessary medical expenses without regard to liability for others arising out of the insured’s activities, premises, or animals.
Medical expenses must be incurred within 3 years of the accident.
Insurance policies limit the amount of medical expenses that are paid. The options may vary by insurance
company and by state, but a limit of $1,000 to $5,000 is common for many basic policies. $10,000 is the upper
limit for some companies.
Coverage F does not pay for medical expenses incurred by the insured or a member of the insured’s household
unless the member of the household is a residence employee
Limits and Exclusions to Coverage F & E
- That are expected or 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, rents, or leases 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 of any kind
Caused by the transmission of a communicable disease
Arising out of sexual molestation, corporal punishment, or physical or mental abuse
Arising out of the use, sale, manufacture, delivery, transfer, or possession of a controlled substance other than
legally-obtained prescription drugs.
What is HO-2?
-Broad Policy Form
Provides coverage on a broads perils basis
What is HO-3 Policy Form?
Special Policy Form
Provides coverage on an “open perils”, or “all-risks” basis.
If a specific peril is not excluded from coverage in the policy, the policy covers losses associated with that peril.
Personal property coverage under a HO-3 policy is still provided on a named perils broad form basis.
HO-4 Renters Policy
- Provides For renters and tenants
- personal liability Coverage
HO-5 Comprehensive Form
- Provides coverage on an “open perils”, or “all-risks” basis.
- comprehensive homeowners insurance.
-very similar to the special form of homeowners insurance (HO-3), with one major change. An HO-5 policy
provides personal property protection on an open perils, instead of a broad perils basis.
HO-6 condominium Owners Form
Provides coverage for condominiums.
Coverage for inside structure of their unit and all of its contents (the outside structure is owned, maintained and
insured by the association)
Covers the same perils provided in the HO-2 and HO4 forms (broad perils coverage)
But does not provide building coverage other than for additions and alterations
Like renters insurance (HO- 4), the minimum amount of personal property coverage (Coverage C) that can be purchased is $6,000
Loss of use (Coverage D) is limited to 50 percent of the Coverage C limit
HO-8 Mosidified Coverage form
Modified form policy
Provides repair cost coverage (instead of providing replacement cost coverage) for damage to property
Provides “functional replacement cost” coverage
Typically insures older homes that may be quite expensive to repair if the insurance is required to use original
construction materials and workmanship
Chart - Coverage for different forms of homeowners insurance
The Personal Auto Policy (PAP)
Organized into parts A-F for coverage
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 - Liability Coverage
- covers bodily injury or property damage to others for which the insured driver is deemed responsible.
- amount of minimum coverage required varies from state to state
- some states have split limit policies and some have combined single limits
PAP - split limit policy
A split limit policy is one in which the liability for bodily injury per person, bodily injury per accident, and
property damage are all separately stated. For example, 50/100/50 means:
$50,000 of bodily injury coverage per person
100,000 of bodily injury coverage per accident
$50,000 of property damage coverage
PAP - Combined Single Limit Policy
-Fixed amount that the insurance company pays, wether the loss is attributable to bodily injury or property damage.
Example - a policy might be issued with a $300,000 limit, which is max coverage for a single accident, regardless of if it was due to bodily injury or property damage.
Part B: Medical Payments Coverage
- Part B provides coverages for medical expenses sustained in an accident.
- coverage extends to the injured or occupants of the insureds car, regardless of who caused the accident.
- part B specifies two groups of insured persons:
- Covers anyone driving or in the car. If your the insured or family member of the insured you also are covered if hit as a pedestrian.
- part b medical payment coverage limits are significantly less than liability payments.
Part C: uninsured motorist coverage
- coverage for uninsured or underinsured motorist is referred to as UM or UIM coverage.
- in an uninsured or underinsured party is at fault. This coverage will pay the property damage or bodily injury if the insured with this type of coverage
Part D: coverage for damage to the insureds automobile
Comprehensive and collision coverages are designed to repair or replace the insureds vehicle when it is damaged.
- vehicles that are financed are required to have coverage for both comprehensive and collision.
- failure to comply may result in lien holder purchasing the required insurance and adding the cost to the monthly payment .
Collision Coverage
- pays if the automobile is damaged in an accident with another vehicle or an object such as a (fence, garage door, etc..)
Comprehensive coverage - “other than collision coverage”
- Helps pay to repair or replace a vehicle that is stole or is damaged in an incident that is not a collision.
fire theft vandalism weather-related (falling tree, flood, earthquake, hail, hurricane, sinkhole) running into animals riots falling objects
Part E: Duties After an accident or loss
- insured is contractually required to fulfill a number of obligations before the loss can be settled.
- immediately after the loss the insured must:
obligations before the loss can be settled. Immediately after the loss, the insured must.
1.Give notice immediately to the insurance company of the time, place and circumstances of the
occurrence, as well as the names and addresses of any claimants and witnesses.
- Protect the auto and equipment from further loss.
- File written proof of the loss with the insurance company consistent with time constraints set forth in the policy.
Part F: General Provisions
- An automobile insurance policy covers the insured driving in any U.S state and Canada.
- not in countries like Mexico
Auto policy exclusions
Insurers utilize exclusions for risk they are unwilling to insure.
- Named driver. Some policies only
cover household residents specifically named in the policy. - Excluded driver. Excludes persons specifically named in an endorsement attached to the policy.
- Intentional acts. Excludes coverage for losses caused by intentional acts
- Racing. Coverage is excluded if the auto is used in a racing event.
- Vehicles with fewer than four wheels are not covered.
What are three different types of legal liability?
Torts(Civil Wrongs)
Breach of Contract
Criminal Offenses
What types of legal liability does liability insurance cover?
Torts
What are the tree types of Torts?
- Intentional Interference
- Strict and Absolute Liability
- Negligence
What is Intentional Interference?
- Intentional Act committed against another that causes injury
- Generally not covered, except for Slander (verbal statement) and Libel (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.
- Workers compensation for example
Strict Liability = Responsible Parties have few defenses
Absolute Liability = Responsible Party has no Defense.
What is Negligence?
an act or failure to act with appropriate care, bodily injury or property damage results from such action or inaction.
Direct Negligence - Act performed by one person
Vicarious Liability - An individual is held responsible or partially responsible for negligent acts performed by someone else. (Parents responsible for kids, employers held responsible for employeesA)
What is res ispa loquitor?
The act speaks for itself
What is negligence per se?
The act itself constitutes negligence, thereby reliving the burden to prove negligence (drunk driving)
What is burden of proof?
Evidence to prove that negligence was commited, evidence to support a claim
What are three different types of damages from a tort?
Special damages - compensate for measurable losses
General damages - compensate for intangible losses ( pain and suffering)
Punitive damages - assessed as punishment against the responsible person
What is the collateral source rule?
Damages assessed against a negligent party should not be reduced simply because the injured party has other sources of recovery available such as insurance or employee benefits
What are the defenses against negligence?
- Assumption of risk - injured party fully understood and recognized the dangers that were involved in an activity and decided to proceed
- Contributory negligence - injured party did not look out for their own safety.
- Comparitive negligence - damage is adjusted to reflect the injured party’s portion of contribution.
What is a personal liability umbrella policy (PLUP)?
Provides an additional layer of protection after underlying liability limits on a homeowner policy or personal auto policy have been exhausted.
Policy will not be issued without PLUP carrier insisting on certain levels of underlying liability coverage for auto and home policies.
-usually provides coverage of $1 million or more
What is a commercial package policy?
- covers loss of assets from various perils and some liability for businesses
- includes basic, broad, and open coverage.
- business owner can add endorsements for business interruption (business losses)
