Property and Liability Insurance (Lesson 3) Flashcards
What does property insurance protect
- financial protection for losses on house, condominiums, automobiles, boats, and other property assets
What does liability insurance protect
- financial loss associated with legal action, due to property damage, personal injury, or loss of income
What type of liability does homeowners or automobile insurance protect against
- Property and liability
What are the three basic forms of coverage offered by homeowners policys
- Basic coverage
- Broad coverage
- Open coverage
What is basic coverage for HO
- Protects the homeowner from losses associated with 12 named perils
- Fire, vehicles, lighting, smoke, windstorm, vandalism or malicious mischief, hail, explosions, riots or civil commotion, theft, aircraft, and volcanic eruption
What is broad coverage for HO
- Provides protection from losses associated with 18 named perils
- Includes the 12 named perils plus losses associated with these 6 additional perils
- Falling objects
- weight of ice, snow, sleet
- accidental discharge or overflow of water or steam
- sudden 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
What is open perils coverage for HO
- Provides protection from losses associated with all perils, except those that are specifically excluded
- More coverage than the basic and broad
Are movement of the ground covered (earthquake) under a policy usually under HO
No
Is damage from rising water covered usually from HO
No
Are nuclear hazards covered under normal HO
No
Are intentional acts and neglect covered under HO
No
What is an endorsement for HO and what does it cover
- Some perils that the standard HO doesn’t cover can be covered by purchase of endorsement
- Supplement to an existing policy that provides additional coverage
- Perils that would be covered with an endorsement are:
- Sink hole collapse
- Earthquake
- Sewage backup
- Refrigerated property coverage
What does section 1 of property insurance include
- Coverage A: Dwelling
- Coverage B: Other Structures
- Coverage C: Personal Property
- Coverage D: Loss of use
What does Coverage A: Dwelling cover
- pays for repairs and replacement for damage to the house and any attached structures
- also covers building materials on the premises
- Losses paid on a replacement cost basis
What is replacement cost
- Amount necessary to repair or replace the dwelling with materials of the same or similar quality at current market price
- does NOT account for depreciation
What is the coinsurance coverage formula
(Amount of insurance / Coinsurance requirement ) x amount of loss - deductible
What does Coverage B: Other Structures cover
- Detached structures on the property
- Detached garages
- greenhouses
- storage buildings
- Insured on a replacement cost basis
What is the limit usually for coverage B
- usually 10% of Coverage A
Is property used for business on your property covered by homeowners insurance
No
What does Coverage C: Personal property cover
- includes tangible moveable property owned by the insured
- Insured on Actual cash value basis (replacement cost endorsement can be purchased)
What is typically the limit for Coverage C
- 50 % of Coverage A
What is usually the limit on coverage for money, coin collection, bank notes
$200
What is usually the limit on coverage for securities, bills, evidence of debt airline tickets, manuscripts
$1,500
What is usually the limit on coverage for jewelry, watches, gems, precious metals, and real furs
$1,500
What is usually the limit on coverage for water craft, trailers, and equipment
$1,500
What is usually the limit on coverage for firearms
$2,500
What is usually the limit on coverage for silverware, goldware, pewter ware
$2,500
Are animals, birds, and fish usually covered under a HO
No
Are motorized land vehicles used off premises usually covered under HO
No
What does Coverage D: Loss of use cover
- will pay for additional living expenses incurred when the insured is unable to occupy the dwelling due to damages caused by a covered peril
What is typically the limit for Coverage D
- 30% of Coverage A for HO-2, HO-3, HO-4, and HO-5 policies
- HO-6 is 50% of Coverage C
- HO-8 has 10% of Coverage A
What does section II of the HO include
- liability and medical payment coverage
What does Coverage E: Personal Liability cover
- Pays for claims that result from bodily injury and property damage to others when the insured or members of the insureds resident family are responsible
What is the minimum coverage for Coverage E
- typically $100,000 per occurrence
- Insurer will also pay for legal defense and settlement costs associated with a claim
What does Coverage F: Medical payments to others cover
- Pays all necessary medical expenses without regard to liability for others arising out of the insureds activities, premises, or animals
When must medical expenses incur to be covered under Coverage F
3 years
Does coverage F pay for medical expenses incurred by the insured or a member of the insureds household
- No unless the member of the household is a residence employee
What are some injuries and medical payments that Coverage E and Coverage F not pay for
- expected or intended expenses
- insureds business or professional activities
- loss from rental on premises
- expenses arising out of ownership of watercraft, ATV, and aircraft
- expenses from war or nuclear weapons
- expenses from communicable disease
What does the HO-2 cover
- Board Form coverage
- Coverage on a board perils basis (18 named perils)
What does the HO-3 cover
- Special form coverage
- Provides coverage on an open perils or all risks basis
- Personal property coverage under an HO-3 policy is still provided on a named perils basis
What does the HO-4 Cover
- Renter policy
- provides coverage for renters and tenants
- does not cover the dwelling or other structures
- provides personal liability coverage
- Personal property covered on a broad perils basis
- Minimum $6,000 personal property coverage
- Provides loss of premises coverage equal to 30% of personal property coverage
What does the HO-5 cover
- Comprehensive from coverage
- Coverage on an open perils or all risk basis
What does HO-6 cover
- Condominium Owners form
- Coverage for inside structure of the unit and all of its contents
- Broad perils coverage
- Minimum $6,000 personal property coverage
- Loss of use is limited to 50% of the coverage C limit
What does HO-8 cover
- Modified Coverage Form
- Provides repair cost coverage for damage to property
- Functional replacement cost coverage
- Typically older homes that may be quite expensive to repair
HO-2 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Broad Form
Coverage A: Broad
Coverage B: Broad
Coverage C: Broad
Coverage D: Broad
HO-3 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Special Form
Coverage A: Open
Coverage B: Open
Coverage C: Broad
Coverage D: Broad
HO-4 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Renters
Coverage A: N/A
Coverage B: N/A
Coverage C: Broad
Coverage D: Broad
HO-5 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Comprehensive From
Coverage A: Open
Coverage B: Open
Coverage C: Open
Coverage D: Open
HO-6 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Condominium
Coverage A: Broad
Coverage B: N/A
Coverage C: Broad
Coverage D: Broad
HO-8 (Open/Broad)
Coverage A: Dwelling
Coverage B: Other Structures
Coverage C: Personal Property
Coverage D: Loss of Use
Modified Coverage
Coverage A: Basic
Coverage B: Basic
Coverage C: Basic
Coverage D: Basic
What does the PAP cover
- Part A Liability Coverage
- Part B Medical Payments
- Part C Uninsured Motorist coverage
- Part D Coverage for damage to insureds automobile
- Part E Duties after an accident or loss
- Part F General provisions
What does a 50/100/50 mean for Coverage A
- $50,000 of bodily injury coverage for person
- $100,000 of bodily injury coverage per accident
- $50,000 of property damage coverage
What does a combined single limit policy have
- has a fixed amount of coverage that the insurance company pays whether the loss is attributable to bodily injury or property damage
What does part B Medical payments cover
- provides coverage for medical expenses sustained in an accident
- medical payments coverage is extended to the injured insured or occupants of the insured regardless of fault
What are the two groups of insured persons that part B covers
- the insured and members of the insureds family and
- other persons who occupy the insureds covered automobile
- No difference of coverage between the two
Does coverage extend to a person hurt in a non owned automobile driven by the insured
No
What does Part C Uninsured motorist coverage cover
- Coverage for uninsured or underinsured motorists
- If under insured or uninsured party is at fault this coverage will pay the property damage or bodily injury of the insured
What is Part D Coverage for damage to the insureds automobile
- Comprehensive and collision coverages are designed to repair and replace the insureds automobile when it is damaged
What does collision coverage pay for
- pays for damaged caused by another vehicle in an accident or an object such as a fence, tree, garage, door, lake, etc
- Also covers damage in a single car accident
What does comprehensive pay for
- helps pay to repair or replace a vehicle that is stolen or is damaged in an incident that is not a collision
- defined as other than collision coverage
What do vehicles that are financed require to have for coverage comprehensive or collsion
Both
What are the requirements for Part E Duties after an accident or loss
- After a loss the insured is required to fulfil a number of obligations before the loss can be settled
What must an insured do immediately after a loss for PAP
- give notice immediately to the insurance company of the time, place and circumstances of the occurrence along with names of individuals
- Protect the auto and equipment from further loss
- file written proof of loss with the insurance company consistent with time constraints set forth in the policy
What does Part F General Provisions of a PAP cover
- covers the insured driving in any US state and Canada but the same policy does not cover Mexico
What are the categories of a legal liability that individuals are exposed too
- torts (civil wrongs)
- breach of contracts
- criminal offenses
What does liability coverage cover
- torts and not breaches of contract and criminal offenses
What are the three general types of torts related to liability
- intentional interference
- strict and absolute liability
- negligence
What is an intentional interference
- act committed against another that causes injury
- Intentional criminal acts are not covered by slander and libel are usually covered
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 regardless of who is responsible of injury
Ex: Workers compensation laws
Under strict and absolute liability does a responsible party have a defense
- Strict few defenses
- Absolute none
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 is the prudent man standard
- if a responsible person confronted with the same circumstances would have preformed the same acts
What is direct negligance
acts or omissions directly attributable to an individual
What is Vicarious liability
- an individual is held at least partially responsible for negligent acts performed by someone else
- EX: Parents held responsible for children
What does Res ispa loquitur
- the act speaks for itself
- permits the use of reasonable evidence when a specific explanation of negligence is not available
- EX: If a plane crash there was negligence it does not have to be proven
What is Negligence per se
- the act itself constitutes negligence thereby relieving the prove negligence
- EX: Drunk driving
What is burden of proof
- initially borne by the injured party
- standard of proof in most civil cases is the preponderance of the evidence
(Damages of Bodily Injury)
What is special damages
- compensate for measurable loss such as loss of limb
(Damages of Bodily Injury)
What is general compensate for intangible losses
- pain and suffering
(Damages of Bodily Injury)
What is punitive damages
- amount assessed against the negligent party as punishment for the act
What is the collateral source rule
- Holds that damages assessed against a negligent party should not be reduced simply because the injured party has other sources of recovery available such as insurance
(Defenses to Negligence)
Assumption of the risk
- injured party fully understood and recognized the dangers that were involved in an activity and voluntary chose to procced
(Defenses to Negligence)
Negligence on the part of the injured party
- contributory negligence in which there is evidence that the injured party did not look out for his own safety
- Comparative negligence in which the amount of damage is adjusted to reflect the injured party’s proportion of contribution to the cause of the injury
(Defenses to Negligence)
Last clear chance
- states that a claimant who is endangered by his own negligence may recover if the defendant has a last clear chance to avoid the accident and failed to do so
What does a PLUP provide
- provides additional layer of protection after the underlying liability limits on a homeowner policy or personal auto policy have been exhausted
What to important factors should be considered when deciding liability insurance for an individual
- Earnings power
- Net worth
A PLUP will not be issued without
- the PLUP carrier insisting on certain levels of underlying liability coverages for both home and auto
How much coverage does a PLUP policy usually provide
- $1 million or more
What liabilities are not covered under a umbrella policy
- Criminal acts and intentional acts
- Slander and libel are the exception
What does a Commercial Package policy cover
- loss of assets from various perils and some liability
- Coverages similar to HO, include basic, broad, or open perils
Does a CCP cover against flood or earth movement
No
Acts that expose a company to product liability include
- Manufacturing a harmful product - Selling a defective product - Packaging the product inappropriately - Providing insufficient directions or warning for use
