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Property/Casualty review Flashcards

1
Q

What is the difference between Additional Coverages and Supplemental Payments?

A
  1. Additional Coverages are things specified in a HOMEOWNERS policy that the insurance company will pay for in addition to the homeowner policy limits of liability
  2. Supplemental Payments are things specified in AUTO policies that the insurance company will pay for in addition to the auto policy limits of liability
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2
Q

What is proximate cause?

A

A loss where the covered peril in the direct cause of the damage (also known as immediate cause or Direct Physical loss)

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3
Q

The amount paid on the loss is know as _____.

A

Adjustment or loss settlement

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4
Q

What does liability coverage cover?

A

All sums for which an insured become legally liable for bodily injuries and/or property damage to THIRD PARTIES, not to exceed the policy limits of liability

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5
Q

An insurance company will pay to an injured claimant in a liability claim only when?

A

Only if the insurance company determines that a court would find the insured legally liable and a court would order the insured to pay to the claimant in the claim were to go to a court hearing

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6
Q

What is considered a bodily injury?

A
  1. Reimbursement for medical bills
  2. Reimbursement for lost wages
  3. Compensation for pain and suffering
  4. Compensation for permanent disability
  5. Compensation for permanent scarring or disfigurement
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7
Q

Under the Fair Credit Reporting Act, the applicant has a right to what?

A

See the inspection report, however, the insurance company is not required to provide the applicant a hard copy (i.e can just email instead of mailing)

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8
Q

What is required under the Gramm-Leach-Bliley Act (GLB) - Privacy Act?

A
  1. Provide the consumer a privacy notice when it enters into a transaction with the financial organization
  2. The notice must explain what information is being collected, with whom it is to be shared, how it is to be used, and how it is to be protected
  3. The consumer must be notified of his/her right to request that information not be shared with other organizations
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9
Q

What is the Loss of Actual Cash Value formula?

A
  1. Depreciation = Percentage of Useful Life Used Up x Replacement Cost
  2. Loss of Actual Cash Value = Replacement cost - Depreciation
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10
Q

What is Insurance to Value?

A

Keeping a property insurance policy up to date, keeping the property continually insured for the required amount or more and meeting the requirements of the Loss Settlement Provisions (Coinsurance Clause)

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11
Q

What requirement must be met in order to get the full cost paid on a loss on a policy with a coinsurance clause?

A

The insured must keep the insured property insured for the required, stated percentage (usually 80%) of its value at all times INCLUDING the time of the loss

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12
Q

How do you calculate the payout when a property with a coinsurance clause is not insured to value?

A
  1. Amount of Insurance Required = Coinsurance Percentage x Replacement Cost at time of loss
  2. Loss Settlement = Amount Carried/Amount of Insurance Required x Replacement Cost at time of loss
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13
Q

When might a deductible be waived?

A

When the loss exceeds the limit of liability

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14
Q

What are the two exceptions to the coinsurance clause?

A
  1. The principles of indemnity and insurable interest prohibit insurance companies from paying more than the actual amount of loss
  2. The insurance company will never pay more than the limits of liability of the policy
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15
Q

What are the 5 parts of a standard policy?

A
  1. Declarations Page
  2. The insured
  3. Insuring Agreements (Insuring Clause)
  4. Conditions (Requirements)
  5. Exclusions
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16
Q

What is included in the Insuring Agreement?

A
  1. The insurance company’s promise to indemnify

2. A list of covered perils (may also be found on declarations page)

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17
Q

What are the three types of hazards that may be listed under exclusions?

A
  1. Morale hazard - when risk of loss is caused by the insured acting in an indifferent, careless or irresponsible manner
  2. Moral hazard - when there is risk of loss due to legal action
  3. Physical hazard - when there is risk of loss due to condition or use of the property
18
Q

What is Inherent Vice excluded?

A

When a special type of property has a special characteristic to deteriorate under special circumstances (i.e. fur coat damaged from being stored in a damp place)

19
Q

What are the 5 elements of a contract?

A
  1. Competent parties
  2. Offer and acceptance
  3. Mutual agreement
  4. Consideration
  5. Legal Subject (Legal Purpose)
20
Q

What is an oral binder?

A

when the insured orally gives the agent the information needed for the application and promises to pay the premium; the agent orally assures the insured they are covered

21
Q

What are the only perils covered under a basic fire policy?

A
  1. Hostile fire
  2. Lightning
  3. Removal
22
Q

What is hostile fire?

A

Any fire not contained within its intended boundaries. Fire coverage also includes damage cause by the fire department or smoke from the hostile fire on the insured property.

23
Q

What is Removal coverage?

A

ALL RISK coverage that protects insured property while is has been removed from the insured premises to avoid damage by a covered peril on the insured premises. All risk removal coverage applies up to 5 days at each location to which the property is removed.

24
Q

What are the perils covered under the extended coverage endorsement?

A

W. C. Shaver

Windstorm
Civil Commotion

Smoke Damage (limited)
Hail
Aircraft
Vehicle/Volcano
Explosion
Riot
25
What is Insurable Interest?
a financial risk interest that the insured must posses at the time of the loss
26
Define Law of Torts
the type of legal proceeding through which claims for money for bodily injuries and/or property damage are made. Sometimes called civil liability
27
What is the arbitration clause?
If the insured and the insurance company disagree as to the actual cash value of the loss and the damaged property cannot be repaired or replaced, they each can select an appraiser. If the appraisers disagree, they select an umpire appraiser who will make the final determination
28
What is indemnity?
the legal concept of one party (the insurance company) standing in the place of or making good for another (the insured). In property insurance it means the same as "reimburse." Prohibits the insurance company from reimbursing the insured fore more than the actual amount of loss
29
What is the Subrogation clause?
clause that states that the insurance company can require the insured to assign to it any legal rights which the insured has against third parties to the insurance company at the time of loss
30
What is required for an assignment of a policy from one person to another to be valid?
the policy must be signed by an officer of the insurance company (President, Secretary, VP, Treasurer)
31
What is the Pro Rata liability clause and when does it apply?
States that no insurance company shall be responsible for any more than its pro rata share of the loss. Applies when 2 or more policies cover the same property
32
What is the difference between vacant and unoccupied?
1. Vacant = completely empty or empty to the point that the insured can no longer engage in the purpose for which the property was insured 2. Unoccupied = furnished, but nobody living or working there
33
What type of property is excluded from a Standard Fire Policy?
Mostly indirect property: 1. Money 2. Accounts/bookkeeping records 3. Valuable Papers
34
What does VMM cover?
Vandalism and Malicious Mischief is an endorsement that covers damage caused by vandalism and malicious mischief UNLESS the building has been left vacant over 30 consecutive days
35
Dwelling and Building Contents Basic Form (DP-1)
- Must be occupied by 4 or less families - Does not have to be owner occupied - Often used to insure rental properties that insured own Perils covered: - Standard Fire Policy perils - Extended Coverage perils - VMM Coverages: A - Dwelling - Actual Cash B - Other Structures - 10% of A automatically extended C - Personal Property - optional, additional (Actual Cash) D - Rental Value - 10% of A automatically extended
36
Dwelling and Building Contents Broad Form (DP-2)
- Must be occupied by 4 or less families - Does not have to be owner occupied - Often used to insure rental properties that insured own Perils covered: - Everything in DP-1 - Plus: hostile fire, lightning, removal, VMM, broader explosion, smoke coverage (minus agriculture/smudging), glass breakage, damage cause by burglars, falling objects, weight of ice/snow/sleet, collapse, artificially generated currents, freezing or discharge from a plumbing/heating/cooling system Coverages: A - Dwelling - Replacement value B - Other Structures - Optional, Additional C - Personal Property - Optional, Additional (Actual Cash) D - Rental Value - Optional, Additional
37
Dwelling and Building Contents Special Form (DP-3)
- Must be occupied by 4 or less families - Does not have to be owner occupied - Often used to insure rental properties that insured own Perils covered: - Building - All Risks - Personal Property - Broad form Coverages: A - Dwelling - Replacement Value (coinsured) B - Other Structures - Optional, Additional C - Personal Property - Optional, Additional (Actual Cash) D - Rental Value - Optional, Additional
38
Building and Personal Property Form
- Covers COMMERCIAL buildings - Can also cover rental properties with MORE THAN 4 families Perils Covered: - One out of: Basic/Broad/Special Form - All Forms cover sinkhole, sprinkler damage and debris removal - VVM unless the building is vacant/unoccupied over 60 consecutive days (or permit is added) Coverages (all Actual Cash): A - Building (+ sign/objects attached) - Optional, Additional B - Personal Property (on premises or within 100 ft) - Optional, Additional C - Personal Property of Others (Bailee Coverage) - Optional, Additional Automatic Extensions: Personal property of others, off-premise, newly acquired property, valuable papers/records, plants/signs within 100 ft of bldg.
39
What does Business Income coverage entail?
1. Loss of income due to shutdown for remodeling and restocking due to a COVERED PERIL 2. Net income before taxes + normal operating expenses to continue business 3. Payroll 4. Coinsured, insured chooses percentage
40
What is Extra Expense Coverage?
Protects the insured against the extra expense of doing business during the period of restoration in excess of normal business costs

Property/Casualty review (1 decks)

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