Property Insurance Flashcards
Property Insurance
Provides protection against most risks to property, such as fire, theft and some weather damage.
Home Owner’s Policy
Section 1: Property Section - covers the structure
-walls, roof, windows, floors
Section 2: General Liability - covers people
-guests, delivery person, mail-man, family members
Lender requires home owner’s insurance
Choices in Purchasing Property Insurance
1) Independent Agent - Primary responsibility is to the insurance company
- may be appointed by several different companies
- different specialties
2) Independent Broker - Primary responsibility is to the client
- goes into the open market to find best policy for you
Obtain quotes from several different insurance companies and compare the rates
Package Policy
Insurance policy that combines coverage from two or more types of insurance (such as property and liability) into one policy.
- better discounts on each individual line offered
- purchase this one!
- homeowners policy is typically this
Package Policy Components:
- Personal Liability (if someone falls at your home)
- Medical Payments (provides medical coverage in someone needs stitches or an ambulance at your house without involving a lawsuit)
Monoline Policy
A policy containing a single coverage part plus the common policy conditions and common declarations
- only provides liability policy (one single coverage)
- not recommended for average homeowner
Home Owner’s Policy
Recommended for home buyers
-meant for covering catastrophic events, not maintenance
Liability Insurance
Policy that covers civil liabilities to third parties, arising from bodily injury, property damage, or other wrongs due to the action or inaction of the insured.
-It will protect you from a lawsuit
Insurance Policy Components:
- Policy Number
- Policy Period (typically renew after a year)
- Name and Address of main insured
- Name and address of insurance company/agent
- Location of premises to be covered
- Mailing Address
- Coverage Limits
- Deductible Amount (all perils or hurricane)
- Premium Amount
- Title or number of any endorsement
Lenders may require home buyers to have an escrow account, which serves as a property insurance fund
Endorsement
A clause in an insurance policy detailing an exemption from or change in coverage
Ex: name change, change in coverage, change in deductible
6 Basic Coverages
A - Dwelling Coverage (walls, windows, roofs, floors) amount of money available to you to rebuild the home structure) main coverage
B - Other Structure’s Coverage (10% of A)
C - Personal Property Coverage (70-75% of A)
D - Loss of Use (provides a living situation if house burns down for example)
E - Personal Liability Coverage (covered for any loss in your home. Damage to another unit, slip and fall)
F - Medical Payments Coverage (without a lawsuit, if you need to cover a friend’s hospital bill that falls at your house)
Homeowners - 1 (HO-1)
Basic Policy
Standard insurance against perils
single line coverage (wind, rain, etc. only one)
Rarely used anymore, not recommended
Homeowners -2 (HO-2)
Broad Form Policy
Coverage in HO-1 plus other perils
Homeowners - 3 (HO-3)
most widely used
Special Form Policy
Most Widely Used Policy
Coverages all forms of loss except those specifically excluded
Property owners should consider a full replacement coverage policy like the HO3
Homeowners - 5 (HO-5)
Comprehensive Form Policy
Includes all coverage in HO-3 plus personal property
Homeowners - 8 (HO-8)
Market Value Policy
Modified version of HO-1; provides cash value coverage instead of replacement cost coverage
Not recommended for mom and pop because of depreciated value
Actual Cash Value
A method of valuing insured property (including depreciation)
Replacement Cost
Normal cost to exact duplication of a property as of a certain date
Homeowners - 4 (HO-4)
Tenant or Cooperative Owners Policies
special provisions built in for a co-op
loss assessment
Homeowners - 6 (HO-6)
Condominiums Owners Policies
For the person who purchases a unit
Purchase the right about of hazard insurance (20% of market value or purchase price)
Amount of Insurance Needed
Actual Cash Value & Replacement Cost
Insuring the Structure (the dwelling itself)
- Get the home appraised
- Appraisal reports will list the estimated rebuilding costs. Refer to this number to determine the amount of coverage needed
- Could be a difference between rebuilding costs and market price. Go by rebuilding costs.
- Once home is rebuilt, the coverage stops
- dwelling coverage also covers garages and fences (10% of dwelling coverage A)
-Don’t want to be over insured for more than your house is worth
Contents
-either actual cash value or replacement cost
Limits and Liabilities
-usually $100,000 (half a million is better)
Guideline for insurance to value = the value that the client should insure is typically 80% of the property value
-BASED ON REBUILDING COSTS
NYPYUA (New York Property Insurance Underwriting Association)
Formed for high risk property can get insurance
Insurance Deductible
In an insurance policy, the deductible is the amount of expenses that must be paid out of pocket before an insurer will pay any expenses
-requires any insurance company full disclosure on deductible (ex. all peril or hurricane 5% of dwelling coverage)
Umbrella Policy
Insurance policy that covers amounts above those covered under one or more other primary policies, and which does not pay until the losses exceed a certain sum. Also called excess insurance.
- Excess liability
- Attorney fees can also be included in the policy
- Could be personal, business or commercial
Commercial Policy
Covers: Bodily Injury, Property Damage, Physical Injury, Advertising Injury
Real Estate Agent Role
- Connection between you and insurance company
- Inform you of requirements
- Give you different policy options
