Property Insurance

Question 1

Property Insurance

Answer 1

Provides protection against most risks to property, such as fire, theft and some weather damage.

Question 2

Home Owner’s Policy

Answer 2

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

Question 3

Choices in Purchasing Property Insurance

Answer 3

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

Question 4

Package Policy

Answer 4

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:

1. Personal Liability (if someone falls at your home)
2. Medical Payments (provides medical coverage in someone needs stitches or an ambulance at your house without involving a lawsuit)

Question 5

Monoline Policy

Answer 5

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

Question 6

Home Owner’s Policy

Answer 6

Recommended for home buyers

-meant for covering catastrophic events, not maintenance

Question 7

Liability Insurance

Answer 7

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:

1. Policy Number
2. Policy Period (typically renew after a year)
3. Name and Address of main insured
4. Name and address of insurance company/agent
5. Location of premises to be covered
6. Mailing Address
7. Coverage Limits
8. Deductible Amount (all perils or hurricane)
9. Premium Amount
10. Title or number of any endorsement

Lenders may require home buyers to have an escrow account, which serves as a property insurance fund

Question 8

Endorsement

Answer 8

A clause in an insurance policy detailing an exemption from or change in coverage

Ex: name change, change in coverage, change in deductible

Question 9

6 Basic Coverages

Answer 9

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)

Question 10

Homeowners - 1 (HO-1)

Answer 10

Basic Policy
Standard insurance against perils
single line coverage (wind, rain, etc. only one)
Rarely used anymore, not recommended

Question 11

Homeowners -2 (HO-2)

Answer 11

Broad Form Policy

Coverage in HO-1 plus other perils

Question 12

Homeowners - 3 (HO-3)

most widely used

Answer 12

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

Question 13

Homeowners - 5 (HO-5)

Answer 13

Comprehensive Form Policy

Includes all coverage in HO-3 plus personal property

Question 14

Homeowners - 8 (HO-8)

Answer 14

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

Question 15

Actual Cash Value

Answer 15

A method of valuing insured property (including depreciation)

Question 16

Replacement Cost

Answer 16

Normal cost to exact duplication of a property as of a certain date

Question 17

Homeowners - 4 (HO-4)

Answer 17

Tenant or Cooperative Owners Policies
special provisions built in for a co-op
loss assessment

Question 18

Homeowners - 6 (HO-6)

Answer 18

Condominiums Owners Policies
For the person who purchases a unit
Purchase the right about of hazard insurance (20% of market value or purchase price)

Question 19

Amount of Insurance Needed

Answer 19

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

Question 20

NYPYUA (New York Property Insurance Underwriting Association)

Answer 20

Formed for high risk property can get insurance

Question 21

Insurance Deductible

Answer 21

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)

Question 22

Umbrella Policy

Answer 22

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

Question 23

Commercial Policy

Answer 23

Covers: Bodily Injury, Property Damage, Physical Injury, Advertising Injury

Question 24

Real Estate Agent Role

Answer 24

• Connection between you and insurance company
• Inform you of requirements
• Give you different policy options