Property/Casualty Insurance Exams > Types of Property Policies > Flashcards
Types of Property Policies Flashcards
Abandonment
the relinquishment of insured property into the hands of another, or into the possession of no one in particular
Boarder
a person who lives with someone else for an agreed-upon price, usually for a considerable amount of time
Breach
breaking or failing to observe a law or agreement
Counterfeit
fraudulent imitation, forgery
Debris
remains of anything broken down or destroyed
Direct Damage
physical damage to property that results from the inability to use the damaged property
Incidental
something occurring as a minor accompaniment to something else
Incidental Occupancy
minor uses that are accessories to or support the predominant occupancy (ex. a piano teacher giving lessons in her home)
Inherent Vice
internal cause of property loss or damage due to the very nature of the insured property (ex. metal rusting or produce spoiling)
Mercantile
related to trade or commerce; commercial
Monoline
A policy that covers one type of insurance (ex. workers compensation or commercial auto)
Ordinance
a law that must be complied with
Over insurance
when a property’s insurance coverage exceeds its cash value
Personal Effects
privately owned items normally worn or carried on the person
Personal Property
non-movable property of the insured, such as autos, furniture, electronics, and any other personal items.
Prepackaged
a policy designed to fit the general needs of a business; the insured usually cannot elect to exclude coverage that is automatically provided in the package.
Real Property
non-movable property, such as land, houses, and other structures
Vandalism
intentional destruction or damage to property
When can business occupancies be accommodated under a dwelling property program?
- As long as they are incidental,
- Are conducted by the insured on the dwelling premises,
- There are no more than 2 people working at any time
Permissible Incidental Occupancies
small service operations where merchandise sales are not the primary function (ex. barber, tailors, handiwork, professional offices, private schools, photography, etc.)
3 Dwelling Property Policy Form structure:
- Agreement
- Definitions
- Deductible
- Coverages, including other coverages
- Perils insured against
- General exclusions
- Conditions
3 dwelling programs and form numbers
- Basic: DP1 - Named Peril
- Broad: DP2 - Named Peril
- Special: DP3 - Open and Named Peril
Basic Dwelling form (DP 00 01)
- Most limited coverage.
- Insures against:
1. Fire
2. Lightening
3. Internal Explosion
Perils included in the extended coverage of a basic form (WHARVES)
- Windstorm or Hail: Interior damage must be caused by damage to the roof/wall first (no open windows)
- Explosion: same as basic internal explosions, but includes external explosions too
- Riot or civil commotion
- Aircraft - includes self-propelled missiles and spacecraft
- Vehicles - does not apply to damage caused by vehicles owned by the insured or resident of the location. Does not cover loss or damage to fences, driveways, or walks.
- Smoke - Does not include smoke from agricultural smudging, industrial operations, or from a fireplace (friendly fires)
- Volcanic Eruption - No coverage for loss caused by earthquakes, shock waves, or tremors.
If Extended coverage is purchased for a basic form, what coverage can also be added?
Vandalism or malicious mischief (VMM)
Excludes:
1. glass breakage or safety glazing material that is part of the building
2. Damage to the building resulting from theft or burglary is covered, but not the actual property that was stolen.
3. No coverage if preceding the loss, the premise is vacant for more than 60 consecutive days immediately before the loss.
Broad Dwelling Form (DP-2)
Expands the causes of loss insured under the basic form with extended coverage perils, and vandalism or malicious mischief purchased.
Expansions include:
1. Breakage of glass and safety glazing material that is part of the building (except when vacant for more than 60 days)
2. No explosion peril exceptions
3. Lawns, trees, and plants are covered if caused by any of the basic perils (excludes theft). Additional amount is limited to a max of $500/tree and max/loss of 5% of the amount of coverage on the dwelling.
4. Collapse of building. Does not include settling, cracking, shrinkage, building, or expansion.
7 additional broad form perils (BB BICE GOLF)
- Bursting of heating systems
- Burglary damage
- Breaking of water heaters
- Ice, snow, or sleet weight
- Collapse of building or part of a building
- Electrical damage (artificially generated)
- Glass breakage
- Objects falling from outside
- Leakage of water or steam damage
- Freezing of plumbing
Special Dwelling Form (DP-3)
An open peril form. (All perils are insured against except those that are specifically excluded.
What additional perils are covered in a special dwelling form?
- Theft of property that is a part of the dwelling or other structure
- accidental discharge or overflow of water and steam is expanded to cover loss due to water or steam pipes that occur off of the insured premises.
- no exclusions for antennas, outdoor equipment, fences, or awnings from the peril of falling objects
- Provides coverage for damage to a roof caused by freezing or thawing of water under roof shingles (ice dam)
4 Core Property Coverages a dwelling policy has
A. Dwelling - Direct Damage: Included in all (DP 1-3)
B. Other structures - Direct Damage: Included in all (DP 1-3)
C. Personal Property - Direct Damage: Included in all (DP 1-3)
D. Fair rental value - Indirect: Included in all (DP 1-3), but may only be added if one of the direct property coverages is written
E. Additional Living Expenses - Indirect: Included in DP 2-3, but can be added by endorsement to DP-1)
Coverage A - Dwelling
Dwelling must be used principally for dwelling or residential purposes.
Property Covered:
1. Dwelling listed in the declarations paged and all attached structures
2. All materials or supplies located on the property used to construct, alter, or repair the dwelling
3. Building equipment and outdoor equipment located on the premises and used to service the location unless insured elsewhere.
Property not Covered:
1. Land, including land on which the property is located on.
Coverage B - Other Structures
Covers other structures at the same location
Property Covered:
1. Other structures on the location separated from the dwelling by a clear space, or connected only a fence or utility line.
2. Other structures rented to anyone, other than a tenant of the dwelling, but not only when used as a private garage
3. Structures used in commercial, farming, or manufacturing when storing property owned solely by the insured or a tenant of the dwelling
Property Not Covered:
1. Land including land where the other structures are located
2. Structures rented or held for rental to anyone other than a tenant of the dwelling when not used as a private garage.
3. Other structures that are used in business (commercial, manufacturing and farming), whether in whole or in part unless used as noted above
4. Gravemarkers or mausoleums
Coverage C - Personal Property
Can be purchased to cover personal property to a residence. Must have a limit shown and a premium charged.
Property Covered:
1. Personal property usual to a residence, located on the location for the resident family members and guests.
2. Model or hobby aircraft (not used to carry people or cargo)
3. Motor vehicles and other conveyances but only while used to service the premises or designed to assist people with disabilities.
4. Rowboats and canoes
5. Blank storage media and prepackaged computer software
6. Property moved to a newly acquired residence for 30 days. The limit shown on declarations will only extend to the expiration date of the policy
Property Not Covered:
1. Coins, currency, deeds, bills, passports, etc.
2. Animals, birds, and fish
3. Aircraft used for flight
4. Hovercraft and parts
5. Watercraft other than noted above
6. Motor vehicles or accessories (only while in or upon the vehicle)
7. The cost to restore data stored in various mediums
8. Credit cards, debit cards or any device used to deposit, withdraw or transfer funds
9. Water or steam (ex. broken water pip increases water bill)
10. Gravemarkers and mausoleums
Coverage D - Fair Rent Value
Applies if property covered under A, B, or C becomes damaged by a peril covered in the policy
Key Points:
1. Policy will pay the fair rental value of the premises but will deduct expenses that discontinue while the premises are unfit for use (ex. heat and electricity)
2. Coverage continues until repairs are completed, but only for the shortest time required.
3. The expiration of the policy will not end the payment of an existing covered claim
4. If a civil authority prohibits use of the insured property because of direct damage to a neighboring property that would have been covered by the insured’s policy (had the damage occurred to he insured property), payment for the loss will be covered for up to 2 weeks.
5. Coverage does not apply to any loss or expense associated with the cancellation of a lease
Coverage E - Additional Living Expense
Only available if broad or special form dwelling coverage is written. Can be added by endorsement to the basic form.
Pays for the increase in normal living expenses the insured incurs while the described premises are unfit for normal use. (ex. rent for alternative housing. Intent is to allow the family to maintain their normal standard of living)
Key points:
1. Coverage will continue until repairs are completed, but only for the shortest time required
2. The expiration of the policy will not end the payment of an existing covered claim
3. If a civil authority prohibits the use of the insured property because of direct damage to neighboring property, payment for loss will be covered for up to 2 weeks
4. Coverage does not apply to any loss or expense associated with the cancellation of a lease
8 Other coverages that ALL Dwelling coverage forms include:
- Other structures - may apply up to 10% of the dwelling insurance amount (coverage A) to cover other structures on the premises.
- Debris removal - covers costs to remove debris after loss.
- Improvements, alterations, and additions - if the insured is a tenant: up to 10% of the personal property limit (coverage C) may be applied.
- Worldwide coverage - may apply up to 10% of the personal property limit (coverage C) to pay for losses to personal property while anywhere in the world. (Does not apply to guests unless DP-2 or DP-3 form)
- Rental value and additional living expense - up to 20% of the coverage A limit of liability may be used for loss of both fair rental value and additional living expense.
- Reasonable repairs - costs incurred by the inspired for repairs necessary to protect property from further damage at the time of a covered loss. Not an additional amount of insurance.
- Property removed - the policy will pay for loss or damage to property removed from the insured premises when threatened by a peril insured against. (basic - provides coverage for 5 days. Broad/Special - provides coverage for 30 days)
- Fire department service charge - up to $500 will be paid for costs incurred by the insured because of an agreement to pay the fire department if they respond to a fire. This is an additional amount of insurance and no deductible applies.
Other coverages that are only included in the broad and special dwelling forms
- Lawn, trees, shrubs, and plants
- Breakage of glass
- Collapse
- Ordinance or law (covers the cost associated with changes in building ordinances and codes after a loss.
What does the standard deductible of $250 not apply to?
All property coverages except fair rental value and additional living expenses
General Exclusions found in all 3 dwelling forms:
- Ordinance or law: does not apply to expenses incurred that require tearing down the property. Does not apply to loss in value of the structure to test, monitor, clean up, or remove pollutants.
- Earth Movement - only thing covered are damages due to fire or explosion
- Water Damage - outside water or water backs up through sewers or drains is not covered
- Power Failure - only covered if an off-premises failure triggers a peril covered in the policy resulting in damage to property by that peril covered.
- Neglect
- War
- Nuclear Hazard
- Intentional Loss
- Governmental Action
General Exclusions found in Special Form (Coverages A and B)
- Weather conditions causing loss
- Acts, decisions, or the failure to act
- Faulty planning, design, or materials
Conditions found in all dwelling policy forms: (23)
- Policy period
- Insurable interest/Lmit of insurance
- Concealment or fraud
- Duties after a loss
- Loss settlement
- Pair or sets
- Appraisal
- Other insurance
- Subrogation
- Suit against the insurer
- Insurer’s option to repair or replace
- Loss payment
- Abandonment
- Mortgage holders
- No benefit to bailee
- Cancellation and nonrenewal
- Liberalization
- Assignment
- Death
- Nuclear Hazard
- Recovered property
- Volcanic eruption
- Loss payable clause
