Unit 4: Basics of Property Insurance Flashcards
(26 cards)
Types of Property
Real Property: buildings
Personal Property: moveable contents
Covered Property
Specific/Scheduled: detailed list of covered items
Blanket: all of a certain type of property
- Single limit of coverage
- No detailed list
Limits of insurance
Maximum coverage limits; listed on declarations page
Insured Perils
Named peril: only perils on the list are covered
Open (special) perils: covers all perils except those specifically excluded
Basic Perils
- Fire, lightning, and internal explosion
- Extended coverage (WCSHAVVER and Vandalism and malicious mischief V&MM)
WCSHAVVER
- Wind
- Civil commotion
- Smoke
- Hail
- Aircraft
- Vehicles
- Volcanic eruption
- Explosion
- Riot
Broad Perils
- All of basic (fire, lightning, internal explosion) plus extended (WCSHAVVER and V&MM)
- Plus BIG AFFECT
- Burglary damage
- Ice, sleet, and snow (weight of)
- Glass breakage
- Accidental discharge of water
- Freezing objects
- Falling objects
- Electrical current
- Collapse
- Tearing asunder
Broad Peril Exclusions
- Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls
- Accidental discharge over water from continuous leaking
- Flooding from river or lake
- Burglary if property vacant more than 60 consecutive days
Special/Open Peril Coverage
Special/Open Perils: all risks of direct physical loss, except those specifically excluded
Common exclusions:
- Flooding
- Earthquake
- Intentional damage caused by an insured
- Losses due to enforcement of building codes
- Damage caused by a power interruption occurring off premises
- Governmental seizure
Types of Loss
Direct: the immediate damage caused by the peril
Indirect: loss over time as a result of the direct loss
- E.g. loss of income a business suffers when the building burns
Classes of Construction
Class 1: Frame
Class 2: Joisted masonry
Class 3: Noncombustible
Class 4: Masonry Noncombustible
Class 5: Modified Fire Resistive
Class 6: Fire Resistive
Loss Valuation
How the insurance company determines appropriate amount of loss to be paid; deductible reduces amount after loss is valued
Insured to collect lesser of:
- Insurable interest
- Policy limits
- Actual cash value (ACV)
- Cost to repair
- Replacement cost
Actual Cash Value (ACV)
Replacement cost based on today’s cost, not what was originally paid for item; cost to replace now
ACV = replacement - depreciate
Replacement cost
Current replacement cost; no depreciation
Similar kind and quality
Functional replacement
Replace with modern construction
Market value
Selling price; seldom used
Agreed amount
Value of loss is determined before the policy is issued
Stated amount
Insured up to this amount
Pair and set
Value of the pair or set before the loss minus value of what remains
Appraisal
Disagreement on the amount of the loss
- Company and insured pay their own appraisers
- Appraisers get an umpire if they can’t agree (cost shared)
- Agreement of any tow of the three determines the amount
Arbitration
Disagreement about other areas of the loss
Coinsurance
The coinsurance requirement requires the insured to carry a minimum amount of insurance, normally 80% of the replacement cost
(insurance carried/insurance required) x loss = claim payment - deductible
Vacancy and Unoccupancy
Vacant: no property or people present at time of loss
Unoccupied: no people present at time of loss
