Unit 4: Basics of Property Insurance Flashcards
Types of Property
■ Real property—buildings
■ Personal property—moveable contents
Covered Property
Details vs No Details
■ Specific/scheduled—detailed list of covered items
■ Blanket— Not detailed list
■Single - limit of coverage
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
■ internal explosion
Broad Perils
■ All of basic and extended perils ■ Plus BIG AFFECT: B—Burglary damage I—Ice, sleet, and snow (weight of) G—Glass breakage A—Accidental discharge of water F—Freezing objects F—Falling objects E—Electrical current C—Collapse T—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
■ 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
–– Loss of income a business suffers when the building burns
–– Cost of a rental car because someone ran into your car
–– Additional living expenses while the home is being repaired
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
CLAIM SETTLEMENT
how the insurance company determines appropriate amount of loss to be paid
■ Deductible reduces any amount after loss has been 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
ACV= replacement – depreciation
Methods of Calculating Value
■ Replacement cost—current replacement cost; no depreciation.Similar kind and quality
■ Functional replacement—replace with modern construction
■ Market value—selling price; seldom used
■ Agreed value—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
Alternative Dispute Methods
■ 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 two of the three determines the amount
■ Arbitration—disagreement about other areas of the loss
Coinsurance
■The coinsurance requirement is normally 80% of the replacement cost. If the minimum required amount is carried, then claims are paid in full up to policy limits. If the minimum is not carried, partial losses are not paid in full.
