105-7 Property, Casualty, and Liability Insurance Flashcards Preview

CFP 2 - Risk, Insurance, Emp. Benefits > 105-7 Property, Casualty, and Liability Insurance > Flashcards

Flashcards in 105-7 Property, Casualty, and Liability Insurance Deck (29)
Loading flashcards...

3 types of coverage in a standard homeowners insurance policy

1. Basic coverage
-covers financial loss due to fire, lightning, windstorm, hail, riots or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, explosion, theft, volcanic eruption

2. Broad coverage
-covers basic coverage perils plus falling objects, ice/snow/sleet, accidental discharge or overflow of water or steam
-sudden and accidental tearing of appliances
-freezing of appliances
-sudden electrical damage

3. Open perils coverage
-all perils covered except those that are excluded


Perils excluded from most homeowners policies

-war or nuclear hazard
-power failure
-intentional loss


Standard homeowners policy 2 sections

Section 1: protects property and belongings

Section 2: provides liability and medical payments coverage to the homeowner for acts occurring in and off of the insured’s property


Homeowners Section 1 Coverages

Coverage A: Dwelling

Coverage B: Other Structures

Coverage C: Personal Property
-cash is considered personal property

Coverage D: loss of use
-provides reimbursement to an insured homeowner for additional living expenses incurred living elsewhere while the home is being repaired

Coverage E: personal liability
-protects the insured homeowner and all resident family members against personal liability for bodily injury and property damage that may occur on or off of the premises due to negligence

Coverage F: Medical Payments to Others


Fair market value (FMV)

The price at which an exchange will take place between a willing buyer and a willing seller


Replacement cost value

The current cost of replacing property with new materials of like kind and quality

Clients should be recommended they insure their home to match the replacement cost


Actual cash value

The depreciated value of personal property per an internal insurance company table and is not the value of the property after depreciation for income tax purposes


Agreed-value basis

How coverage is written on scheduled items


Basic homeowners (HO) Insurance forms available in the marketplace today

HO-2: broad form (named perils)

HO-3: special form (open perils)

HO-4: contents broad form (for tenants or renters)

HO-5: comprehensive form (open perils)

HO-6: unit owners form (for condominium owners)

HO-8: modified form (for older or historic home)


HO-2: Broad Form

Provides broad coverage for the dwelling and personal property


HO-3: Special Form

Most popular and widely purchased of the basic homeowners policies

Real property is covered on an open-perils basis

Personal property is covered on a named-perils basis


HO-4: Tenants or Renters

Designed for tenants who do not own their dwelling


HO-5: comprehensive form

Similar to the HO-3 except that Coverage C (personal property) for an HO-5 policy is written on an open perils basis


HO-6 Condominium Owners

Provides coverage for the condo owner’s personal belongings and any owned structural part of the building

This type of policy also provides liability protection


HO-8: Modified Form for Special Risks

Provides coverage for those who live in an older home whose replacement cost exceeds its market value
The HO-8 policy uses a functional replacement cost provision for loss


Flood insurance

Provides coverage for physical loss from a flood

The predominant provider is the federal government through the National Flood Insurance Program (NFIP)


Earthquake Insurance

Provides coverage for physical loss due to an earthquake

These policies generally have high deductibles which may be as high as 10% or the face amount to avoid numerous small claims after an earthquake


Inland marine coverage

Insurance on specific items of personal property that are not covered under the homeowners policy is provided under inland marine coverage

Items typically covered: furs, jewelry, silverware

Coverage is on an open perils basis


Insurance on watercraft

An individual boat owner’s policy covers liability, physical damages medical payments, and bodily injuries caused by uninsured boaters


Personal automobile policy

Provides protections against the following 3 major losses:
1. Damage to or loss of the jnsured’s vehicle
2. Injury to the insured or family members
3. Legal liability for personal injuries and damages to property

Part A: liability coverage
Part B: Medical payments
Part C: uninsured motorists
Part D: coverage for property damage to your auto
Part E: Duties after an accident or loss
Part F: general provisions


Personal Automobile Policy (PAP)

Other-than-collision or comprehensive coverage

Protects the insured from damages incurred where the perils are typically viewed as accidental and out of the insured’s control

Because the expected claim cost is usually lower, the premium for comprehensive coverage is typically lower than that for collision coverage


Personal liability umbrella policy (PLUP)

Structured to provide a layer of liability insurance coverage on top of the individual’s homeowners and automobile insurance policy

When both the umbrella policy and underlying homeowners or automobile policies cover a loss, the PLUP will not pay any claims until the underlying coverage has been exhausted


Commercial package policy (CPP)

The basic commercial a
property and liability insurance policy

Comprehensive, has no gaps in overall coverage


Businessowners policy (BOP)

Another type of commercial property and liability insurance


Malpractice insurance

Generally used where the deficient conduct of the insured may result in bodily harm (e.g. a physician, surgeon, or dentist)


Errors and omissions (E&O Insurance)

Provides protection against the deficient acts of a professional that handles money


Workers’ compensation insurance

Most states require workers’ compensation for the benefit of the employees

Benefits are funded through premiums paid by the employer


Unemployment compensation

Not so much indemnity insurance (to make one whole) as it is in lieu of salary

Unlike workers’ compensation benefits that are nontaxable, unemployment compensation is fully taxable to the recipient


Collision definition under Part D of a personal automobile policy

The upset of your covered auto or its impact with another vehicle or object

Covers damages incurred in an accident involving other vehicles or those sustained when an automobile runs off the road into a tree