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M3: Personal Lines > Homeowners 3 > Flashcards

Homeowners 3 Flashcards

1
Q

ISO forms and their functions:

A
  • HO-2: Broad Form (cheap but provides more coverage than HO-8.)
  • H0-3: Special Form (Middle of road.)
  • HO-4: Contents Broad form (renters)
  • HO-5: Comprehensive Form (Best coverage and high end)
  • HO-6: Condominium Form (Condo)
  • HO-8: Modified Coverage Form (Limited coverage)
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2
Q

Types of coverage:

A
  • Named peril Coverage
  • Extended coverage
  • Broad form coverage
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3
Q

Extended coverage endorsements cover these 7 events along with the perils of fire and lightening:

A
  • Windstorm
  • Hail
  • Explosion
  • Riot or civil commotion
  • Vehicles
  • Aircraft
  • Smoke
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4
Q

Broad Form Endorsement covers these 9 events:

A
  • Vandalism
  • Theft
  • Falling objects
  • Weight of ice, snow, or sleet
  • Damage from a steam or hot water system
  • Accidental discharge or overflow of water or steam
  • Freezing of plumbing, heating, air conditioning systems, or domestic appliances
  • Sudden and accidental damage from artificially generated electrical current
  • Sudden and accidental tearing apart, cracking, burning or bulging.
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5
Q

Broad form perils (18):

A
  • Fire: has to be hostile (uncontrollable or started accidentally)
  • Lightning: natural (not artificial)
  • Explosion: not covered are explosions outside covered building, burst water pipes, electrical arcing, pressure relief device rupture, storm boiler or steam pipes owned by insured.
  • Windstorm: hurricane, tropical storm, tornadoes included, but not limited to.
  • Hail: 2 exclusions.
  • Riot: 3 or more people trying to disturb the peace with violent public disorder. -Aircraft: Does not require physical contact ( could be sonic boom from nearby crash). Covers damage by model and hobby aircraft.
  • Vehicles: Does not require physical contact. (HO-2 form excludes vehicle damage to fence driveway or walkway caused by a resident of the insured home.)
  • Smoke: Must be accidental and sudden (Excludes damage caused by agricultural smudging or industrial operations.)
  • Theft: excluded: by insured, under construction, rental section of non insured, off premises at secondary property.
  • Falling objects: no coverage inside building unless object punctures roof or wall first before damaging inside property then it is covered.
  • Ice and snow: weight to properties and property inside
  • VMM (vandalism and malicious mischief): Not for buildings vacant (no people or belongings) more than 60 consecutive days immediately before the loss. Under construction is not vacant.
  • Discharge: Excludes system or appliance that it escaped from, 60+ days vacant properties, sumps, constant seepage, freezing, off premises accidental discharge or overflow.
  • Tearing apart: rupture, cracking, burning or bulging of steam or hot water heating system (or appliance for heating water), AC system, fire sprinklers. Excludes coverage for system or appliance that was affected.
  • Freezing: Excludes homes that are vacant, unoccupied or under construction, unless insured maintains reasonable care to maintain heat, or shuts off water and drains system.
  • Artificial current: Excludes any electrical current that is not naturally generated, for example, lightning. Excludes losses to circuitry, tubes, transistors, electronic components of appliances, fixtures, computers, or electronics.
  • Volcano: Excludes, earthshakes, landshock waves or ground tremors.
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6
Q

Exclusions to wind and hail:

A

1: watercraft, trailers, furnishings, equipment, and outboard engines or motors only covered when inside fully enclosed building.
2: Damage caused by rain, sand, sleet, snow, or dust is only covered if the wind or hail first made the opening that allowed the elements in to a building to damage personal property, (building itself does not apply accept in the Broad Form).

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7
Q

Named peril forms:

A
  1. ) H0-2 (Broad): insures all 17 Broad Form perils; Covers insured’s house and personal property. Excludes earthquakes, damage to fence, driveway or walkway if caused by resident of resident premises.
  2. ) HO-4 (Contents Broad Form): renters; insures against all Broad Form perils; only personal property.
  3. ) HO-6 (Unit Owner’s Form): aka Condo Form; owner’s belongings; insures all finished surfaces of the individual condominium unit; insures against broad form perils.
  4. ) HO-8 (Modified Coverage Form): Covers fewer perils; Covers property at ACV (deducts depreciation for age, condition and wear); considers fair market value of home; cheaper. Covered perils: Fire, lightning, windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, volcanic eruption.
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8
Q

Open Peril Special Form Endorsement:

A
  • HO-3 and HO-5
  • Covers damages caused by all perils, except those specifically excluded.
  • If loss is caused by unlisted peril it is covered.
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9
Q

Open-Peril Forms

A
  • HO-3: (most popular coverage) dwelling and other structures; Named peril coverage for personal property (covered against all broad form perils)
  • HO-5: Same as HO-3, except that it covered structures and personal property; most comprehensive coverage available.
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10
Q

6 Sections of a homeowners policy

A
  1. ) Dec page
  2. ) Insuring agreement
  3. ) Definitions
  4. ) Section 1- Property coverage:
    - Coverage A: Dwelling
    - Coverage B: Other structures
    - Coverage C: Personal Property
    - Coverage D: Loss of Use
    - Additional Property Coverages
    - Exclusions
    - Conditions
  5. ) Section 2- Liability Coverage:
    - Coverage E: Personal Liability
    - Coverage F: Medical Payments
    - Additional Liability Coverages
  6. ) General Conditions and Endorsement
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11
Q

Dec page details:

A
  • Policyholder name
  • address
  • premium
  • deductible
  • policy term
  • limits of coverage
  • endorsements
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12
Q

You, your means:

A

insured

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13
Q

We, Us means

A

insurer

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14
Q

Insured means

A
  1. ) person named on dec page
  2. ) residents of household: relatives, under 21 in insured’s care.
  3. ) FT students, under age 24, away at school.
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15
Q

Residence premises refers to (9):

A
  1. ) Dwelling listed on dec page
  2. ) other buildings, grounds where insured lives
  3. ) Building bought for use as a dwelling
  4. ) premises used in connection with the above
  5. ) Any premises the insured rents regularly but does not own
  6. ) Vacant land, except farm land
  7. ) Land the insured owns or rents in order to build a one to four unit residence
  8. ) Cemetery plots
  9. ) Premises the insured occasionally rents, unless for business purposes.
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16
Q

Personal lines definition

A

Insurance an individual takes out on a risk owned for personal reasons (a home, mini van, land etc.)

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17
Q

Homeowners insurance definition

A

insurance for property inhabited by the insured, includes house, apartment, and condominiums.

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18
Q

Insurance Service Office (ISO) Forms:

A
  • HO-2: Broad form- named peril
  • HO-3: Special form- all peril for structure; named peril for contents
  • HO-4: Renter’s insurance- named peril
  • HO-5: Comprehensive form- all peril coverage for both structure and contents
  • HO-6: named peril for finished surfaces and owner’s belongings
  • HO-8: Modified coverage form- limited named perils.
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19
Q

Coverage A- Dwelling

A

Property covered:

  • Dwelling
  • Structures attached to dwelling
  • Materials located in or near the “residence premises” used to construct, alter, or repair dwelling.
  • Items that service dwelling (AC compressor, fuel tanks)
  • Under HO-6 (Condo Form): alterations, appliances, fixtures, and improvements that are part of building contained within residence.
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20
Q

Coverage B- Other structures

A
  • Detached structures including: Garages, gazebos, fences, mailboxes, lampposts, sheds
  • Amount of B is only a percentage of A. 10% is common. Paid in addition to limit for A.
  • Excludes structures used at all for business, rental or held for rental.
  • Covers structures rented to an insured or tenant of the primary dwelling; garages rented as private garages.
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21
Q

Coverage C- Personal Property

A
  • Real property: Buildings, elements attached to buildings, building materials/supplies that are located on or next to the residence premises and intended for use on those premises.
  • Personal Property: All property that does not qualify as real property; covered anywhere in the world.

Limits:

  1. ) Property usually situated at the residence premises : full coverage
  2. ) Property usually situated somewhere other than the residence premises: 10% of Coverage C limit or $1,000, whiceh si greater.
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22
Q

Coverage C Special limits:

A
  • $200: Coins and money
  • $1500: securities, accounts, deeds, letters of credit, manuscripts, personal records, passports, tickets, and stamps.
  • $1500: Theft of jewelry, watches, furs, and precious stones.
  • $2500: Theft of firearms
  • $2500: Theft of silver, gold and platinum
  • $1500: Boats and their trailers, furnishings, equipment, and engines
  • $1500: Other types of trailers
  • $2500: Personal property used for a business
  • $1500: personal property used for a business when away from the residence.
  • $1500: Portable electronics and accessories that are in a vehicle
  • $250: Antennas, tapes, wires, records, disks and other media while in a vehicle.
23
Q

Coverage C exclusions:

A
  • Pets
  • motor vehicles
  • aircraft and hovercraft (but hoppy aircraft are covered)
  • Property of a renter or boarder
  • Personal property the insured is renting out
  • Credit cards
  • Value of water or steam, such as from a heating system (but water in a residential pool is covered under coverage C)
  • Sometimes Mysterious disappearance
24
Q

Coverage D- Loss of use

A

For indirect losses that result from direct losses.

Coverages include:

  1. ) Additional Living Expenses (ALE)
  2. ) Fair Rental Value (FRV)
  3. ) Prohibited Use (aka Civil Authority)
25
Q

ALE requirements

A
  • Dwelling must be uninhabitable
  • Damage must have been caused by a covered peril
  • Only covers costs that exceed the insured’s normal living expenses
26
Q

FRV details

A
  • Indemnifies insured for lost rent if tenant has to move out due to covered damages
  • Pays lost rental income until it is habitable again
  • Only pays net loss: Subtracts any expenses that do not continue while the tenant is gone.

-Coverage does not include losses due to cancelled lease or agreement

27
Q

Civil Authority coverage details

A
  • Pays for ALE and FRV when a civil authority prevents the insured from using the home
  • Civil authority: any government entity acting on behalf of, or to protect people or property.
  • Only applies if the damage was caused by a peril covered in the insured’s policy.
28
Q

Coverage D limits

A
  • Measured in time rather than dollars
  • designed to cover the insured until the dwelling is habitable
  • Allow additional living expenses and fair rental value to extend beyond the policy expiration date if needed.
  • ADL paid until the shorter of two timeframes: repaired/replaced, or household can settle elsewhere
  • FRV paid: for the shortest amount of time needed to restore to rentable condition
  • Civil authority pays ALE and FRV up to a maximum of 2 weeks until access to home is restored.
29
Q

Coverage D deductibles

A
  • ADL and FRV= subject to policy deductible
  • Civil authority= not subject to any deductible
  • HO deductibles apply once for each occurrence so coverage A losses will usually end up covering the deductible.
30
Q

12 additional coverages

A
  1. ) Debris removal
  2. ) Reasonable repairs
  3. ) Trees, shrubs, etc. (named perils: lightning, vandalism, fire; $500 per plant)
  4. ) Fire Dept. Charge ($500 limit; no deductible)
  5. ) Loss assessment (condo owners; limit $1000 or $2500 per claim)
  6. ) Property removal (if covered peril is imminent; once moved, covered for 30 days)
  7. ) Credit card fraud, forgery, etc. (Limit $500)
  8. ) Collapse and Glass breakage (covered when caused by hidden decay or insects, weight, defective materials during construction; Collapse not covered if caused by earth movement (settling, shrinking, expansion, cracking or bulging); Excluded: awnings, fences, patios, swimming pools, underground pipes, septic tanks, foundations, retaining walls, docks)
  9. ) Ordinance or law (pays difference between old construction and new code required construction during repair or damage due to a covered peril.; 10% of Coverage A limit as additional insurance (available even if policy limit is exhausted))
  10. ) Landlord’s furnishings (Limit: $2500)
  11. ) Building additions and alteration (For HO-4 and HO-6; Covers structural alterations made at renter’s or condo unit owner’s own expense)
  12. ) Grave markers: (limit: $5000)
31
Q

Debris removal limits:

A

The limit for the type of property involved.

  • Debris from dwelling: coverage A limit
  • Debris from other structures: subject to Coverage B limit
  • Debris from personal property: Subject to coverage C limit.

-when needed debris removal can pay an additional 5% of the applicable limit for each type of coverage (A, B, or C)

32
Q

Named peril vs Open peril

A

Named peril: narrow coverage= few exclusions

Open peril: wide coverage= many exclusions

33
Q

Exclusions to HO property coverage (9):

A
  • Ordinance
  • Earth movement
  • Water damage
  • Off premises power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional acts
  • Mechanical breakdown
34
Q

Section 1 conditions:

A
  • Interest
  • Deductible
  • Duties: if there are two or more deductibles under a policy, the highest deductible amount applies.
  • Concealment
  • Loss settlement
  • Pair or set
  • Appraisal
  • Other insurance
  • Suit against us
  • Our option
  • Loss payment
  • Abandonment
  • Mortgage
  • No benefit to bailee
  • Nuclear hazard
  • Recovered property
  • Volcano
  • Policy period
35
Q

Section 1: Duties after loss:

A

Insured must:

  • notify police if the loss my have involved a crime.
  • notify the insurer about what property was involved, and the circumstances surrounding the loss.
  • submit a description of how, where, and when the loss occurred.
  • Try to prevent further damages, and keep track of expenses incurred doing this.
  • Give the insurer a list of damaged property.
36
Q

Section 2 conditions:

A
  • Limit of liability
  • Severability
  • Duties After “Occurrence”
  • Duties of an injured person
  • Claim payment
  • Suit against us
  • Bankruptcy
  • Other insurance
  • Policy period
  • Concealment or fraud
37
Q

Section 2: duties after loss:

A

Insured must:

  • Report the claim in a reasonable time frame
  • Allow an adjuster to examine the loss
  • Allow physical examinations
  • Let the insurer know any pertinent information
38
Q

Section 2: Duties of an injured person:

A
  • Give insurer proof of occurrence
  • Authorize examination of medical records
  • Submit to a physical examination
39
Q

Suit against us:

A
  • Insured cannot take action against an insurer unless the insured has fully complied with all the terms of a policy
  • No one has the right to join an insurer in taking action against its insured
  • No action can be taken against an insurer until the obligation of the insured is determined by the insurer.
40
Q

Section 1 and 2 conditions:

A
  • Subrogation
  • Cancellation
  • Nonrenewal
  • Liberalization
  • Waiver or change
  • Assignment
  • Death
41
Q

Loss settlement

A

Personal property is usually covered at ACV:

  1. ) ACV valuation subtracts depreciation from cost of new item
  2. ) age and condition (wear and tear) of item are factors of its depreciation

If residence and other structures are covered for RC:

  1. ) Replacement is of like, kind, quality of original structure
  2. ) Insured must show what has already been spent on repair, if any.
42
Q

Homeowners liability coverage can pay for:

A
  • medical bills
  • lost wages
  • pain and suffering
  • inconvenience
  • property damage
43
Q

Liability coverages: Coverage E

A
  • *personal liability:
  • pays for bodily injury and property damage to 3rd party if inured is found negligent.
  • Applies even if the insured’s property causes a 3rd party damages.
  • Never pays the insured.
  • Must be result of policyholder’s negligence, and partly the fault of the insured.
  • min coverage: $100,000.
  • Pays insured’s legal defense fees
  • Legal defense: insurer pays fees all the way to the end of the lawsuit, even if the limit is exceeded.
  • Insurer has the right to settle damages with the claimant however it wants.
44
Q

Liability coverages: Coverage F:

A
  • *Medical payments
  • No fault coverage
  • For medical expenses incurred by third party due to an accident on insured’s premises
  • only necessary, reasonable medical charges.
  • $1,000 minimum limit.

Covered medical expenses:

  • Medical services
  • Surgery
  • X rays
  • Dental costs
  • Ambulance services
  • Hospital stays
  • Professional nursing
  • Prosthetic devices
  • Funeral services
45
Q

Liability coverages: Additional coverages (4):

A
  1. ) Property of others: Exclusions: Pays nothing covered by section 1; No coverage for intentional damage by persons 13 or over; No coverage for insured’s property; No coverage for property of tenants or residents.
  2. ) First Aid: Does not pay for first aid of insured, but does for others.
  3. ) Claims Expenses: Covers: cost to investigate claim; expenses incurred by insured (lost wages up to $250/day); Interest on judgements that accrue after the judgement; Premiums for bonds required in a suit defended by the insurer.
  4. ) Loss assessment: Pays up to $1000 for assessments of property association member; kicks in when injury or damage is not excluded under section 2 or when the liability is for an act committed by an elected director or officer, not a paid employee of the association. No coverage for assessments charged by a governmental body.
46
Q

Liability coverage exclusions: E

A
  • Bodily injury and property damage to the insured
  • Bodily injury to persons covered by workers compensation insurance
  • Damage to property rented by insured, occupied or used by insured, or held in insured’s custody and care.
  • Liability for contracts; however covered when relating to ownership, maintenance, or use of insured location, or if inured had assumed others; liability before an occurrence.
47
Q

Liability coverage exclusions: F:

A
  • insured person
  • anyone who lives on residence premises regularly
  • anyone eligible for workers comp or disability for the occurrence
  • Harm to a resident employee who is not in the course of employment, or is not at premises at time of occurrence
  • Harm from nuclear reactions.
48
Q

Exclusions to both coverages E and F

A
  • Intentional or malicious harm to third party by insured
  • harm from war
  • disease transmitted from insured to third party
  • Sexual molestation or abuse by insured
  • Drug use, sale, manufacture, possession.
49
Q

Liability Vehicle exclusions

A
  • Harm or damage caused by insured’s automobile use (exceptions: vehicles for property maintenance, handicapped persons, or those in storage. Recreational vehicles are covered under certain conditions
  • Aircraft
  • Watercraft (if owned by insured, motor is 25 hp or greater; if rented by insured, motor is 50hp or greater; rented or owned, sailboats 26 feet or greater.
50
Q

Liability Business exclusions

A
  • Third party losses due to insured’s business.

- Third party losses from insured’s failure to render business services.

51
Q

HO endorsements

A
  • Sinkhole collapse
  • sewer backup
  • earthquake
  • hurricane (coverage can be removed)
  • ordinance or law
  • Personal property replacement cost
  • Inflation guard
  • Scheduled personal property.
52
Q

Endorsements can add coverage for:

A
  • sinkhole collapse
  • sewer backup (up to $5,000, deductible applies)
  • Earthquake
  • Ordinance or law
53
Q

Endorsements can remove coverage for:

A

Hurricane damage (if a state program already provides this coverage)

54
Q

For increased premium, endorsements can add:

A
  • Replacement cost valuation rather than ACV
  • Inflation Guard to automatically increase limits
  • Scheduled personal Property, such as jewelry, furs, collectibles

M3: Personal Lines (9 decks)

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