Property Basics

Question 1

A sudden, unforeseen, unintended, and unplanned event from which loss or damage results.

Answer 1

Accident

Question 2

An accident includes continuous or repeated exposure to the same general harmful conditions.

Answer 2

Occurrence

Question 3

A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged and retained by the insurer for the number of days coverage was in place; the unearned premium is the premium refunded to the insured for the number of days coverage was not in place.

Answer 3

Pro Rata Cancellation

Question 4

A cancellation of insurance that incurs a financial penalty/when the insured cancels the policy before its expiration date/ The insurer retains a portion of the unearned premium to cover costs.

Answer 4

Short Rate Cancellation

Question 5

A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided and the insurer must refund the policy premium paid by the insured

Answer 5

Flat Cancellation

Question 6

The termination of a policy at the expiration of its term. The policy does not renew and no coverage is provided after the expiration date.

Answer 6

Nonrenewal

Question 7

The primary cause of loss. If only one peril caused the loss, it is the first event in the unbroken chain of events that resulted in loss. If more than two perils caused or contributed to the loss it is the peril having the most significant impact in generating the loss or damage.

Answer 7

Proximate Cause

Question 8

A fire that burns outside its intended boundaries, or becomes uncontrollable.
ex: a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture.

Answer 8

Hostile Fire

Question 9

A fire that was intentionally set and stays within its intended boundaries (e.g., a fireplace) and results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from this.

Answer 9

Friendly Fire

Question 10

A quality within property that causes it to damage or destroy itself. Examples include rust, rot and the fading of paint. This is not covered by a property policy.

Answer 10

Inherent Vice

Question 11

A legal agreement issued by an insurance company or a producer that provides temporary proof of insurance until the insurer is able to issue an insurance policy

Answer 11

Binder

Question 12

Process whereby a disputed claim is decided by a neutral third party

Answer 12

Arbitration

Question 13

The right of the insurer to take possession of damaged property after paying for its loss.

Answer 13

Right of Salvage

Question 14

The amount for which property can be sold at the end of its useful life. In property insurance, it is the scrap value of damaged property.

Answer 14

Salvage Value

Question 15

A policy form that alters or adds to the provisions of a property and casualty insurance contract.

Answer 15

Endorsement

Question 16

A principle holding that when two perils simultaneously cause a loss, the insurer must pay the loss even if one of the perils is excluded by the policy.

Answer 16

Concurrent Causation

Question 17

The existence of two or more policies covering the same exposures, having the same policy periods, and the same coverage triggers. ex. an auto policy and an umbrella policy written with the same policy dates

Answer 17

Concurrency/Concurrent Policies

Question 18

The existence of two or more policies covering the same exposures that don’t have the same policy periods

Answer 18

Non-Concurrency/Non-Concurrent Policies

Question 19

The specified amount of each loss that the insured must bear

Answer 19

Deductible

Question 20

Words, terms, and phrases that are clearly described and used in an insurance policy for the purpose of clarifying the intent of the insurer and to avoid coverage disputes with respect to the extent of coverage provided by the policy

Answer 20

Definitions

Question 21

A person or any organization to which property has been entrusted, usually for repairs, servicing or storage. Property insurance policies exclude coverage for property in the care of this.

Answer 21

Bailee

Question 22

A person or organization that entrusts property to a bailee

Answer 22

Bailor

Question 23

Any type of coverage that responds to a loss before all other coverage responds

Answer 23

Primary Insurance

Question 24

Any form of insurance coverage that provides protection against certain perils or causes of loss ONLY after loss or damage exceeds a stated amount or the limits stated in specific policies or self-insurance. ex. umbrella insurance

Answer 24

Excess Insurance

Question 25

A property that contains personal property but has no occupants

Answer 25

Unoccupancy

Question 26

A provision in a property policy that eliminates or limits coverage for buildings that don’t contain sufficient personal property to support intended occupancy or use

Answer 26

Vacancy

Question 27

The taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry into, or exit from, the property of another while trespassing.

Answer 27

Burglary

Question 28

The taking of property from the care and custody of a person who has been caused or threatened with bodily harm.

Answer 28

Robbery

Question 29

The broadest of the crime coverages, includes any act of stealing

Answer 29

Theft

Question 30

The loss of property when the cause of loss is not known. This is NOT theft, burglary, or robbery.

Answer 30

Mysterious Disappearance

Question 31

A loss that causes direct damage to property without an intervening cause

Answer 31

Direct Loss

Question 32

A loss that is not the direct result of a peril.

Answer 32

Indirect Loss or Consequential Loss

Question 33

What are the two types of perils that may be covered by property insurance policies?

Answer 33

Named Peril and Open(or Special Form/All-Risk) Peril

Question 34

This type of property coverage only provides insurance for the causes of loss, or perils, listed. If a peril is not “named” in the policy, no coverage applies. (up to 16 perils)

Answer 34

Named Peril

Question 35

This type of property coverage provides insurance for all causes of loss that are not specifically excluded under the policy. Ex. flood and earthquake.

Answer 35

Open Peril (Special Form, All–Risk)

Question 36

What is loss valuation?

Answer 36

A property policy pays for losses to property based on the valuation method contained in the policy or chosen by the insured in an endorsement added to the policy.

Question 37

The cost to replace property with property of like kind and quality, at current pricing, without a deduction for depreciation.

Answer 37

Replacement Value

Question 38

The cost to repair or replace property at its replacement value, minus depreciation.

Answer 38

Actual Cash Value (ACV)

Question 39

The insurance company and insured agree to a specific value of a particular property before the policy is issued

Answer 39

Agreed Value

Question 40

states the value of a particular property on the declarations page, but provides for the insurer to pay the lesser of the stated value or ACV of the property following a loss.

Answer 40

Stated Value

Question 41

states the value of property as the amount shown on the Declarations page and will pay that full face value in the event of a total loss, regardless of the actual cash value

Answer 41

Valued Policy

Question 42

The cost to replace property with other property that performs the same function with similar efficiency, although the replacement property is not identical to the property being replaced

Answer 42

Functional Replacement Value

Question 43

The price a willing buyer would pay for property purchased from a willing seller

Answer 43

Market

Question 44

What calculation is used to determine the actual cash value (ACV) of a loss? A: Market value – original purchase price = ACV B: Replacement cost – market value = ACV C: Market value – depreciation = ACV D: Replacement cost – depreciation = ACV

Answer 44

Replacement cost – depreciation = ACV

Question 45

A building that has a roof, floor, and supports of combustible material, usually wood, and combustible interior walls.

Answer 45

Frame

Question 46

Buildings with exterior walls of masonry or fire-resistive construction rated for not less than one hour and with combustible floors and roofs.

Answer 46

Joisted Masonry

Question 47

The buildings and its walls, floors, and structural framework are constructed of noncombustible materials.

Answer 47

Noncombustible

Question 48

Buildings with exterior walls of masonry (not less than 4 inches thick) or made of fire-resistive construction with a rating of not less than one hour and noncombustible floors and roofs

Answer 48

Masonry Noncombustible

Question 49

The entire building and roof are constructed of reinforced concrete and steel. Must have at least a 2-hour ____rating.

Answer 49

Fire Resistive

Question 50

The materials used in the walls, floors, and roof of a structure must have a fire resistive rating of at least 1 hour, but less than 2 hours.

Answer 50

Modified Fire Resistive

Question 51

Methods of Writing Property Insurance Limits Include:

Answer 51

specific limit, scheduled limit, and blanket limit

Question 52

Insures a single item of property for a single limit of insurance. For example, a fire policy insures one dwelling for $100,000.

Answer 52

Specific Limit

Question 53

Insures one or more items of property on a single policy and the amount of insurance applying to each item is shown on a schedule. For example, one farm policy insures a home for $100,000 and a barn for $200,000.

Answer 53

Scheduled Limit

Question 54

Insures property located at more than one location OR more than one type of property at the same location OR both. For example, the $1 million ______ applies to two separate buildings at two separate locations, as well as the business personal property contained in each building.

Answer 54

Blanket Limit

Question 55

What is the acronym used to remember the structure of a standard property insurance policy?

Answer 55

DICE (declarations, insuring agreement, conditions, exclusions)

Question 56

Describes basic info about policy including: who, what, where, when, how much

Answer 56

Declarations

Question 57

states the insurance company’s promise to pay the insured. This promise is usually broad and the other sections of the policy restrict or limit the scope of coverage provided by the policy. Property insurance policies state in the_______ what perils are covered.

Answer 57

Insuring Agreement

Question 58

states the obligations of the parties to the contract, spells out the insureds duties and obligations

Answer 58

Conditions

Question 59

Specifies that coverage only applies to losses occurring when the policy is in force

Answer 59

Policy Period

Question 60

Specifies that coverage will not apply if an insured makes a material concealment, misrepresentation, or fraud in the application pertaining to the claim.

Answer 60

Concealment or Fraud

Question 61

Specifies that if the insurer broadens coverage with no increase in premium, that broadening of coverage will apply to existing policies without the need for an endorsement.

Answer 61

Liberalization Clause

Question 62

Specifies the terms under which the policy can be cancelled by the insurer and the named insured.

Answer 62

Cancellation

Question 63

Addresses the requirements of the insurer if it elects not to renew a policy.

Answer 63

Nonrenewal

Question 64

Specifies that the insured may not transfer rights of ownership without the insurer’s prior written consent.

Answer 64

Assignment

Question 65

States the insured must transfer to the insurance company its right of recovery against any party causing a loss after it accepts payment from the insurer for a loss. It allows the insurer to recover from the party that caused a loss any amounts paid to an insured

Answer 65

Subrogation

Question 66

- Prevents the insured from collecting twice for the same loss - Helps the insurer control expenses and premiums -Ultimately holds the responsible third party accountable for the loss

Answer 66

Subrogation

Question 67

Any changes to the policy must be made in writing by the insurer.

Answer 67

Changes

Question 68

The insurer will not be responsible for payment of loss in an amount greater than the financial interest of an insured.

Answer 68

Insurable Interest and Limit of Liability

Question 69

Specifies the sum and circumstances under which an insurer charges the insured, usually a business firm, to restore a policy to its initial face value or not reduce limits of coverage after the insurer has paid a claim either to the insured business or a third party on behalf of the business.

Answer 69

Restoration/Nonreduction of Limits

Question 70

Specifies the obligations of the insured in the event of a loss

Answer 70

Duties in the Event of Loss

Question 71

Obligations of the insured in the event of a loss include:

Answer 71

1. Giving prompt written notice to the insurer 2. Notifying the police if a theft 3. Cooperating with the insurer in the investigation and settlement of the loss 4. Protecting property from further damage 5. Preparing an inventory of the damaged property 6. Allowing the insurer to inspect 7. Submitting proof of loss to the insurer

Question 72

Specifies which loss valuation method will apply to the property insured under the policy.

Answer 72

Loss Settlement

Question 73

Specifies which loss valuation method will apply to the property insured under the policy.

Answer 73

Loss Settlement

Question 74

Addresses disputes about the amount of a loss. It is a dispute resolution method and is not used to determine whether the policy provides coverage for a loss

Answer 74

Appraisal

Question 75

Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss.

Answer 75

Other Insurance

Question 76

Specifies that no one may bring suit against the insurer until all terms and conditions of the policy have been complied with.

Answer 76

Legal Action Against Us

Question 77

Specifies how the insurer will make payment for loss and any applicable time frames that must be honored when submitting proof of loss and other claim documents.

Answer 77

Loss Payment

Question 78

Specifies that the insurer is not obligated to accept any property abandoned by an insured.

Answer 78

Abandonment of Property

Question 79

Specifies how the policy protects the mortgagee’s financial interest.

Answer 79

Mortgage Clause

Question 80

Under the mortgage clause, the mortgagee must comply with what requirements?

Answer 80

- It must pay any premium due under the policy on demand if the insured fails to do so - It must notify the insurer of any change in ownership, occupancy, or substantial change in risk of which the mortgagee is aware - It must submit a proof of loss to the insurer if the insured fails to do so

Question 81

Specifies that no coverage applies if loss payment benefits a bailee

Answer 81

No Benefit to Bailee

Question 82

Specifies the procedure to be followed when lost or stolen property is recovered after the insurer has made payment under the policy.

Answer 82

Recovered Property

Question 83

Specifies that bankruptcy or insolvency of the insured does not relieve the insurer of any of its duties or obligations under the policy.

Answer 83

Bankruptcy Clause

Question 84

– Specifies that in the event of the named insured’s death, the insurer will extend coverage to the legal representative of the deceased with respect to the premises and property covered under the policy at the time of the named insured’s death.

Answer 84

Death

Question 85

Specifies how the policy protects the interests of a loss payee. A loss payee has insurable interest in personal property.

Answer 85

Loss Payable Clause

Question 86

In policy structure, what are exclusions?

Answer 86

Perils that are NOT covered by the policy

Question 87

Name some common property exclusions:

Answer 87

- Ordinance or Law - Earth movement - War - Water Perils that are NOT covered by the policy are listed in the exclusions section. Other perils may be excluded in provisions stated elsewhere in the policy (i.e., water damage, flood, sewer backup, etc.) - Utility failure that originates off-premises - Neglect of the insured to protect covered property from further loss - Intentional loss - Nuclear hazard, war, and military action - Governmental action - Fungus, wet rot, dry rot, and bacteria (e.g., mold)

Question 88

Each of the following is a typical property insurance policy exclusion, except: A Neglect B Flood C Fire D Ordinance or Law

Answer 88

Fire. Fire is a basic peril covered under property policies. Ordinance or law, flood, and neglect are common exclusions.

Question 89

automatically included in property policies without an additional premium. paid in addition to those stated in the insuring agreement and include debris removal, collapse, and fire department service charges.

Answer 89

Additional Coverages

Question 90

What are some types of insureds in common policy provisions?

Answer 90

Named insured, insured, first named insured, and additional insured

Question 91

person or organization designated on the Declarations page of the policy. should be owner of the property.

Answer 91

Named Insured

Question 92

A person or organization protected by an insurance contract.

Answer 92

Insured

Question 93

has rights and responsibilities not applying to other insureds. represents all insured, particularly on commercial lines policies. ______receives notifications from the insurer, can cancel the policy, and is responsible for paying the premium. Receives the broades coverage of all persons...

Answer 93

First Named Insured

Question 94

A person or organization not ordinarily protected by a policy but which, through the addition of an endorsement to the policy, is granted status as an insured. Under a property policy, an _____ is often a co-owner of real property. Under a liability policy, an ______ is often a party to an indemnification or hold harmless agreement.

Answer 94

Additional Insured

Question 95

A common policy provision contained in most policies insuring commercial property, and is used to encourage the insured to purchase and maintain insurance to value, and to establish the basis of payment in the event the insured fails to maintain a specified percentage of that value. applies only in the event of a partial loss, as total losses typically are paid in accordance with the Valued Policy Law.

Answer 95

Coinsurance