SFP never covers
Theft, Liability, or Money!
Real property
Building structure
Endorsement
A form added to the policy that changes the policy’s provisions for better or worse, usually for an extra premium
Declarations
States NAAPP: Named insured and ins. Co, Address of Property, Amount of Coverage, Premium, Policy Period
Insuring Agreement
Contains CECE PAID: Consideration Clause, Effective Time, Company Options, Effective Location, Perils Covered (or Excluded) ACV limitation, Insurable Interest,, Direct versus Indirect Losses
Conditions
Conditions apply to both insured and insurer.
(Duties)
Insured must notify the company immediately and protect the property from further damage
Exclusions
Specify losses not covered by the policy
SFP Declarations
First page of the policy
Company =first party named
Insured=second party named
Policy period= 1 year
SFP Insuring Agreement
Consideration clause (insured’s answers on app and premium and insurer’s agreement and pays covered claims.)
Removal=5 days
Consideration
Is required to make a valid contract
Effective time
Policy starts and ends at 12:01 a.m. on the inception and expiration dates shown in the dec.
Effective Location
Policy takes effect at 12:01 am at the location of the property insured
Policy Limit
The policy will never pay more than the policy limit that is indicated in the dec
ACV (Actual Cash Value)
In the event of a claim, the policy will pay the insured the policy limit or the ACV, whichever is less.
ACV is R/C minus depreciation or
Current Value minus depreciation
SFP
ACV
Company’s Options: The insurance co. always has the option of paying the claim or repairing the property with materials of like kind and quality,
Whichever is best for the company
The SFP only covers direct losses. Ex: fire
Indirect losses
Are not covered
Ex: loss of business income
Insurable interest must exist
At the time of the loss
Peril
Cause of Loss
Ex: fire,lightning, and removal
Named peril policy
If the peril is not listed in the insuring agreement, it’s not covered.
Peril of Removal
All-Risk
DP-1= 5 days
DP-2 and DP-3= 30 days
CPP=10 days???
For the peril of removal to apply to your policy, you must list
The contents coverage desired in the declarations and pay an extra premium to cover it
Conditions apply to
both the insured and the insurer
An ‘exclusion’ is
Something that is never covered.
The policy is void if the insured
Willfully conceals or misrepresents any material fact concerning the insurance.
Representation
Answers to the application (the truth to the best of your knowledge)
Concealment
Omits (fails to disclose) a material fact
Money is never covered on a fire policy, although there may be
Some coverage (up to $200) on a homeowners policy
Hazard
Something that increases the risk
Risk
Chance or uncertainty of loss
Coverage is suspended
While the structure is vacant or unoccupied beyond 60 consecutive days
There is no coverage for explosion or riot, unless fire ensues, and in that event
Only the loss caused by the fire is covered
If you cnx the company, the refund is always
Short rate, with the company keeping some of your money as a penalty.
If the company cnxs you, the refund is always
Pro-Rata, and you will get back the entire unearned premium.
Cancellation for nonpayment of premium only
Requires 10 days’ advance notice
Collateral Security
Bank’s insurable interest position in the property
The company will pay ACV or the policy limit
Whichever is less
Other insurance aka pro-rata liability clause states that in the event that there is more than one policy in force on a structure at the time of loss,
The loss will be shared by the various insurance companies on a pro-rata basis, whether collectible or not.
Premium/ Total Premium
Right of Appraisal
If insurer and insured fail to agree on the amount to be paid in the event of a loss, each side hires an appraiser. The two appraisers choose a disinterested umpire. A decision will be made when 2 of the 3 decide.
Each side pays 1 1/2
Negligence
Failure to act as a reasonable person.
One of the purposes of Subrogation is
To keep the insured from collecting twice, from the co. and from the negligent party.
Negligence
Failure to act as a reasonable person
SFP may be used to insure either
A dwelling structure up to four units (four-plex) or a commercial structure (office bldg or apt house)
SFP is never sold by itself. Endorsements must be added to describe the type of property to be covered and to
Broaden the policy’s coverage. These endorsements are the dwelling property forms.
Three dwelling property forms
DP-1 basic
DP-2 broad
DP-3 special
If SFP is being written to insure a commercial structure instead of dwelling , then the insurance company would add a form called
The commercial building and personal property form, instead of the dwelling property form.
Time-Element Coverage
Loss of income will occur over a period of time (until the dwelling is repaired).
Consequential loss
Aka time-element coverage
Consequence of a direct loss
Deductible in Dwelling
Often $250
Proximate Loss
The result; rain damage
Proximate Cause
Cause; wind blowing roof tiles off
ECE
Extended Coverage Endorsement
WHARVVES
WHARVVES
Wind Hail Aircraft Riot Volcanoes Vehicles Explosion Smoke
VMM (optional)
There’s no coverage for this unless the insured declares it on the Declarations page and pays an extra premium for it
V&MM
Does not over glass (windows)
Any coverage for vandalism is excluded if the structure has been vacant
For a period in excess of 60 days before the loss.
If structure burns down after 60 days of vacancy, there is coverage. But for V&MM perl, after 60 days, there is no coverage.
DP-1 exclusions
Ordinance or law
Earth movement
Water damage
Power failure off premises
Neglect, war, nuclear hazard, intentional loss
Any losses to lawns, plants, shrubs, or trees outside of the structure
Liberalization clause
Gives insurance company permission to broaden (make the policy better) without notifying the insured, as long as the change applies to all policyholders and no additional premium is charged.
DP-1 claims are still adjusted on a
Depreciated value (ACV) basis on both structure and contents
DP-1 is really three forms in one:
Dwelling property form,
ECE,
V&MM
SFP + DP-2 covers
Ordinance or law
Improvements, alterations, and additions (10% of C)
Collapse
Glass (unless dwelling vacant >60 days)
Fire department service charge ($500 in addition to limits, no ded.)
Coverage E-Additional Living Expense
DP-2
Coverage E-Additional Living Expense is
A form of time-element coverage (like rental value) that covers the insured’s costs incurred by staying in a hotel in the event his or her insured property was damaged by an insured peril.
DP-2 covers trees, shrubs, plants, and lawns (max $500 per each)
If named peril, not theft.
Damage done by vehs covered unless veh operated by insured or tenant
DP-2 building damage paid
Without any deduction for depreciation (R/C coverage)
Purpose of the 80% clause, aka co insurance, is
To require the insured to purchase adequate policy limits
If you do not carry 80% of current replacement cost at the time of a loss, you are subject to one of two possible penalties:
The co-insurance penalty (did/should x loss)
Or
Payment based on the ACV (R/C- depreciation)
The ins. co. pays whichever of these is higher.
DP-2 additional perils covered:
Damage done by burglars Falling objects Weight of ice, snow,or sleet Water leakage Sudden explosion of steam or hot water heating system or an appliance for heating water Freezing of plumbing Power surge Volcanic eruption
DP-2 exclusions:
Flood
War
Nuclear radiation
Glass breakage is generally covered unless dwelling has been vacant for more than 60 consecutive days
DP-3 special form offers
Open-Peril (all-risk) coverage on Cov A (the dwelling) and Cov B (the other structures).
Unless it is excluded,it is covered.
DP-3 excludes
Theft of any property (unless it is built-in) Wear and tear Deterioration Rust Dry rot Industrial smoke Pollutants Mech breakdown Settling Shrinking Expansion Vermin Rodents Insects Domestic animals
Big advantage of DP-3 is the
All-risk coverage on bldg structures while contents are still named peril and ACV.
Building structures are covered on R/C basis
If the insured carries at least 80% insurance-to-value
Inflation guard endorsement
Added at no additional charge (usually)
This is when the policy limits are increased automatically along with the rate of inflation in the geographical area where the dwelling is located
SFP is a named-peril policy. The named perils are
Fire
Lightning
Removal
Covers direct losses only!
SFP never
Covers theft, liability, or money
ACV is
Replacement Cost minus depreciation
Or
Current Value minus depreciation
DP-1 basic form
Worst named peril
DP-2
More named perils;
R/C if co-ins 80% is met
DP-3 special form
Open peril (all risk) on the dwelling
R/C if co- ins if 80% clause is met (most exclusions)
Contents are always named peril
DP-1
Cov A-dwelling
House and attached garage includes building equipment, outdoor equipment, and materials
(Declare a limit)—> most paid is limit
ACV on dwelling
DP-1
Cov. B=Other Structures
Detached garage
10% of Cov A
DP-1
Cov. C= Personal Property
Pay a premium and Declare a limit
Must be on dec page to be covered
Off-Premises= 10% of Cov C
DP-1
Cov D= Fair Rental Value
Indirect loss/Consequential Loss
20% of Cov A
DP-1 is SFP+ECE
Fire
Lightning
Removal
ECE=WHARVVES Wind Hail Aircraft Riot Volcanoes Vehicles Explosion Smoke
Dwelling has a deductible!!!
V&MM is optional on
A DP-1 but built in the DP-2 and covered by the DP-3 unless vacant more than 60 days.
Pay extra on a DP-1
Never covers glass (a proximate cause)
DP-1
No coverage for…
Ordinance or law Earthquake Flood, tidal wave, sewer backup Power failure off premises Neglect War Nuclear hazard Intentional loss Trees, grass, shrubs, lawns
DP-2 Broad Form
More named perils
R/C (if 80% clause met)
It stacks
DP-2
Covers:
Ordinance or law Collapse Glass (unless vacant more than 60 days) Fire dept. service charges Additional living expenses (new coverage) Trees, shrubs, lawns, plants $500 Damage caused by burglars Falling objects Weight of ice, sleet, snow Water leakage from plumbing , heating, or A/C system Explosion Freezing of plumbing (if heat left on) Power surge Volcanic eruption
DP-2
Cov A=Dwelling Declare a limit Cov B=Other Structures 10% of Cov A Cov C=Contents Pay premium; declare a limit (Off premises 10% of Cov C)
Cov D= Fair Rental Value Cov E= Additional Living Expenses (Policy covers the difference- extra costs) D&E (Total 20% of A)
DP-3
Special Form
R/C
Stacking
Open Peril (All-Risk) on the dwelling
No coverage for…
Theft of contents Wear and tear Deterioration Dry rot Rust Industrial smoke Mechanical breakdown Vermin Rodent Insects Domestic Animals Settling Shrinking Expansion Pollutants
Inflation Guard Endorsement
Free; as inflation in economy, the premium goes up.
DP-3 covers damage caused by
Wild animals