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Real property

Building structure

1

SFP never covers

Theft, Liability, or Money!

2

Endorsement

A form added to the policy that changes the policy's provisions for better or worse, usually for an extra premium

3

Declarations

States NAAPP:
Named insured and ins. Co,
Address of Property,
Amount of Coverage,
Premium,
Policy Period

4

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

5

Conditions

Conditions apply to both insured and insurer.
(Duties)

Insured must notify the company immediately and protect the property from further damage

6

Exclusions

Specify losses not covered by the policy

7

SFP Declarations

First page of the policy

Company =first party named
Insured=second party named

Policy period= 1 year

8

SFP Insuring Agreement

Consideration clause (insured's answers on app and premium and insurer's agreement and pays covered claims.)

Removal=5 days

9

Consideration

Is required to make a valid contract

10

Effective time

Policy starts and ends at 12:01 a.m. on the inception and expiration dates shown in the dec.

11

Effective Location

Policy takes effect at 12:01 am at the location of the property insured

12

Policy Limit

The policy will never pay more than the policy limit that is indicated in the dec

13

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

14

SFP

ACV

15

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

16

The SFP only covers direct losses. Ex: fire

Indirect losses

Are not covered
Ex: loss of business income

17

Insurable interest must exist

At the time of the loss

18

Peril

Cause of Loss

Ex: fire,lightning, and removal

19

Named peril policy

If the peril is not listed in the insuring agreement, it's not covered.

20

Peril of Removal

All-Risk

DP-1= 5 days
DP-2 and DP-3= 30 days
CPP=10 days???

21

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

22

Conditions apply to

both the insured and the insurer

23

An 'exclusion' is

Something that is never covered.

24

The policy is void if the insured

Willfully conceals or misrepresents any material fact concerning the insurance.

25

Representation

Answers to the application (the truth to the best of your knowledge)

26

Concealment

Omits (fails to disclose) a material fact

27

Money is never covered on a fire policy, although there may be

Some coverage (up to $200) on a homeowners policy

28

Hazard

Something that increases the risk

29

Risk

Chance or uncertainty of loss

30

Coverage is suspended

While the structure is vacant or unoccupied beyond 60 consecutive days

31

There is no coverage for explosion or riot, unless fire ensues, and in that event

Only the loss caused by the fire is covered

32

If you cnx the company, the refund is always

Short rate, with the company keeping some of your money as a penalty.

33

If the company cnxs you, the refund is always

Pro-Rata, and you will get back the entire unearned premium.

34

Cancellation for nonpayment of premium only

Requires 10 days' advance notice

35

Collateral Security

Bank's insurable interest position in the property

36

The company will pay ACV or the policy limit

Whichever is less

37

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

38

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

39

Negligence

Failure to act as a reasonable person.

40

One of the purposes of Subrogation is

To keep the insured from collecting twice, from the co. and from the negligent party.

41

Negligence

Failure to act as a reasonable person

42

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)

43

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.

44

Three dwelling property forms

DP-1 basic
DP-2 broad
DP-3 special

45

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.

46

Time-Element Coverage

Loss of income will occur over a period of time (until the dwelling is repaired).

47

Consequential loss

Aka time-element coverage

Consequence of a direct loss

48

Deductible in Dwelling

Often $250

49

Proximate Loss

The result; rain damage

50

Proximate Cause

Cause; wind blowing roof tiles off

51

ECE

Extended Coverage Endorsement
WHARVVES

52

WHARVVES

Wind
Hail
Aircraft
Riot
Volcanoes
Vehicles
Explosion
Smoke

53

VMM (optional)

There's no coverage for this unless the insured declares it on the Declarations page and pays an extra premium for it

54

V&MM

Does not over glass (windows)

55

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.

56

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

57

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.

58

DP-1 claims are still adjusted on a

Depreciated value (ACV) basis on both structure and contents

59

DP-1 is really three forms in one:

Dwelling property form,
ECE,
V&MM

60

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

61

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.

62

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

63

DP-2 building damage paid

Without any deduction for depreciation (R/C coverage)

64

Purpose of the 80% clause, aka co insurance, is

To require the insured to purchase adequate policy limits

65

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.

66

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

67

DP-2 exclusions:

Flood
War
Nuclear radiation
Glass breakage is generally covered unless dwelling has been vacant for more than 60 consecutive days

68

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.

69

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

70

Big advantage of DP-3 is the

All-risk coverage on bldg structures while contents are still named peril and ACV.

71

Building structures are covered on R/C basis

If the insured carries at least 80% insurance-to-value

72

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

73

SFP is a named-peril policy. The named perils are

Fire
Lightning
Removal

Covers direct losses only!

74

SFP never

Covers theft, liability, or money

75

ACV is

Replacement Cost minus depreciation
Or
Current Value minus depreciation

76

DP-1 basic form

Worst named peril

77

DP-2

More named perils;
R/C if co-ins 80% is met

78

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

79

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

80

DP-1

Cov. B=Other Structures

Detached garage

10% of Cov A

81

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

82

DP-1

Cov D= Fair Rental Value

Indirect loss/Consequential Loss

20% of Cov A

83

DP-1 is SFP+ECE

Fire
Lightning
Removal

ECE=WHARVVES
Wind
Hail
Aircraft
Riot
Volcanoes
Vehicles
Explosion
Smoke

Dwelling has a deductible!!!

84

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)

85

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

86

DP-2 Broad Form

More named perils
R/C (if 80% clause met)
It stacks

87

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

88

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)

89

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

90

Inflation Guard Endorsement

Free; as inflation in economy, the premium goes up.

91

DP-3 covers damage caused by

Wild animals