Unit 4 Part B Flashcards
(23 cards)
loss valuation/claims settlement
legal duty of insurer to determine appropriate amnt of claim payment according to terms of the policy
insured has right to collect the lesser of… (4)
- insurable interest
- policy limit
- actual cash value
- cost to repair/replacement cost
actual cash value
current cost of replacing an asset minus accumulated depreciation and obsolescence
although ACV is the most common method for reimbursement…
the insured may be reimbursed on the basis of repair cost if the amnt is less than ACV
in some policies the company may agree to automatically pay the replacement cost without depreciation, but the replacement property must be…
similar kind and quality
functional replacement cost
cost of acquiring another item that will perform the same function with equal efficiency (ex. if a fire damages your plaster walls, they may allow repair using drywall)
market value
the price someone would pay based on market conditions – insurance industry is not generally concerned with this
with certain items, such as antiques, etc., the NI and company will agree on an ______ ____ before the policy is issued. and, this is reset _____ ____
agreed value (*is guaranteed in event of loss)
every year
stated value
allows insured to determine the value of their own property; in event of loss, insurer will pay lesser of stated value or ACV – therefore payment of stated val is not guaranteed
pair or set condition
loss settlement condition stating if part of a pair/set is lost, the loss will be valued as a fair proportion of the total value
ex. if a diamond earring is stolen and the remaining is worth$8k, the insured will be paid $30k (total value for the pair) minus $8k (what remains) = $22k
appraisal condition
either party may demand an appraisal if there is disagreement between NI and insurer – must pay own appraiser
if 2 appraisers can’t agree, an umpire is called in: 2/3 must be in agreement
arbitration condition
similar to appraisal condition but extended to other areas of disagreement such as over coverage/third party loss/ etc.
used before insured turns to legal action if possible
coinsurance
requires insured to carry a minimum amnt of insurance, normally up to 80% of replacement cost for a piece of property;
if the NI does not carry this amnt of coverage the company will only pay a % of what full reimbursement would’ve been: coinsurance penalty
coinsurance penalty formula
- does NI carry replacement cost*.8?
- NO –> (insurance carried)/(insurance required)*loss= claim payment - deductible
the coinsurance clause is meant to encourage property owners to…
purchase full or nearly full coverage and review their policy periodically
vacancy
empty building, NI penalized after 60 consecutive days
unoccupied
contents remain but no people, no penalty
standard mortgage clause
specifies rights and duties of mortgagee (bank, mrtg company) under the policy that may include:
- filing proof of loss
- paying premium
Nothing the insured does can prevent a listed mortgagee from being paid. In the event of an illegal act, the mortgage company would ….
become the insured as they are lien holder
loss payable clause
extremely similar to standard mortgage clause but for cars, boats, and other personal property rather than homes paid to a LENDER (not mortgage)
bailee
entity that has temporary possession of someone else’s personal property, such as a storage facility or a dry cleaning est.
no benefit to bailee condition
the bailee is not covered under policy – the property would be covered under BAILEE’S policy instead
in terms of coinsurance, when a total loss occurs…
the full policy limit is paid
