CH. 7 Miscellaneous Personal Lines Coverage

A single-family dwelling may purchase up to what amount of flood insurance in the NFIP's Emergency program?

$35,000

Personal Inland Marine Insurance

- can be attached by endorsement to a Homeowners or Dwelling Policy; it may also be written as a separate policy. -form of coverage used to insure moveable property against direct loss. Since moveable property is known as floating property, the word floater is often used.

National Flood Insurance Program (NFIP)

- enables certain property owners to purchase flood insurance. The Federal Insurance Administration administers the program under the Federal Emergency Management Agency (FEMA). The federal government makes payment for, or subsidizes, all flood losses. -Flood policies are available from participating private insurers who participate in the Write Your Own (WYO) Program, and directly from the NFIP. Agents do not have authority to bind coverage with the NFIP, but all licensed agents and brokers may write flood insurance with the NFIP - Communities in flood-prone areas must have established an approved flood control program in order to participate in the NFIP and are called participating communities. If a property owner lives in a community that is not a participating community, the property owner CANNOT purchase flood insurance, regardless of the degree of flood risk.

Additional Floater Features Personal Jewelry Floate

-Coverage may be written on a valued or actual cash value basis. The floater contains a "Pair and Sets Clause". If a covered loss occurs to an item that is part of a set, the value of the remaining item(s) is reduced based on the difference between the value of the total set and the value of each item individually. -because each item is worth more as a "set" than on its own. For example, if a pair of diamond earrings is valued at $2,000, and a loss occurs to one earring, the value of the pair drops by more than 50%. If one earring by itself is valued at $800, the total loss is $1,200. The "Pair and Sets Clause" specifies the conditions and the policy limit should this type of loss occur. - insured must submit an appraisal that documents both a description of the property to be insured and its value. Some insurers require appraisals for all insured items; others only require appraisals for items insured in excess of a certain amount, such as $2,500. An appraisal is usually required at or before the time insurance is bound. -Newly acquired items are automatically insured if they are the same class of property already insured by the floater. The limit of coverage is no more than a specific percentage of the value shown on the schedule. Automatic coverage for newly acquired items is only provided for 30 days.

Personal Articles Floater (Scheduled Article Floater)

-The basic form used to insure "individual" items of personal property on a scheduled basis. Claims are normally settled on an "actual cash value basis" with some exceptions. -Coverage is provided worldwide, with some exceptions. -Coverage is provided on an open perils basis with very few exclusions. Typical exclusions are wear and tear, insects or vermin, intentional loss, and war. Specific classes of property have additional exclusions. For example, a collection of glassware may have specific exclusions for breakage caused by certain perils. -Coverage may be provided for classes of property consisting principally of the following: Jewelry, Furs, Cameras, Musical Instruments, Silverware and Goldware, Golfer's Equipment, Fine Arts, Stamp Collections, Coin Collections, China and crystal

Write Your Own (WYO Program)

-cooperative effort involving FEMA and the private sector that allows existing property and casualty insurance companies to write, issue, and service flood insurance under their own names. It is estimated that over 90% of the flood insurance policies in force are maintained by WYO companies. The remaining policies are written and maintained directly by FEMA. -WYO companies, according to guidelines and regulations of the NFIP, may structure their flood insurance business within their existing personal lines business. This provides incentive for producers or agents to place their flood business with the WYO companies they represent.

Windstorm Insurance Coverage

-covered under the peril of wind in standard property insurance policies. In some states, exclusionary endorsements may be added to property policies to exclude coverage for the peril of wind or windstorm. These states are Alabama, Delaware, Florida, Georgia, Louisiana, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, South Carolina, and Texas. -ecause these states are at high risk for wind loss caused by hurricane, they have established wind and/or wind and hail associations that provide a marketplace of last resort for those who are unable to purchase insurance for the peril of wind on their primary property policies. In these and other states, some insurers require mandatory wind deductibles of a certain dollar amount, such as $2,500 or higher, based on the geographic location of property (such as within a certain distance of the sea coast) or prior wind losses.

Yacht Policy

-designed for larger vessels, many of which have crew members. Larger vessels are normally insured under the complete package of yacht coverages, which includes in addition to Hull Insurance, Protection and Indemnity and Medical Payments. -"Lay Up Warranty" applies when the insured boat is in storage and allows for a return of premium due to the reduced risk of the boat not being used when laid up. If the insured operates the yacht during the lay-up period (or lives on it), no coverage is provided. Each yacht policy contains a navigation territory that states where the boat will be navigated, such as on inland lakes and waterways. The insured does NOT have coverage if the boat is navigated outside the designated territory. If the insured wishes to change or broaden the navigation territory, the insurer must issue an endorsement. - In addition to providing property and liability coverage, a yacht policy also offers the following coverages: Protection and indemnity coverage for the insured's legal liability for bodily injury and damage to property of others. Personal property coverage for property on the yacht. Coverage for fuel spills, commercial towing, and dinghies.

Personal Umbrella Policy

-liability insurance provided on an excess basis. Each contract is unique and may contain provisions and language not found in other umbrella policies. Personal umbrella coverage may be issued as an endorsement added to a homeowners policy or as a standalone policy. -The purpose of the umbrella policy contains three elements: It provides an additional layer of liability insurance after the limits of underlying primary policies are exhausted due to paid claims. It provides coverage on a broader basis than the primary policies. It drops down to provide first-dollar coverage when the underlying primary policies don't provide coverage. -usually written in increments of $1 million, with a single limit per occurrence covering claims for both Bodily Injury/Property Damage, and Personal Injury in excess of the insured's underlying policy limits. -require their insureds to have underlying primary insurance in place. "Primary" insurance pays before the umbrella pays and "underlying" insurance provides coverage for the same risks that are insured under an umbrella policy. For example, every umbrella policyholder must also have personal auto and personal liability insurance in place. If the insured owns recreational vehicles, watercraft, or rental property, those exposures must also be insured on underlying primary policies.

Mobile Home Insurance

-may be written by adding a Mobile Home Endorsement to a Homeowners Policy, or by writing a separate Mobile Homeowners Policy. When mobile homes are insured by writing a separate policy, the policy includes Section I - Property and Section II - Liability, which are similar to the corresponding sections in a homeowners policy. -Under the mobile homeowners policy, Coverage A (Mobile Home), insures the mobile home itself; property installed on a permanent basis, (such as appliances, floor coverings, dressers and cabinets, attached structures, and utility tanks). Coverages B, C, and D are nearly identical to the same coverages under the homeowners policy, except that Coverage C - Personal Property is generally written at 40% of Coverage A, instead of at 50%. The Additional Coverage, Property Removed, is generally expanded to include up to $500 for reasonable expenses incurred while moving the mobile home when threatened by a covered peril. -ay be written on an open perils basis with losses to the mobile home valued on a replacement cost basis, with other items of property being valued on an actual cash value basis. Typically, the endorsements available for attachment to a homeowners policy are also available for coverage with a mobile homeowners policy. Endorsements unique to the mobile homeowners policy are the Transportation/Permission to Move Endorsement and the Mobile Home Actual Cash Value Settlement Endorsement.

Multi-Peril Crop Insurance (MPCI)

-overage is written by private insurers and is reinsured by the Federal Crop Insurance Corporation (FCIC). Coverage may be provided for approximately 200 different types of crops, but 5 major crops account for 90% of the liability assumed (corn and maize, cereal grains, soybeans, tobacco, and cotton). -Covered causes of loss include: adverse weather conditions, fire, insects, plant disease, wildlife, earthquake, and volcanic eruption.

Personal Watercraft Insurance Boatowners Policy

-package policy that provides both property and liability coverage and is similar in design to the homeowners policy. The coverage it provides is similar to that provided by the personal auto policy. The policy is generally used to insure boats that can be towed by a car. -Section I provides open perils coverage for the hull, motor, trailer, equipment, and accessories manufactured for marine use. Losses are settled on an actual cash value (ACV) basis. -Section II provides Watercraft Liability, Medical Payments for passengers, and Uninsured Boaters coverages. (Does not include Personal Injury Liability).

Earthquake Endorsement

-peril of earthquake, or earth movement, is excluded on virtually all property policies. It may be added to most homeowners policies by endorsements and, in some jurisdictions, such as California, may also be purchased as a separate policy. -ncluded in the peril of earthquake are earth movement, land shock waves or tremors, landslide, mudslide, mudflow, sinkhole, and the rising, sinking, or shifting of the earth. All earth movements occurring within a 72-hour period are considered a single occurrence of earth movement.

Fair Access to Insurance Requirements (FAIR)

-provide basic property insurance to property owners who are unable to secure coverage in the standard property marketplace. Most FAIR plans operate in a similar fashion. - utilized when existing homeowners or dwelling property coverage is being cancelled or non-renewed due to loss history or the property owner or the property fail to meet other underwriting guidelines of an insurer. Insurance may also be purchased from a FAIR plan when a dwelling is currently uninsured, and no carrier in the standard marketplace will write coverage. -In some states, the insured must certify the inability to secure coverage elsewhere. Farm property isn't eligible for coverage, though certain types of incidental business use may be allowed. Agents don't have binding authority, and coverage is usually bound only after the receipt of the application and first premium payment by the insured.

Difference in Conditions (DIC)

-requires the use of a special form designed to fill in the coverage gaps contained in a property policy. There is no standard policy form. Coverage is generally written on an open perils basis, excluding losses by perils that are covered under standard property forms (such as fire, lightning, windstorm, hail, etc.). - form does not contain a Coinsurance or Pro Rata Clause, and the form may be written for an amount of insurance different from the limit of insurance provided by the policy it complements. When written to supplement an underlying policy, DIC coverage normally carries a high deductible, such as $10,000 or more. The form is often written to provide coverage in the event of earthquake, flood, collapse, and subsidence.

Crop, Hail, and Windstorm Insurance

-specialized policy that protects the insured against reduced yield because of a covered loss to crops before they are harvested. - private insurance, not reinsured by the federal government. This policy provides named perils coverage. Other perils that may be included in addition to hail are: Fire, lightning, wind. Freezing, drought, insects and disease. -developed by the Crop Hail Insurance Actuarial Association (CHIAA). Crop-hail insurance is rated on an acreage basis and the insured can choose a wide variety of coverage options. Typically, coverage begins at 12:01 a.m. following the date the application is signed, provided the crop is clearly visible above the ground. However, this will vary by insurer and state. Changes will be addressed in the state law chapter if applicable. -pically written with deductibles (normally a 5% yield reduction). Policies can be written to cover a percentage of expected yield, such as 50% or 100%. If a crop is expected to yield 10,000 bushels but yields only 5,000, the policy will cover the unrealized 5,000 bushels. The coverage ceases when the crop is harvested (1 growing season) and the payment of an insured loss reduces the total amount of available insurance. The policy includes a replanting provision designed to reduce both the insured's and the insurer's losses. The insurer may reimburse the insured up to 20% of the amount of insurance. The reimbursement does not reduce the amount of insurance available for the crop.

In order to be considered a single occurrence, the Earthquake endorsement covers all earth movement that occurs within what time period?

72 Hours -Earth movement includes earthquakes, land shock waves or tremors, landslides, mudslides, mudflows, sinkhole, and the rising, sinking, or shifting of the earth, and must occur within 72 hours.

The self-insured retention in the Umbrella policy is described as which of the following?

A method of cost-sharing -Like a deductible, the insured pays the self-insured retention unless there is a primary policy available to pay its limit of insurance.

Which of the following statements about the Personal Jewelry Floater is correct?

Automatic coverage for newly acquired items is only provided for 30 days -The Pair and Set Clause applies. Coverage is written on a valued or actual cash value basis and appraisal is required.

NFIP Eligibility, Limits and Conditions

Coverage is provided on/for: 1- to 4- family dwellings under the (Dwelling Form). Other residential buildings and non-residential buildings under the General Property Form. Buildings owned by a residential condominium association under the Residential Condominium Building Association Form (RCBAP).

Which of the following is not eligible for coverage under a Fair Access to Insurance Requirements program?

Farm property -While farm property is not eligible, some incidental business use on the farm property is allowed.

Which of the following is correct about Difference in Conditions (DIC) Insurance?

Flood is a peril that can be covered by this policy -This policy fills in insurance gaps and covers perils that are excluded under standard property policies (such as flood), and excludes perils that are covered under standard property policies.

Common personal umbrella liability exclusions include:

Losses arising from bodily injury and property damage if the insured fails to maintain the required underlying insurance. Intentional injury Damage to property in the care, custody, or control of an insured Aircraft Business pursuits Professional Liability Directors and Officers Liability Discrimination

Musical Instrument Floater

No coverage is provided if the covered instruments are played for remuneration, or a fee. Anyone playing for hire must purchase an endorsement and pay an additional premium. The insured must report newly acquired items within 30 days.

Section I of the Boatowners policy provides what type of coverage for the hull?

Open perils -The hull, motor, trailer, equipment, and marine accessories are covered on an open peril basis.

The National Flood Insurance Program (NFIP) sells flood insurance in which of the following types of communities?

Participating communities -Communities in flood-prone areas must have an approved flood control program in order to benefit from the NFIP.

Which of the following perils is covered under the Personal Umbrella?

Personal injury -Personal injury perils are covered under the Umbrella policy, and will drop down to cover from the first dollar if personal injury coverage is not covered on the primary policy.

Which of the following types of property are covered by the Personal Effects Floater?

Personal property carried by travelers -This floater covers traveler's personal property on an open perils basis anywhere in the world except on the insured's premises.

All of the following are true regarding the Personal Umbrella Policy, except:

The Umbrella acts as a contributory liability policy -The Umbrella acts as an excess liability policy over the limits of the underlying policies.

Cameras Floater

The insured items are scheduled, with the exception that blanket coverage is provided on items such as shades, filters, etc. Automatic coverage is provided on newly acquired items for 30 days at a limit of insurance up to 25% of the limit designated on the schedule.

Exclusions for crop/hail insurance

Until normal visible (crop must be above ground) Failure to harvest a mature crop Non-owned property (share crop) Loss from injury to buds, blossoms or blooms, unless the crop is affected Injury to leaves, vines, etc unless crops are also damaged or affected Injury to trees, bushes, fruit or nut crops

Fine Arts Floater

covers such items as paintings, etchings, pictures, tapestries, rare manuscripts, and antiques. The floater provides automatic coverage for 90 days for newly acquired items. Coverage is usually written on a valued, or agreed, basis. Additional exclusions include: Loss caused by the restoration or repairing process. Breakage that is not caused by fire, lightning, explosion, aircraft, collision, windstorm, earthquake, flood, malicious mischief, theft, or derailment or overturn of a conveyance. Mysterious disappearance.

2. The Regular Program

offers a $250,000 maximum amount of coverage on residential buildings and $500,000 on non-residential buildings. The maximum amount of coverage for contents in a residential building is $100,000 and $500,000 on non-residential buildings.

1. The Emergency Program

offers a $35,000 maximum amount of coverage on 1- to 4-family dwellings and a maximum $100,000 on other residential and non-residential buildings. The maximum amount of coverage for contents in a single-family dwelling is $10,000 and $100,000 on other residential and non-residential buildings.

Personal Effects Floater

provides open peril coverage for items worn or carried by tourists and travelers. The coverage applies worldwide, but not at the insured's home.