Personal Lines Insurance Exam - Arizona

Special Limits for Theft

$1,500 (jewelry, watches, and furs), $2,500 firearms (and related items), $1,500 (silver, gold, or pewterware)

Special Limits for Theft Coverage

$200 money, $1,500 valuable paper property i.e. manuscript, $1,500 watercraft (includes trailer and equipment), $1,500 for trailers not used for watercraft, $1,500 jewelry, $2,500 firearms, and $2,500 silver, gold, or pewterware

Special Limits for ALL Losses

$200 money, $1,500 watercraft (related items), $1,500 for trailers, $2,500 business personal property ON premises, $1,500 business personal property AWAY from premises and $1,500 portable electronic apparatus AWAY from the premises

Personal Effects Floater

(Travelers Baggage) Designed to protect the insured personal belonging while they travel, worldwide.

Dwelling Policy Eligibility

1-4-unit dwellings with boarders, vacation dwellings, rental dwellings, dwellings under construction (with an endorsement), mobile homes (with an endorsement), farms dwellings ARE NOT eligible.

Example of a split limit of liability.

100/200/50 ($100,00 bodily injury per person, $200,000 bodily injury for all persons, and $50,000 for property damage.

Parties

1st - Insured, 2nd - insurer, and 3rd - the other guy

Parties

1st - insured, 2nd - insurer, and 3rd - "other" guy

Dwelling Property Coverages

A - Dwelling, B - Other structures (10% of Coverage A), C - Personal property (off premises its covered at 10% of Coverage C), D - Fair rental value, E - Additional living expense (can be added for additional premium to DP-1, automatically comes with DP-2 and DP-3 coverages), L - Personal Liability (at fault coverage for BI and PD on and off the premises), M - Medical payments (no fault coverage to pay the medical (and other bills) of others, covers for 3 years after the accident both on and off of the premises)

Four Coverages Under Section One of a Homeowners Policy

A - Dwelling, B - Other structures (10% of Coverage A), C - Personal property (off premises its covered at 10% of Coverage C), D - Loss of Use (pays the Fair Rental Value)

No Benefit to the Bailee

A condition that states that a bailee (parking garages for example) is NOT to benefit from a loss that occurs while in the bailee's possession.

Lloyd's Association

A group of underwriters that insures against unusual risks, for example Peyton Manning insuring his arm as a football quarterback.

Limits of Insurance

A list of the maximum coverage limits which is list on the declaration page; only covers the listed perils based on the type of coverage (basic, extended, or special)

Salvage

A right of the insurer to take possession of the property and pay the insured out for a total loss, not at insureds discretion.

Vacancy vs Unoccupied

A vacancy is where no property or people are present at the time of loss (abandoned building) but, unoccupied is where only no people are present (example snowbirds' primary residence during off session).

How do you determine the value for personal property claims under the dwelling and homeowners' policies?

ACV = Replacement Cost - Depreciation

Absolute (Strict) vs. Vicarious

Absolute (Strict) is an individual liability without negligent acts and vicarious is being liability for someone else's actions.

Admitted / Authorized vs. Non-admitted/Unauthorized

Admitted/ Authorized is when state requires insurance companies in that state to carry a certificate of authority in order to sell insurance. Non-admitted/Unauthorized is when a certificate of authority is not required.

Fair Credit Reporting Act (FCRA)

All insurers and producers must comply, where notice must be given to the applicant within 3 days AFTER the report was requested. The fines are $5,000, a year in prison, or both.

Standard Mortgage (or Loss Payable) Clause

Allows lender to pay the premium, lender entitled to receive notice if the policy is to be canceled, lender can file a claim, lender protected from negligent or dishonest acts from the insured, lender only entitled to receive payment up to the amount of the debt

Contract (Policy)

An agreement between the insured and the insurer. Property insurance the contact is a 1st party contract where the 1st party is the insured and the 2nd party is the insurer. For Casualty insurance the contract is a 3rd party contract where the previous two parties are the same and the 3rd party is the "other guy" suing you for their loss.

What are the property exclusions under theft coverage?

Animals, Credit cards, Property in the mail, Aircraft, Other insurance property, Tenant's property (if unrelated to insured), Business property, Property in custody of others, Motor vehicles (unless for assisting the disabled i.e. scooter).

What does perils does collision coverage protect the insured from?

Any damages resulting from the vehicle coming into contact with another object (another vehicle, tree, house) or the car is overturned.

Scheduled Rating

Applies a system of debits or credits to reflect characteristics of a particular insured.

Alternative Dispute Methods

Appraisal and Arbitration

TRIPRA

As a reaction to the 9/11 attacks on the US, that was enacted in 2002 by congress. It limits the exposure to insurers in case of another catastrophic event is triggered which is $200 million (the amount was $100 million and increased in increments of $20 million between 2015-2020).

List Examples of Exposure

Auto Accident, Lost Luggage (on a trip), Pet Bites Mailman, House Fire, etc.

List THREE additional endorsements that can be used with a dwelling policy.

Automatic increase in insurance (provides an increase automatically of a preset percentage like 4% for example), Dwelling under construction (IF named insured is intended occupant), and Mobile home (if on a permanent foundation, otherwise it falls under the auto policy)

List the exclusions for damage to the insureds auto in section D of a Personal Auto Policies (PAP).

Autos used as a public or livery conveyance; Wear and tear (freezing, mechanical/electrical breakdown or road damage to tires); Media used with electronics; Government confiscation; Customization or custom furnishings (for pickups or vans); Nonowned vehicles used for an auto business; pre-organized race (random racing down the street is NOT excluded)

Liberalization

Built in extended coverage to the insured at no additional premium or action required by the insured.

Broad Peril Coverage (BI AFFET)

Burglary, Ice (snow, sleet; weight of), Accidental Discharge (water/steam), Freezing Objects, Falling Objects, Electricity, and Tearing Asunder; this used to include Glass and Collapse (BIG AFFECT)

Elements of Insurable Risk (CANHAM)

Calculable, Affordable, Non-Catastrophic, Homogeneous, Accidental, and Measurable

List four methods of transportation covered in section D (under transportation expenses).

Car rental, taxi, bus, train

Classes of Construction (with example)

Class 1 - frame (made of wood or other combustible materials), Class 2 - joisted masonry (walls noncombustible (brick) but floor and roof are combustible (wood)), Class 3 - noncombustible (all metal), Class 4 - masonry noncombustible (roof and floor metal and walls are wood), Class 5 - modified fire resistive (2 hour rating or less), and Class 6 - fire resistive (of 2 or more hours rating)

Other Additional Coverages in HO-2, HO03, and HO-5

Collapse (by covered Peril not earthquake), Landlord furnishings (up to $2,500), Grave markers (up to $5,000), and Ordinance or Law (10% of Coverage A)

Name both types of property coverages on a Personal Auto Policies (PAP).

Collision and Other than collision (AKA comprehensive coverage)

Types of Damages

Compensatory, Punitive, and Liability.

Defenses Against a Claim of Negligence (made by another)

Contributory, Comparative, Assumption of Risk, Intervening Cause, Statute of Limitations, Last Clear Chance

What coverages are a part of Section Two, of a homeowner's policy?

Coverage E - Personal Liability and Coverage F - Medical Payments (to others).

Casualty Insurance

Coverage against liability (don't sue me money) which always pays the other guy. AKA 3rd Party Loss

Property Insurance

Coverage the building and personal belongings if loss is caused by a covered peril. AKA 1st Party Loss

Towing and Labor Cost Endorsement

Covers towing and/or labor at the scene for minor repairs (i.e. putting on a spare tire) or charging a battery. However, repairs done at a repair facility are NOT covered.

Exclusions to Liability

Damage to property of an insured, bodily injury to an injured, bodily injury to an employee, nuclear energy liability, and intentional damage caused by the insured.

Additional Coverages in all Homeowners Policies

Debris Removal (if caused by covered peril, it covers a max of $1,000 per occurrence or $500 per tree), Reasonable Repairs (needed to protect against further loss), Trees (Shrubs and Plants) (Max of Cost $500 per item or Max Per Occurrence 5% of Coverage A), Fire Department Service Charge (not covered in AZ by state law; outside AZ $500 is the coverage limit without a deductible), Property Removal (all Perils, for 30 days), Credit cards (forgery and counterfeit) pays up to $500 without a deductible, Glass.

Other Coverages (Automatically Included With a DP-2 and Dp-3)

Debris Removal, Property Removal (all Perils, for 30 days), Reasonable Repairs, Renters Improvements (10% of Coverage C), Fire Department Service Charge (not covered in AZ by state law; outside AZ $500 is the coverage limit without a deductible), Worldwide Personal Property (10% of Coverage C), Trees (Shrubs and Plants) (Max of Cost $500 per item or Max Per Occurrence 5% of Coverage A), Collapse (by covered Peril), Glass, Ordinance or Law ( 10% of Coverage A)

Other Coverages (Automatically Included With a DP-1)

Debris Removal, Property Removal (all Perils, for 5 days), Reasonable Repairs, Renters Improvements (10% of Coverage C), Fire Department Service Charge (not covered in AZ by state law; outside AZ $500 is the coverage limit without a deductible), Worldwide Personal Property (10% of Coverage C)

Policy Sections (DICEE)

Declarations (who, what, when, where, and how much), Insuring Agreement(s) (promise to pay for loss due to covered perils), Conditions (rules for policy), Endorsements (changes to original coverage, i.e. adding theft), and Exclusions (not covered items)

What additional coverages are automatically included in Section Two of a homeowner's policy?

Defense costs (hiring an attorney if sued), Bonds (court ordered), Interest (pre and post judgement interest on court ordered payments), Reasonable Expenses (example traveling to appear in court ($250/a day)), Aid (first aid), Damage to property of others (pays for up to $1,000 per occurrence for property damaged / destroyed by the insured without admitting fault), and Loss assessment (pays up to $1,000 of the insureds portion of loss assessment charged during the policy period)

Loss Ratio

Determined by dividing incurred losses by earned premiums; used to compare insurers operations year over year.

Expense Ratio

Determined by dividing underwriting expenses (cost of acquiring and keeping policies) by the written premium (gross premium income paid by the insured).

Combined Ratio

Determined by taking loss ratio and adding expense ratio; 100% is the breakeven point, < 100% is underwriting profit, and >100% underwriting loss; shows us the profitability of underwriting.

Direct vs Indirect Loss

Direct is the immediate damage caused by the peril (example a burned rental home) and indirect is the damage received as a result of the direct damage (example the loss of income from the renter while uninhabitable).

Direct Loss vs. Indirect Loss

Direct loss is a physical loss (a rental home that burns down) and the indirect loss is a consequence of the direct loss (loss of rent during the repairs, if loss made the rental uninhabitable).

What are the three insurance company locations (with examples)?

Domestic (Arizona based insurance company selling insurance in Arizona from Arizona), Foreign (Arizona based insurance company selling in Arizona from Texas), and Alien (US based insurance company selling insurance in the United States from Mexico).

Special (Open) Peril Coverage

Everything is covered except for the listed exclusions: flooding, earthquakes, intentional damage caused by insured, losses due to the enforcement of building codes, damages caused by a power interruption occurring off premised, or government seizure of property

Type of Authority

Expressed - a written contract where the company specifies the authority held by that agent; Implied - activities an agent knows they can do because these are typical activities that are done by insurance agents while selling insurance (nothing written out); and Apparent - activities that a reasonable person will assume an agent has the authority to do based on that agents actions and statements

Federal Laws / Regulations (Regarding Insurance)

Fair Credit Reporting Act (FCRA), Terrorism Risk Insurance Program, Reauthorization Act of 2019 (TRIPRA), Gramm-Leach-Bliley Act (GLBA), Fraud and False Statements

True/False: There one deductible for any issues occurring withing a week of an earthquake.

False it is covered for 72 hours.

True or False: bailees are covered under the owner's property policy.

False there is not coverage to the bailee (person with temporary control over insured's property).

True/False: ONLY 46 states have financial responsibility laws that require drivers to be able to produce proof that they can pay for BI and PD if in an accident.

False, ALL states have financial responsibility laws.

True/False: The insurer can cancel during the first 60 days of the policy for any reason, without ANY notice.

False, a minimum of 10 days' notice is required.

True/False: Agents have binding authority with flood insurance, AS LONG AS the collect the premium in full.

False, agents DO NOT have binding authority with flood insurance.

True/False: Coverage E - Personal Liability includes bodily BUT DOES NOT include property damage.

False, both are included

True/False: Bodily injury includes bodily harm, sickness, and disease EXCLUDING death.

False, death is also covered under BI

True/False: Exclusions on a flood policy include ALL the following for property outdoors: Lawns, trees, shrubs, plants, growing crops, livestock, fences, pools, retaining walls, bulkheads, wharves, piers, bridges, docks, other above water structures, aircraft, self-propelled vehicles, moto vehicles, newly constructed structures, wells, septic tanks, gas/other liquid storage, and silos for grain storage.

False, everything listed is excluded EXCEPT silos for grains those are covered.

True/False: When a pipe bursts and floods the home, that is covered WITH flood insurance.

False, flood insurance DOES NOT cover water from inside the home; it must come from a "natural" source that covers 2 or more acres of land that is usually dry

True/False: Uninsured motorist do not include damages from a hit and run; those are 100% paid for by the inured.

False, hit and runs are covered by the uninsured motorist insurance.

True/False: If an insured person's medical bills are paid by their own health insurance company; then they only get paid 50% of the amount they would normally receive under the policy.

False, if the medical bills are covered by the insured's health insurance company then the Personal Auto Policies (PAP) would NOT pay on the claim.

True/False: Insured and insurers can cancel a Personal Auto Policies (PAP) at ANY time WITHOUT ANY notice.

False, insured can cancel WITHOUT notice, insurers though must provide written notice to cancel or deny the renewal of a policy.

True/False: Yacht coverage includes coverage for the boat (hull), trailer, and protection BUT does NOT include indemnity (liability).

False, it DOES INCLUDE indemnity (liability).

True/False: Occupying a vehicle specifically refers to siting in a vehicle ONLY.

False, it also includes coming upon the vehicle, as well as getting into, on, out of, or off a vehicle.

True/False: Mobile home insurance CANNOT be a separate policy; it HAS TO be added as an endorsement to a dwelling or homeowners' policy.

False, it can be purchased alone or added as an endorsement to a dwelling or homeowners' policy for increased protection.

True/False: In addition to collision and comprehensive coverages, section D provides coverage of transportation expenses WHEN the insured decides to use PUBLIC transportation.

False, it covers transportation expenses when the insureds car is in the process of being repaired and is undrivable resulting from a covered peril.

True/False: Medical payments coverage (Section B), has a single limit of liability that applies to ALL injuries sustained by ALL persons (as a combined total); for example, $100,000 for all injuries for all persons in the vehicle.

False, it has a single limit of liability that applies to ALL injuries sustained by each INDIVIDUAL person injured in any ONE accident.

True/False: The deductible for flood insurance is $2,000 for building and $500 for contents.

False, it is $1,000 for buildings and $1,000 for contents.

True/False: Loss of use is covered at 10%.

False, it is covered at 20%.

True/False: There is a 30-day waiting period on all new flood policies and requests to increase coverage.

False, it is waived if the house has a mortgage on it.

True/False: The Agreed Value Loss Settlement form uses the HIGHER of the following: ACV, cost to repair, cost to replaced with a substantially identical item, or the amount of the insurance specified in the policy.

False, it pays the LESSER of the previously listed methods for calculating value of loss.

True/False: Permitted incidental occupancies has a $2,500 limit on business personal property.

False, it removes the $2,500 limit

True/False: The limits of liability under a Personal Auto Policies (PAP) are the SAME in each state AND territory of the US.

False, limits vary from state to state.

True/False: Smoke from an agricultural smudge or industrial operations IS COVERED under a HO - 1 Basic policy.

False, neither is covered under a HO-1 Basic policy.

True/False: All property stored in a basement are covered under flood insurance.

False, nothing located in a basement is covered.

True/False: Section D (Physical Damage), also provides a certain amount of coverage for any property left in the vehicle.

False, personal property is not covered.

True/False: When someone buys a new car, the new car is automatically covered with insurance using the same limit of coverage as the insured has on their existing vehicle, the insured just has to notify the insurer withing 60 days of the purchase.

False, the insured has 14 days to notify the insurer about the new vehicle; if the insured does not have insurance, they must purchase it within that same 14-day window.

True/False: Covered autos must be owned or leased under a long-term contract of a YEAR or MORE to be covered under a Personal Auto Policies (PAP).

False, the long-term contract MUST be a minimum of six months to be covered.

True/False: Insurers are required to give a minimum of 5 days' notice when canceling for non-payment of premiums.

False, the minimum is 10 days advanced notice.

True/False: The nine categories of property covered under Traveler's Baggage, INCLUDE ALL the following: jewelry, fur, cameras, musical instruments, silverware, golf equipment, fine art, stamps, and antique cars.

False, the nineth category is coins not antique cars.

True/False Extended nonownded coverage and named nonowner endorsements are the same thing.

False, the one provides expanded coverage to a Personal Auto Policies (PAP) to include a company car, while the name nonowner endorsement provides auto coverage to someone who DOES NOT OWN a vehicle but DOES have a company car for that company car.

True/False: The other insurance provision assists insured with stacking coverages to increase the coverage limit.

False, the provision is to prevent stacking of coverage limits.

True/False: All dwelling AND homeowners policies INCLUDE theft coverage automatically.

False, theft coverages IS included automatically with ALL homeowners' policies; but you MUST add it to a dwelling policy.

True/False: There is only one program for flood insurance that is offered through National Flood Insurance Program and that is the emergency program.

False, there are two programs; in addition to the emergency program there is also a regular program.

True/False: There is a 24-hour waiting period for transportation expense coverage for losses occurring from BOTH theft and non-theft perils.

False, there is a 48-hour waiting for losses arising from theft, all others have a 24-hour waiting period.

True/False: For physical damage coverage to the insured's vehicle ONLY collision has a deductible, there is not one if it is comprehensive.

False, there is a deductible for BOTH collision and comprehensive.

True/False: Vehicles are COVERED under a HO - 1 Basic policy EVEN if they are NOT in a FULLY enclosed building like a garage.

False, they must be in a FULLY enclosed building like a garage to be covered.

True/False: Compensatory damages are either special (full tort which are nonmonetary losses) and general (limited tort which are monetary losses).

False: Special are limited tort which are monetary losses and general is full tort which are nonmonetary losses.

Who manages the National Flood Insurance Program?

Federal Emergency Management Agency (FEMA)

Basic Peril Coverage

Fire, lighting and internal explosion

Insured Types

First Insured (Declarations Page), First-Named Insured (Declarations Page, commercial policies use this for multiple partners), Insured by Definition (Not Specifically Named), Additional Insured (Added By Endorsement)

List the seven general exclusions in ALL dwelling policies (FIG WONET).

Flood, Intentional loss, Government seizers, War, Ordinance or law, Nuclear, Earthquake, Theft

Pro-Rata Rate

Full refund of unearned premium paid when the company cancels.

Punitive

Gross negligence.

Homeowner Policies

HO-2 Broad Form (owner occupied), HO-3 Special Form (owner occupied), HO-4 Tenant / Renters, HO-5 Comprehensive Form (owner occupied), HO-6 Condominium Owners, HO-8 Modified Form

Loss Valuation

How the insurance company determines appropriate amount of loss to be paid. Deductible reduces any amount after loss has been valued; insured collects the lesser of insurable interest, policy limit, actual cash value, cost to repair, or replacement cost.

How is value of loss determined for flood insurance?

IF it is a single-family dwelling insured for 80% of its value and the primary residence; then insurers use replacement cost. However, for everything else ACV is used.

Fraud and False Statements

Illegal and if guilty individuals can be fined, get 10 years in prison or both, while CEOs get up to 15 years in prison (if the false statement jeopardized the issuer).

Methods of Marketing

Independent, Exclusive/Captive, General Agents or Managing Agents, Direct-Writing companies, and Direct- Response (no agent involved)

Abandonment

Insured cannot abandon property that can be repaired and expect to be paid for a total loss.

What is the difference between the insurer and insureds duties for ending a policy?

Insurer is required to give advanced notice and the insured is not required to give advanced notice.

Risk Purchasing Group

Is a group of businesses from the same industry coming together to buy liability insurance.

Homeowners Policy

Is a package or multiline policy, as it includes both property AND liability coverage.

Stock Insurer

Is an insurer that is: owned by stock or shareholders, issues non-participating policies, dividends are not guaranteed but if paid they are paid to the stock or shareholders, and the dividends are taxable. Example GEICO

Mutual Insurer

Is an insurer that is: owned by the policy holders, issues participating policies, dividends are not guaranteed but if paid they are paid to the policy holders, and the dividends are not taxable (considered to be a refund). Example USAA

Out-of-State Liability Coverage

Is coverage protecting drivers who are not in their home state. It provides coverage (to the higher limit) of the insureds policy limit or the other's states required limit.

Loss Costs

Is pure claims data, as it excludes operating expenses and profits.

Exposure

Is the possibility that risk will occur.

Dwelling Insurance

Is unique from homeowner's insurance as, the property is NOT required to be owner-occupied. So, it is ideal coverage for rental properties, older homes, and hunting cabins.

Agency

Is where the insurance agent acts on behalf on behalf of the principal (insurance company).

Write Your Own Program

Is where the insurance company writes the policies but the rates, coverage limitations and eligibility regulations are created by the government (FEMA). The insurer keeps a part of the premium it collects and if there is a profit the profit is sent to the government.

What perils does HO-2 Broad Coverage protect against?

It automatically comes with all of the coverage in HO-1 Basic plus, BIG EFFECT protections which include: Falling objects, Accidental discharge of water (not flood), Weight of snow/ice/sleet, Freezing of plumbing (if cared for), Artificially generated current, Sudden tearing and breaking of an HVAC system.

What perils does DP-1 Basic Coverage protect against?

It automatically comes with fire, lighting, and internal explosion protection. However, for an additional premium you can add two more packages (WCSHAVVER and VMM; Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic Eruption, Explosion (away from the covered location), Riot; Vandalism and Malicious Mischief.

What perils does DP-2 Broad Coverage protect against?

It automatically comes with fire, lighting, and internal explosion protection; in addition to WCSHAVVER and VMM. WCSHAVVER and VMM includes: Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic Eruption, Explosion (away from the covered location), Riot; Vandalism and Malicious Mischief. Plus, you get BIG EFFECT protections which include: Burglar damages, Ice (snow and sleet) (weight of), Glass breakage, Accidental discharge / overflow of water / steam, Falling objects, Freezing objects, Electrical damage, Collapse, and Tearing asunder.

What perils does HO-1 Basic Coverage protect against?

It automatically comes with theft, fire, lighting, and internal explosion protection. Plus, the following extended coverages (WCSHAVVER and VMM; Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic Eruption, Explosion (away from the covered location), Riot; Vandalism and Malicious Mischief; as well as theft.

What are key things to know about Coverage F - Medical?

It does not cover the insured, just those who suffered a loss (including domestic employees on / off premises) because as a result of the insureds activities, for up to three years after the loss occurred. However, it does not admit fault of the insured.

What is included and excluded (peril wise) under DP-3 Special coverage?

It is an open peril policy where everything is included except the following exclusions: intentional damages, theft, freezing of pipes (if unoccupied or not take care of), wear and tear, and foundations.

How does the appraisal settlement option work?

It is where the insured and insurer can each select an appraiser and both of them pick/ pay for an umpire, if the two appraisers differ on the value of the loss; then the umpire will be the deciding party as to the value of the loss.

What is umbrella insurance?

It provides additional liability insurance over and above the base policy. In addition, it covers some loses excluded by the underlying liability insurance policy. Coverage begins at $1 million.

Risk Retention Group

Liability insurance company created for the policyholders from the same industry, an example would be ABC Auto Rental Company going to a risk retention group for car rentals for coverage.

What is covered under casualty?

Liability, medical payments, and damages caused by uninsured or underinsured motorist.

List the Insurers' Rights (to Covered Property) (LAASS)

Liberalization, Assignment, Abandonment, Salvage, and Subrogation

True/False:

Limits for uninsured motorist can be a single ($100,000 per accident) or combined limit (100 200 75 - read as BI per person, BI per occurrence, PD).

Financial Ratios

Loss Ratio, Expense Ratio, Combined Ratio

What are the components of a rate?

Loss costs, claims handling costs, operating, expenses and profits.

List the seven conditions concerning how losses are to be paid out.

Loss settlement, Our option, Deductible, Pair or set, Loss payment, Other insurance, and Recovered property.

List the Eligibility Requirements for Homeowners Insurance

MUST be owner-occupied, no more than 4 family dwelling, primary use MUST be a residence, dwellings under construction IF it is intended to be owner-occupied, mobile homes IF on permanent foundation (with endorsement), farms are NOT eligible

Appraisal

Method to settle a disagreement on the amount of loss between insured and insurer (who obtain their own appraisers), if there is not an agreement between the appraisers then an umpire can be hired (cost of umpire is shared).

Perils Covered Under "Other Than Collision"

Missiles / Falling Objects; Fire; Theft / Larceny; Explosion / Earthquake; Windstorm; Hail / Water / Flood; V & MM; Riot / Civil Commotion; Contact with Bird/Animal; Breakage of Glass.

Experience Rating

Most commonly used for workers compensation insurance, where actual loss is compared to historical loss for a particular rating class. This is based on information that impacts the premium costs (either increases or decreases) based on experience of loss; goes back three years.

Insurable Interest

Must be present at the time of loss but not required at the time the insured completes the application. It is when someone has a risk of financial risk of loss (or vested interest).

List the supplementary payments (or additional coverages that are paid in addition to the limit of liability), at no extra cost to the insured (think BAILED).

NOTE: applies to supplementary payments on HO, DP, and PA polices. Bonds (premiums for certain bonds), Aid (first aid, given to others at the scene of the accident), Interest (pre and post judgement interest on court ordered payments), Loss of earnings (time missed at work to appear in court), Expenses (dealing with investigating the claim), Defense costs (hiring an attorney if sued).

List the Insureds Covered on a Personal Auto Policies (PAP)

Named Insured, Named Insured's Resident Spouse, Their Resident Family Members, and anyone who borrows a covered auto with permission of any insured.

Regular Program Maximums for Buildings vs Contents

Non-commercial limit of coverage for dwelling is $250,000 and contents are $100,000; for commercial it is $500,000 for buildings and $500,000 for contents.

Emergency Program Maximums for Buildings vs Contents

Non-commercial limit of coverage for dwelling is $35,000 and contents are $10,000; for commercial it is $100,000 for buildings and $100,000 for contents.

Duties After Loss

Notify insurer promptly, forward notices, assist the insurer with investigation, and never assume liability

What are two responsibilities of the insured, on a Personal Auto Policies (PAP) claim?

Notify the police if the vehicle is STOLEN and ALLOW the insurer to inspect the damages

List the elements of negligence.

Owe a duty, breach a duty, be a proximate cause, and damages (drunk driver not guilty of a crime but not negligence unless he /she causes harm to another party)

Short Rate

Partial refund of unearned premium paid when the named insured cancels.

Additional / Supplementary Coverage

Payment for additional expenses not normally covered, with their own separate limits of insurance.

Restoration of Limits / Non-Reduction of Limits (three items to note)

Payment of claim restores the occurrence limit for the next claim, payment of an occurrence reduces the aggregate limit, aggregate limit is restored upon renewal.

List the different property endorsement that you can add to a homeowner's policy.

Personal property replaced at replacement cost (not ACV), Scheduled personal property, Permitted incidental occupancies, Earthquake (includes volcanic eruption), Covers limited fungi (wet/dry rot or bacteria) caused by a covered peril, Home day care (cost is based on the number of kids)

What personal property is excluded from Coverage C personal property coverage?

Pets, Motorized vehicles (unless used to service the premises like riding lawnmower), Personal property belonging to renters or boarders

List and Describe the 3 Hazard Types

Physical hazards, are visible hazard like wet floors. A moral hazard is an intentional act of dishonesty that causes a loss, for example the employee lied to their boss and said they put up the wet floor sign but did not. While a morale hazard is an act of carelessness that could cause loss, for example someone who decides to forgo wearing their seatbelt.

What is covered under Policy B of a Personal Auto Policies (PAP)?

Policy B covers all necessary medical and funeral services incurred within three years of the date of the injury (regardless of fault).

What is the formula for the pro-rata method?

Policy limit of one company divided by Policy limit of all companies; then multiply that amount by the total amount of loss.

List the three ways policies are paid out where there are multiple insurers on the policy.

Primary / Excess (primary policy pays first and if any is left it is paid by the secondary insurance policy); Equal Shares (all policies pay an equal amount, up to the smallest policy limit); and Pro-Rata (each policy pays its share, according to the total insurance).

List the duties of the named insured following a loss. (PPC-MSC)

Prompt notice to insurer; Protect property from further damage; Completed proof of loss (if requested); Make property available for inspection; Submit to examination under oath if required; Cooperate with insurer

Fiduciary Trust (four key points)

Promptly sends premiums to insurer; has Product Knowledge; Complies with Laws/Regulations; and never commingles funds

Property Coverage vs Casualty Coverage

Property Coverage (1st Party Loss) - pays the insured for the loss and Casualty Coverage (3rd Party Loss) - pays the "other guy" for damage you caused to their items.

Section C Uninsured Motorist Coverage

Protects the insured when the 3rd party is "at fault" and is NOT carrying ANY insurance. It also protects the insured if they encounter a hit and run situation where the 3rd party flees the scene of the accident instead of being accountable. It also protects the insured when the 3rd party is "at fault" and is not carrying enough insurance to meet the minimum requirements in the state of the accident.

Personal Articles Form

Provides coverage for nine optional classes personal property covered under the homeowners' scheduled personal property endorsement.

Misc. Vehicle Endorsement

Provides coverage for the coverage of misc. vehicles to include motorcycles, scooters, golf carts, and motor homes.

Fraternal Insurer

Provides insurance and other benefits but, the insured must be a member of the society to get the benefits. Example Catholic Financial Life

Section D of a Personal Auto Policies (PAP)does what?

Provides the insured with physical damages to their vehicle (or a nonowned vehicle driven by the insured at the time of the accident), by offering two types of protection: collision and other than collision.

Retrospective Rating

Rates based on insured's premium on losses incurred during a policy period.

Types of Property Under Property Insurance

Real (buildings) and Personal (moveable contents in the covered building)

Methods for Calculating Value

Replacement Cost (current replacement cost (no depreciation), of a similar kind & quality), Functional Replacement (replace with modern materials / construction techniques), Market Value (selling price, rarely used), Agreed Value (determined by policy), Stated Amount ( insured up to amount), Pair and Set (value of a pair or set before the loss minus the remaining value)

How do you determine the value for dwelling claims under the dwelling policies (DP-2 and DP-3) as well as under any homeowner's policy?

Replacement Cost (no depreciation removed) IF the insured carries enough coverage to insure at least 80% of the replacement value of the dwelling.

GLBA (Gramm-Leach-Bliley Act)

Requires companies to inform consumers and customers of their information sharing practices and safeguards all sensitive data.

Residential Theft Coverage (Dwelling Policies)

Residential theft coverage is not automatic under the DP policy, as it must be added for an additional cost; there are two offerings (broad where the dwelling must be owner-occupied to be eligible and limited where owner-occupancy is not required).

Adverse Selection

Risks that are not wanted by insurers because they have a greater-than-average chance of loss. This is the why insurers go through the underwriting process to determine the level of risk and base the decision to accept/refuse risk as well the amount of money for the premiums.

STARR Method for Handling Risk

Sharing, Transfer, Avoidance, Retention, Reduction

Types of Property

Specific / Scheduled (details list of covered items) and Blanket (by type of property, no detailed list with a single coverage limit.

Describe Both Type of Risk

Speculative risk has a chance for gain or loss and pure risk is 100% risk (making it insurable).

Formats to Determine Limits of Liability (Dollar Amounts of Coverage)

Split (bodily injury vs property damage), Combined Single, and per person, and aggregate (all loss experienced in a specified period)

Types of Insurers

Stock Insurer, Mutual Insurer, Fraternal Insurer, Reciprocal Insurer, Lloyd's Association (individual writers not a company), Risk Retention Group, Risk Purchasing Group, Self-Insurance, Federal Government Provided

In addition to personal property what else is paid out at actual cash value (ACV) on a homeowner's policy?

Structures (other than buildings like an inground pool), Awnings, Carpeting, Appliances, Outdoor antennas, and Outdoor equipment.

List the six injuries/situations that are excluded under Section B (Medical Payments), of a Personal Auto Policies (PAP).

Sustained while occupying a motor vehicle with fewer than four wheels; sustained while using a cover auto as a public or livery transportation; losses covered under worker's compensation; sustained while occupying a vehicle WITHOUT reasonable belief that this person is entitled to do so; sustained while occupying a vehicle being used for the insured's business operations; sustained while participating in an "organized" race.

Deductible

The amount of loss paid by the insured; the higher the premium paid the lower the deductible is.

Peril

The cause of loss, for example when a house burns down the peril is fire.

Policy Period

The defined start and end date of a policy.

Who is covered with section C (under or uninsured motorist) coverage, during an accident?

The insured, and their family and / or passengers.

Subrogation

The insurer has the right to sue an "at-fault" party for damages that the insurer had to pay to the insured.

Law of Large Numbers

The larger the number of people in a group then the more accurately the company can predict future loss.

Mortgagee's Rights Under the Standard Mortgage Clause

The mortgagee can: pay the premium when the insured fails to do so, file a claim up to the insurable interest, receive advanced notice from the insurer of cancellation, dishonesty from the insured doesn't prevent the mortgagee from collecting.

Property Damage

The physical injury to, destruction of, or loss of use of a tangible item.

Treaty

The reinsurer accepts the transfer of risk according to the agreement.

Facultative

The reinsurer evaluated each risk before allowing the transfer.

Actual Cash Value

The replacement cost minus the depreciation amount, is the actual cash value formula.

Coinsurance

The requirement that is normally 80% of the replacement cost. If the minimum required amount is carried, then claims are paid in full up to the limit. If the minimum is not carried, then partial losses are not paid in full. Formula used for partial losses, where the amount of the insurance carried is divided by the amount of insurance required; then that amount is multiplied by the loss. This is also equal to claim payment minus the deductible.

What is included and excluded (peril wise) under HO-3 Special coverage?

The special form provides coverage for all DIRECT damage causes of loss to a dwelling or other structure unless it is specifically excluded.

Certificate of Authority

The state license that an insurance company must carry in order to sell insurance.

Rating Risk

The way an underwriter assigns rates for policies; most common types judgment, manual (class), experience, retrospective and scheduled.

What perils are excluded from HO-1 Basic coverage?

Theft by the insured, Theft from a dwelling under construction, Theft from the rental portion of the premises, Theft of watercraft off the premises, and Mysterious disappearance.

Reciprocal Insurer

These insurers are unincorporated, and the members are required to pay an assessed amount of a loss to any member in the group.

Coverage A Dwelling Coverage

This coverage includes any attached property (built in cabinets for example) and construction materials on the premises, but there is no renters coverage included.

Coverage B Other Structures Coverage

This coverage protects any structures that are separated by a clear space but connected via phone lines, fence, or something similar. However, the space CANNOT be used for ANY business purposes.

Coverage C Personal Property Coverage

This coverage protects the personal property in the covered premises (and anywhere in the world), IF the property is not attached to the dwelling (i.e. built in cabinets). Guest property can be protected if requested by the insured.

Coverage D Loss of Use Coverage

This coverage provides the insured with three types of coverage. If the property is uninhabitable, then the policy covers additional living expenses such as a hotel room, to return the insured to their normal standard of living. Second if the property is rented to others and the loss causes part of the residence to be uninhabitable, then the policy will pay fair rental value. Lastly if a civil authority prohibits the insured from using the residence premises as the result of damage to a neighboring premise by a covered peril; then insured is protected against additional living expenses or fair rental value.

In Section B Medical Payments (AKA 1st Party Benefits), covers who in an accident and is the coverage only in effect while in the vehicle covered under the Personal Auto Policies (PAP)?

This section covers medical payments (up to funeral expenses) for the insured and passengers. This coverage is also applied to protect the insured and their family as pedestrians.

True / False: Liability insurance covers unintentional torts.

True

True / False: Tort is a civil wrong that causes another to suffer loss while negligence is failure to act reasonably.

True

True/False Extended nonowned coverage (for vehicles furnished for regular used) endorsement expands the Personal Auto Policies (PAP) coverage to include another vehicle that the insured drives but does not own, for example a company car.

True

True/False: After the first 60 days of a policy the insure can cancel due to material misrepresentation from the insured or a substantial change in risk for the insured, but ONLY with a minimum of 30 days' notice.

True

True/False: An appraisal is a settlement option for insured and insurers to settle disputes in the value of the loss.

True

True/False: An assigned high-risk plan is for high risk insureds who get assigned to a particular insurance company, which typically consists of just liability coverage.

True

True/False: Coverage E - Personal Liability applies anywhere in the world but only if the insured is AT FAULT.

True

True/False: Exclusions on a flood policy include ALL the following for property indoors: accounts, bills, currency, deeds, evidence of debt, money, securities, bullion, manuscripts.

True

True/False: For a Personal Auto Policies (PAP) family member refers to any person related to the named insured or resident spouse by blood, marriage, ward, adoption, or foster care.

True

True/False: For personal watercraft coverage, boats that are 26' OR LESS are covered, along with their applicable trailer and equipment while coverage for anything larger than 26' is for a yacht.

True

True/False: If an insurer decides not to renew a policy for an insured, they must give the insured 30 days advanced notice.

True

True/False: Limits of underinsured motorist coverage (section c) usually CAN'T be greater than the insured's liability limit.

True

True/False: Mobile home insurance protects mobile homes if they are on a permanent foundation ONLY; otherwise it is an auto policy that is needed.

True

True/False: Mudslides are included with flood insurance.

True

True/False: Personal Auto Policies (PAP) include coverage for both casualty and property.

True

True/False: Physical damages are reimbursed at the LESSER of ACV, Functional Repair, or Replacement cost.

True

True/False: The Agreed Value Loss Settlement form is used for scheduled property ONLY.

True

True/False: The following is true regarding scheduled personal property endorsements insures property against open perils, replaces items at replacement cost, and usually there is no deductible.

True

True/False: The insured is covered for $20 a day, up to an occurrence maximum of $600 for transportation expenses.

True

True/False: The maximum amount that physical damage coverage pays out is $1,500 if the damage is to a nonowned trailer attached to the phyical or $1,000 if the damage is to an audio system NOT permanently installed in the covered vehicle BY the manufacturer.

True

True/False: You and your refers to the named insured shown on the declarations page and their resident spouse on a Personal Auto Policies (PAP).

True

True/False: Other than collision is also referred to as comprehensive insurance.

True.

True/False: Vandalism and Malicious Mischief are covered under a HO - 1 Basic policy ONLY IF the covered location is not vacant for more than 60 consecutive days.

True.

Personal Auto Policies (PAP) policy territory is....

US (and its territories and Canada; Mexico can be added by endorsement.

True/False:

Umbrella coverage still covers fully for a year if the base plan lapse for ANY reason. False, the umbrella policy ONLY the EXCESS above the limits of the base plan; it won't fully cover the insured unless the base plan is in effect.

Underwriting

Using the application (and/or other common sources used by underwriters), the agent/producer evaluates the risk and decide if the applicant can be insured and the cost to do so.

Federal Governments

War Risk Insurance, Nuclear Energy Insurance, Flood Insurance, Federal Crop Insurance, Unemployment Insurance and Workers Compensation Insurance

List some exclusions that are applicable under both Coverage L and Coverage M.

War, Losses that are expected / intended by the insured, Business pursuits (rendering or failing to render services), Transmission of communicable diseases by an insured, Sexual molestation (corporal punishment, physical abuse, or mental abuse), Controlled substance (use, possession, or sale that is not considered legitimate use of a prescribed medication).

List the different additional liability endorsement that you can add to a homeowner's policy.

Watercraft (same stipulations apply as with base watercraft coverage), Business pursuits (business conducted away from the primary residence), Personal injury (includes liable, slander, false arrest, invasion of privacy, or malicious prosecution), Permitted incident occupancies (covers home-based business activities listed on the endorsement), Home day care (sexual molestation and corporal punishment are excluded), and Covers limited fungi (wet/dry rot or bacteria) caused by a covered peril.

List the watercraft covered in Section Two of a homeowner's policy.

Watercraft owned or rented to an insured that is: a sailboat less than 26 feet in length, boat with inboard motors of 50 hp or less, and boat with an outboard motor of 25 hp or less.

Broad Peril Coverage Exclusions

Weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks or retaining walls; accidental discharge from a continuous leak; flooding from lake or river; Burglary if the property has been vacant for 60 or more consecutive days

Self-Insurance

When a business reserves money to cover losses to cover risks they retain (rather than transfer).

Reinsurance

When an insurance company (the ceding company) pays another insurance company (reinsurer) to take some of the company's risk to help spread out the risk.

Nonrenewal

When cancellation occurs on the policy end date.

Manual (Class) Rating

When the company uses predetermined rates for a particular state listed in a manual which is made available for all agents by the company.

Assignment

When the policy covering the property cannot be transferred with out written consent from the insurer.

Cancellation

When the policy is canceled before the policy end date.

Judgement Rating

When the premium is determined by considering the individual risk.

Joint Ownership Coverage Endorsement

Where an insured can add an unrelated person, who resides with them, to be covered on the policy (like a common-law spouse).

What is subrogation?

Where the insurance company of the person hit, can go after the uninsured motorist in court to sue for damages.

Policy Territory

Where the loss must occur to be covered.

Insurance Clause

Where you have two insurers splitting the cost of the claim. The amount insurance A vs. insurance B pay is determined by the following formula: policy limits (insurance A for example) divided by the total limits of both policies together; then multiply that percentage by the total cost of the loss. This is the amount insurance A pays and the difference between this and the total cost is what insurance B pays. An example is if someone borrows a neighbor's that neighbor's insurance policy is policy A in this case; the other is the driver's (or person borrowing the car) insurance.

Extended Coverage (WC SHAVVER plus V&MM)

Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic Eruption, Explosion (away from the covered location), Riot; Vandalism and Malicious Mischief

Are other structures and contents also included on a mobile home insurance plan; explain?

Yes, personal property is covered for up to 40% of the dwelling coverage, and other structures (garage) are covered at 10% of the dwelling coverage.

Are there exclusions specified for DP-2 Broad coverage?

Yes, they are 1) weight of ice, snow, or falling objects on awnings, fences, patios, swimming pools, docks, and retaining walls. 2) accidental discharge of water from a continuous leak 3) flood 4) burglary (if the property is vacant for 60 (or more) consecutive days.

Common Sources of Information Underwriters Use

application, inspection services, credit score (Equifax or TransUnion), government bureaus (i.e. Depart. Of Motor Vehicles), industry bureaus (i.e. Automated Property Loss Underwriting System), financial information (i.e. Standard and Poor's), previous insurers, other insurance company claims files

Three Types of Liability

bodily injury (includes medical bills, lost wages, suffering, and death), property damages (includes cars, buildings, etc.) and personal injury (includes hurt feelings of a person or business).

List the liability exclusion on a Personal Auto Policies (PAP)

intentional injury or damage, injury to the insured, damage to property owned /transported by insured, injury to an employee, using a vehicle as a taxi (carpool is OK), used the vehicle without permission, vehicles less than four wheels or not licensed for road use, and racing vehicles.

Arbitration

is the method to settle disagreement about other areas of loss through an impartial 3rd party.

Risk

is the uncertainty or possibility of a loss

Coverage E - Personal Liability Exclusions

liability for injury or damage that is expected or intended by the insured; liability assumed through a contract; BI/PD arising from the business pursuits or rendering or failing to render services; BI/PD arising from a rental of any part of the premises, except for the rental portion of an insureds residence; liability arising out of ownership, maintenance, use, loading, unloading of any aircraft, watercraft, or motor vehicle; Liability arising out of a transmission of a communicable disease by the insured; and Liability arising out of sexual molestation, physical abuse, or mental abuse; liability arising out of the use, sale, manufacture, delivery, transfer, or possession of a controlled substance (other than legitimate use of a prescribed drug).

Insureds Covered on a Homeowners Insurance

named insured includes resident spouse, resident relatives, anyone under 21 years old who is in the care of the insured (i.e. foster kids), fulltime students under 24 years old (who were prior residents before leaving for school), and the insureds representative (in the event of the insureds death)

Excluded Perils in All Homeowners Policies

ordinance / law (construction regulations, repair, and demolition), earth movement (includes earthquake and mine subsidence), flooding and overflow of a sump pump, power failure off the residence premises, war, nuclear hazard, insureds failure to save and preserve property (protecting from further loss), intentional loss by the insured or at the direction of the insured, and government actions like seizers for example.

Hazard

something that increases the chances of a loss.

Binders

temporary insurance that is given by the agent (verbally or in writing), this does not guarantee a policy can be issued. It can be canceled by the insurer only and ends automatically when an underwriter writes a new policy.

Insurance

transfer of risk from a person or business to an insurer