P&C Education Objectives
If 3 volcanic eruptions happen within 48 hours, and each contributes to property damage, how many deductibles will apply in the dwelling policy?
1 deductible (all instances of volcanic eruptions that occur within a 72-hour period are considered 1 occurrence)
In dwelling policies, within how many years of a loss may an insured bring a lawsuit against the insurer?
2 years
An insured with a homeowners policy has removed the property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for how many days?
30 days
If an insured is in the process of moving to a new location, his personal property coverage under the dwelling policy will apply on a pro rata basis at both locations for how long?
30 days
Losses caused by vandalism and malicious mischief are excluded from coverage if a dwelling has been vacant for how many days?
60 days
In dwelling policies, any volcanic activity will be considered part of one occurrence if it all happens within how many hours?
72 hours
In order for forms HO-2, HO-3, and HO-5 to provide coverage, a dwelling must be insured for a least what percentage of replacement cost?
80%
What is consideration on the part of the insurer?
A promise to pay in the event of a loss
What does the term unilateral contract mean?
A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise
According to the Law of Agency, who represents the principle?
Agent or producer
What are the four elements of an insurance contract?
Agreement, consideration, competent parties, and legal purpose
DP-3 (Special) is an open-peril form. What does that mean?
All perils are insured unless specifically excluded
How many owner-occupied residences per covered home are allowed by homeowners policies?
An HO policy may insure a property that has 1-4 family owner occupied residences
What is a commercial floater?
An Inland Marine policy designed to cover movable commercial property, wherever it may be located
What is a warranty in an insurance contract?
An ansolutely true statement upon which validity of the policy depends
What type of authority is based on the agent's actions, or words?
Apparent
Under Coverage C of an HO-3 policy, what is the amount of insurance provided for personal property?
At least 50% of the Coverage A limit (this applies to all policies except for HO-4 and HO-6)
Replacement cost coverage is provided in both the broad and special form dwelling policies when the amount of insurance on the dwelling is what percentage?
At least 80% of the replacement cost
In property insurance, when must insurance interest exist?
At the time of loss
What are the methods of managing risk?
Avoidance, transfer, sharing, retention, and reduction
What are the 3 types of coverage available in dwelling policies?
Basic, Broad, Special
What is the difference between cancellation and nonrenewal?
Cancellation is the termination of an insurance policy by either party prior to the policy's expiration date. Nonrenewal is the termination of a policy at its expiration date by not offering a continuation of the existing policy.
What does the term reasonable expectations mean in insurance?
Certain expectations for coverage that a reasonable person would have based on sources other than just the policy language
What document is required for an insurance company to transact insurance?
Certificate if authority
What is consideration in an insurance contract?
Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding.
What are the 5 coverages of dwelling policies?
Coverage A - Dwelling, Coverage B - Other structures, Coverage C - Personal property, Coverage D - Fair rental value, and Coverage E - Additional living expenses
What are the major coverages included in a homeowners policy?
Coverage A - Dwelling, Coverage B - Others Structures, Coverage C - Personal Property, and Coverage D - Loss of Use
Which dwelling policy coverage will insure a garage not attached to the primary insured dwelling?
Coverage B - Other Structures
Which dwelling policy coverage will provide protection for contents damaged by fire in an insured dwelling?
Coverage C - Personal Property
In homeowners policies, which coverage provides protection against an indirect or consequential loss?
Coverage D - Loss of Use
An insured's house becomes uninhabitable due to damage by a fire. As a result, the insured has to rent an apartment until the repairs are made. Which type of coverage under the dwelling policy will pay for the expense of renting the apartment?
Coverage E- Additional living expenses
What are the 2 liability coverages included in homeowners policy forms?
Coverage E: Personal Liability Coverage F: Medical Payments to Others
Which of the 3 DP forms provides the most limited coverage?
DP-1 (Basic)
Which dwelling form is called the broad form?
DP-2
Which dwelling coverage form(s) will pay for the replacement cost of a dwelling?
DP-2 (Broad) and DP-3 (Special)
Which dwelling form provides open peril coverage on the building?
DP-3 (Special)
What are additional coverages available in homeowners policies without additional premiums? (Name several)
Debris removal, lawns/plants/shrubs, and trees, removal, reasonable repairs, and fire department service charge
If an insured peril was the proximate cause of loss, what type of loss is it?
Direct
How are direct and indirect losses related?
Direct losses can cause indirect losses.
Insurers are classified according to their domicile. What are three types on insurers?
Domestic, foreign, and alien
What do dwelling policies insure?
Dwelling only, contents only, or both dwelling and contents
In general, what do homeowners policies cover?
Dwellings used primarily as private residences
What are some of the exclusions found in all three dwelling forms?
Earth movement, water damage, power failure, neglect, war, nuclear hazard, intentional loss, freezing of plumbing, ordinance of law, and government action
What are three types of agent authority?
Express, implied and apparent
A basic dwelling policy automatically provides coverage against what?
Fire, lightning, and internal explosion
How is the coverage usually written for HO-8 forms?
For the market value of the property
What type of insurer is formed under the laws of another state?
Foreign
What coverage forms are available in homeowners policies?
HO-2, HO-3, HO-4, HO-5, HO-6, and HO-8
What Homeowners policy form is known as a special form?
HO-3 special form
What HO form insures a tenant living in an apartment?
HO-4 (tenant broad form)
What homeowners policy form is known as contents broad form?
HO-4 contents broad form
Why does the HO-4 form not provide dwelling coverage?
HO-4 is written for a tenant residing in a rented dwelling; the tenant does not own the dwelling.
What HO form covers condominium unit owners?
HO-6
What HO form covers a historic home with replacement cost more than the market value?
HO-8 (modified homeowners)
Which is the most limited HO coverage?
HO-8 (modified homeowners)
Conditions that increase the chance of loss are known as what?
Hazards
When is an appraisal needed and how can it be requested?
If an insured and an insurer disagree about the value of a property loss, either party can make a written demand for an appraisal.
Under what conditions can broad theft coverage be added to a dwelling policy?
If the insured is the owner-occupant of the dwelling
An insured's business is damaged by a fire, and temporarily shut down for repairs. As a result, the insured suffers loss of income. What type of loss is the loss of income?
Indirect or consequential
Who do individuals use to transfer their risk of loss to a larger group?
Insurance
In the agent/insurer relationship, who is considered the principle?
Insurer
A gas stove exploding in the dwelling is an example of which named peril?
Internal explosion
What are some of the exclusions from coverage in all of the homeowners forms?
Land, structures used for business purposes, animals/birds/fish, aircraft, rented property, electronic data, and motor vehicles
What type of coverage is included in homeowners policies, but is not available in dwelling policies?
Liability coverage
What determines an insurer's responsibility for payment, as stated in an insurance policy?
Limits of liability
What are the five characteristics of an ideally insurable risk?
Loss must be 1) Due to chance, 2)definite and measurable, 3) statistically predictable, 4) not catastrophic, 5) coverage cannot be mandatory
What is mysterious disappearance?
Misplacement or loss of property without knowledge as to the location, time and cause of the loss
What type of policy consists of the declarations, conditions, endorsements, and other attachments applicable to a single line of insurance?
Monoline
How are the dwelling and other structures covered in an HO-3 policy form?
On an open-peril basis
When will damage to the interior of the building be covered under the falling objects peril in the broad form of the dwelling policy?
Only if the interior damage is a direct result of exterior damage from a falling object
Under Coverage C- Personal Property in the dwelling policy, when will a guest's property be covered?
Only when the property is at the insured location
When would theft of property of guests and residence employees be covered under the HO-8 form?
Only while on the insured premises
A policy that covers all causes of loss except for those specifically excluded is known as what type of policy?
Open peril (or special) form
What sublimit in a liability policy puts a ceiling on the payment for all claims that arise from a single accident?
Per occurrence
A tornado that destroys a property would be an example of what?
Peril
What is the term for the causes of loss insured against in an insurance policy
Peril
What type of coverage is included in Section II of homeowners insurance?
Personal liability coverage
What are the three types of hazards?
Physical, moral and morale
In property insurance, what is actual cash value?
Replacement cost at the time of loss, minus depreciation
What types of entities can be insured under a General Liability policy?
Sole proprietors, partnerships and corporations
Wagering on a sporting event is known as what type of risk?
Speculative
What types of limits of liability has the limits separately stated for different coverages?
Split limits
When replacement coverage cost is not reasonable, what type of HO coverage is applicable?
The HO-8 modified homeowners form is intended for use when replacement cost coverage is not practical.
What are the limits of theft coverage on an HO-8 form policy?
The actual cash value of what was stolen; however, additional limits may apply to certain classes of property
In homeowners policies, what determines the amount an insurer will pay under Coverage D?
The amount of coverage on a dwelling
What does the HO-5 cover?
The dwelling and other structures, as well as contents and personal property
In dwelling policies, what is the purpose of the automatic increase in insurance endorsement that increases the amount of insurance by an annual percentage?
To offset the effects of inflation
What does idemnify mean in insurance?
To restore an insured to the same financial status as before a loss
What is a risk?
Uncertainty of loss
What is the process that insurers use to determine whether a policy should be issued and on what terms and conditions?
Underwriting
Insurance contracts are aleatory in nature. What does that mean?
Unequal values are exchanged between parties to a contract
What is the maximum number of units in residential dwellings insurable by a Dwelling policy?
Up to 4 units
When would a misrepresentation on an insurance application be considered fraud?
When it is intentional and material
In insurance contracts, when is the offer usually made?
When the insurance application is submitted
In insurance contracts, when does acceptance usually occur?
When the insurer approves a prepaid application
What are extended coverage perils on a basic dwelling policy?
Windstorm or hail, explosion, smoke, aircraft and vehicles, riot or civil commotion, volcanic eruption, and vandalism and malicious mischief
If an insurer holds a Certificate of Authority, it is known as what type of insurer?
authorized or admitted
What provision states that if a policy allows for greater benefits than the financial loss occurred, the insured may only be compensated only for the amount lost?
indemnity
A situation in which a person can experience only a loss and no gain presents what type of risk?
pure risk
What is the date stipulated on the declaration page of a claims-made liability form as the earliest date on which an incident may occur and be covered by the policy?
retroactive date
