Property Insurance

The two unusual and irreplaceable matching totem poles at the entrance to Indian Gift Shop were valued at $5,000. After one of them was vandalized, the remaining totem pole is valued at $1,000. In accord with the pair, sets, or parts provision in the commercial inland marine policy covering these items, what will the insurer pay Gift Shop?

4,000. The insurer will pay the difference between the value of the pair before and after the loss or damage

Allison's businessowners policy has a $500,000 limit on covered business personal property at her arts and crafts shop. This limit is based on her average inventory values. Her inventory is at its peak when water from a winter storm ruins it. With the policy's seasonal increase provision, what is the most that she can recover for the loss?

625,000. Because the built in seasonal increase provision that increases the business personal property limit is 25% to accomadate for seasonal fluctuations

Burglars break into Landon's house steal several items. Which of these items is subject to a sublimit under Landon's homeowners insurance policy?

750 in cash, kept in a cookie jar. A sublimit of 200 applies to money and related items

Package policy

A combination policy providing several different coverages. Usually refers to a policy providing both general liability insurance and property insurance

Which incident that resulted in a liability claim against Aida did NOT involve "bodily injury" as defined in her homeowners insurance policy?

A neighbor's reputation was harmed by rumors Aida spread

Self contained policy

A single document that contains all the agreements between the insured and the insurer and that forms a complete insurance policy.

underinsurance

A situation resulting from a failure to carry enough coverage on the value of a property, especially when there are coinsurance implications

Supplementary payments

A term used in liability policies for the costs associated with the investigation and resolution of claims

Marine insurance

A type of insurance designed to provide coverage for the transportation of goods either on the ocean or by land

Mac buys a motorboat and wants a boatowners insurance policy. He can expect the policy to include the following coverages EXCEPT:

Accidental death coverage

Hans insures his home under a DP 1 policy. On what basis will the insurer value losses to the dwelling or other property?

Actual cash value

Upon learning that his HO 3 policy covers personal property for only its actual cash value, Jamal wants to get replacement cost coverage instead. How can he do this?

Add the personal property replacement cost loss settlement endorsement to his current policy

Reasonable repairs

Additional coverage provided by the homeowners policy. The insurer will pay for any reasonable costs incurred by the named insured to protect his or her insured property from further damage

Premium audits

An audit of the exposure basis for an insurance policy after then end of a policy to determine the actual (audited) exposure for the purpose of making a final calculation of the premium and premium taxes

The large heating and air-conditioning systems Albert installs in commercial buildings are expensive, and Albert wants to make sure he has insurance on this equipment during the time when it is being installed. What kind of floater should Albert purchase?

An installation floater

Commercial property policy

An insurance policy for businesses and other orgs that insures against damage to their buildings and contents due to a covered cause of loss, such as a fire

Modular policy

An insurance policy that consists of several different documents, none of which by itself forms a complete policy.

Inflation guard provision

Automatically increases the building coverage limits by 8 percent annually unless the declarations specify a different percentage

Shawn's ice cream parlor gets most of its customers from the health club next door. What coverage, if any, in Shawn's policy would apply if a fire closes the health club?

Business income from dependent properties additional coverage would apply

Dwelling Property 3 (Special form)

Comprehensive form that provides coverage on all perils unless they are excluded

Dalton rents an unfurnished house. Dalton's dwelling policy is most likely to have Coverage C-Personal Property and:

Coverage E-Additional Living Expense

Loss of use

Coverage that protects a policyholder whose residence premises cannot be used because of an insured loss

Other structures

Coverage that protects structures on the residence premises that are not attached to the dwelling, such as a gazebo or pool

Inchmaree Clause

Covers direct damage caused by the bursting of boilers, breaking of propeller shafts, or loss due to faults or errors in navigation by the crew.

Homeowners policy special form 3

Covers dwelling and other structures on an open perils basis; personal property on a named perils basis. Is the most popular form

Homeowners policy broad form 2

Covers dwelling, other structures, and personal property on a named perils basis; loss of use, personal liability, and medical payments

Dwelling Property 1 (Basic form)

Covers the perils listed in the policy. Is the least comprehensive form

Gertrude's will specifies that, upon her death, her son Dirk will be the executor of her estate. Coverage for Dirk's actions as the executor are described under what policy condition of the homeowners policy?

Death

Protective Safeguards Endorsement

Endorsement that makes it a condition of coverage that the things such as alarms or sprinkler system be in operation at all times except when the insurer has been notified of the impairment

Which forms are attached to a commercial property policy to broaden or narrow coverage?

Endorsements

Breach

Failure to live up to the conditions or warranties contained in a contract

Jordan converts her home's attached garage into an apartment that students rent year-round for $300 each month. A tenant accidentally starts a fire in the apartment, making it uninhabitable for three months while the damage is repaired. Which coverage in Jordan's homeowners insurance policy covers her rental income loss?

Fair rental value

Homeowners Modified Form 8 (HO 8)

For older homes when their replacement cost may substantially exceed their market value: dwelling and other structures based on the amount needed to repair or replace the property using common construction materials and methods; loss of use, personal liability, and medical payments.

Homeowners policy unit owners form 6

For owners of condos and apartments; personal property on a named perils basis, limited dwelling coverage, loss of use, personal liability, and medical payments

Homeowners policy contents broad form 4

For tenants of houses or apartments: covers personal property on a named perils basis, loss of use, personal liability, and medical payments

Defense costs coverage

For use on commercial general liability policies, this endorsement state that if the insurer agrees to provide a defense to an insured, but it is later determined that the claim wouldn't be covered by the policy, the insurer is entitle to pay the defense costs incurred up to that point

When fire broke out in the ship's forward hold, the crew flooded all cargo in that area to keep the fire from destroying the entire vessel. AC Company's cargo was in a different hold, so it was not damaged. Yet, the company is being asked to pay for some of the cargo that was damaged because that loss is considered to be a(n):

General average. Loss incurred for the common good that is shared by all parties to the venture

Jamie rents a two-bedroom apartment in a 12-unit apartment building where she lives with her two-year-old son. She wants to insure the property in their apartment. Which homeowners policy form, if any, is appropriate for her situation?

HO 4. This one is designed for tenants

Vandals throw a brick through the window of Giovanni's pizza parlor. He hires a handyman to board up the broken window until the glass can be replaced. His businessowners policy covers his building and personal property. How much coverage does the BOP provide for these temporary repairs?

His expenses are covered, subject to the applicable limit

Lori accidentally shut a door on her boyfriend's finger. Her homeowners policy's medical payments to others coverage should cover the boyfriend's medical expenses if the incident took place in an "insured location." Which would be an insured location?

Hotel room occupied by Lori and her boyfriend

What kind of insurance is the coverage in an ocean marine insurance policy that protects a shipowner against a covered loss to the vessel but not to its cargo?

Hull insurance

Personal property

Includes more than the items in the dwelling, such as a tv, washing machine or clothing

Cargo insurance

Inland or ocean marine coverage for goods in transit

Extra expense coverage

Insurance coverage for extra expenses incurred by the named insured to avoid or minimize the suspension of operations resulting from direct damage caused by a covered cause of loss.

Business income coverage

Insurance covering loss of income suffered by a business when damage to its premises by a covered cause of loss causes a slowdown or suspension of its operations during the time of repairing the property

Dwelling Property 2 (Broad form)

Is a named perils form that covers the same perils as the basic form, including several more. If a peril is not listed in a basic or broad form, the insurer does not cover it

Which statement is correct about the businessowners policy coverage for personal and advertising injury?

It covers a claim for tort liability

Josephine's novelty store has a businessowners policy that covers the building and business personal property. When will the personal and advertising injury liability coverage address a claim?

Josephine detains a suspected shoplifter who turns out to be innocent. Because personal and advertising injury are infringements on a person or business's personal rights

personal liability coverage

Liability coverage provided by the homeowners policy that protects the insured against the financial consequences of liability to others for bodily injury and property damage

Bodily injury

Liability insurance term that includes bodily harm, sickness, or disease, including resulting death.

Which loss would the businessowners policy NOT cover?

Manufacturing error causing defective product

Hull coverage

Marine or aviation insurance covering damage sustained to an insured vessel or airplane.

Hull insurance

Marine or aviation insurance covering damage sustained to an insured vessel or airplane. Does not cover cargo

Coverage F

Medical expenses to others. Pays for an injured party's medical care regardless of the insured's liability

Basic causes of loss form

One of the three ISO causes of loss forms. Provides coverage for these perils: fire, lightning, explosion, smoke, windstorm, hail, riot, civil commotion, aircraft, vehicles, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action

nonowned auto

One that is not owned by the business or business owner but is owned by an employee using their car to conduct company business. Ex; a pizza delivery drier using their car to deliver pizzas

Hired Automobile

One that is rented in the name of the business or business owner. Ex; a company executive renting a car to attend a business conference

Under a DP 2 broad form, replacement cost coverage applies to:

Other structures

Clyde's tenant-occupied house is insured under a DP 1 policy that covers only the dwelling building. His policy covers losses caused by:

Perils named in the policy

Coverage E

Personal liability where financial compensation is paid for when the insured is liable to other parties for bodily injury an property damage

Floater

Policy that covers personal property wherever it may be within the policy territory. Only issued by inland marine insurers

Reporting from coverage

Property insurance that allows an insured with fluctuating inventory values to establish a limit of insurance adequate to cover the highest possible exposed value but to pay a premium based on the actual values exposed

The business owners policy is a package policy that combines coverage for

Property, liability, crime, and inland marine risks

Dwelling policy

Provides protection like a homeowners policy, but just covers property insurance. Is a a cheaper option and is available when HO might not be for certain reasons

Pair or set clause

Provision found in homeowners and commercial property forms dealing with losses involving part of a set or one of a pair. Insurer can repair/replace any part to restore the pair or set to its value before the loss, or pay the difference between the actual cash value of property before and after the loss

Limitations

Reduce or restrict coverage in certain situations or with respect to certain kinds of covered property

Judith's engagement ring is stolen soon after she and her fiancé cancelled their wedding plans. Instead of paying Judith in cash, her homeowners insurance policy gives the insurer the right to

Replace the missing ring. Due to repair or replace option

Insured contract

Term common in liability policies tat provides limited exceptions to the contractually assumed liability exclusion, by stating that the exclusion does not apply to liability assumed in an "insured contract"

Keri habitually dumps used paint cleaner on the ground behind her art shop. She must now spend $20,000 to have the pollutants removed. To what extent, if any, does Keri's businessowners policy cover this expense?

The BOP does not cover intentional dumping of pollutants

What is the difference between the homeowners insurance policy's property damage liability coverage and the damage to property to others additional liability coverage?

The HO policy's property damage coverage pays for property damage for which the insured is deemed legally liable and is being sued. The damage to property of others additional coverage is "goodwill coverage" that pays for property damage caused by the insured for which the insured has not been held liable.

Subrogation

The assignment to an insurer by terms of the policy or by law, after payment of a loss, of the rights of the insured to recover the amount of the loss from one legally liable for it

The impressions embedded in their neighbor's new concrete driveway are those of the Walker's seven-year-old daughter Margie. Will the Walker's homeowners policy pay for the driveway's repair?

The damage to property of others coverage will pay up to $1,000. This is because margie is younger than 13

Adrian leaves his workbench to help a customer. When he returns, he discovers that his soldering iron has fallen into a wastebasket and started a fire. Adrian rents his shop and has a businessowners policy with only business personal property and liability coverage. Why will his BOP cover the landlord's claim for damage to the building?

The fire damage was caused by Adrian's negligence

Boatowners

The most common type of watercraft policy for individuals and families. It combines property, liability, medical payments and uninsured boatowners coverage

general aggregate limit

Under the cgl policy, the maximum limit of insurance payable during any given annual policy period for all losses other than those arising from the products and completed operations hazard

Which coverage cannot be combined with other coverage forms under a single businessowners policy?

Workers compensation

Ida's boutique at a shopping mall escapes damage when a portion of the atrium roof caves in. However, her business came to a sudden halt when the debris blocks access to her store. Does Ida's businessowners policy cover the resulting loss of income?

Yes, because the BOP's business income and extra expense coverage applies when a business interruption is caused by damage to any area used to gain access to the insured's premises.

Clare, a convenience store owner, accepts a $100 bill from a customer who buys a pack of cigarettes. Her bank tells her the bill is counterfeit. Does her businessowners policy cover this loss?

Yes, because the policy provides up to $1,000 coverage for loss due to the insured having accepted counterfeit money

The business income and extra expense coverage in the businessowners policy has:

a 12-month maximum recovery period

Twenty percent of Aubrey's cargo was damaged when the ship transporting it encountered a violent storm in the Bermuda triangle. In terms of ocean marine insurance, what is this partial loss to Aubrey's cargo called?

a particular average

The businessowners policy that insures the apartment building Laurie owns includes building coverage but not business personal property coverage. Therefore, she does NOT have coverage for loss or damage to:

a tenants furniture

As compared with fire insurance policies, inland marine floaters typically provide coverage:

against more causes of loss. Because it is an open perils

Morgan sends a newsletter to his clients that includes photos from a recent business event that many of them attended. One of the clients sues him for invasion of privacy. Morgan's ISO businessowners policy will:

cover the claim because it is for a personal injury. Because personal and advertising injury includes claims for violation of privacy rights

Homeowners policy comprehensive form 5

covers dwelling, other structures and personal property on an open perils basis. The broadest homeowners coverage

A paint booth explosion halts production at Wilfred's manufacturing plant. Wilfred paid some employees overtime to repair the damage and return the plant to operation as soon as possible. The overtime pay costs less than the income he would have lost without the overtime work. Wilfred's business income insurance will cover the overtime pay if he has:

either the business income and extra expense coverage form or the business income form without extra expense

Many inland marine insurance policies accompany covered property whether it remains in a single location or moves from one location to another. Because of this, what are inland marine policies often called?

floaters

Broad causes of loss form

includes the perils listed in the basic causes of loss form, plus the perils of falling objects, weight of ice,snow or sleet and water damage, and collapse from specified causes

A benefit of the extra expense additional coverage in a businessowners policy is that it:

is not subject to the limits of insurance

Although it addresses common terms that apply to all commercial policy forms, the commercial policy conditions form does NOT include:

no benefit to bailee conditions

After receiving payment from the insurer for a claim he filed under his personal article floater for the loss of his expensive golf clubs, Robert found the clubs in a shed. What does the "recovered property" condition in Robert's inland marine policy require him to do?

notify the insurer and be prepared to return the claim payment

Alex's Diner is insured by an unendorsed businessowners policy. The policy's declarations page specifies limits for the building coverage and for the business personal property coverage. What kind of perils coverage does Alex have?

open perils coverage on both the building and personal property

Laurie applies for a businessowners policy to cover her small enterprise. What kind of business would make her ineligible for a BOP policy?

pinball and video game arcade

Endorsements

printed addendums to a contract that are used to change the policy's original terms, conditions, or coverages. Usually limits the coverage

The liability section of the ISO businessowners policy has an aggregate limit for:

products and completed operations.

Which provision is NOT found in the common policy conditions section of a business owners policy?

property loss settlement

Special causes of loss form

referred to as open perils because it does not list the covered causes of loss. Instead, all causes of loss are covered except for those specifically excluded.

After striking a shoal, the freighter Benita was in danger. The fishing vessel Flossie was in the area and provided assistance. Flossie then billed the Benita to recover its expenses, which marine insurers refer to as:

salvage charges

Randolph has bought grain and packaged it for sale in pet stores for the past four years. In the third year, customers claimed that the grain sickened their pets. He then discovered that he was using grain treated with a pesticide. Randolph had BOPs for each of these four years. Which BOP will cover his liability?

the first three BOPs, which were in effect from the time the damage began until the time he discovered it

Although she had been told that she was getting the broadest possible property coverage, Earlene is disappointed to discover that the special causes of loss form attached to a building and personal property coverage form excludes all the following perils EXCEPT:

theft

Erin wants to protect her warehouse inventory against damage from extremely hot and cold temperatures resulting from a loss of electrical power. What endorsement should her businessowners policy include?

utility services-direct damage