chapter 24 prop insurance
prop insurance offers protection against the financial loss an owner might suffer if these events occur:
Fire, windstorm, hail, tornadoes, vandalism, smoke damage and other physical damage to the owner's home or belongings Theft of the owner's personal property Injury of a person on the owner's property due to the negligence of the property owner or a member of the owner's family Damage caused by the policyholder to another's property as a result of negligence.
Which policy is sold much less than other policies.
HO-1
Which of these policies is the most common for a residential property?
HO-3
Which policy covers condominiums?
HO-6
As a rule, how is coverage for home computers usually handled?
Home computers used for personal use are subject to the limit available for personal property. Some companies may have a separate limit for the home computer. However, if they are used for business, the company will only pay up to $2,500.
cost of insurance
Homeowners and tenants insurance premiums vary widely from company to company. The cost depends on a number of factors including: Location Age and type of building The use of the building, such as residence and/or commercial enterprise Local fire protection Choice of deductibles Application of discounts Scope and amount of insurance coverage purchased
If the owner does not carry this type of insurance -
- he or she carries less than the 80% figure - any claim will be handled in either of these two ways: The loss will be settled for actual cash value. The loss will be prorated. For example, if a person's home is insured for only 70% of its replacement value and the owner suffers a loss of $15,000, the insurance will pay $13,125. (70% ÷ 80% = .875 x $15,000 = $13,125) Replacement type coverage is more expensive than actual cash value coverage.
business owners policy
Commercial insurance may be available in an affordable, General Liability and property package policy known as a Business Owner's Policy, or BOP. These policies are designed for small to medium-sized businesses operating in a low-risk business class. A BOP combines the insurance into one policy with one premium.
C-MAP is administered by
NYPIUA
What is the New York Property Insurance Underwriting Association and what does it do?
New York Property Insurance Underwriting Association is a pool of all insurance companies writing fire insurance in New York State. It offers fire and extended coverage, as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies.
special program: New York Prop Insurance Underwriting Association (NYPIUA)
New York Property Insurance Underwriting Association is a pool of all insurance companies writing fire insurance in New York State. It offers fire and extended coverage, as well as coverage for vandalism, malicious mischief, and sprinkler leakage to consumers who are unable to purchase this type of insurance from individual insurance companies. NYPIUA does not offer liability, flood, or theft coverage. "wrap-around" cov means that the fire and extended coverage are provided through NYPIUA and the liability, theft and other coverage are underwritten by a licensed insurer offering such wrap-around coverage. higher premium
when determining val of personal prop, owner should do extensive
analysis of home going through each room of house and listing every piece of furniture and fixture
Tenants or Cooperative Owners Policies (HO-4) and Condominium Unit Owners Policies (HO-6)
are policies that insure against damage to the contents of the apartment, cooperative or condominium and for personal liability of the insured when people are injured or suffer property damage in the insured unit.
homeowners-1 (HO-1)
basic policy which insures home and contents against perils listed below. Fire, lightning and smoke damage Windstorm and hail Burglary and theft Explosion Glass breakage Vehicle or aircraft damage Riot and civil commotion Vandalism and malicious mischief Bodily injury Damage to property of others Civil judgments Medical payments Personal property (at home) Personal property (away) Additional living expense
after a policy has been in effect for 60 days it may not
be cancelled or non-renewed for a 3 year period except for any of the following reasons: Nonpayment of premium (However, if payment is received by the company within 15 days of the mailing of the cancellation notice the policy will not be cancelled.) Conviction of a crime arising out of acts increasing the hazard insured against Discovery of fraud or material misrepresentation in obtaining the policy or in the presentation of a claim under the policy Discovery of willful or reckless acts of omissions increasing the hazard insured against Physical changes in the property insured occurring after issuance or last annual anniversary date of the policy which result in the property becoming uninsurable in accordance with the insurance company's objective, uniformly applied underwriting standards in effect at the time the policy was issued or last voluntarily renewed A determination by the Superintendent of Insurance that the continuation of the policy would violate or would place the insurer in violation of the Insurance Law
For a hurricane to be covered by a policy with a compulsory windstorm deductible, regardless of the insurer, the storm must
be classified a hurricane
the deductible must be paid by the insured
before the benefits of the policy can apply
property insurance
provides protection.
at the end of this 3 year period the company may refuse to
renew the policy. However, by law, they are required to provide at least 45 days, but not more than 60 days, notice of non-renewal.
_____________ coverage is more expensive than ___________ coverage.
replacement cost, actual cash value
What type of policy would pay a homeowner for the full cost of the repair or replacement without deduction for depreciation?
replacement cost-which insures the home for at least 80% of its replacement cost.
actual cash value (ACV) aka market val
standard that insurance companies prefer when reimbursing policyholders for their losses. Actual cash value is equal to the replacement cost minus any depreciation. It represents the dollar amount an owner could expect to receive for an item if he or she sold it in the marketplace.
Under current New York State law, an insurance company may cancel a homeowner's or tenant's policy by issuing a cancellation notice during the first 60 days it is in effect, as long as
the cancellation notice states the specific reason or reasons for the cancellation.
Generally, if the property owner purchases coverage on a replacement cost basis and insures the home for at least 80% of its replacement cost,
the insurance will automatically be issued on a replacement cost basis.
If a homeowner installs hurricane or storm shutters, the law mandates
the insurer must offer coverage discounts
some types of cov such as flood insurance are always excluded.
the only way to obtain them is through federal insurance programs
in an insurance policy the deductible is
the portion of any claim that is not covered by the insurance provider.
homeowners-2 (HO-2)
this Broad Form Policy insures the policyholder's home and contents against the perils in the HO-1 policy and other additional listed perils. additional: Falling objects Weight of ice, snow or sleet Accidental discharge or overflow of water from plumbing systems Freezing of plumbing systems Electrical damage to appliances Rupture of water heaters and heating systems Accidental discharge or overflow of water from an automatic sprinkler system
amount of insurance needed
to determine how much insurance a prop owner will need, must eval the home and personal prop owned
umbrella policies
type of liability insurance avail to individuals and companies to protect them against claims above and beyond the amount covered by their primary policies or for claims not currently covered.
When does an umbrella policy provide coverage?
when the liability on other policies has been exhausted
Generally, personal liability limits of ____________ per occurrence and medical payments limits of __________ per person are sold to the public.
$100,000, $1,000
Under current New York State law, an insurance company may cancel a homeowner's or tenant's policy by issuing a cancellation notice within how many days after it is in effect?
60 days
when shopping for insurance, prop owners should keep in mind:
-shop for the best prices and terms -make insurance a requirement even if there is no mortgage involved -If prop owner is a landlord, talk to other landlords to find out what unexpected events cause problems -get both liability and replacement coverage (someone is responsibly for the lady who slipped on prop walkway) -eval a # of factors besides the size of the prop to determine amount of insurance needed
real estate agents role
-should explain the purpose and cost of prop insurance to the buyer -should explain the lenders interest in prop insurance
Homes in Brooklyn that are eligible for coverage under C-MAP must be located within ________ of the shore.
1 mile
Sue purchased a homeowner's policy to cover 75% of its replacement value and then experienced a $13,000 loss by vandals. How much can Sue expect to receive from her insurance company to cover the loss?
12,187.50
ex of cost of insurance
A brick building, for example, is more resistant to fire than a frame building and, as a result, costs less to insure against fire. The building's location also has a bearing on the cost of fire coverage, because some communities have better fire protection than others. Also, some areas have greater crime and vandalism problems than others, thereby affecting the cost of insuring against such losses.
Many insurance companies also offer premium discounts for the use of dead bolt locks, smoke alarms, fire extinguishers, sprinkler systems and security systems.
As we said earlier, insurers are required to offer premium discounts if a policyholder has installed hurricane/storm shutters and/or hurricane-resistant laminated glass windows and doors. All of these devices minimize losses and in some instances, may prevent them.
insurance broker may have the power to issue a policy or bind an insurance company to issue a policy - or they may not have that power.
But once a broker finds a company that will issue a policy, whatever premium the policyholder pays to the broker is the same as if the owner had paid the premium to the insurance company directly.
hurricanes
By statute the companies must provide proper disclosure to their policyholders of any windstorm deductibles attached to their homeowner's policies. In order to reduce or prevent losses, homeowners should think about installing hurricane or storm shutters and/or hurricane-resistant laminated glass windows and doors. Insurance companies are required by law to offer discounts to any homeowner who has installed such shutters or hurricane-resistant laminated glass windows and doors.
What does Commercial General Liability (CGL) coverage do for businesses?
Commercial General Liability (CGL) coverage protects business organizations against liability claims for bodily injury, property damage, personal injury and advertising injury.
What is a Homeowners-3 policy?
Homeowners-3 is a Special Form Policy and is the most widely-used homeowner's policy. This policy covers the owner's property for all risks of physical loss, except those that are specifically excluded, such as flood or earthquake.
How does the Homeowners-5 policy differ from the Homeowners-3 policy?
Homeowners-5 protects a home against the same perils as the HO-3 policy. However, it adds coverage for the owner's personal possessions for all risks of physical loss, except those risks that are specifically excluded.
problems getting insurance
If a homeowner cannot find an insurance company that will issue a homeowner's or tenant's policy because of the home's closeness to the coastline, or if the homeowner cannot obtain certain coverage, such as fire or flood insurance, there are special insurance agencies to contact or special programs available.
the agent should explain when to obtain prop insurance if the purchase is a cash sale
If there will be no mortgage, there will be no lender to require the escrow of funds for taxes and insurance. It's important for the agent to remind the buyers that they still need to protect themselves and their property by having sufficient insurance coverage.
each of NYCs 5 boroughs constitutes. a separate rating territory
In the remainder of the state, rating territories are based upon the quality of the community's public fire protection, ranging from Class 1 (the best protection) to Class 10 (unprotected).
How is the amount of coverage available for personal property normally figured?
It is a percentage of the amount of insurance carried on the structure.
the agent should explain the escrow of prop insurance along with prop taxes
Many lenders require borrowers to set up an escrow account to hold funds for insurance and tax payments. This helps protect the lender's investment.
Under what conditions can property owners purchase flood insurance through the NFIP?
Property owners can purchase flood insurance through the NFIP if they reside in a community which has been designated as a special flood hazard area which implements and enforces measures to reduce future flood risks.
national flood insurance program
Property owners can purchase flood insurance through the NFIP if they reside in a community which has been designated as a special flood hazard area which implements and enforces measures to reduce future flood risks.
choices in purchasing property insurance
Property owners can purchase insurance from independent agents, insurance companies or insurance brokers.
what is meant by replacement cost?
Replacement cost means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose.
Workers' Compensation Insurance
The Insurance Law requires that any policy that provides personal injury liability and is issued for a one-to-four family, owner-occupied dwelling or condominium apartment also provide workers' compensation insurance. This insurance would apply to any employee working less than 40 hours per week, performing, for example, household chores or yard work in or about the residence.
how would a homeowner be reimbursed if he or she had actual cash value
The homeowner would receive an amount equal to the replacement cost minus any depreciation. It represents the dollar amount an owner could expect to receive for an item if he or she sold it in the marketplace.
basic policies in NY
The policies range from a basic package to more expensive comprehensive packages. Comprehensive packages provide greater coverage against more perils for both the policyholder's home and possessions.
Which type of coverage is NOT available through the New York Property Insurance Underwriting Association?
Theft
home day care coverage
There is limited liability coverage under a homeowner's policy for day care activities. Ordinarily coverage is provided for the policyholder who takes care of one or two children for a mutual exchange of services. In other words, if the insured takes care of a friend's children in exchange for their day care services for the insured's children, with no exchange of money, liability coverage will be provided under the policy. If a person is paid for day care services, it is considered a business enterprise and the insured must purchase additional coverage.
homeowners-5 (HO-5)
This Comprehensive Form Policy protects a home against the same perils as the HO-3 policy. In addition, the owner's personal possessions would also be covered for all risks of physical loss, except those risks that are specifically excluded. This extra protection may also be provided by purchasing a HO-3 policy with the "Special Personal Property" endorsement.
homeowners 8 (HO-8)
This Market Value Policy is a modified version of the HO-1 policy, providing actual cash value coverage in place of replacement cost coverage for a building. Under no circumstances will the company's settlement figure exceed the amount necessary to repair or replace the dwelling. This policy form is generally used when the replacement value of the property exceeds its market value, as in the case of older homes.
homeowners-3 (HO-3)
This Special Form Policy is the most widely-used homeowner's policy. It is becoming the standard homeowner's policy and many lenders recommend it. This policy covers the owner's property for all risks of physical loss, except those that are specifically excluded, such as flood, earthquake, war, nuclear accident, etc. The policy will give a complete listing of the excluded perils. Coverage for loss of the home's contents is also covered for many of the same perils for which the home is covered.
commercial general liability (CGL) coverage protects business organizations against liability claims for bodily injury, property damage, personal injury and advertising injury.
Those claims may be the result of events at the place of business, from business operations, from the products made or services performed, or from communications or advertisements broadcast about the business.
If a policy contains a standard all peril deductible, such as $250, the policyholder would collect the amount of any covered property loss, less $250.
With a deductible, the premium cost of the policy is lower than if there were no deductible.
when insurance policies are sold they are issued as either
a monoline policy or a package policy
when determining val of home prop owner must
calc how much it would cost to replace home if it were destroyed
independent agents
can represent a number of different insurance companies, thereby offering a wider choice of available products.
insurance companies
can sell through independent agents. companies can also write insurance off for their company-owned products directly, by using their own staff of employees, sales representatives, or the Internet.
The C-MAP program can help homeowners find insurance for what type of area?
coastal
insurance brokers
have primary obligation to the client - not the insurance company. place client's interest first when negotiating coverage terms, assisting claims, providing risk management advice..
5 diff types of policies are avail to provide coverage for owners who occupy 1 or 2 family houses. a 6th policy type covers tenants of a
house or apt building or cooperative owners. a seventh policy type provides coverage for condominium owners
Insurers are required to offer premium discounts if a policyholder has installed
hurricane/ storm shutters
independent agents and brokers not only advise clients about insurance, they also recommend loss-prevention ideas that can cut costs.
if a loss occurs, the independent insurance agent or broker stands with the client until the claim is settled.
example of why property insurance is important
if there is a fire the owner needs to have the financial ability to rebuild and restore the property to its original condition. Few owners could afford those expenses on their own. Even partial damage could be too costly for the owner's reserves.
a package policy
includes several diff types of coverage such as prop insurance and liability insurance
deductibles save money bc the 1st dollars of the insurance are the most expensive to buy
increasing a deductible to a higher amount such as 500 or 1000 can lower the premium even further
due to _______ the replacement cost of a home generally increases each year
inflation
coastal residents assistance The Coastal Market Assistance Program (C-MAP)
is a voluntary network of insurers that assists New York homeowners who live in coastal areas to find insurance. The program is for owner-occupied, one-to-four family homes, apartment units, or condominium units located in the Bronx, Brooklyn, Nassau, Queens, Staten Island, Suffolk and Westchester. On Long Island's south shore and forks, as well as in Brooklyn, Queens and Staten Island, the home must be located within one mile of the shore. On the north shore of Long Island and in the Bronx and Westchester, the home must be within 2,500 feet of the shore to qualify for consideration.
purpose of prop insurance
is designed to protect the lender and the prop owner in the event of something unexpected.
a package policy is generally
less expensive than purchasing a separate policy for each insurance needed
monoline policy contains 1 type of coverage such as liability insurance
liability insurance is coverage to protect against claims alleging that one's negligence or inappropriate action resulted in bodily injury or prop damage
injury of a person on prop damage caused by policyholder to another prop as result of negligence would be covered under the
liability portion of the policy
List three factors that can influence the cost of insurance. (See screen 27 for other correct answers.)
location, age and type of building, choice of deductibles
Which of the following would NOT result in an insurance premium discount?
lower deductible
replacement cost
means the cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose. The replacement cost of a home must be estimated at the time the property owner takes out a homeowner's policy.
actual cash value vs replacement cost
once a prop owner has determined a value for the home and its contents, one will need to decide what kind of coverage is best.
