Term
| Define Personal Property insurance. |
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Definition
| Refers to insurance policies provided for property having a personal or non-business use. |
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Term
| Define Business Property insurance. |
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Definition
| Refers to insurance policies provided for property having a business use. |
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Term
| State the main difference between "named peril" policies and the broader "all risks" policies provided by most insurers. |
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Definition
1. "Named peril" policies name the perils that are insured within the policy. When a loss is caused by a peril not named in the policy, there is no coverage.
2. "All risks" policies insure against all risks of direct physical loss or damage subject to policy conditions and exclusions. In other words, all causes of loss are insured unless specifically excluded by the policy. |
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Term
Identify the types of property insured by policies of Personal Property insurance.
(Homeowners Forms) |
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Definition
* Dwelling building
* Detached private structures
* Personal Property |
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Term
| Identify the types of property insured by policies of Commercial Property insurance. |
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Definition
* Building
* Stock
* Equipment |
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Term
Property policies insure "direct" damage only. Explain & provide examples of:
1. Direct Damage
2. Indirect Damage |
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Definition
Direct Damage is when the object of insurance is damaged or destroyed by any insured peril. Ex. Damage to roof caused by firefighter's axe, smoke & heat damage to adjacent storage shed.
2. Indirect Damage is when the other losses arise as a result of direct losses. Ex. Loss of food in a freezer when the electrical motor is damaged by a lightning strike, loss of profit to the business after a tornado destroys the building. |
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Term
| Insurance policies may contain conditions and warranties. Identify two types of "conditions" and briefly describe each. |
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Definition
* Statutory Condition - Established in statute and legally binding on all parties.
* Policy Condition - Specifically developed by insurers to deal with important coverage areas. |
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Term
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Definition
| A warranty is a promise by insureds that certain facts are truly as they are represented to be and that they will remain so. |
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Term
| Which of "conditions" or "warranties" can result in a denial of coverage, regardless of whether the the breach was directly linked to the cause. |
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Definition
| The warranty requires exact compliance. a breach of warranty entitles the insurer to nullify the contract and deny coverage. |
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Term
| Exclusions are common to all property insurance policies. Provide two reasons why insurance policies contain exclusions |
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Definition
1. Some items represent a greater than normal potential for loss are more properly insured by other policy forms.
2. The potential for catastrophic losses is of concern to all insurers. Ex. War is a loss that could jeopardize the solvency of insurers, therefore coverage is not included. |
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Term
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Definition
| A deductible represents the amount the insured is required to pay for each loss before receiving any payment from the insurer. |
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Term
Every property policy contains a description of how claims are paid. Explain the way claims are settled when there is a loss to:
1. One item of a pair or set.
2. One part of property which consists of several parts. |
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Definition
1. The item not lost continues to have value and this amount will be deducted from the amount of the claim payment.
2. When there is loss to only one part of property that consists of several parts, the basis of settlement shall be the value of the lost or damaged part, including the cost of installation. |
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Term
"Indemnity Agreement" outlines the criteria considered by the adjuster in determining the amount payable under the policy.
State the three criteria considered by the adjuster in determining the amount of the loss. |
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Definition
1. The actual cash value (ACV) of the property at the time of loss or damage
2. The interest of the insured in the property
3. The amount or limit of insurance specified on the "Declarations Page" in respect of the property lost or damaged. |
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Term
"Indemnity Agreement" outlines the criteria considered by the adjuster in determining amount payable under the policy.
When the value for each of these criteria has been determined, the adjuster will make an offer to the insured. What is the basis of the offer made to the insured. |
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Definition
| The offer of settlement will be based on the least of those amounts. |
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Term
"Indemnity Agreement" outlines the criteria considered by the adjuster in determining the amount payable under the policty.
Identify four factors used to determine the amount of depreciation when insured property is lost or damaged. |
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Definition
1. Condition of the item(s)
2. Obsolescence
3. Resale Value
4. Normal life expectancy |
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Term
| When replacement cost coverage is being claimed for building losses, the insureds must comply with certain policy provisions. Identify three provisions relating to replacement cost coverage. |
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Definition
1. Replacement shall be effected by the insured with due diligence & dispatch.
2. Replacement shall be on the same site or an adjacent site.
3. Settlement on a replacement cost basis shall be made only when replacement has actually been effected. |
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Term
| What is the basis of settlement when all of these provisions are not met? |
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Definition
| If the insureds fail to comply with even one of the provisions, settlement will be made on an ACV basis. |
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Term
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Definition
| The cost to replace a piece of lost or damaged property with a new item that is similar in kind and quality to the original article. There is no charge for depreciation on the lost or damaged property. |
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Term
| Identify two important provisions to be followed by the insurer when making settlement on a replacement cost basis. |
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Definition
1. Replacement Cost
2. Depreciation (nil) |
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Term
| Explain the basis of settlement under a "valued" policy. |
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Definition
| In regard to property that cannot be replaced, the insurer may agree to provide coverage on a valued basis. When there is a loss to insured property, the basis of settlement will be the value agreed to by the insured and insurer. |
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Term
| Property polices normally contain a "Standard Mortgage Clause". Who can be a mortgagee? |
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Definition
| A mortgagee is anyone having an insurable interest in the property insured. It can include a bank, trust company, credit union, individual or group of people. |
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Term
| Identify two guarantees provided to the mortgagee by the Standard Mortgage Clause. |
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Definition
1. Guarantee of payment when insured breaches any policy conditions.
2. Guarantee that the insurer will not reduce coverages to the prejudice of the mortgagee nor terminate the policy without providing it with the same notice required by law to be given to the insured. |
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Term
| What do deductibles accomplish? |
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Definition
The application of a deductible to all losses helps to keep insurance affordable.
*Insurers will usually provide insureds with deductible options. The higher the deductible, the lower the premium paid. |
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