Unit 4 Property Insurance Basics

Buildings and permanent structures

Real Property

Movable property such as furniture, clothing, and appliances

Personal Property

Coverage requiring a detailed list of covered items

Specific (Scheduled) Coverage

Single limit covering an entire class of property

Blanket Coverage

Maximum amount the insurer will pay for a loss

Limit of Insurance

Coverage applying only to listed perils

Named Peril Coverage

Coverage applying to all direct physical loss unless excluded

Open (Special) Peril Coverage

Least expensive and most restrictive property coverage

Basic Form

Middle level property coverage

Broad Form

Most comprehensive property coverage

Special Form

Fire, Lightning, and Internal Explosion

Basic Form Perils

Wind, Civil Commotion, Smoke, Hail, Aircraft, Vehicles, Volcanic Eruption, Explosion, Riot, Vandalism & Malicious Mischief

WCSHAVVER

Mnemonic for Broad Form additional perils

BIG AFFECT

Burglary Damage, Ice/Sleet/Snow, Glass Breakage, Accidental Discharge, Freezing, Falling Objects, Electrical Current, Collapse, Tearing Asunder

BIG AFFECT

Property coverage that includes Basic, Extended Coverage, and BIG AFFECT perils

Broad Form Coverage

Flooding, Earthquake, Intentional Damage, Ordinance or Law, Off-Premises Power Failure, Government Seizure

Common Special Form Exclusions

Immediate damage caused by a peril

Direct Loss

Consequential loss resulting from a direct loss

Indirect Loss

Class 1 Construction

Frame

Class 2 Construction

Joisted Masonry

Class 3 Construction

Noncombustible

Class 4 Construction

Masonry Noncombustible

Class 5 Construction

Modified Fire Resistive

Class 6 Construction

Fire Resistive

Process used to determine the amount payable after a loss

Loss Valuation

Replacement Cost minus Depreciation

Actual Cash Value (ACV)

Current replacement cost without depreciation

Replacement Cost

Cost of replacing property with modern materials performing the same function

Functional Replacement Cost

Selling price of an asset

Market Value

Value agreed on before the policy is issued

Agreed Amount (Valued Basis)

Amount listed on the policy, but insurer pays the lesser of stated amount or actual loss

Stated Amount

Value of the set before loss minus value of what remains

Pair and Set Condition

Method used when insured and insurer disagree on amount of loss

Appraisal

Agreement of any two of the three parties in appraisal determines the amount

Appraisal Rule

Method used when parties dispute something other than amount of loss

Arbitration

Requirement that insured carry a minimum percentage of property value

Coinsurance

Typical coinsurance requirement

80%

Penalty applied when required coinsurance is not maintained

Coinsurance Penalty

Building with no people and no contents

Vacant

Building with contents but no people

Unoccupied

Vacancy period commonly triggering coverage restrictions

60 Days

Clause protecting a lender's interest in covered property

Standard Mortgage Clause

Clause protecting a lender with an interest in personal property

Loss Payable Clause

Person or business with temporary possession of another's property

Bailee

Property owner's policy does not cover the bailee

No Benefit to Bailee