Property and Casualty License Chapter 5 - Dwelling Polic

PNC License Exam chapter 5 - Dwelling Policy

What is the Dwelling Program

Uses monoline policies to provide property insurance to residential dwellings that may not eligible for Homeowners Policy. Typically, older homes.

What dwellings may be insured under the dwelling program?

May be Owner or Tenant occupied but must be used principally for residential purposes with up to 4 dwelling units and no more than 5 roomers or boarders. Certain incidental business occupancies are allowed that DO NOT involve retail sales such as instructional studies, beauty shops or schools

Are Mobile Homes eligible for coverage?

Yes, if they meet certain qualifications such as permanently affixed to a foundation.

Are farm dwellings eligible for coverage?

No, they are not eligible for coverage and would require difference insurance.

Who are Dwelling policies primarily written for?

They are typically written for the people who own the building and thus are responsible for insuring the building.

What are the Five Coverages available to Dwelling Programs?

Coverage A - Dwelling

Coverage B - Other Structures

Coverage C - Personal Property

Coverage D - Fair Rental Value

Coverage E - Additional Living Expenses

What are three policy form options for Dwelling Program?

Basic Form (DP-1), The Broad Form (DP-2) and the special form (DP-3)

Is Liability coverage automatically applied to Dwelling Forms?

No, but the additional liability coverage may be added for an additional cost

Coverage A - Dwelling

Applies to the residential dwelling described in the Declarations, including Structures attached to the dwelling, (ex garage). Coverage also provided material and supplies on or next to the described location used to construct, alter or repair the dwelling/structures. Unless otherwise covered in the policy, building equipment and outdoor equipment used to service the described location are considered part of the dwelling if they are located on the described location. Coverage DOES NOT apply to the land the dwelling is on.

Coverage B - Other Structures

Applies to structures other than the dwelling that is DETACHED from the dwelling by a clear space. This includes structures connected to the dwelling only by fense, utility line or similar connection. Also includes buildings like tool sheds or nonbuilding structures like a pool. Does not apply to land or grave markers. Excludes structures used for commercial, manufacturing or farming purposes.

Coverage B Limit of Insurance

The limit of liability applicable to other structures is an amount equal to 10% of the Coverage A Limit. Contained within Coverage A limit on the DP-1. For DP-2 and DP-3 this is an additional coverage A limit.

Coverage C - Personal Property

Applies to household and personal property usual to the occupancy of a dwelling. Includes anything the insured owns or uses, and anything owned or used by the insured family members who live with the insured, unless the personal property is excluded by the policy. Canoe and rowboats are covered

What does Coverage C - Personal Property NOT cover?

• Accounts, bank notes, coins, currency, evidence of debt, passports and securities.

• Animals/Pets

• Aircraft, hovercraft or watercraft

• Motor Vehicles, other than the ones used to service the property or to assist people with disabilities.

• Data, including in books of account, drawings, paper records or computers

• Credit cards, fund transfer cards, and other access devices

• water or steam

  • grave markets

When does Coverage C - Personal Property apply?

Applies while the insured property is located at the described location UNLESS personal property is moved from the describe location to a newly acquired principal residence, coverage will apply at each residence for up to 30 days or until the police expiration, whichever occurs sooner.

Is the personal property of a tenant or boarder covered under Coverage C - Personal Property?

No, as tenants and boarders will need to have their own insurance for their own personal property. However, the insured can request for a guests or domestic employee’s personal property to be covered while they are on the described location.

Coverage D - Fair Rental Value

Applies when a portion of the described location is rented to others, and it provides insurance for indirect losses that occur as a result of covered direct losses to property insured under A, B and C. This part of the policy pays loss rent of that portion of the described location that is rented and is unable to be due to loss until it is returned to a normal use. Payments will be made for the shortest time necessary to repair the damaged portion of the dwelling that is normally held for rental, even if that time extends beyond policy expiration.

Coverage E - Additional Living Expenses

Policy pays for necessary increases in the living expenses incurred by the named insured when a covered loss makes the unit in which the named insured lives uninhabitable. Payment only made to the extend that the insured household can maintain its normal standard of living.

Where is Coverage E - Additional Living Expenses automatically included?

Automatically included in the DP-2 and the DP-3 but not included in the DP-1 unless added by endorsement.

DP-1 (Basic Form)

Protects against 3 named perils, Fire, Lightning, and internal explosion. Provides the most basic insurance coverage.

Extended Coverage added to the DP-1 include losses from:

• Windstorm and hail

• Aircraft

• Riot or Civil Commotion

• Vehicles (car driving into dwelling)

• Volcanic Eruption (not including earthquake damage)

• Explosion (replaces internal explosion to cover external and internal explosions)

• Smoke

What can the insured cover against if they already have Fire and EC perils included for an additional premium?

Vandalism or malicious mischief (VMM). It excludes loss for vandalism occuring after 60 days of consectuive days of vacancy. Also excludes loss by theft, burglary BUT does cover the BUILDING Damages by burglars.

DP-2 (Broad Form)

Covers the dwelling, its contents and other structures against named perils including all the perils included for the DP-1 (fire, EC and VMM).

What Perils do the DP-2 (Broad Form) cover in addition to the named perils?

• Damage by Burglars

• Falling Objects

• Weight of Ice, Snow or Sleet

• Accidental discharge or overflow of a water or steam

• Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heat system

• Freezing of a plumbing/water system

• Sudden and accidental damage from artificially general current

What do the dwelling forms define plumbing and household appliances as?

Those that do not include a sump, sump pump or related equipment. They also cannot include a roof drain, gutter or similar fixture.

What is the Vehicle peril exclude under DP-2 (Broad Form)?

The vehicle peril only excludes loss to a fence, driveway, or walk caused by vehicle owned or operated by the named insured or a resident.

Extended Coverage Perils can be remembered by the Acronym WHARVVES

Windstorm, hail, Aircraft, Riot and Civil Commotions, Vehicles, Volcanic action, explosion and smoke

DP-3 Special Form

Offers the broadest coverage in the dwelling program. Includes all coverages listed in DP-1 and DP-2 AND works on an open peril basis, meaning the form insures against all direct physical loss to property and does not cover losses resulting from perils specifically excluded.

What are the excluded perils on the DP-3 special form?

• The exclusions listed on the general exclusions section of the form

• Collapse, expect for coverage provided by other coverages

• freezing, thawing or weight of water on patios, fences, swimming pools etc

• Theft of property not part of a covered building or structure

• theft in or to a dwelling or structure under construction

• VVM after it has been vacant for more than 60 consecutive days immediately before loss

• Constant or repeated seepage or leakage of water over a period of time

• Wear and Tear

• Smog, rust corrosion mold and wet/dry rot

• Pollutants, unless its discharge is caused by a covered peril (gas from volcanic action)

• Settling, cracking or bulging of foundation, walls, floors pavement or patios

• Birds, vermin, rodents, insects or domestic animals

Other Coverages on Dwelling Forms

They have this section rather than an additional coverages section. These are provided automatically and typically at no additional cost to the insured

Debris Removal

Other Coverage on All Dwelling Forms, covers removing any debris from the damaged property if the damage was caused by an insured peril. The expense is included in the limit of insurance that applies to the damaged property

Improvements, Alterations and Additions

If the insured is a tenant, they may use up to the 10% of the coverage C limit of insurance for a covered loss to improvements made or acquired at the insured expense to the part of the describe location occupied only by the named insured. Under DP-! Coverage is included in the limit insurance. Under DP-2 and DP-3, it is additional insurance.

Worldwide Coverage

May use up to 10% of the coverage C limit of liability for a covered loss to property insured under coverage C while it is located anywhere in the world. This coverage DOES NOT apply to rowboats or canoes. Included in the Coverage C limit of liability

Rental Value and Additional Living Expenses

Basic Form polices offer coverage for loss in fair rental value under the Coverage D. The insured may use up to 20% of the Coverage A limit of liability fair a covered fair rental value loss. This amount is included in the Coverage A limit of insurance. Meaning payments made under the Coverage D will reduce the Coverage A limit.

Reasonable Repairs

If covered property is damaged by an insured peril, the policy the reasonable costs incurred by the named insured for necessary measures taken solely to protect overed property from further damage. This is not additional insurance, and coverages does not increase the limit of insurance that applies to the covered property.

Property Removed

If property is being removed from the described location because it is endangered by a covered peril, the coverage is only provided for direct loss by any peril while removed.

Fire Department Service Charge

Under all the Dwelling forms, the policy will pay up to $500 for the named insured liability assumed by contract o agreement for fire department charges incurred when another city or district fire department is called to save or protect covered property from an issued peril.

Trees, Shrubs, and other Plants

Only included in the Broad and Special forms, the loss of the plants described by the follow perils are covered:

• Fire/Lightening

• Explosion

• Riot/Civil Commotion

• Aircraft

• Vehicles not owned by the named insured or resident

• VVM but not property theft

The limit is up to 5% of the Coverage A limit with a maximum of $500 applying to one tree, shrub or plant. This is additional insurance.

Collapse

Defined by the abrupt falling down or caving in of a building or any portion of a building but only if it cannot be occupied for its intended purpose. If the building is only in danger of falling down/caving in or still standing it is NOT at a state of collapse. This coverage does not increase the limit of insurance applicable to the damaged property.

Glass or Safety Glazing Material

Coverage is only provided if it is part of a covered building, storm door, or storm window. Includes a direct loss to glass caused by earth movement. As well as damage to property caused by the pieces of glass. Does not apply if vacant for 60 consecutive days before loss. Coverage does not increase the limit of liability to the damaged property.

What are General Exclusions of Dwelling Forms?

They do not insure for any loss caused directly or indrectly by named perils, regardless of any other cause of event that contributes to the loss.

General Exclusions - Ordinance or Law

The insurer will not pay for losses caused by the enforcement of any ordinance or law requiring or regulating The Contruction/repair of any debris OR testing for/cleaning up pollutants. This exclusion does not apply to the coverages provided by the Ordinance or law Other Coverage Provided by the Broad and Special forms

General Exclusions - Earth Movement

The insurer will not pay for any losses caused by earth movements which includes:

• Earthquakes, including shock waves

• Landslines/Mudflows

• Subsidence or sinkhole

• earth sinking/rising or shifting

If a direct loss by fire, explosion or breakage if glass is caused by earth movement, the policy would only then pay for the ensuing loss.

General Exclusions - Water

The insurer will not pay for losses caused by water:

• Flood, surface water or overflow of body of water

• water that backs up through sewers and drains

• water below the surface of the ground that exerts pressure on or seeps through a building or other structure

  • water or waterborne escaping or overflowing from a dam, levee or similar system

What are the two most important exclusions in Property Insurance?

Earth Movement Exclusion and Water Exclusion

Power Failure Exclusion

The insurer will not pay for losses caused by the failure of power or other utility services if the failure takes place off the described location Power failure occurring on the described location is covered. If the insured peril ensures on the described location as a result of power failure, the ensuring loss would be covered.

General Exclusions - Neglect

The insurer will not pay for losses caused by the insured neglect to use all reasonable means to save and preserve property at/after time of loss.

General Exclusions - War

Insurer will not pay for losses caused by war including the following:

• Undeclared war, civil war insurrection rebellion or revolution

• Any warlike act by a military force

• destruction/seizure of property for military use

• the discharge of a nuclear weapon, even if accidental

Nuclear Hazard - General Exclusions

The insurer will not pay for losses caused by any nuclear reaction, radiation or radioactive contamination whether controlled or uncontrolled. Any fire from the hazard IS covered under the fire policy.

Intentional Loss

The insurer will not pay for losses arising out of any act committed by or at the direction of an insured with the intent to cause a loss. In the event of an intentional act, coverage is excluded for ALL insured, even those who did not conspire to do the loss

General Exclusions - Governmental Action

Coverage is not provided for losses caused by government action as described in Coverages A, B or C by the order of a governmental or public authority.

What does the DP-1 specifically exclude coverages to?

Loss to lawns, plants, shrubs and trees out of the building

What does the DP-3 specifically exclude?

Does not provide coverage for faulty, inadequate or defective planning/zoning/development/renovation. However, if a covered loss to a dwelling or other structure ensures from this faulty work, then that other loss is covered.

What are the commonly found conditions in Dwelling Policies?

Concealment or Fraud, Duties in the Event of Loss, Pair/Set clause, Appraisal, Subrogation, Abandonment, Mortgage Clause, No Benefit to bailee Clause, Liberalization Clause, Waiver/Change, Assignment, Death, Recovered Property, Loss Payable Clause, policy period.

Actual Cash Value Basis

All covered property losses for DP-1 forms are settled on an ___ but not more than the amount required to repair or replace the damaged property.

How is Loss Settlement calculated for DP-2 and DP-3 forms?

Personal Property, awnings, carpeting and appliances, structures that are not buildings, are settled on an actual cash value basis

How is the Loss Settlement of a Building/Other Structures covered by Coverages A and B settled for DP-2 and DP-3 forms?

They are settled on an replacement cost basis, provided that the coverage A limit is 80% of the full replacement cost of the building immediately before the loss. The policy will pay nor more than the LESS of the following amounts:

• Applicable limit of liability

• the cost to replace the damaged part of the building with materials of like kind/quality for use

• The necessary amount actually spent to repair/replace the damaged building.

What happens if the insurance is not maintained to value for DP-2 and DP-3?

THe policy will pay the greater of the following amounts:

• The limit of liability

• the actual cash value of the damaged part of the building

• the proportion of the loss that the limit bears to 80% of the buildings replacement cost.

The insurer will pay no more than the actual cash value of the damage until actual repair or replacement is complete. The Exception to this is the loss is less than 5% of the coverage A limit and less than $2,500.

What happens if there are multiple Volcanic eruptions within 72-hour period?

The volcanic activity will be considered as one volcanic eruption

Automatic Increase in Insurance Endorsement

is used to help offset inflation and may be referred to as the inflation guard endorsement. It allows for an automatic annual increase in the Coverage A and Coverage B limits of insurance by the percentage shown on the endorsement.

Broad Theft Coverage Endorsement

This endorsement covers if the described location is OWNER occupied. It offers on-premises coverage, it included personal property owned by a residence employee as well. Off-Premises Coverage is provided when the covered property is away from the described location if the property is owned or used by an insured. If the insured wants off-premises coverage, the on-premise coverage is mandatory. Property subject to a special limit includes money, securities, passports, watercraft, trailers, jewelry, furs, firearms, silverware and goldware.

Limited Theft Coverage Endorsement

Only offers coverage for property on the premises. Includes property placed in the safekeeping of a bank, safe deposit box or public warehouse.

Personal Liability Supplement

If personal liability is desired, the insured may obtain that coverage for an additional premium. It can be written as a sperate policy OR a dwelling policy endorsement to cover the insured liability exposures.

Coverage L - Personal Liability

Covers claims made against an insured for damages of bodily harm or property damage to which the policy applies. The standard limit of liability for this coverage is $100,000 PER OCCURANCE.

Coverage M - Medical Payments to Others

Applies to claims for the necessary medical expenses incurred within 3 years from the date of the bodily injury. Does not apply to expenses incurred by the named insured but does apply to employees at the residence. Standard is $1,000 per person.

What are the common exclusions for a personal liability supplement?

• Motor vehicle, watercraft, aircraft, and hovercraft liability

• Expected or intended injury

• Liability resulting from an insured’s business conducted on an insured location

• Professional services

• War

• Communicable disease

• Sexual molestation, corporal punishment, and physical or mental abuse

• Controlled substance