Chapter 3 - Types of Property Policies

Replacement cost coverage is provided in both the broad and special form dwelling policies when the amount of insurance on the dwelling is what percentage?

At least 80% of the replacement cost

A businessowners policy is sold as a package. What does that mean?

Coverage includes both property and liability

What businesses qualify for coverage under a businessowners policy?

Small to medium size businesses

What does form HO-5 cover?

The dwelling and other structures, as well as contents and personal property

What do dwelling policies insure?

Dwelling only, contents only, or both dwelling and contents

Which dwelling form is called the Broad form?

DP-2

What HO form covers a historic home with replacement cost more than the market value?

HO-8 (modified homeowners)

What type of property would be covered under the Builder’s Risk Coverage Form?

The building, temporary structures, foundations, fixtures, equipment, and materials and supplies within 100 feet of the premises

What are additional coverages available in Homeowners policies without additional premiums? (name several)

Debris removal, lawns/plants/shrubs, and trees, removal, reasonable repairs, and fire department service charge

Under Coverage C - Personal Property in the dwelling policy, when will a guest’s property be covered?

Only when the property is at the insured location

What HO form covers condominium unit owners?

HO-6 (condominium unit owners)

What is the maximum number of units in residential dwellings insurable by a Dwelling policy?

Up to 4 units

Why does the HO-4 form not provide dwelling coverage?

HO-4 is written for a tenant residing in a rented dwelling; the tenant does not own the dwelling

An insured’s house becomes uninhabitable due to damage by a fire. As a result, the insured has to rent an apartment until repairs are made. Which type of coverage under the dwelling policy will pay for the expense of renting the apartment?

Coverage E - Additional Living Expenses

What are the coverage parts that may be included in a Commercial Package Policy (CPP)?

Commercial property, general liability, crime, equipment breakdown, auto, inland marine, and farm

According to the liberalization condition, if an insurer makes a change to broaden coverage in newly issued dwelling policies, how will that change affect policies already in force?

The change will apply automatically

What type of policy is a Businessowners policy?

Prepackaged, stand-alone policy

What components make up a Commercial Policy?

Policy cover; policy declarations; interlines endorsements; lines of insurance declaration pages; lines of insurance coverage forms; common policy conditions; lines of insurance conditions; causes of loss forms; and endorsements

What Homeowners policy form is known as contents broad form?

HO-4 contents broad form

What is the purpose of the National Flood Insurance Program (NFIP)?

To fill the gap in flood coverage left by private insurers

What are the major coverages included in a Homeowners policy?

Coverage A – Dwelling, Coverage B – Other Structures, Coverage C – Personal Property, and Coverage D – Loss of Use

Which of the 3 DP forms provides the most limited coverage?

DP-1 (Basic)

What is the name for policy endorsements that may apply to more than one coverage part?

Interline endorsements

In order for forms HO-2, HO-3, and HO-5 to provide coverage, a dwelling must be insured for at least what percentage of replacement cost?

80%

In Commercial Package Policies (CPPs), who may cancel the policy in writing and make changes to the policy with the consent of the insurer?

First-named insured

When a dwelling policy is cancelled for nonpayment of premium, the insurer must give notice within how many days of the cancellation?

10 days

Which dwelling policy coverage will insure a garage not attached to the primary insured dwelling?

Coverage B - Other Structures

Under Coverage C of an HO-3 policy, what is the amount of insurance provided for personal property?

At least 50% of the Coverage A limit (this applies to all policies except for HO-4 and HO-6)

What are the 5 coverages of dwelling policies?

Coverage A – Dwelling, Coverage B – Other structures, Coverage C – Personal property, Coverage D – Fair rental value, and Coverage E – Additional living expenses

When can insured cancel a Businessowners policy?

At any time by mailing a written notice of cancellation

A basic dwelling policy automatically provides coverage against what?

Fire, lightning, and internal explosion

A businessowners policy is mostly similar to what other insurance form?

Homeowners

Where can National Flood Insurance be issued?

Only in participating, flood-prone areas

When would theft of property of guests and residence employees be covered under the HO-8 form?

Only while on the insured premises

What are the 3 types of coverage available in dwelling policies?

Basic, broad, and special

What Homeowners policy form is known as a special form?

HO-3 special form

Losses caused by vandalism and malicious mischief are excluded from coverage if a dwelling has been vacant for how many days?

60 days

Under what conditions can broad theft coverage be added to a dwelling policy?

If the insured is the owner-occupant of the dwelling

What are some of the types of businesses that are excluded from coverage under a Businessowners policy?

Auto sales and servicing, large banks, bars and grills, places of amusement, and manufacturers

What are some of the exclusions from coverage in all of the Homeowners forms?

Land, structures used for business purposes, animals/birds/fish, aircraft, rented property, electronic data, and motor vehicles

In dwelling policies, any volcanic activity will be considered part of one occurrence if it all happens within how many hours?

72 hours

What type of property can be covered under Inland Marine insurance?

Any type of property that is portable on land, as well as means of transportation and communication

What HO form insurers a tenant living in an apartment?

HO-4 (tenant broad form)

If 3 volcanic eruptions happen within 48 hours, and each contributes to property damage, how many deductibles will apply in the dwelling policy?

1 deductible (all instances of volcanic eruptions that occur within a 72-hour period are considered 1 occurrence)

What is the limit that the insurer will pay for all for all losses that occur during a policy period?

Aggregate limit

How are the dwelling and other structures covered in an HO-3 policy form?

On an open-peril basis

In Commercial Inland Marine policies, who transports the property of anyone who hires them?

Common carriers

What are the 2 types of Utility Services endorsements available in Businessowners policies?

Utility Services – Direct Damage, and Utility Services – Time Element

Which dwelling coverage form(s) will pay for the replacement cost of a dwelling?

DP-2 (Broad) and DP-3 (Special)

When other insurance is written on the same basis as a Commercial Property policy, what is the insurer obligated to cover?

A share of the loss

Commercial property coverage can be written with one of three causes of loss forms. What are they?

Basic, Broad, and Special

In dwelling policies, what is the purpose of the automatic increase in insurance endorsement that increases the amount of insurance by an annual percentage?

To offset the effects inflation

What are extended covered perils on a basic Dwelling policy?

Windstorm or hail, explosion, smoke, aircraft and vehicles, riot or civil commotion, volcanic eruption, and vandalism and malicious mischief

How many owner-occupied residences per covered home are allowed by Homeowners policies?

An HO policy may insure a property that has 1- to 4-family owner-occupied residences.

What are the 2 liability coverages included in Homeowners policy forms?

Coverage E – Personal Liability, and Coverage F – Medical Payments to Others

In dwelling policies, within how many years of a loss may an insured bring a lawsuit against the insurer?

2 years

What are some of the exclusions found in all 3 dwelling forms?

Earth movement, water damage, power failure, neglect, war, nuclear hazard, intentional loss, freezing of plumbing, ordinance or law, and government action

How is the coverage usually written for HO-8 forms?

For the market value of the property

Which dwelling policy coverage will provide protection for contents damaged by fire in an insured dwelling?

Coverage C - Personal Property

Which dwelling form provides an open peril coverage on the building?

DP-3 (Special)

What is the purpose of interline endorsements in Commercial Package Policies (CPPs)?

They eliminate redundancy and minimize the number of other policy endorsements.

What type of policy consists of the declarations, conditions, endorsements, and other attachments applicable to a single line of insurance?

Monoline

What type of coverage is included in Homeowners policies, but is not available in Dwelling policies?

Liability coverage

DP-3 (Special) is an open-peril form. What does that mean?

All perils are insured unless specifically excluded.

When will damage to the interior of the building be covered under the falling objects peril in the broad form of the dwelling policy?

Only if the interior damage is a direct result of exterior damage from a falling object

What is mysterious disappearance?

Misplacement or loss of property without knowledge as to the location, time and cause of the loss

An insured with a Homeowners policy has removed property from the insured location to protect it from loss that could be caused by a covered peril. The removal coverage applies for how many days?

30 days

In general, what do Homeowners policies cover?

Dwellings used primarily as private residences

Assuming the insurer and the insured agree on the amount payable for a loss covered under a dwelling policy, how soon after receiving the proof of loss must the insurer pay the claim?

60 days

What would be considered a single accident in Equipment Breakdown coverage?

All accidents at a single location, at the same time, by the same cause