Unit 4 - Basics of Property Insurance Activities

real property

permanent structures and buildings

personal property

furniture, appliances, clothing, tools, and other moveable property

specific (scheduled) coverage

-detailed list of covered items

ex: coverage for a diamond ring described with a jeweler's written appraisal

inclusive (blanket) coverage

single limit coverage that applies to all items of a certain property type

policy limit

maximum coverage limits. Listed on declarations page

open peril policy

insures against all risks of direct physical loss except those specifically excluded. Sometimes called all risk, special, or comprehensive coverage.

named peril policy

lists the specified perils or causes of loss insured against under the contract

basic perils

fire, lightning, and internal explosion

extended coverage perils

WCSHAVVER and V&MM

broad perils

all basic perils, extended coverage perils and BIG AFFECT perils

BIG AFFECT

Burglary damage

Ice, sleet, and snow (weight of)

Glass breakage

Accidental discharge of water

Freezing objects

Falling objects

Electrical current

Collapse

Tearing asunder

broad peril exclusions

Weight of ice, snow, or falling objects on certain structures, accidental discharge over water from continuous leaking, flooding from river or lake, burglary if property vacant more than 60 consecutive days

special perils

insures against all risks of direct physical loss unless they are specifically excluded

common special peril exclusions

flooding, earthquake, intentional damage, losses due to building codes, damage by power interruption, government seizure

direct loss

property loss caused by an unbroken chain of events covered under an insurance policy

indirect loss

comes as a result or consequence, of the original loss. It is also known as consequential loss

class 1 - frame

frame structures have outside support walls, roof, and floors constructed of wood or other combustible materials. The exterior walls may be covered with stucco or brick veneer

class 2 - joisted masonry

structures with outside support walls made of noncombustible masonry materials (such as concrete, brick, hollow concrete block, stone, or tile) and a roof and floor made of combustible materials.

class 3 - noncombustible

structure with exterior walls, floors, and roof constructed and supported by noncombustible materials such as metal, asbestos, or gypsum

class 4 - masonry noncombustible

structures with exterior walls constructed of masonry materials and a roof and floor made of metal or other noncombustible materials

class 5 - modified fire resistive

structures with exterior walls, floors, and a roof constructed of masonry or fire resistive material with a fire resistance rating of 2 hours or less

class 6 - fire resistive

structures made of fire resistive material or masonry with a fire resistance rating of 2 hours or more

valuation/claims settlement

how loss will be paid

loss valuation collection

the lesser of: insurable interest, policy limits, actual cash value, cost to repair, or replacement cost

actual cash value

the current cost of replacing an asset that is damaged with an identical or comparable asset minus accumulated depreciation and obsolescence

functional cost

does not subtract depreciation, however the replacement property must be of similar kind and quality

functional replacement cost

the cost of acquiring another item of property that will perform the same function with equal efficiency

market value

price one would pay based upon free market conditions, adjusting for supply and demand

agreed amount

loss that is valued based on an agreement between the insured and insurer. ex. antique furniture or fine arts.

stated amount

written amount decided by insured. At the time of loss, the insurer will pay the lesser of the amount stated on the declarations page or actual cash value

pair or set condition

if part of a pair or set is lost or damaged, the loss will be valued as a fair proportion of the total value of the set

appraisal condition

provides that either party may demand an appraisal of a loss

arbitration condition

may be used to resolve areas of disagreement between the insured and the insurance company such as a coverage dispute between the company and a third party in the case of liability insurance, or between two insurers.

coinsurance

requires the insured to carry a minimum amount of insurance. normally 80% of the replacement cost.

coinsurance clause

meant to encourage property owners to purchase full or nearly full coverage and review their policy periodically that their coverage is adequate

vacant

entirely empty

unoccupied

the lack of habitational presence of human beings

standard mortgage clause

specifies the rights and duties of the mortgagee under the policy. may include filing proof of loss if the insured fails to do so or paying the premium if the insured fails to do so

loss payable clause

protects the lender, and is very similar to the standard mortgage clause

bailee

person or organization that has temporary possession of someone else's property

no benefit to bailee condition

states that the bailee is not covered under the property owner's policy while the bailee has possession of the property