Unit 4 Cram Sheet: Types of Property and Insurance Concepts

Flashcards covering property types, perils, construction classes, loss valuation methods, and standard insurance clauses from the Unit 4 Cram Sheet.

Real property

Buildings

Personal property

Moveable contents

Specific/scheduled property

Property covered based on a detailed list of covered items

Blanket property

Coverage for all of a certain type of property under a single limit of coverage without a detailed list

Limits of insurance

Maximum coverage limits listed on the declarations page

Named peril

A policy that covers only the perils specifically listed

Open (special) perils

A policy that covers all perils except those specifically excluded

Basic Perils

Includes fire, lightning, internal explosion, extended coverage (WCSHAWER), and vandalism and malicious mischief (V&MM)

BIG AFFECT

Acronym for broad perils: Burglary damage, Ice/sleet/snow (weight of), Glass breakage, Accidental discharge of water, Freezing objects, Falling objects, Electrical current, Collapse, and Tearing asunder

Direct loss

The immediate damage caused by the peril

Indirect loss

Loss over time as a result of the direct loss, such as loss of income or additional living expenses

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

Actual Cash Value (ACV)

Replacement cost based on today's cost minus depreciation ($ACV = \text{replacement} - \text{depreciation}$)

Replacement cost

Current replacement cost of similar kind and quality with no depreciation

Functional replacement

Replacing property with modern construction

Market value

The selling price of the property; seldom used in insurance valuation

Agreed amount

Value of loss that is determined before the policy is issued

Stated amount

A method where the insured is covered up to a specific amount

Pair and set

Value of the pair or set before the loss minus the value of what remains after the loss

Appraisal

An alternative dispute method used when there is a disagreement on the amount of the loss

Arbitration

An alternative dispute method used for disagreements about areas of the loss other than the amount

Coinsurance requirement

Normally $80\%$ of the replacement cost; if met, claims are paid in full up to policy limits

Coinsurance formula

$$\frac{\text{insurance carried}}{\text{insurance required}} \times \text{loss} = \text{claim payment} - \text{deductible}$$

Vacant

No property or people present at the time of loss

Unoccupied

No people present at the time of loss; does not affect covered perils and claim value

Standard Mortgage or Loss Payable Clause

Allows a lender to pay the premium, receive cancellation notices, and file a claim; the lender is protected from negligent acts of the insured

Bailee

A person or business that has temporary control of the insured's property and cannot benefit from the property owner's policy