Term
| Define: Personal Property Insurance |
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Definition
| Insurance policies provided for property having a personal or non-business use. |
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Term
| Define: Commercial Property Insurance |
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Definition
| Insurance policies provided for property having a business use. |
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Term
| State the main difference between "named perils" policies and the broader "all risks" policies provided by most insurers. |
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Definition
"Named perils" policies only cover losses caused by perils named in the policy.
Broader "all risks" policies insure against all risks of direct physical loss or damage subject to policy conditions and exclusions. |
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Term
| Identify the types of property insured by policies of Personal Property Insurance. |
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Definition
1.) Dwelling building
2.) Detached private structures
3.) Personal property |
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Term
| Identify the types of property insured by policies of Commercial Property Insurance. |
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Definition
1.) Building
2.) Stock
3.) Equipment |
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Term
Property policies insure "direct damage only. Explain and provide examples of:
i) direct damage
ii) indirect damage
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Definition
i) Direct Damage is when the object of insurance is damaged or destroyed by an insured peril. Ex: physical damage caused by firefighters' axes, smoke and heat damage to adjacent storage shed.
ii) Indirect Damage is when the other losses arise as a result of direct losses. Ex: Loss of food in a freezer when the electrical motor is damages by a lighning strike, loss of profit to the business after a tornado destroys the building. |
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Term
| Identify two types of Conditions that can be found in insurance policies and profice an example for each. |
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Definition
1.) Statutory Conditions.
eg. Any of the 15 Statutory Conditions on policies insuring against Fire Peril.
2.) Policy Conditions.
eg. Insurance companies ususally require that they be notified immediately when a protection system (alarm, sprinklers etc) become defective. |
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Term
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Definition
| A promise by insured that certain facts are true as they are represented and will remain so. Contract is nullified and coverage ceases should the insured breach the warranty. |
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Term
| Which of "Conditions" or "Warranties" can result in a denial of coverage, regardless of whether the breach was directly linked to the cause of the loss. |
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Definition
| Breach of Warranty entitles the Insurer to deny coverage, regardless of whether the breach was directly linked to the cause of the loss. |
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Term
| Provide two reasons why insurance policies contain exclusions. |
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Definition
1.) Covering certain catastrophic losses, such as War, would jeopardize the solvency of insurers.
2.) Wear and tear is a certainty, and only losses that MAY occur are insurable.
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Term
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Definition
| The specific dollar amount or percentage of the insured value to be borne by the insured before he is entitled to reimbursement from the Insurer. |
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Term
Explain the way claims are settled when there is loss to;
i.) One item of a pair or set
ii.) One part of property which consists of several parts |
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Definition
i.) A loss to one item of a pair does not constitute loss to the entire set. The item not lost continues to have value and its value will be deducted from the claim payment.
ii.) When there is loss to one part of property which consists of several parts, the basis of settlement shall be the value of the lost or damaged part, including the cost of installation. |
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Term
| State the three criteria considered by the adjuster in determining the amount of the loss. |
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Definition
Step 1 - ACV (Actual Cash Value) at Time of Loss
Step 2 - Interest of Insured
Step 3 - Limit of Insurance |
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Term
| When the value of each criteria is identified in the "Indemnity Agreement", how does the adjuster determine the reimbursement offer to the Insured? |
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Definition
Reimbursement is based on the lower amount of;
1.) ACV
2.) Interest of Insured
3.) Limit of Insurance |
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Term
| Identify four factors used to determine depreciation when insured property is lost or damaged. |
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Definition
1.) Condition of the item(s)
2.) Obsolescence
3.) Resale value
4.) Normal life expectancy |
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Term
| Identify three provisions Insured must comply with relating to replacement cost of building losses. |
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Definition
a) Repalcement shall be effected by the Insured with due diligenc and dispatch. In other words, Insured must replace damaged or lost property ASAP.
b) Replacement shall be on the same site or an adjacent site. This provision removes temptation to cause deliberate loss in order to relocate business.
c) Settlement a replacement cost basis shall be made only when replacement has actually been effected.
** If any of the above provisions is not met, settlement is made on an ACV basis. |
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Term
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Definition
| The cost of replacing, repairing, constructing or reconstructing, whichever is least, the property on the same site with new property of like kind and quality and for occupancy without deduction for depreciation. |
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Term
| Identify two provisions Insurers must follow when settling claims on Replacement Cost basis. |
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Definition
i.) Insurer prohibited from settling claim with used or damaged materials.
ii.) Insurer shall not make any deduction for depreciation. |
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Term
| Explain the basis of settlement under a "Valued" policy. |
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Definition
| When Insureds have property that cannot be replaced (art, antiques, memorabillia etc), Insurer may agree to provide coverage on a valued basis, If loss occurs, the basis of settlement will be of the value agreed upon by the Insured and Insurer. |
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Term
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Definition
| Anyone having an insurable interest in the property insured. Can include bank, trust company, credit union, individual or group of people. |
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Term
| Identify two guaranteeds provided to mortgagees by the Standard Mortgage Clause. |
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Definition
1.) Guarantee of payment when Insured breaches any policy conditions.
2.) Guarantee that Insurer will not reduce coverages to the prejudice of the mortgagee, nor terminate the policy w/o providing it with the same notice required by law to be given to the Insured. |
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