A sudden, unforeseen, unintended & unplanned event from which loss or damage results.
Accident
An accident includes continuous or repeated exposure to the same general harmful conditions.
Occurrence
A proportionate cancellation of insurance that refunds premium to the insured based on the precise number of days coverage was in effect. The earned premium is the premium charged & retained by the insurance company for the number of days coverage was in
Pro Rata Cancellation
A cancellation of insurance that incurs to financial penalty. Sometimes when the insured cancels the policy before its expiration date, a short-rate cancellation is issued. The insurance company retains a portion of the unearned premium to cover costs.
Short Rate Cancellation
A cancellation of insurance that is retroactive to the effective date of the policy. No coverage is provided & the insurance company must refund the policy premium paid by the insured.
Flat Cancellation
The termination of a policy at the expiration of its term. The policy does not renew & no coverage is provided after the expiration date.
Non-renewal
The primary cause of loss. If only one peril caused the loss, the ______ is the first event in the unbroken chain of events that results in loss. If more than two perils caused or contributed to the loss, the _____ is the peril having the most significant
Proximate Cause
A fire that burns outside its intended boundaries, or becomes uncontrollable. Examples of a hostile fire include a wildfire or a fire that damages a home when a spark from a fire in the fireplace ignites a piece of furniture.
Hostile Fire
A fire that was intentionally set & stays within its boundaries (e.g., a fireplace) & results in smoke damage to the inside of a fireplace. Property insurance does not cover damage from a friendly fire.
Friendly Fire
A quality within property that causes it to damage or destroy itself. Examples include rust, rot & the fading of paint. Inherent vice is not covered by a property policy.
Inherent Vice
A legal agreement issues by an insurance company or a producer that provides temporary proof of insurance until the insurance company is able to issue an insurance policy. _____ are issued for specific time periods (maximum of 60 days) & automatically end
Binder
Process whereby a disputed claim is decided by a neutral third party. The disputing parties choose the impartial third party & agree in advance to accept the final decision of the arbitrator, who makes a decision after a hearing where both parties offer e
Arbitration
The right of the insurance company to take possession of damaged property after paying for its loss. The salvage belongs to the insurance company.
Right of Salvage
The amount for which property can be sold at the end of its useful life. In property insurance, the salvage value is the scrap value of damaged property.
Salvage Value
A policy that alters or adds to the provisions of a property & casualty insurance contract.
Endorsement
A principle holding that when two perils simultaneously cause a loss (i.e., they are both considered the proximate cause of loss), the insurance company must pay for the loss even if one of the perils is excluded by the policy.
Concurrent/Causation
The existence of two or more policies covering the same exposures, having the same policy periods, & the same coverage triggers. For example, if an auto policy & an umbrella policy are written with the same policy dates, they are considered to be concurre
Concurrency/Concurrent Policies
The existence of two or more polices covering the same exposures that don't have the same policy periods. Non-concurrency may create a coverage gap when underlying liability policies & an umbrella policy are non-concurrent because if an underlying liabili
Non-Concurrency/Non-Concurrent Policies
The specified amount of each loss that the insured must bear. In property insurance (& with a per claim, or per occurrence, deductible), the insurance company subtracts the _______ from the amount of loss when making payment. By accepting a larger _______
Deductible
Words, terms & phrases that are clearly described & used in an insurance policy for the purpose of clarifying the intent of the insurance company & to avoid coverage disputes with respect to the extent of coverage provided by the policy. Most policies con
Definitions
A person or any organization to which property has been entrusted, usually for repairs, servicing or storage. Because ____ are legally responsible for property in their care, property insurance policies specifically exclude coverage for property in the ca
Bailee
A person or organization that entrusts property to a bailee.
Bailor
Any type of coverage that responds to a loss before all other coverage responds.
Primary Insurance
Any form of insurance coverage that provides protections against certain perils or causes of loss ONLY after loss or damage exceeds a stated amount or the limits stated in specific policies or self-insurance. Excess insurance may be written over primary,
Excess Insurance
A property that contains personal property but has no occupants.
Unoccupancy
A provision in a property policy that eliminates or limits coverage for buildings that don't contain sufficient person property to support intended occupancy or use.
Vacancy
The taking of property from inside the premises or a locked safe or vault by a person who commits forcible entry into, or exist from, the property of another while trespassing.
Burglary
The taking of property from the care & custody of a person who has been caused or threatened with bodily harm.
Robbery
The broadest of the crime coverages, ____ includes any act of stealing.
Theft
The loss of property when the cause of loss is not known. This is NOT theft, burglary or robbery.
Mysterious Disappearance
____ is attached to the policy to alter or add to the policy provisions.
Endorsement
A person who takes possession of another person's property in order to repair it is called?
Bailee
If the insured does not agree with the insurance company's decision regarding a claim, what process helps decide the outcome?
Arbitration
Direct Loss
Indirect Loss or Consequential Loss
Types of property losses
A loss that causes direct damage without an intervening cause.
Direct Loss
A loss that is not the direct result of a peril.
Indirect Loss or Consequential Loss
Named Perils
Open Perils
Scope of Coverage
This type of property coverage only provides insurance for the causes of loss, or perils, listed. If a peril is not "named" in the policy, no coverage applies for loss or damage caused by that peril. Typically ______ are fire & theft. _____ may contain co
Named Perils
This type of property coverage provides insurance for all causes of loss that are not specifically excluded under the policy. Typical exclusions in an _____ policy are flood & earthquake.
Open Perils
Replacement Value
Actual Cash Value (ACV)
Agreed Value
Stated Value
Functional Replacement Value
Market Value
Loss Valuation
The cost to replace property with property of like kind & quality, at current pricing, without a deduction for depreciation. Many property policies providing loss valuation at _____ require covered property to be insured to certain percentage of its _____
Replacement Value
The cost to repair or replace property at its replacement value, minus depreciation.
Actual Cash Value (ACV)
The insurance company & insured agree to a specific value of a particular property before the policy is issued. If a total loss occurs, the insurance company will pay the _____.
Agreed Value
A valuation method that states the value of a particular property on the declarations page, but provides for the insurance company to pay the lesser of the states value or ACV of property following a loss.
Stated Value
A policy that states the value of property as the amount shown on the Declarations page & will pay that full face value in the event of a total loss, regardless of the actual cash value.
Valued Policy
The cost to replace property with other property that performs the same function with similar efficiency, although the replacement property is not identical to the property being replaced. This valuation method is typically used with older property (such
Functional Replacement Value
The price a willing buyer would pay for property purchased from a willing seller.
Market Value
Frame
Joisted Masonry
Noncombustible
Masonry Noncombustible
Fire Resistive
Modified Fire Resistive
Classifications of Construction
A building that has a roof, floor & supports of combustible material, usually wood & combustible interior walls.
Frame
Buildings with exterior walls of masonry or fire-resistive construction rated for not less than one hour & with combustible floors & roofs.
Joisted Masonry
The buildings & its walls, floors & structural framework are constructed of noncombustible materials.
Noncombustible
Buildings with exterior walls of masonry (not less than 4 inches thick) or made of fire-resistive construction with a rating of not less than one hour & noncombustible floors & roofs.
Masonry Noncombustible
The entire building & roof are constructed of reinforced concrete & steel. Must have at least 2 hour fire-resistive rating.
Fire Resistive
The materials used in the walls, floors & roof of a structure must have a fire resistive rating of at least 1 hour but less than 2 hours.
Modified Fire Resistive
____ is NOT a direct loss.
loss of income
_____ is the method of loss valuation that values damaged property at the cost to replace with property of like kind & quality, at current prices & without deduction for depreciation.
Replacement Value
What is the calculation used to determine the actual cash value (ACV) of a loss?
Replacement cost - depreciation = ACV
Specific Limit
Scheduled Limit
Blanket Limit
Methods of Writing Property Insurance Limits
Insures a single item of property for a single limit of insurance. For example, a fire policy insures one dwelling for $100,000.
Specific Limit
Insures one or more items of property on a single policy & the amount of insurance applying to each item is shown on a schedule. For example, one farm policy insures a home for $100,000 & a barn for $200,000.
Scheduled Limit
Insures property located at more than one location OR more than one type of property at the same location OR both. For example, then $1 million _____ applies to two separate buildings at two separate locations, as well as the business personal property co
Blanket Limit
D I C E
Declarations
Insuring Agreement
Conditions
Exclusions
_____ BEST describes a scheduled limit of insurance on a property policy.
Insures multiple items of property on a single policy
Declarations
Who
What
Where
When
How Much
Insuring Agreement
Conditions
Exclusions
Additional Coverages
Policy Structure
The _____ describes basic information about the policy including:
who
what
where
when
how much
Declarations page
Names the insurance company & the insured, including legal representatives in the event of the insured's death.
Who
A description of the property being insured & other parties having insurable interest, such as a mortgagee.
What
The location of insured property & the named insured's mailing address
Where
The effective & expiration dates of the policy.
When
The limits of liability insuring covered property & the annual premium for each type of coverage
How Much
The _____ states the insurance company's promise to pay the insured. This promise is usually broad & other sections of the policy restrict or limit the scope of coverage provided by the policy. Property insurance policies state in the ______ what perils a
Insuring Agreement
Policy Period
Concealment or Fraud
Liberalization Clause
Cancellation
Non renewal
Assignment
Subrogation
Changes
Insurable Interest & Limit of Liability
Restoration/Non-reduction of Limits
Duties in the Event of Loss
Loss Settlement
Appraisal
Other Insura
Conditions
Specifies that coverage only applies to losses occurring when the policy is in force.
Policy Period
Specified that coverage may not apply if an insured makes a material concealment, misrepresentation or fraud in the application pertaining to the claim.
Concealment or Fraud
Specifies that if the insurance company broadens coverage with no increase in premium, the broadening of coverage will apply to existing policies without the need for an endorsement.
Liberalization Clause
Specifies the terms under which the policy can be cancelled by the insurance company & the named insured.
Cancellation
Addresses the requirements of the insurance company if it elects not to renew a policy.
Non-renewal
Specifies that the insured may not transfer rights of ownership without the insurance company's prior written consent.
Assignment
States the insured must transfer to the insurance company its right of recovery against any party causing a loss after it accepts the payment from the insurance company for a loss. _____ allows the insurance company to recover from the party that caused a
Subrogation
Any ____ to the policy must be made in writing by the insurance company.
Changes
The insurance company will not be responsible for payment of loss in an amount greater than the financial interest of an insured.
Insurable Interest & Limit of Liability
Specifies the sum & circumstances under which an insurance company charges the insured, usually a business firm, to restore policy to its initial face value or not reduce limits of coverage after the insurance company has paid a claim either to the insure
Restoration/Non-reduction of Limits
Specifies the obligations of the insured in the event of a loss. With respect to any loss, these obligations include: giving prompt written notice to the insurance company, including a complete description of how, when, & where the loss or damage occurred
Duties in the Event of Loss
Specifies which loss valuation method will apply to the property nsured under the policy.
Loss Settlement
Addresses disputes the amount of a loss. If the insurance company & insured cannot agree on the amount of a loss, either party may request an appraisal. Each party selects its own appraiser & the appraisers select an umpire. Agreement by any two parties s
Appraisal
Specifies the process to be followed when more than one policy covers the same loss. Each policy pays no more than its share of the loss.
Other Insurance
Specifies that no one may bring suit against the insurance company until all terms & conditions of the policy have been complied with.
Legal Action Against Us
Specifies how the insurance company is not obligated to accept any property abandoned by an insured.
Loss Payment
Specifies how the policy protects the mortgagee's financial interest. (A mortgagee has insurable interest in real property.) Payment is made to mortgagees only up to its insurable interest in covered property & in order of precedence. The mortgagee must c
Mortgage Clause
Specifies that no coverage applies if loss payment benefits a bailee.
No Benefit to Bailee
Specifies the procedure to be followed when lost or stolen property is recovered after the insurance company has made payment under the policy. Each party shall notify the other of any recovery & under most property policies, the insured has the right of
Recovered Property
Specifies that bankruptcy or insolvency of the insured does not relieve the insurance company of any of its duties or obligations under the policy.
Bankruptcy
Specifies that in the event of the names insured's death, the insurance company will extend coverage to the legal representative of the deceased with respect to the premises & property covered under the policy at the time of the named insured's death.
Death
Specifies how the policy protects the interests of a loss payee. A loss payee has insurable interest in personal property.
Loss Payable Clause
Ordinance or Law
Earth Movement
War
Water perils that are NOT covered by the policy are listed in the exclusions section. Other perils may be excluded in provisions stated elsewhere in the policy (i.e., water damage, flood, sewer backup, etc.).
Utility fa
Exclusions
_____ are automatically included in property policies without an additional premium. The type of additional coverages depends upon the type of policy. Additional coverages are paid in addition to those states in the insuring agreement & include debris rem
Additional Coverages
The duties & obligations of the insured are found under what part of the insurance policy?
Conditions
A Liberalization Clause serves _____ purposes.
Broadened coverage applies automatically to all policies without a premium charge.
____ is NOT a typical property insurance policy exclusion
Fire
Named Insured
Insured
First Named Insured
Additional Insured
Types of Insureds
The person or organization designated on the Declarations page of the policy. If property is being insured, the named insured should be the owner of the property. If vehicles are being insured, the named insured should be the party of entity to which the
Named Insured
A person or organization protected by an insurance contract.
Insured
The _______ is the person or organization whose name appears first on the Declarations. The ______ is granted rights & responsibilities by the policy that are not granted to other insureds. In commercial lines, many policies spell out those duties & respo
First Named Insured
A person or organization not ordinarily protected by a policy but which, through an addition of an endorsement to the policy, is granted status as an insured. Under a property policy, an additional insured is often a party to an indemnification or hold ha
Additional Insured
A provision contained in most policies insuring commercial property & is used to encourage the insured to purchase & maintain insurance to value, & to establish the basis of payment in the event the insured fails to maintain a specified percentage of that
Coinsurance
______ has the broadest coverage under the insurance policy.
Named Insured
Regarding Coinsurance _____ is NOT true.
It applies in the event of a total loss.
An ____ is an accident & includes continuous or repeated exposure to the same general harmful conditions.
Occurrence
If an insurance company cancels an insurance policy before its expiration date, the refund is made on a ______ basis.
Pro Rata
A _____ stays within its intended boundaries & a ____ burns outside its intended boundaries.
Friendly fire
Hostile fire
An ______ is a policy form that alters or adds to the provisions of a property & casualty insurance contract.
Endorsement
The _____ is the specified amount of each loss that the insured must bear. A larger ____ reduces the premium & the the submission of small claims.
Deductible
A _____ causes damage without an intervening cause, & indirect loss occurs as the consequence of a direct loss.
Direct Loss
A _______ policy specifically lists the covered perils (causes of loss) & an ______ policy covers all perils except those specifically excluded.
Named Perils
Open Perils
The _____ of property is the cost to replace it with property of like kind & quality, at current pricing, without a deduction for depreciation.
Replacement Value
_____ is the replacement value of property minus depreciation.
Actual Cash Value
A ____ requires the insurance company pay the total scheduled limit of insurance for a total loss.
Valued policy
A property insuring property for a ______ insures one or more items on a single policy for a single limit of insurance.
Specific Limit
A policy insuring property for a ______ insures one or more items on a single policy & each item is insured at a _____ of insurance.
Scheduled Limit
A policy insuring property for a _____ insures multiple items of property on a single policy with one limit of insurance applying to all insured property.
Blanket Limit
The ____ describes basic information about the policy; i.e., the who, what, where, when & how much.
Declarations page
The _____ is the insurance company's promise to pay the insured.
Insuring Agreement
The _____ section states the obligations of the insurance company & the insured, as well as any other ____ of coverage.
Conditions
The ____ provision states the insured's obligation to transfer to the insurance company its right of recovery against any party causing a loss after it accepts payment from the insurance company for a loss.
Subrogation
____ are NOT covered by the policy are listed in the exclusions section.
Perils
______ are automatically included in property policies without an additional premium & include items such as debris removal, collapse & fire department service charges.
Additional coverages
____ is a common property policy provision that requires the insured maintain a certain limit of insurance coverage in order to avoid a penalty in the event of a partial loss.
Coinsurance