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06 07 2012 Chapter 7 Insuring Agreement 1Q Insuring agreement Summarizes the major promises of the insurer o 2 Types 1 Named Perils Coverage Only perils specifically named in policy will be covered 2 All Risks Coverage Open Perils All losses are covered except those which are specifically excluded Exclusions 1Q Exclusions Provision in an insurance contract in which the insurer states situations when coverage will not apply o 3 Major types 1 Excluded Perils Floor Nuclear 2 Excluded Losses 3 Excluded Property Airplanes in HO o Reasons for Exclusions Professional liability in HO 1 Some perils considered uninsurable 2 Presence of extraordinary hazards 3 Coverage provided by other contracts 4 Moral Hazard Problems 5 Coverage not needed by typical insured s Declarations 1Q Declarations Statements that provide information about the particular property or activity to be insured o Info provided ID of the insured Location of property Amount of insurance Size of deductible Deductibles 2Q Deductibles Provision by which a specified amount is subtracted from the total loss payment that would otherwise be payable o Purposes 1 Eliminate small claims 2 Reduce premiums 3 Reduce moral and morale hazard o Deductibles in Property Insurance Straight Deductible Insured must pay a certain number of dollars of loss before the insurer is required to make a payment Aggregate Deductible All losses that occur during a specified time period are accumulated to satisfy the deductible amount o Deductibles in Health Insurance Calendar Year Deductible Aggregate deductible Elimination Waiting Period Time deductible Endorsements and Riders 1Q E R A written provision that adds to deletes from or modifies the provisions in the original contracts o Endorsements Used in property insurance to modify extend or delete Ex Cali residents buy earthquake endorsements provisions o Riders Used in life health insurance to add or increased benefits waive conditions or amend the basic policy Coinsurance 2Q Coinsurance clause Encourages the insured to insure the property to a stated percentage of its insurable value o Typically uses an 80 coinsurance clause Purpose Equity in rating Notion that if everyone insured for partial losses instead of full losses insurance rates would be higher o Problems o Health Inflation Insured may be in compliance when the policy went into effect at first but price inflation could increase the replacement cost of the property Insured may incur a coinsurance penalty if property values fluctuate Percentage Participation Clause Requires the insured to pay a certain percentage of covered medical expenses in excess of the deductible Typically 80 20 coinsurance clause Purpose Reduce Premiums Prevent over utilization of policy benefits Conditions 1Q Conditions Provisions in the policy that qualify or place limitations on the insurer s promise to perform o Common conditions 1 Notifying the insurer if a loss occurs 2 Protecting the property after a loss 3 Preparing an inventory of damaged personal property 4 Cooperating with the insurer in the event of a liability Definitions 1Q Definitions Purpose is to define clearly the meaning of key words or phrases so that coverage under the policy can be determined more easily o Ex We refers to the insurance company and refers to the insurance company and you refers to the insured Chapters 16 and 17 Coverage Questions i e I give you a scenario and you decide if it covered under what part of the contract and or for what amount 11Q Section 1 Coverage s o Coverage A Dwelling Covers dwelling on the residence premises as well as any attached structure to the dwelling Is settled with Coinsurance Land is excluded o Coverage B Other Structures Other structures on the residence premises that are separated from the dwelling by clear space Tool Sheds Horse stables Detached garages HO3 Policy 10 of insurance in dwelling applies to detached structures Is settled with Replacement cost Excluded o Land o Structures being rented o Structures used to conduct business o Structures used to store business Exclusions A B property Collapse Freezing Fences pavement patio similar structures Dwelling under construction Vandalism and malicious mischief 60 days Mold fungus dry rot Coverage C Personal Property o Personal property owned or used by the insured anywhere in the world Includes borrowed property 50 of insurance on the dwelling o Settled with Actual cash value basis Coinsurance is not a factor o If personal property is usually located at another residence cabin vacation home the off premises coverage is limited to 10 of coverage C o Certain types of property have maximum dollar limits on the amount paid for any loss o Is covered on a Named Perils Basis Excluded Animals Motor vehicles Aircraft and hovercraft Property of roomers boarders tenants Business records Credit cards electronic fund transfer cars or access devices Only know Cash Jewelry Fur Coats o Coverage D Loss of Use Protection when the residence premises cannot be used because of a covered loss 30 of Coverage A is covered 3 Benefits 1 Additional Living Expense 2 Fair Rental Value 3 Prohibited Use o Both of the above can be paid in 2 weeks of a civil authority prohibits the insured from using the premises o Section II Coverage E Personal Liability o Protects an insured when a claim or suit is brought because of property damage or bodily injury o Minimum amount of 100 000 per occurrence o Legal Defense and liability Insurer agrees to provide you legal defense even if the suit is groundless false or fraudulent Coverage F Medical Payments to Others o Pays reasonable medical expenses of another person who is accidently injured On insured s location Activities of the insured Animals owned by the insured o Minimum of 1 000 per person per occurrence o Insured s are not required to be legally liable for Coverage F o Coverage F doesn t apply to named insured or resident to apply relatives Exclusions E F o Motor Vehicle Liability Does not include Dead storage assist handicapped recreational vehicles not for public roads and not owned by insured sometimes golf carts 5 People 26 MPH o Watercraft liability Excluded if boat is used in race rented to others used to carry people cargo for free o Aircraft and Hovercraft Liability Does not apply to hobby or model aircraft o Expected or International Injury o Business activities o Professional Services o Communicable Diseases o Controlled Substances E Only o Contractual Liability Insured agrees to


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FSU RMI 3011 - Chapter 7 Insuring Agreement

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Test 2

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Test 1

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TEST 2

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Chapter 1

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Notes

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