or highlights emphasized in class most likely on the test RMI Test 2 Chapter 7 Analysis of Insurance contracts Basic parts of insurance contracts o Declarations Statements that provide information about the particular property or activity to be insured 1st page of policy n property Contains name of the insured location of the property period of protection amount of insurance premium and deductible information o Insuring agreement Summarizes the major promises of the insurer 2 forms of this in property insurance Named perils coverage where only those perils specifically named in the policy are covered Open perils or special coverage where all losses are covered except those losses specifically excluded o Exclusions 2 major types Excluded perils o Example flood intentional act Excluded losses o Example professional liability loss Excluded property o Example pets o Conditions Necessary because some perils are not commercially insurable extraordinary hazards are present or coverage is provided by other contracts Excluded because of moral hazard problems attitudinal hazard problems or coverage not needed by typical insured Provisions in the policy in the policy that qualify or place limitations on the insurer s promise to reform If policy conditions are not met the insurer can refuse to pay claim Policies contain a variety of misc provisions o Example cancellation subrogation grace period misstatement of age o Insurance contracts must identify the persons who are insured under Insured the policy The person or persons named in the declarations Named insured section of the policy First named insured Has certain additional rights and responsibilities that do not apply to other named insured o Endorsements Written provision that adds to deletes or modifies the provisions in the original contract Example adding earthquake or flood insurance to homeowners to make it more personalized A provision that amends or changes the original policy Example a waiver of premium rider on a life insurance o Rider o Deductibles policy A provision by which a specified amount is subtracted from the total loss payment that otherwise would be payable Purpose Eliminate small claims reduce premiums reduce moral attitudinal hazard Straight deductible The insured must pay a certain number of dollars of loss before the insurer is required to make a payment o An auto insurance deductible Aggregate deductible All losses that occur during a specified time period are accumulated to satisfy the deductible amount Health insurance Calendar year deductible Elimination period o Period of time at the beginning of a loss during which no insurance benefits are paid o Coinsurance clause Encourages the insured to insure the property to a stated percentage of its insurable value If not met at the time of loss insured must share in the loss as a coinsurer Purpose is to achieve equity in rating Health insurance Policies frequently contain a coinsurance clause Requires the insured to pay percentage of covered medical expenses in excess of deductible Reduces premiums and prevents overutilization of policy benefits o Other insurance provisions Prevent profiting from insurance and violation of the principle of indemnity Pro rata liability Share of loss is based on the proportion that its insurance bears to the total amount of insurance on the property Contribution by equal shares Insurer shares equally in the loss until share paid by each insurer equals the lowest limit of liability Primary and excess insurance Primary insurer pays 1st Coordination of benefits provision Prevent over insurance and duplication of benefits Chapter 16 Homeowner s Section I coverage s o Coverage A Dwelling Covers the dwelling on the residence premises as well as any structure attached to the dwelling Excludes land If land on which the dwelling is located is damages form an insured peril the LAND is not covered o Coverage B Other structures Insurers other structures on the residence premises that are separated from the dwelling by clear space Ex Detached garage tool shed etc Exclusions Land damage Structure rented to someone o Ex Todd rents his tool shed to someone if it catches on fire it is not covered Structures where business is conducted o Works on cars in detached garage if it catches on o Coverage C Personal property fire it is not covered Property owned is covered anywhere including borrowed property Insurance can be extended to cover the personal property of a guest If a guest s coat catches on fire at your house the loss can be covered under your policy Insurance of personal property covers you on and off the premises If a thief breaks into your dorm room and steals your laptop it is covered under your parent s policy Chapter 17 Homeowner s Personal liability insurance o Personal liability protects the named insured and family members against legal liability arising out of their personal acts Section II coverages o Coverage E Protects the insured when a claim or suit for damages is brought because of bodily injury or property damage allegedly caused by an insured s negligence Occurrence Defined as an accident which results in bodily injury or property damage during the policy period Liability arising out of the use of a motor vehicle aircraft o Coverage F Mini accident policy o Exclusions to E and F watercraft Expected or intentional injury War Etc o Exclusions to E only Bodily injury to self o NEED TO KNOW Endorsements to the Homeowners Policy Inflation guard endorsement Not so important that you know particular exclusions just that there are exclusions to prevent duplication For instance liability arising out of the use of a motor vehicle isn t covered because it is covered under auto insurance not home insurance Provides for an annual pro rata increase in the limits of insurance in the section I coverages Inflation increases replacement costs and if one does not keep up they could be underinsured Earthquake coverage endorsement Covers earthquakes landslides volcanic eruption and Only 10 of Californians purchase earthquake earth movement insurance When personal property replacement cost loss settlement endorsement is added it is paid on replacement cost no depreciation Schedule personal property endorsements Provides additional coverage for 9 classes of property jewelry silverware musical instruments furs cameras golfer s equipment fine arts postage stamps and coins o Insurer pays stated amount if loss occurs Personal injury endorsements Used
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