RMI 3011 Prof Lynne McChristian Exam 2 CHAPTER 7 1 Know the 6 basic parts of the insurance contract 1 Declaration are statements that provide information about the particular property or activity In formation contained in the decorations section is used for underwriting and rating purposes and for identification of the property or activity that is insured 2 Definitions the purpose is to define key words or phrases so that the coverage under the policy can be determined more easily 3 Insurance Agreements Promises of the insurer There are two basic forms of insuring agreement in property insurance A Named perils policy only those perils named are covered B Open perils special coverage policy If it is not excluded then it is covered 4 Exclusions A Excluded Perils ex perils of flood earth movement war etc B Excluded Losses ex the failure of insured to protect the property from further damage after a loss C Excluded Property ex in a HO policy certain cars animals Exclusions are necessary because commercial insurers may consider the peril uninsurable are excluded 5 Conditions are provisions that qualify or place limitations on the insurers promise to preform Conditions impose certain duties on insured if he or she wishes to collect for a loss the 6 Miscellaneous Provisions Provisions in property and casualty insurance include cancellation subrogation requirements if a loss assignment of the policy and other insurance provisions occurs 2 What are endorsements riders endorsements riders are written provision that adds to deletes or modifies the provision in the original contract An endorsement or rider normally takes precedence over any conflicting terms in the contract to which the endorsement is attached Ex Adding flood insurance to a HO 3 Policy the purpose is to customize the needs based on what you need don t need or want to insure They take precedence over any conflicting terms in the policy RMI 3011 Prof Lynne McChristian Exam 2 CHAPTER 7 IMPORTANT VOCAB o First named insured first name that appears on the declaration page o Other insured person or parties who are insured under the named insured s policy even if they aren t specifically named o Deductible a specific amount is subtracted from the total loss payment that otherwise would be payable Higher the deductible the lower the premium o Straight Deductible the insured must pay a certain number of dollars a loss o Aggregate Deductible All losses that occur during a specified time period before the insurer is required to make a payment deductible pay every loss usually a policy year are accumulated to satisfy the Once the deductible has been met the insurer will after that Ex Medical Insurance o Coinsurance Clause in a property contract encourages the insured to insure the property to a stated percent of its insurable value THE IS TO ACHIEVE EQUAITY IN RATING o Pro rata liability each insurers share of the loss is based on the proportion that its insurance bears to the total amount of insurance on the PURPOSE property RMI 3011 Prof Lynne McChristian Exam 2 CHAPTERS 16 17 1 What is a HO 3 Policy also known as a special form covers the dwelling and other structures against direct physical loss to the described property All losses to the dwellings and other structures are covered except those losses specifically excluded Personal property is covered on a named perils basis Covers legal liability arising out of bodily injury or property damage to someone else NOT YOU 2 Who are the Persons Insured in an HO 3 policy Named insured residents of the household who are relatives Persons under 21 under the care of the insured Full time student away from home Any person legally responsible for covered animals Someone using a motor vehicle you own watercrafts Ex someone mowing your lawn on your mower 3 What perils are covered Dwelling and other structures are covered against direct physical loss to property All direct physical losses are covered except those losses specifically excluded It also covers the same personal property in a HO 2 Ex fire lightening explosions windstorms hail smoke vehicles etc 4 What is covered under Coverage A Have an understanding of the exclusions under Section I Coverage A Dwelling covers the dwelling on the residence premises as well as any structure attached to the dwelling Example being a garage Materials and supplies to build them are covered Excludes land damages to land aren t covered Exclusions ordinance of law earth movements water damage power failure neglect war nuclear hazards intentional loss government action weather conditions acts or decisions faulty planning 5 What is scheduled property Protects valuable items that are out of the ordinary and need to carry separate coverage to ensure that their full value is covered incase of an event of a claim RMI 3011 Prof Lynne McChristian Exam 2 6 A deductible can be a percentage or flat rate 7 Understand an insured s duty after a loss The conditions section imposes certain duties on the insured after a loss to covered property occurs the A The insured must give immediate notice of the loss B The property must be protected from further damage C The insured must prepare an inventory of the damaged personal D Proof of loss must be filed within 60 days property and maybe required to show the damaged property to insurer as often is reasonably required 8 Insured s option if they don t agree with the claims settlement amount If the insured doesn t agree they can deny the amount and ask for more A Appraisal Clause when the insured and insurer agree that there is a loss but do not agree on the settle price B Arbitration arbitration takes place out of court the two sides select an impartial third party known as an arbitrator agree advance to comply with the arbitrator s award and then in a hearing at which both sides can present testimony The arbitrator s decision is rarely reexamine it in participate evidence and usually final and courts RMI 3011 Prof Lynne McChristian Exam 2 CHAPTER 16 IMPORTANT VOCAB living o Additional living expenses the increase in living expenses actually incurred by the insured to maintain the families normal standards of o Guaranteed replacement if a total loss occurs the insurer agrees to replace the home exactly as it was before o Loss to a pair or set insurer can either elect to repair or replace or pay the difference in actual cash for the value of property before and after a loss o Proximate Clause an unbroken chain of events between
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