Home Self Study: Chapter 1 Capstone Exam

Section 1.6 – Additional / other coverages
Additional / other coverages are “freebies” automatically included into the policy. Most additional / other coverages help to enable or expedite the payment of larger losses. Common additional / other coverages include fire department service charge and removal of trees

Section 1.10 – Insurable interest and mortgage basics
Regardless of the reason, there are only two valid times in which you may submit payment to escrow. If the policy is written in conjunction with a new home closing or the customer currently has homeowners insurance paid through an escrow account, you may submit a request for payment to the escrow account. Under no other circumstances may you do this.

Section 1.2 – Casualty insurance basics
The first party is the named individual or party who enters into a liability contract. It is the person transferring the risk of loss to the insurer (the second party). In a standard homeowners contract scenario, the homeowner is both the first named insured and first party to the liability section of the contract

Section 1.8 – Endorsements – incidental business
Only the person selling crafts is eligible. The telecommuter does not need any special endorsement and we would be able to insure her with no issues because her usage of the property does not constitute incidental business usage. The partner of a law firm is ineligible because he requires professional liability protection which we are unable to provide (other occupations in this ineligible category include psychologists, psychiatrists, dentists, and other medical professionals who operate primarily out of the primary residence). The person renting a detached structure on the residence premises does not qualify for this endorsement because rental income is not equivalent to business income for the purposes of personal lines insurance.

Section 1.7 – Endorsement basics
All of the above reasons are triggers that you should use to offer water/sump pump backup coverage. The lowest level of the home is most susceptible to water losses.

Section 1.5 – Section II Coverages
Section II coverages (Coverage E: Personal Liability and Coverage F: Medical Payments) cannot be paid to insureds or household members. Section II coverages offer liability protection, meaning that they protect the insured’s assets by paying to injured third parties seeking damages from the insured due to the insured’s negligence

Section 1.9 – Home and property forms
Nearly all condominium unit owners are responsible for all structural items from the “studs in.” This typically puts the unit owner on the hook for wiring, electrical work, walls and finishes, light fixtures, etc. The insured also needs coverage A to replace any built-in bathroom and kitchen fixtures like sinks and counter-tops. While $20,000 is the recommended minimum, it should be understood that this is still insufficient for most condo unit owners.

Section 1.2 – Casualty insurance basics
Punitive damages are not paid by personal lines casualty insurance. Punitive damages are fees and fines charged to the insured as punishment for breaking a law or acting in a grossly negligent fashion. A speeding ticket is an example of a punitive damage.

General damages: Intangible damages sustained by a third party being charged to the insured. The values of general damages are typically subjective and as such are often negotiated during a settlement process or contested in civil court. Common general damages include pain & suffering. When covered by the policy general damages are typically paid to a third party by Coverage E: Personal Liability

Special damages: Tangible medical bills and other finite damages sustained by a third party being charged to the insured. When covered by the policy, general damages are typically paid to a third party by Coverage F: Medical Payments. Depending on the situation and value of damages, special damages may also be paid by Coverage E: Personal Liability

Section 1.4 – Section I Coverages
Of the perils listed above, only pipe bursting is covered by Section I of the standard homeowners contracts. Loss due to sump pump overflow or backup may be endorsed onto most policies. Earth movement/earthquake endorsements are available but vary greatly by territory and carrier. Power failure is not a commonly endorsable coverage and is not often paid by insurance.

The common policy exclusions are:
Flood, earth movement, war, sump pump overflow, neglect, intentional destruction, power failure, sewer backup, nuclear hazard, ordinance or law, and wear and tear. Many policies also exclude loss due to mold, fungi, wet rot & dry rot. Exclusions vary by carrier.

Section 1.9 – Home and property forms
Personal lines dwelling contracts are designed for landlords with a small number of rental properties. For these customers we typically write a DP-02 Broad Form or DP-03 Special Form with a Personal Liability endorsement. We do not insure owner-occupied properties with dwelling contracts.

Section 1.11 – Other forms of additional interests
Home equity loans and reverse mortgages do not come with escrow accounts and do not manage the homeowners insurance. A homeowners association is in no way an interested party to the home itself.

Section 1.1 Property insurance basics
The loss settlement provision is the condition that describes how damages will be valued. Separate coverages may have different loss settlement methods. Common loss settlement examples include replacement cost, actual cash value, agreed value, stated amount, and market value.

Other terms found above:
Duties after a loss: The condition that outlines the steps that both the insurer and insured are expected to take in the event of a covered loss including the maximum amount of time an insurer may take to pay a valid claim
Appraisal: The condition that describes how disputes between insured and insurer are to be settled regarding the assessed value of a loss