Introduction to Property Insurance
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Real property includes land, buildings, and other structures attached to the land.
Every other kind of property, such as the contents of the building.
- A building of frame construction is one with an exterior wall of wood or other combustible construction, including:
- stucco on wood or plaster on combustible supports
- aluminum or plastic siding over frame
Masonry Veneer Construction
Has exterior walls of combustible construction with an outside veneer (layer) of brick or stone. The masonry veneer does not support the building.
Consists of an outer layer of brick and an inner layer of brick. Unlike masonry veneer homes, masonry supports or holds up the house.
Three Types of Superior Construction
- masonry noncombustible
- fire resistive
An indirect loss is sometimes also referred to as a consequential loss. The term consequential loss is also sometimes applied to other less-than-direct losses, such as food that spoils because a refrigeration system is out of operation.
When must an insurable interest exist?
With property and casualty insurance, an insurable interest must exist at the time of the loss. In contrast, life insurance requires an insurable interest only when the policy is purchased.
The cost to repair or replace property that has been damaged or destroyed with similar new property. Houses and commercial buildings.
Actual Cash Value
Generally defined as replacement cost minus physical depreciation. Household contents and other personal property.
Functional Replacement Cost
The amount that it would cost to repair or replace the damaged building with less costly common construction materials and methods that are functionally equivalent to the obsolete, antique, or custom construction materials and methods that were originally used.
The amount for which it could be sold if the buyer and the seller are under no unusual pressure. Usually used for valuing cars.
Stated Amount Approach
- The insurer agrees to pay the lowest of three amounts:
- The property's actual cash value at the time of the loss.
- The cost to repair or replace the property with similar property.
- The dollar amount specified in the policy.
Typically covers paintings, sculptures, antiques, and one-of-a-kind items for which it is difficult to determine a value. To handle this problem, the insurer and the insured agree on the value of the item when the policy is written, and that value is listed in the policy.
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