Property & Casualty Insurance Policy Conditions
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- The liberalization clause applies when
- (1) the insurer makes a change that expands coverage under the policy form without charging an additional premium and
- (2) the change is put into effect shortly before a policy's effective date or during the policy term.
A policy limit is also known as a limit of insurance or a limit of liability. A policy limit is the maximum amount an insurer will pay for a covered loss.
A deductible is the part of a covered loss that the insurer does not pay. A specified portion of every covered loss will be deducted (subtracted) from the amount the insurer would otherwise pay.
The coinsurance provision "requires" the insured to buy a limit of insurance that is at least equal to a specified percentage of the full insurable value of the covered property. The coinsurance clause reduces the amount of recovery only in partial loss situations. For a total loss, the policy would pay the total limit of insurance applicable to that property.
Restoration of Limits
- When a scheduled item has been lost or destroyed, there is nothing left to insure. After insured property is destroyed, and an insurer indemnifies the insured, what happens to the insurance? Many property policies include a restoration of limits provision that answers this question.
- Three approaches are common. Some policies state that the limits are restored after a loss is paid, and some state exactly the opposite—that paying a loss does not reduce the policy limits. With others, however, after the insurer pays a total loss, coverage ceases and the insurer returns any unearned premium. The first approach is called restoration of limits, and it is most advantageous to insureds.
Vacancy or Unoccupancy
The wording in many property insurance policies limits, reduces, or entirely eliminates coverage when a building has been vacant (or, in some forms, vacant or unoccupied) for a designated period of time such as 45 or 60 days.
Per Occurrance Limit
A per occurrence limitation of liability provision establishes the maximum amount the insurer will pay for all claims resulting from a single occurrence, no matter how many people are injured, how much property is damaged, or how many different claimants may make claims.
Per Person Limit
A per person limit is, as you might guess, the maximum amount the insurer will pay for one person's injuries.
- Many auto insurance policies use the split limits approach, which combines the per person and the per occurrence approach. With split limits, three separate dollar amounts apply to each accident.
- The first limit is a per person limit: the maximum amount that will be paid to any one injured person.
- The second limit is a per occurrence limit: the maximum amount that will be paid to all injured persons.
- The third limit is a per occurrence limit that applies to property damage claims; this is the maximum amount that the insurer will pay for damage to other cars or property resulting from the accident.
Combined Single Limits
The combined single limits approach simply states a single dollar limit that applies to any combination of bodily injury and property damage liability claims.
Aggregate limit of liability is the maximum amount the insurer will pay for all applicable claims during the policy period—usually one year.
Property Loss Conditions
Property insurance covers accidental losses to the insured's own property. If a loss is covered by the insurance policy, the insurer makes its claim payment directly to the insured.
Liability Loss Conditions
Liability insurance, on the other hand, covers accidental losses when the insured is legally responsible (liable) for injury to someone else or damage to another's property. If the loss is covered, the insurer's payment is made directly to the claimant who suffered the loss.
Subrogation refers to the insurer's right to recover its claim payment from the party that was responsible for the loss.
When two or more insurance policies cover the same loss exposure, they should preferably be concurrent—cover the same losses and have the same inception and expiration dates.Nonconcurrency occurs when this is not the case.
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