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coverage is provided only on property which is specifically identified or scheduled
All Property Policy
policy used to insure building, stock and equipment under a single limit of insurance
5 approaches to determining ACV
- 1. Formula/cost: ACV minus straight line depreciation (the number of years the bld could've been used minus how long it was used.
- 2. Market value/direct sales: real estate appraiser will come to a value based on market value
- 3. Income: rental income
- 4. True value to owner: other methods fail to consider special circumstances
- 5. Broad Evidence rule: combo of 4 methods
- an insurer ceding part of the risk it has assumed to one or more other insurers,
- (the contract is between the insurers)
a policy under which a group of insurers has agreed to participate in providing coverage
something imposed by the insurer which requires the insured to do or not do something
the right of the insurer to "step into the shoes" of the party whom is has compensated and sue any party who the compensated party could have sued.
a promise that certain facts are as they are represented to be and remain so
a fact which if communicated to the insurer would induce it either to decline the insurance altogether, or not accept it unless a higher premium is paid
to act wilfully, and with the specific intent to deceive or cheat
in which a contract has no "legal or binding force" and as such is "incapable of being enforced by law"
building which has met minimum standards in terms of hours it will withstand a specific, carefully controlled test fire
all structural members including floors, roofs and their supports are constructed of steel, iron, concrete or other non combustible materials. Exterior is also required to be non combustible construction.
conditions common to all buildings which influence their potential for loss
the proximity of the building insured or containing the property insured to other commercially rated buildings
occurs when the applicants for insurance are largely those most likely to suffer a loss
refers to the grouping or classifying of risks according to established criteria which, in large part, is based on their probability for loss as a class
Characterized by intense competition between insurers. As a result, rates tend to be low
occurs when low profit margins force out some of the competition. As a result, insurers use a more disciplined underwriting approach. The insured normally receives little or nothing in the way of rate discounts
in a condition which may cause a peril to occur
a condition relating to the use of tangible property which could cause a peril to occur
subjective characteristics of the applicant that could cause a peril to occur (dishonesty)
business which is marginal or substandard but which the insurer agrees to accept as a favour to the broker
the existence of other insurance policies the applicant has with the same insurer
"empty" or when the normal occupant is absent and then contents have been removed
lack of habitual presence of human beings or when the premises are complete with it's contents, except that such person who normally occupies the premises is temporarily away
an additional rate charged over and above the fire rate
the inertia of a body that tends to move it away from the centre wround which it revolves
"failure in the working mechanism of the machinery…a functional defect in the moving parts of the equimpent which causes the latter to cease functioning or to function improperly"
a failure in the electrical mechanism of the machinery, appliance or device.
the type of losses which might be expected as part of the every day operation of a business
Wear and tear
"deterioration or depreciation (i.e. value by ordinary and resonable use of the subject matter)"
the deterioration of an object which arises naturally over time
a hidden or concealed defect. One which could not be discovered by reasonable and customary inspection: one not apparent in the face of goods, product, document, etc.
disappearance under circumstances which cannot be explained
changes the terms or conditions of the policy
adds additional coverages to those already in place
materials, including diskettes, tapes and punch cards upon which data is recorded
the information stored on media
a location not specified on the policy which is not owned, rented or controlled in whole or in part by the insured
"newly acquired" location
a location acquired (owned, rented or controlled) by the insured. Such location is a newly acquired location for a period of 30 days from acquisition
the cost of repairing or replacing the property on the same site with new property of like kind and quality and for like occupancy without deduction for depreciation
Bailee for hire
is one who has temporary custody of the personal property of another for the purpose other than sale and who is compensated as a condition of such custody
the legal duty imposed upon bailees which requires them to take the same care of the goods of others as would be taken by a prudent and diligent owner of such goods
includes airlines, railroads, trucking companies and others that furnish transportation to any member of the public seeking their services
Bill of lading (3)
- The gov't regulates the movement of goods by a tariff that lists the shipping rates for the carrier and the rules by which the shipment is made.
- Standard: reflects the amount for which the common carrier will be held legally liable under the tariff.
- Valued: the value is higher than what is expected, therefore the owner can negotiate to pay a higher rate to cover the additional cost
- Released: where the carrier doesn't hold any liability for goods transported
one that carries, for pay, the goods of certain customers only as contrasted to a common carrier that carries the goods of the public in general.
ones who haul their own goods or goods entrusted to them as bailees or lessees and includes shippers who own or lease their vehicles and carry their own goods.
the maximum amount an insurer will pay in only one disaster or occurrence
is concerned with setting up physical barriers to restrict unauthorized access to property
is concerned with setting up electronic barriers to restrict unauthorized access to property
refers to the methods used by owners to secure access to the premises when the business is closed (alarm).
refers to the protection provided to areas within the building where valuable property is being stored
provides direct security for individual items such as safes, vaults, chests, filing cabinets, display cases
refers to the ability of a telephone to withstand tampering
all negotiable and non negotiable instruments or contracts representing money or other property and includes revenue and other stamps in current use, tokens and tickets, but doesn't include money
Burglary (insurance meaning)
the unlawful taking of property by a person unlawfully entering or leaving the premises as evidenced by marks of forcible entry or exit
Robbery (insurance meaning)
means the taking of insured property from a custodian by a person or persons who have: - caused or threatened to cause bodily harm or commited an overt unlawful act witnessed by the custodian or taken such property from a custodian who has been killed or rendered unconscious.
includes the insured(s), their partner(s) or any employee authorized by them to have the care and custody of insured property
Theft (insurance meaning)
includes all means of taking property without the owner's consent
loss resulting directly from one or more fraudulent or dishonest acts commited by and employee, acting alone or in collusion with others.
The time permitted by an insurer, commencing with the expiry date of the policy, in which a claim must be discovered by the insured if it is to be covered by the policy
The insured or a partner of the insured or any employee who is duly authorized by the insured to have the care and custody of the insured property outside the premises
a person is guilty of forgery if he fraudulently alters any writing, makes, completes, executes authenticates issues or transfers any writing so it purports to be the act of another who did not authorize that act
includes all monies from sales or services rendered by a business
expenses that continue during the period of an interruption
Semi variable expenses
expenses which may or may not continue during the period of interruption
is the gross profit minus all other expenses earned by the business
Actual loss sustained
the measure of recovery under the Gross Earnings Form- refers to the amount the business would actually have earned had the loss not occured
Ordinary payroll expense
the entire payroll expense for all employees of the insured, except officers, executives, dept mgmt, employees under contract, and other important employees whose services would not be dispensed with should the business be interefered or interrupted
the manufacturer or supplier upon whom the insured depends for materials or goods
The customer(s) who the insured depends upon to purchase its products
building improvements, alterations, and betterments made at the expense of or purchased by the insured as long as they are not the owner
Actual Cash Value (ACV)
the replacement or repair cost less depreciation
the costs to repair, replace or rebuild lost or damaged property without deduction for depreciation (new for old)
Types of Commercial Property (4)
- 1. Mercantile: corner store
- 2. Non-mercantile: Doctor's office, lawyer
- 3. Manufacturing/industrial: restaurant, bakery
- 4. Institutional: gov't buildings, nursing homes, hospitals
Building defined as...
- -fixed structures
- -additions and extentions
- -permanent fittings and fixtures attached and forming part of the building
- -materials, equipment, and supplies used for repair, maintainance and minor alterations to or for the building
- -growing plants inside the building for decorative purposes (but only if the insured is also the owner)
Stock defined as...
- -merchandise pertaining to the business
- -packing, wrapping, and advertising material
- -similar property belonging to others which the insured is under obligation to keep ir is legally liable.
Equipment defined as...
- -contents usual to the insureds business
- -property belonging to others
- -tenant improvements
actual cost/purchase price minus depreciation (not a good way to value as even if the item technically is worth $0, it may still be useful)
Hazard defined as....
is a condition which may cause a loss to occur
- a. type of building constuction: the ability to withstand fire, earthquake...
- b. Occupancy: type of operations (welding shop, library)
- c. Housekeeping: maintainance of the building
- d. External exposures: location of risk (next to a club vs senior home)
- e. Geography: rural areas with limited access to the fire department
- f. Protection: fire station, public services and police protection
- a. Financial Condition
- b. Associates: association with known criminals
- c. Moral character: questionable business ethics, history of police confrontations...
- d. Indifference to loss: lack of concern
- e. Poor managment: indifference in implementing standards aimed at loss prevention and reduction.
Broker's role in underwriting process...
- 1. completing the survey
- 2. seek interested insurers
- 3. arrange meeting with prospect and obtain order for insurance
- 4. submit app to insurer (if required)
- 5. deliver the policy
based on a specific amount of time the building can stand under a controlled fire. usually steel frame, reinforced concrete, concrete block, masonry.
structure, walls, floors, roofs and supports are made of steel, iron or concrete
in older homes, timbre is used in columns, beams, girders, floors, roofs...
brick/joist and concrete block/wood roof type buildings. ext bearing walls are of non-combustible construction having a fire resistance of approx 2 hours. Roofs, floors and int framing are constructed whole or partly of wood or other combustible material.
supporting walls are constructed of wood. Ext is made of wood or stucco.
5 classes of Building Construction
- 1. Fire resistive
- 2. Non-combustible
- 3. Heavy timbre
- 4. Ordinary
- 5. Frame
the insured should have a minimum 80% of value insured. If not, then the payment of settlement will be shared by both the insured and the insurer. If the loss is less than $5000 or 2% of the amount of insurance, then the co-insurance clause will not be applied.
x loss = settlement
- 72,000 x 1,200 = settlement
Common Hazards (5)
- 1. heating: hot water/steam, hot air, radiant, electric
- 2. electrical services: wiring (copper), fuses, breakers
- 3. detachment: proximaty to other commercially rated buildings.
- 4. protection: private, public
- 5. occupancy: nightclub, library...
Why do Exclusions in policies exist?
- 1. considered to be commercially uninsurable: war, nuclear energy hazard
- 2. potential to be catastrophic: earthquake, landslide, flood
- 3. more specialized poicy forms have been developed: auto, money and securites, business records
- 4. wholly or partially in the control of the insured: the application of heat or other process, normal wear and tear, scratching or marring
- 5. which are not common to a large nuber of insured, but which represent an increased potential for loss which is deserving of an additional premium charge: communication towers and antennae, buildings in the course of construction...