Property Insurance

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Property Insurance
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2011-07-08 01:12:36
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Property Insurance Exam IL
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Property Insurance Exam (IL)
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  1. What is an Insurance Policy?
    A Social Device (Legal Contract, or Policy) for the Transfer of Risks.
  2. What is Pooling of Risks?
    Is when a large group of people contributes money to a fund out of which their losses can be paid. The larger the group, the better it works financially.
  3. What is a Peril?
    • Causes Damage - Is an actual Cause of Loss that can be insured against.
    • (ie: Fire and allied perils, hail, vandalism, etc.)
  4. What is a Hazard?
    • Could Cause Damage - Is a condition or operation in property which either creates or increases the chance of loss by a covered peril.
    • (ie: frayed wiring, etc.)
  5. What is Risk?
    • Exposure to Damage - Is the likelihood, probability, or degree of uncertainty that a covered peril will cause a loss.
    • (Ie: An old building with frayed wiring has more risk than a new building.)
  6. What are Actuarial Tables?
    Are statistical tables used in calculating premium rate tables. They tell the insurance companies how many people are likely to have claims and how much the losses are likely to be.
  7. What are Loss Reserves?
    Moneys set aside to pay claims in accordance with actuarial tables.
  8. What is an Actuary
    An actuary is an insurance company representative who keeps track of loss statistics and calculates premium rate tables and loss reserves.
  9. What is the Law of Large Numbers?
    The law of large numbers says that the more people the insurance company insures, the more accurate the actuarial tables will be.
  10. What is Insurable Interest?
    • Is a financial interest (risk) which the insured(s) must possess at the time of loss.
    • -Owner
    • -Mortgagee
    • -Lienholder
  11. What is Indemnity?
    • Is the legal concept of one party (the insurance company) standing in the place of or making good for another (the insured).
    • -In property insurance it means the same as reimbursement.
    • -The word indemnify means the same as reimburse.
  12. True or False: Both the Principles of Indemnity (Reimbursement) and Insurable Interest (Financial Interest) prohibit the Insurance Company from reimbursing (indemnifying) an insured for more than the actual amount of loss.
    True.
  13. What is a Deductible?
    It is an initial amount of loss which the insured must suffer (pay) before the insurance company begins to indemnify.
  14. What is the purpose of a Deductible?
    The purpose of the deductible is to eliminate small claims that the insured can afford and which would cost the insurance company to administer.
  15. What are the Limits of Liability?
    Are the maximum amounts which the insurance company will pay under each coverage.

    -Some policies express limits as the maximum amount that insurance company will pay to each person as wells as a total (aggregate) maximum that they will pay to all person per occurrence. An aggregate limit is a total limit.
  16. What are other name for Limits of Liability?
    • -Face Amount
    • -Amount Carried
  17. What are Supplemental Payments?
    Are things specified in auto policies that the insurance company will pay for in addition to the auto policy limits of liability.
  18. What is Additional Coverage?
    Are things specified in homeowner policies that the insurance company will pay for in addition to the homeowner policy limit of liability.
  19. What is an Adjuster?
    • Is an insurance company representative who administer claims. An adjuster has two principle responsibilities in administering claims.
    • 1) Determine there was insurance coverage in effect for the loss.
    • 2) Investigate and settle the loss.
  20. What are the details of the two responsibilities that an Adjuster has?
    • 1) Determine there was insurance coverage in effect for the loss.
    • - Verify that there was coverage in effect on the date of loss on the property that was involved in the loss.
    • -Or, verify that there was coverage in effect on the date of loss on the person who is submitting the claim.

    • 2) Investigate and settle the loss.
    • - Verify that the loss was a covered type of loss.
    • - Verify the amount of loss.
    • - Take necessary legal steps to settle the loss.
    • - The amount paid on the loss is called the loss settlement or adjustment
  21. What is All Risk (Open Peril) Coverage?
    • Protects insured property against all of the perils that would have been covered under a Basic form policy, all of the perils covered under a Broad form policy plus more. It protects insured property against loss caused by all perils except those specifically excluded.
    • -Special causes of loss - Protects buildings against all perils except those excluded.
  22. What is Direct Physical Loss?
    Is a loss where the covered peril is the direct cause of the damage (immediate cause, or proximate cause).
  23. What is Indirect (consequential) Loss?
    • Is a loss where the covered peril is not the direct cause (immediate cause or proximate cause) of damage or where the property is mostly indirect value.
    • - Most policies either exclude indirect loss or provide only very limited coverage.
    • - To cover indirect loss an endorsement is needed under most policies.

    (ie: If I own a rental property, and it catches fire, indirect loss would be lost revenue during the rebuilding period.)
  24. True or False: It is possible for an insured ot have liability coverage in effect at the time of an accident, for a claimant to have injuries and/or damages, for the claimant to make a claim, for the insured to be covered by liability insurance, but the insurance company to pay no money to the claimant.
    True
  25. True of False: An insurance company wll pay to an injured clamant on a liability claim only if the insurance company determines that a court would find the insured legally liable and a court would order the insured to pay to the claimant if the claim were to go to a court hearing.
    True
  26. What are Necessary Elements (Requirements)?
    Are legal requirements that a claimant must be able to prove to a court to be successful in making a liability claim. There are several necessary elements (requirements) that a claimant has to be able to prove to be successful in making a liability claim through the courts.
  27. What is Negligence?
    Is the most important necessary element (requirement) a claimant must satisfy to persuade a court that the insured is legally liable for an accident and the claimant's injuries and/or damages. An insured can be negligent two ways:

    • 1) Omission - Failing to do something that he or she should have done.
    • 2) Commission - Doing something that he or she should not have done.
  28. What is Representation?
    • Are the basic, regular statements on an application which the insured believes to be correct to the best of his/her knowledge. An insurance company can contest (refuse to pay) a claim due to a representation on an application if the insurance company can prove the representation was:
    • -False or concealed
    • -Material (significant)
    • -Intentional
  29. What are Warranties?
    Are special statements on an application which the insured guarantees to be correct. They are usually made to obtain rate reductions or other special considerations. An insurance company can refuse to pay (contest) a claim due to a warranted, guarantee statement on an application if it was in any way false or concealed.
  30. What is Underwriting?
    Is the process of deciding whether an application for insurance coverage qualifies for coverage and what the premium charge should be. An Underwriter is the insurance company representative who does this.
  31. What are Inspections?
    Insurance companies will sometimes hire outside firms to inspect the property to be insured to verify it value, its use, the use of the surrounding properties and that the premises are well maintained.
  32. What is the Fair Credit Reporting Act?
    Is a Federal Law which requires an agent (producer) to warn an applicant if there may be a consumer investigative (inspection) report done as part of an insurance application.

    • 1) The applicant has a right to the name and address of the investigative firm if coverage is rated or rejected because of an inspection report.
    • 2) The applicant has a right to see the report.
    • 3) There is a procedure for correcting misinformation.

    (You only have to show them the report, you DON'T have to provide them with a copy)
  33. What is Replacement Cost Coverage?
    • Replacement cost coverage indemnifies (reimburses) the insured the cost of rebuilding, repairing or replacing the insured property with new materials and new labor at the time of loss.
    • 1) The insured must rebuild, repair, or replace the insured property with new materials and new labor of like kind and like quality at the same location.
    • 2) If the insured does not rebuild, repair or replace with new materials at the same location, then the insurance company will indemnify only the actual cash value of the loss.
    • - Replacement cost is the cost of rebuilding new from the foundation up including the foundation as of the date of loss. It does not take into account the value of the lot or landscaping.
  34. What is Actual Cash Value?
    Actual cash value coverage indemnifies (or, in orther words, reimburses) the insured for no more than his/her actual financial or economic loss. It will pay the cost of rebuilding repairing or replacing the damaged property, but not to exceed its actual cash value. The insured's loss of actual cash value can be determined by market value immediately prior to loss or according to the Loss of Actual Cash Value formula.
  35. What is the Loss of Actual Cash Value formula?
    Depreciation = Percentage of Useful Life Used Up x Replacement Cost

    Loss of Actual Cash Value = Replacement Cost - Depreciation
  36. What is the Loss Settlement Provision (Coinsurance Clause)?
    • - The Loss Settlement Provision (Coinsurance Clause) requires the insured property to be insure for at least a stated, specified percentage of its value at all times (continuously).
    • - The Loss Settlement Provision (Coinsurance Requirement) is the provision that must be met to have the cost of repairing or rebuilding with new materials and labor less the deductible paid.
    • -Some Loss Settlement Provisions (Coinsurance Clauses) require the insured to insure the insured property for at least 60% of its value, others 70%, others 80%. Some policies require the insured property to be insured for 100% of its value.
    • -To have the cost of repairing or rebuilding with new materials and labor less the deductible paid on a partial loss the insured must keep the insured property insured for the required, stated percentage (often 80%) of its value at all times including the time of loss.
    • -If the insured property is not insured for the required, stated percentage of its value at the time of loss (insured to value), the insured will be penalized in the loss settlement. The insurance company will pay less than 100% of the loss.
  37. What is the formula for loss settlement when the property is not insured to value?
    Amount Required = Coinsurance Percentage x Replacement Cost at Time of Loss

    Loss Settlement (Adjustment) = Amount Carried/Amount Required x Loss
  38. What are the Two Coinsurance Exceptions?
    • 1) The principles of indemnity (reimbursement) and insurable interest (financial interest) prohibit the insurance company from paying more than the actual amount of loss.
    • 2) The insurance company will never pay more than the limits of liability of the policy.
  39. What is the Inflation Guard Endorsement?
    Some insurance companies (but not all) offer an endorsement that can be added to some policies (but not all) for an extra premium charge. It is called the Inflation Guard Endorsement. This endorsement if added increases the face amount of the policy by a percentage rate that is stated in the endorsement at intervals specified in the endorsement. In is also one of the five ways to insure that property is insured to value.
  40. What is the Guaranteed Replacement Cost endorsement?
    Some insurance companies (but not all) offer an endorsement that can be added to some policies (but not all) called the Guaranteed Replacement Cost endorsement. This endorsement guarantees that the property is insure to value.
  41. What are the 5 Parts of a Policy?
    • 1) Declarations
    • 2) The Insured
    • -The Named Insured
    • - An Insured
    • - Additional Insureds
    • 3) Insuring Agreements (Insuring Clause)
    • - Is the clause that states the insurance company's promise to indemnify.
    • - A list of perils covered is found in the insuring agreement, or the declarations' page, or both.
    • 4) Conditions - Requirements
    • A) At the time a policy is purchased.
    • 1) Application.
    • 2) Premium.
    • B) At the time of loss.
    • 1) Notice of loss.
    • 2) Proof of loss.
    • 5) Exclusions - limitations, reductions, things not covered.
  42. What are the Elements of a Contract?
    • 1) Competent Parties
    • - An insured is a competent party if he/she is not a minor, mentally incompetent, on drugs or alcohol or otherwise incompetent at the time that the policy is purchased.
    • -If the insured is not a competent party at the time the policy is purchased, the policy is voidable at the insured's option. The insured can return the policy an get his/her premium back.
    • 2) Offer and Acceptance
    • - Insured makes the offer.
    • - Insurance company accepts the offer
    • - Oral Binder is when the insured orally give the agent (producer) the information needed for the application and promises to pay the premium; the agent (producer) orally assures the insured he/she is covered.
    • 3) Mutual Agreement
    • 4) Consideration
    • - Must be an exchange of material value.
    • - Once the insured has completed his/her application and paid the premium, he/she has met his/her consideration requirement.
    • - Once the insurance company has issued the policy, it has met its consideration requirement.
    • 5) Legal Subject (legal purpose)
    • - An insurance policy has legal subject (it is not against public policy) if the insured still has insurable interest at the times of loss.
  43. What are 2 reasons why people buy Property Insurance?
    • 1) It protects an insured against financial loss which the insured cannot individually afford cause by a covered peril.
    • 2) It is required to borrow money on property.
  44. What is the Standard Fire policy (1943, 165 line New York Standard Fire policy)?
    • - Most basic of all property insurance policies.
    • - The Standard Fire Policy is the least coverage available. Insurance companies usually issue policies that provide coverage which is broader and better. Insurance companies usually do not issue policies which provide less coverage that that provided by the Standard Fire Policy.
    • - It covers only those classes of property specifically described on hte declaration page for only their actual cash value.
    • -Technically it can be used alone, but usually is a base, or cornerstone for a broader policy from covering several classes of property automatically against a greater number of perils. Because it is the base policy, or cornerstone policy, that all other property insurance begin with and add to, most of the provisions of the Standard Fire policy are found in other policies.
  45. What perils are covered by the Standard Fire policy?
    • - Hostile Fire - A hostile fire is any fire not contained within its intended boundaries. It also covers damage caused by the fire departmet as well as smoke caused by a hostile fire on the insured premises.
    • - Lightning
    • - Removal - Removal coverage is All-Risk Coverage that protects insured property while it has been removed from the insured premises to avoid damage by a covered peril on the insured premises.
  46. What are the duties of the insured under the Standard Fire Policy?
    • - Pay the Premium.
    • - Take all reasonable means to save an protect the property from loss. Don't have to risk life or injury. Reasonable would be calling 911 right away.
    • - Give the insurance company immediate notice of loss.
    • - Give the insurance company proof of loss within 60 days of the loss.
    • - Separate the damaged property from the undamaged property and allow the insurance company to inspect the undamaged property as well as the insured's books and records.
    • - The insured cannot sue the insurance company unless all of these requirements have been satisfied and then he/she must sue within 12 months of the loss.
  47. What are the duties of the insurance company under the Standard Fire policy?
    • - The insurance company must indemnify the insured within 60 days of proof of loss.
    • - The insurance company may either pay the appraised actual cash value of the loss or repair or replace the damaged property.
    • - If the insured and the insurance company disagree as to the actual cash value of the damaged property and the damaged property cannot be repaired or replaced, they each can select an appraiser. If the appraisers disagree, they select and umpire appraiser who will make the final determination (arbitration or appraisal clause).
  48. What is a Subrogation Clause?
    The insurance company can require the insured to assign (transfer) to it any legal rights which the insured has against third parties (other parties) to the insurance company at the time of loss.
  49. What is an Assignment Clause?
    • - An assignment is a transfer of a policy to another person.
    • - The Assignment clause of a property insurance policy says no assignment (transfer) of the policy is valid unless signed by an officer of the insurance company.
  50. What is the Other Insurance Clause?
    The insurance company can either prohibit other insurance or can limit the amount of other insurance by adding an endorsement to the policy.
  51. What is a Pro Rata Liability clause?
    • - It applies when there are concurrent policies. Concurrent insurance is when two or more policies cover the same property. It is sometimes done when insuring high value property. The policies should be identical in all respects except face amounts.
    • - The Pro Rata Liability clause says that no insurance company shall be responsible for any more than its pro rata share of the loss.
  52. What are mortgagee rights?
    • If a mortgagee lender is named on the declarations page, it acquires three rights in the policy.
    • 1) 10 days notice of cancellation.
    • 2) To have the loss paid to the mortgagee.
    • 3) To provide Proof of Loss should the insured fail to.
  53. What is it for an Insurance company to Salvage (seconds)?
    After an insurance company pays a claim, the insurance company has the right to assume ownership of the damaged property to repair it, sell it and recover part of the loss.
  54. What is the Abandonment Clause?
    Provides that no property can be abandoned to the insurance company without its consent.
  55. What is the Vacancy and Unoccupancy Clause?
    • 1) It is usually found only in policies covering commercial (business) property.
    • 2) If included, it states that coverage is terminated after the insured property has been left cavant or unoccupied for 60 consecutive days.
    • A) Vacant - Means either completely empty or empty to the point where the insured can no longer engage in the purpose for which the property is insured.
    • B) Unoccupied - Means there are furnishings in the building, but nobody living in it or working in it.
    • 3) The Vacancy and Unoccupancy Permit
    • - Extends coverage beyond 60 days of vacancy or unoccupancy.
  56. What property is excluded under the Standard Fire policy (mostly indirect value)?
    • - Money
    • - Account (including bookkeeping records)
    • - Valuable
    • A) Securities certificates
    • B) Legal documents
    • C) Manuscripts (such as blueprints)
  57. What perils are excluded under the Standard Fire policy?
    • - War - It will cover fire damage resulting form a riot or violent demonstration.
    • - Theft
    • - Negligence - Neglect to save and protect from loss.
    • - Civil Authority - Loss caused by an order of vivil authority (except loss caused by fire).
  58. What are two types of property and casualty insurance policies?
    • 1) Personal lines property/casualty insurance. - Includes Homeowner insurance, Dwelling insurance and Personal Auto insurance.
    • 2) Commercial lines property/casualty insurance. - Includes Commercial Property insurance, Commercial Package policies, Commercial General Liability Insurance, Commercial Crime insurance and Business Auto insurance.
  59. What perils are covered under Extended Coverage (E.C.) endorsement?
    • W.C. Shaver
    • - Windstorm
    • - Civil Commotion
    • - Smoke Damage (limited) - If there is no hostile fire, smoke damage must result from a sudden cause. It will cover smoke resulting from a furnace backfire.
    • - Hail
    • - Aircraft
    • - Vehicle and Volcanic Action
    • - Explosion
    • - Riot
  60. What perils are excluded under Extended Coverage (E.C.) endorsement?
    • - Nuclear Reaction
    • - Earth Movement
    • - Flood, Sewer Backup, and Water Below the Surface
    • - Power Interruption Away from the Premises
  61. What perils are covered under the Vandalism and Malicious Mischief (V.M.M.) endorsement?
    Damage caused by vandalism and malicious mischief.
  62. What perils are excluded under the Vandalism and Malicious Mischief (V.M.M.) endorsement?
    Vandalism and malicious mischief coverage is excluded after the building has been left Vacant for 30 Consecutive Days.
  63. What are the components of the Dwelling Building and Content Basic (DP-1) form?
    • A) It covers dwelling buildings which are building people live in. To qualify for a Dwelling policy:
    • 1) The property must be occupied by four or less families.
    • 2) The property does not have to be owner occupied.
    • 3) Dwelling policies are often used to insure rental properties that the insure owns and rents to others to live in.
  64. What are the covered perils of the Dwelling Building and Content Basic (DP-1) form?
    • - The three Standard Fire policy perils.
    • - The eight Extended Coverage (E.C.) (W.C. Shaver) perils.
    • - Damage caused by Vandalism and Malicious Mischief (V.M.M.) endorsement.
  65. What are the excluded perils of the Dwelling Building and Content Basic (DP-1) form?
    • - The 4 perils excluded under the Standard Fire Policy.
    • - The 4 perils excluded under the Extended Coverage (E.C.) endorsement.
    • - V.M.M. coverage is excluded after the insure premises have been Vacant 30 Consecutive Days.
  66. What are the different coverages of the Dwelling Building and Content Basic (DP-1) form?
    • Coverage A - Dwelling - actual cash value (appraised - coinsured).
    • Coverage B - Other Structures - (Outbuildings or Appurtenant Structures) - 10% of Coverage A Automatically Extended.
    • Coverage C - Personal Property - Optional, Additional coverage.
    • Coverage D - Rental Value - 10% of Coverage A Automatically Extended.

    Both Buildings (under Coverages A, B, and D) and Personal Property, (if added under Coverage C), are protected for Actual Cash Value Only.
  67. What is the Liberalization clause?
    Provides that if within the policy period the insurance company changes its policies so as to provide more coverage without additional premium charges, the policy will automatically have the broadened coverage added without any forms or endorsements added to the policy.
  68. What are the components of the Dwelling Building and Content Broad (DP-2) form?
    • - It covers dwelling building and, optionally, contents.
    • - Liberalization Clause
  69. What are the covered perils of the Dwelling Building and Content Broad (DP-2) form?
    • - The three Standard Fire policy perils.
    • - The eight Extended Coverage (E.C.) (W.C. Shaver) perils.
    • - Damage caused by Vandalism and Malicious Mischief (V.M.M.) endorsement.
    • - Broader Explosion and Broader Smoke Coverage.
    • - Glass Breakage.
    • - Damage Caused by Burglars.
    • - Falling Objects.
    • - Weight of Ice, Snow, and Sleet.
    • - Collapse.
    • - Artificially Generated Currents.
    • - Freezing of or Discharge from a Plumbing Heating or Cooling System.
  70. What is the Broad Form perils story?
    W.C. Shaver had a bad day. There was damage to his property caused by the twelve basic perils. In addition, discharge from his plumbing came into contact with artificially generated currents which caused smoke and explosion as well as glass breakage. Weight of ice, snow, and sleet caused falling objects to collapse onto a burglar's damage.
  71. What are the excluded perils of the Dwelling Building and Content Broad (DP-2) form?
    • - The 4 perils excluded under the Standard Fire Policy.
    • - The 4 perils excluded under the Extended Coverage (E.C.) endorsement.
    • - V.M.M. coverage is excluded after the insure premises have been Vacant 30 Consecutive Days.
    • - Damage caused by Agricultural or Industrial Smudging.
  72. What are the different coverages of the Dwelling Building and Content Broad (DP-2) form?
    • Coverage A - Dwelling - Replacement Value -(coinsured).
    • Coverage B - Other Structures - (Outbuilding or Appurtenant Structures) - Optional, Additional Coverage.
    • Coverage C - Personal Property - Optional, Additional coverage.
    • Coverage D - Rental Value - Optional, Additional Coverage.

    Buildings (under Coverages A, B, and D, if added) and Personal Property, (if added under Coverage C), are protected for Actual Cash Value Only.
  73. What are the components of the Dwelling Building and Content Special (DP-3) form?
    • - It Covers Dwelling Buildings and, Optionally, Contents.
    • -Liberalization clause.
  74. What are the perils covered of the Dwelling Building and Content Special (DP-3) form?
    • - Buildings (Under Coverage A, as well as B and D, if added) are protected against ALL RISKS.
    • - Personal Property (Under Coverage C, if added) is protected against the BROAD FORM named perils.
  75. What are the perils excluded of the Dwelling Building and Content Special (DP-3) form?
    • - The 4 perils excluded under the Standard Fire Policy.
    • - The 4 perils excluded under the Extended Coverage (E.C.) endorsement.
    • - V.M.M. coverage is excluded after the insure premises have been Vacant 30 Consecutive Days.
    • - Damage caused by Agricultural or Industrial Smudging.
    • - Damage caused by wear, tear, rot, deterioration, settling, cracking, mold, rust, inherent vice, discharge of pollutants.
    • - The cost of repairing mechanical breakdowns.
    • - Damage cause by birds, vermin, rodents, insects, or domestic animals.
  76. What are the coverages under the Dwelling Building and Content Special (DP-3) form?
    • Coverage A - Dwelling - Replacement Value -(coinsured).
    • Coverage B - Other Structures - (Outbuilding or Appurtenant Structures) - Optional, Additional Coverage.
    • Coverage C - Personal Property - Optional, Additional coverage.
    • Coverage D - Rental Value - Optional, Additional Coverage.

    Buildings (under Coverages A, B, and D, if added) are protected for Replacement Cost. Personal Property, (if added under Coverage C), are protected for Actual Cash Value Only.
  77. When is the Building and Personal Property form used?
    This policy is used to cover Commercial (Business) Buildings?

    * Includes a Liberalization clause.
  78. Which group of perils does the Building and Personal Property form cover?
    • It can be written to cover any one of the three groups of perils:
    • 1) Basic Cause of Loss form.
    • 2) Broad Cause of Loss form.
    • 3) Special (all risk) Cause of Loss form.

    * All three forms cover sinkhole and sprinkler leakage damage.
  79. What are the perils excluded under the Building and Personal Property form?
    • - The 4 perils excluded under the Standard Fire Policy.
    • - The 4 perils excluded under the Extended Coverage (E.C.) endorsement.
    • - V.M.M. coverage is excluded after the insure premises have been Vacant 30 Consecutive Days.
    • - Damage caused by Agricultural or Industrial Smudging.
    • - Damage caused by wear, tear, rot, deterioration, settling, cracking, mold, rust, inherent vice, discharge of pollutants.
    • - The cost of repairing mechanical breakdowns.
    • - Damage cause by birds, vermin, rodents, insects, or domestic animals.
    • - Vacancy and Unoccupancy clause.
  80. What are the Optional Additional coverages of the Building and Personal Property form?
    • Coverage A - Building (including signs and objects attached to the building).
    • Coverage B - Personal property of the insured (either on the insured premises or within 100 feet of it).
    • Coverage C - Personal property of others. Bailee Coverage.
  81. What are the Automatic Extensions of coverage of the Building and Personal Property form?
    • - Personal property of others and personal effects.
    • - Off-premises.
    • - Newly acquired property.
    • - Valuable papers and records (but not bookkeeping records).
    • - Outdoor tress, shrubs, plants, fences, antennas, and sign not attached to the building, but within 100 feet of it.

    - This policy covers both the building and personal property for their actual cash value only. An endorsement can be added for an extra premium charge to protect buildings for replacement cost
  82. What are the Indirect Loss-Time Element Coverages of the Building and Personal Property form?
    • 1) Business Income coverage
    • A) It covers the loss of earnings of a business while it is shutdown to remodel and restock because of a covered peril.
    • B) Covered earnings include net income before taxes plus continuing normal, operating expenses such as continuing utilities, advertising expenses, and rent or mortgage payment as well as continuing payroll.
    • C) Payroll is covered unless excluded by endorsement. This allows the business to continue to pay its payroll during the shutdown.
    • D) It is coinsured (the insured can choose 50%, 60%, 80%, etc.).
  83. What are the Extra Expense coverages of the Building and Personal Property form?
    • A) This endorsement is used when a business must continue operations while the insured premises are being remodeled and/or restock as a result of a covered peril.
    • B) It protects an insured against the extra expenses of doing business during the period of restoration in excess of normal business costs.

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