Insurance: Dwelling Policy

Front 1

Four Parts of Dwelling Policy with Standard Fire Coverage:

Back 1

DICE
Declarations, Insuring Agreement, Conditions, Exclusions

Front 2

Declarations

Back 2

States names of insurance company and insured, address of property,
amount of coverage, premium, and Policy Period

Front 3

INsuring Agreement

Back 3

Contains the Consideration clause, Effective Time (inception and
expiration), Effective Location, Actual Cash Value
limitation, company options, Direct versus Indirect losses,
Insurable Interest, and Perils covered (or excluded)

Front 4

Endorsement

Back 4

a form added to a policy that changes the policy’s
provisions for better or worse, usually for an extra premium.

Front 5

CONDITIONS

Back 5

Conditions apply to both the insurer and the insured; for example,
the insured must give the insurance company immediate written
notice of any loss

Front 6

EXCLUSIONS

Back 6

Exclusions specify losses not covered by the policy; for example,
there is no coverage for loss caused by war or theft

Front 7

Consideration Clause

Back 7

In essence, the applicant’s consideration is the amount of the premium paid
(and his answers to the questions on the application) and the company’s consideration is its agreement
to abide by the provisions contained in the policy and to pay covered claims. Consideration is required
to make a valid contract.

Front 8

Actual Cash Value (ACV):

Back 8

The policy will pay the insured, in the event of a claim, the policy limit or
the Actual Cash Value, whichever is less. ACV is the Depreciated Value, defined as today’s
Replacement Cost minus Depreciation (which is based on the age of the structure insured).

Front 9

Replacement Cost

Back 9

only
the Depreciated Value (the ACV) of the structure. Most insurance companies will depreciate a
building at a rate of about 1% per year, up to a maximum of about 40%.

Front 10

Direct versus Indirect Losses:

Back 10

The Standard Fire Policy only covers Direct Losses. An example of a
Direct cause of loss is Fire. Indirect losses are not covered. If you had a Standard Fire Policy
covering your office building and it caught fire, the damage done by the fire would be a direct result,
and it would be covered. However, you would no longer be able to operate your business at this
location until the repairs were completed. This loss (Loss of Business Income) is an indirect result of
the fire and it is not covered on the Standard Fire Policy.

Front 11

The Standard Fire Policy only covers three Perils:

Back 11

Direct
loss by Fire, Lightning, and Removal. The Standard Fire Policy is a Named Peril or Specified Peril
policy, meaning that if a peril is not listed in the Insuring Agreement, it is not covered.

Front 12

The policy is Void (no coverage) if

Back 12

the insured willfully conceals or misrepresents
any material fact concerning the insurance.

Front 13

The policy does not cover

Back 13

certain types of property. Even when such a
property is destroyed by fire, it is not covered. Money is never covered on a Fire policy, although
there may be some coverage (up to $200) on a Homeowners policy.

Front 14

The policy will not cover Fire if it is caused by

Back 14

invasion or civil war, if the
insured neglects to use "all reasonable means to save and preserve the property at and after a loss," or
when the property is endangered by fire in a neighboring premises, and (line 24) there is no coverage
for Theft.

Front 15

Certain conditions will cause coverage to be suspended

Back 15

an increase in hazard within the knowledge or control of the insured,

Front 16

hazard:

Back 16

something that increases the risk

Front 17

line 33 coverage is suspended while

Back 17

vacant or unoccupied for more than 60 days

Front 18

Vacancy

Back 18

moved out, taking all of his furnishings
with him

Front 19

Unoccupied

Back 19

temporarily gone (on vacation) and his furnishings
are still on the premises

Front 20

Short-Rate
penalty

Back 20

it is figured from a percentage table, called the Short-Rate Table, that insurance
companies use to determine exactly how much the penalty will amount to. So you would receive
back a little less than the $60 unearned by the company, probably around $50, instead. The
difference is the Short-Rate penalty

Front 21

cancellation for nonpayment

Back 21

of premium only requires 10 days’ advance notice.

Front 22

Right of Appraisal.

Back 22

if the insured and insurer fail to agree
on the amount to be paid in the event of a loss, each side may hire its own appraiser and bear the cost
thereof. The two appraisers will then select a disinterested third party (umpire) and the cost of the
umpire will be borne between the parties. The parties are bound by the decision of any two of the
three (appraisers plus umpire).

Front 23

Collateral
Security Interest.

Back 23

bank’s insurable interest position in the property

Front 24

salvage

Back 24

After the
insurer pays a claim, whatever is left of the damaged property now belongs to the company.

Front 25

Abandonment

Back 25

walking away from a property with a lost without assisting the insurance company in a settlement

Front 26

Subrogation

Back 26

your insurance
company, after paying your claim, now stands in your place and takes over your right to sue the guilty
party.

Front 27

Negligence

Back 27

failure to act as a reasonable person.

Front 28

Dwelling Property Forms.

Back 28

Endorsements must be added to
describe the type of property to be covered and to broaden the policy’s coverage

Front 29

Dwelling Property Forms,

Back 29

DP-1=basic, DP-2= broad, DP-3= special/all-risk

Front 30

Basic form, DP1

Back 30

A Named Peril policy that pays on ACV for both structure and contents (if covered).
Extra premium buys Extended Coverage Endorsement (ECE - not optional) and
Vandalism or Malicious Mischief coverage (VMM - optional). All extensions payments
reduce Coverage A payments. Covers some Indirect Losses when they result from a
Direct Loss, such as Rental Value. Vacancy restrictions are dropped except as specified
in VMM.

Front 31

Broad Form, DP2

Back 31

A Named Peril policy that adds several perils. Some extensions are in addition to
Coverage A limit, while others reduce it. Structures are covered for Replacement Cost,
contents (if covered) are still ACV. Includes all DP-1 coverages.

Front 32

Special Form, DP3

Back 32

An ALL-RISK policy (on the structures coverage only), in which anything not
EXCLUDED is COVERED. Unspecified Perils are included, and Theft coverage is
added for items "built into" the structure(s), but not Contents. Liability is still not
covered. Contents (if covered) are still Named Peril and ACV. Effect of extensions of
coverage on Coverage A limit is the same as in DP-2. Includes all DP-1 and DP-2
coverages.

Front 33

WHARVVES

Back 33

Wind, Hail, Aircraft, Riot and Civil Commotion, Vehicles, Volcanic Eruption, Smoke