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34 Cards in this Set

  • Front
  • Back

identify 3 classes of property insured by commercial property insurance policies

building, equipment & stock

commercial property identify 2 ways to insure it?

1-Scheduled coverage only the property specifically identified or scheduled on the policy is insured / 2 - POED - All property, single limit of insurance

Why is it important to ensure that a proper description of the business is provided to the insurance company RE: Stock?

because the description of the insureds business, sets the parameters of coverage provided by the insurance company relating to the stock. - (so if a claim arises claims will only be paid on stock that is USUAL to the insureds business)

Similar property belonging to others is Automatically insured under the amounts for stock & equipment; Discuss 3 circumstances that this would apply

1. the property lost or damaged is similar to that insured by the policy

2.The insured was under an obligation to insure that property

3. The insured was legally liable for it

identify 3 ways property can be valued?

1. Actual Cash Value- the replacement or repair less depreciation

2. Replacement Cost- represents the cost of repair, replace or rebuild the lost or damages property without deduction for depreciation

3.Book Value

Which method of valuation has NO bearing on the amount of payment made by the insurer?

book value- is the price which was expended @ the time of purchase

explain the basic difference between ACV & replacement value

ACV takes depreciation into account where Replacement cost does not

the calculation of AVC is often not as straight forward; discuss 5 different approaches used to determine ACV

1. Formula/Cost approach- most commonly used step to determine the replacement cost of all property

2. Market Value/Direct Sales: Done by a realtor, determine the fair market value of the property; property value prior to the loss, property after the loss, The land value

3. Income Approach: income producing companies, useful when the building is dilapidated or run down buildings. Use the net annual rent & multiply it by the capitalization rate to arrive @ the ACV amount

4. True Value to the Owner: Used when the 3 previous methods have failed.

5. Broad Evidence Rule

Formula/Cost approach-

most commonly used step to determine the replacement cost of all property

Income Approach:

income producing companies, useful when the building is dilapidated or run down buildings. Use the net annual rent & multiply it by the capitalization rate to arrive @ the ACV amount

True Value to the Owner:

Used when the 3 previous methods have failed have failed used to consider special circumstances.

Broad Evidence Rule

1. Replacement Value less depreciation

2. Market Value

3. Rental Value

4. Use of the building

5. Location

6. Obsolescence

7. Assessed Value

8. Resale

Explain the difference between package & manuscript policies:

Package policies combined under one form a variety of coverage's needed by the majority of offices & small mercantile operations

manuscript policies are designed for risks having special exposure and for which no standard coverage form exists

Reinsurance Policy:

Are created when the Primary Insurer cedes part of the risk assumed to one or more other insurers, all insurers share premiums & losses. Contract is between the Insurer & the re-insurer policy. Controlled by the primary Insurer and all claims are paid by it.

Subscription Policy:

Are based on a group of insurers who have agreed to participate in providing insurance coverage's & share both the premiums & losses each agreement is usually negotiated separately on a form acceptable to all subscribers, Lead Co issues the policy, collects the premium & handles policy holder services including claims, which are paid on a basis of participating by each insurer, cheques being issued by each insurer

Whats the purpose of minimum retained premiums

The purpose of the minimum retained premium is to ensure that the costs of underwriting the policy can be recouped at least in part

Common Policy Clauses

3 Factors considered by the adjuster when determining the amount to be provided by the policy?

1. ACV

2.Insurable Interest

3. Amount of Insurance

Co Insurance

Explain the intent of the waiver of Co-Ins

recognizes that many insured losses are small, the waiver of Co \ins clause eliminates the need for costly inventory to prove compliance with the co clause

-wont be applied if the loss is less than $5k

-is less than 2% of the amount of insurance

What is the purpose of the Stated Amount Co-Ins?

The stated amount co-ins clause provides for the removal of the standard co-ins penalty for under insurance

What requirements fall upon the insured who wants to take advantage of stated amount co-insurance clause?

insured must file a statement of valiues with the insurer representing 100% of the value of all property, verified by appraisal or other means acceptable to the insurer. the insured must maintain those values throughout the policy term.

State why exclusions exist & provide 2 examples of each?

Exclusions are designed for the following reasons.

1. To exclude losses which are generally considered by insurers to be commercially uninsurable

-Deliberate Acts of violence(war, rebellion, revolution)

-Nuclear energy hazard

To excluded losses which have within them the potential to be catastrophic;

-EQ, snowslide, landslide


to exclude losses for which more specialized policy forms have been developed:

-Automobiles & aircraft

-Money & securities

-Boiler & machinery

Identify 2 situations where a breach of a policy condition will not result in a denial of coverage by the insurer

1-When the loss was not caused or contributed by the breach

2-When the breach occurred in a portion of the premises over which the insured had no control

Reinstatement Clause:

amount of insurance is automatically reinstated immediately following a loss. In other words the insured will have as much insurance after a loss as they did before.

property protection systems, list 3


2-Fire detection system

3-Intrusion detection system

state 3 obligations placed upon the insured regarding property protection systems

1. Must advise the insurance company if there is a flaw or interruption to the system which they are aware of

2. when any contract providing monitoring or maintenance or maintenance services to such systems has been cancelled or not renewed

3. when the police service in response to any of the above has been suspended

Tenants improvements, state 2 settlement options provided by the policy when there has been a loss

1.- Settlement is based on ACV basis when the lost or damaged property is reinstated with due diligence & dispatch

When the property is not reinstated with due diligence and dispatch the amount of the settlement is based upon the original cost of the improvements & betterment's factored against time remaining on the lease

Outline the basis of settlement when there is a loss to an insured's records?

manual records settlements are limited to the "blank value " only plus the costs to copy or transcribe them

automated records: limited to the cost of reproducing lost info from the duplicates or from originals

In either case there is no payment for the cost of gathering or assembling data

Statutory Conditions

Misrepresentation constitutes a breach of good faith by the applicant. List 3

1. False Description of the property to be insured

2.Misrepresentation of a material fact

3. Fraudulent omission of a material fact

Identify 5 common types of misrepresentation, made on insurance applications

1. Previous Claims

2. Use of business premises by the insured & others

3. Existences of other insurance on the property

4. Number of mortgages or encumbrances on the property

5. Vacancy

Additional Conditions


This condition requires that the loss to property caused by an illegal act be reported immediately to authorities this helps discourage fraudulent claims


Obliagtes insured to take all reasonable measures to recover lost or stolen property


The policy does not remove the responsibility for the insured's from the person having custody of such property


Loss or damage to one item of a pair or set does not constitute loss to the entire set, the remaining items continue to have value and this amount will be deducted from the amount of the claim payment


When there is loss to only one part of property which consists of several parts the amount of the settlements is restricted to the value of the lost or damaged part including the cost of installation