Insurance Policies & Coverage Analysis Flashcards
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Read the first 7 Insurance Policies & Coverage Analysis flashcards as text
An insured files a claim for water damage caused by a burst pipe. The adjuster discovers the pipe had been leaking slowly for months before bursting. Which policy exclusion is most likely to apply?
Answer: Wear and tear / gradual damage exclusion
Gradual or continuous leakage is typically excluded under most property policies because it represents maintenance neglect rather than a sudden, accidental loss.
A liability policy with a '$1 million per occurrence / $2 million aggregate' limit means:
Answer: The insurer pays up to $1 million for any single event and $2 million total for all events in the policy period
The per-occurrence limit caps payment for a single incident, while the aggregate limit is the total the insurer will pay for all occurrences during the policy period.
Which homeowner policy form (HO-3) provides open-peril coverage on the dwelling but named-peril coverage on personal property?
Answer: HO-3
The HO-3 Special Form covers the dwelling and other structures on an open-peril basis but covers personal property only for the named perils listed in the policy.
A 'claims-made' liability policy covers claims:
Answer: That arise from incidents occurring after the retroactive date and reported during the policy period
Claims-made policies require that the triggering incident occur after the retroactive date AND that the claim be reported while the policy is in force.
Under the principle of indemnity, an insured who suffers a $40,000 loss on property insured for $60,000 should receive:
Answer: $40,000
Indemnity means restoring the insured to their pre-loss financial position, so they receive the actual loss amount ($40,000), not the full policy limit.
An 'umbrella' liability policy is designed to:
Answer: Provide excess coverage above the limits of underlying policies and fill certain coverage gaps
Umbrella policies sit above underlying liability policies and pay after those limits are exhausted, and may also cover some exposures excluded by underlying policies.
Which of the following best describes a 'blanket' property insurance policy?
Answer: A policy covering multiple locations or items under a single limit
A blanket policy provides one combined limit applicable to multiple locations, buildings, or categories of property rather than scheduling each separately.