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CPCU 551 Chapter 6

Chapter 6 Notes

QuestionAnswer
What is the National Flood Insurance Program? A program created by the government acknowledging that flood insurance did not exist at a price consumers were willing to pay.
What is WYO? Write Your Own (A program allowing private insurers to write flood insurance under National Flood Insurance Program.
Who is eligible for flood national flood insurance? Property located in communities participating in the nfip.
What two programs does the nfip consist of? Emergency and Regular Program
Define Emergency Program? Initial phase of nfip property owners can purchase a limited amount of insurance at subsidized rates (lower limites though).
Define Regular Program? Second phase of nfip in which community agrees to adopt flood control and land use restrictions. Higher limits available.
Maximum amounts of insurance available for flood insurance? Regular program is $500k for building and same for personal property in emergency program it is $100k.
Name the two forms the nfip insurance policy comes in? General Property Form, Residential Condominium Building Association Policy
Rules associated with the nfip general property form? Always covers at acv, does not include co-insurance, cannot be written as blanket policy, no loss of use or income included.
Name the four coverages in property covered secition of nfip Property Covered section? A) Building Property B) Personal Property C) Other Coverages D) Increased Cost of Compliance
Coverage B (Personal Property) can be purchased to cover either? Household Personal Property or Other then Household Personal Property (but not both)
Coverage C (Other Coverages)includes? Debris Removal, Loss Avoidance Measures, Pollution Damage
Coverage C (Other Coverages) pollution coverage pays for up to how much? $10k
Describe Coverage D (Increased Cost of Compliance)? Only covers for compliance relative to floodplain management. Limit is $30k
What is REBAP? Residential Condominium Building Association Policy.
In what three ways does REBAP differ from the General Property Form? 1) Higher limit ($250k x # of units), 2) Replacment Cost is used 3) 80% Coinsurance applys
What is the ISO Flood Coverage Endorsement? Insurance available through insureds outside of the mapped flood zones. It is attached to a commercial property policy.
How does the endorsement differ from nfip coverage? Greater variety of property covered, wider range of coverage, can be written to cover at replacement cost of functional valuation.
Limits of insurance for flood endorsement (what is difference to other commercial coverage)? Often subject to separate limit and usually lower then regular limit.
Earthquake Insurance (Often limited from $1-$5 million) why are these limits sufficient? Insureds are often in area of low probability of quakes and damage is often minor, insureds often underestimate their exposure, insureds are unwilling or able to purchase higher limits.
Earthquake and Volcanic coverage consider what period of time as one occurrence? 7 days
How are deductibles applied to earthquake coverage? As a stated percentage of either the limit of insurance applicable, or a percentage of the value of the property.
How does earthquake coverage pay for "ensuing loss" ie a fire caused by an earthquake? The most it will pay is the limit on the other covered peril (ie fire).
Define a "Difference In Conditions Policy"? Policy that covers all risks basis to fill in gaps in regular commercial coverage.
List the advantages of purchasing Difference in Conditions Insurance? Cost Effective, no coinsurance, easy to modify, broader coverage
List the dis-advantages of purchasing Difference in Conditions Insurance? Market is Limited, Not standardized so they could be interpreted differently by the court, Minimum Premium amounts may make it too expensive for smaller insureds.
List the 3 types of speciality property policies? Output Policies, Insurance for Highly Protected Risks, Layered Property Insurance.
Define Highly Protected Risk? A large property that employees higher standards of loss control in exchange for broader coverage. Generally not cost effective to pay for the level of loss control for smaller properties.
Define Layered Property Coverage? Buying property coverage in layers with excess levels so one carrier may cover up to 1 million, the next coverage over $1 million.
Attachment Point Defined? Dollar amount at which a reinsurer respondes to loss.
Created by: GARYSCHILD