Arizona Independent Insurance Adjusters Exam

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_______ ______is offered under what’s called the Dwelling Program.

Dwelling Insurance

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designed for insuring residential structures that are not eligible for a homeowners policy.

Dwelling Insurance

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A _____ ______is the most basic property insurance policy available.

Dwelling policy

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A basic dwelling policy is a _______insurance policy (does not include liability coverage or medical payments except by endorsement)

property-only

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The Dwelling program does not require the structure to be ________.

owner-occupied

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Eligibility for the Dwelling policy is as follows:

- single family homes • 1-4 family dwellings (including duplexes, 4-plexes, etc. • dwellings under construction • max 5 boarders are allowed in a DP-insured dwelling • permanently installed mobile homes are OK • incidental business risks only

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Dwelling policies can be held by ______, but also by entities such as corporations, partnerships, etc.

individuals

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Homeowners insurance, on the other hand, requires that the insured must be a ______ _____.

private party

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_______ _____ are not eligible for a dwelling policy.

Farm properties

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Properties that would require a dwelling policy because they do not qualify for a homeowner’s policy are:

a) 1-4 family dwellings rented to others b) some older homes c) most mobile homes d) homes with values under a certain threshold e) properties with low mortgage balances f) hunting cabins, bunkers

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There are three different policies under the Dwelling Program:

DP-1 Basic form (cheapest and least coverage) • DP-2 Broad Form • DP-3 Special Form (most expensive and broadest coverage)

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This policy provides very basic coverage for direct physical loss. It’s a “named peril” policy, and only covers loss by one of three perils: fire, lightning and internal explosion.

DP-1 “BASIC FORM”

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A DP-1 is a _______ _______ policy.

named peril

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DP-1 covers:

fire, lightning and internal explosion.

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For Fire loss to be covered, it must be:

Vandalism and Malicious Mischief (VMM) covers only intentional acts, does not include losses caused by burglary or theft, and does not cover “vacant” houses.

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______means houses that have no contents or permanent residents for 60 days.

“vacant”

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Internal Explosion loss does not include:

a) loss due to explosions that occur outside of the covered building b) Burst water pipes c) electrical arcing d) rupture of pressure-relief devices e) loss due 2explosions of steam boilers or steam pipes owned leased or operated by the named insured

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Many insureds who hold a DP-1 policy add two endorsements at an additional cost;________ and _______

Extended Coverage (EC) and Vandalism & Malicious Mischief (VMM)

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Extended Coverage adds the following perils:

a) Windstorm(hurricane, tornado) b) Civil commotion c) Smoke d) Hail e) Aircraft(plane hits the house) f) Vehicles(if a car swerves off the road and hits the house) g) Volcanic eruption h) Explosion (includes external explosion) i) Riot

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WC SHAVVER

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The ____ ______is very similar to the DP-1; it just covers more perils.

Broad Form (DP-2)

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the ____ automatically includes all of the Extended Coverage (EC) and Vandalism & Malicious Mischief perils:

DP-2

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Under DP-2 extended coverage there’s ___ ______for interior damage unless the wind first damages the exterior, thereby letting water in, that then causes the damage.

no coverage

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Under a DP-2 extended coverage ensuing earthquake is ____ ____(an earthquake endorsement would be needed for damaged caused by earth movement by volcanic eruption) • multiple eruptions within 72 hours are considered “one eruption” for claim purposes

not covered

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The DP-2 also covers:

weight of ice, snow & sleet burglary damage glass breakage freezing of pipes Electrical damage falling objects sudden and accidental tearing apart, cracking burning orbulging accidental discharge Collapse

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Gives “open perils” coverage for the dwelling and all structures on the property.

DP-3 SPECIAL FORM

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Although the DP-3 covers structures on an open perils basis, personal property (i.e. contents) is still covered on a ___ ___ basis (the named perils covered are the same as the DP-2; fire, lightning, EC, VMM, etc.)

named peril

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The dwelling policy is made up of the following sections:

a) Coverages b) Perils Insured Against c) General Exclusions d) Conditions

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This is coverage for the principle structure on the property; the one described on the declarations page. Coverage A includes any structures attached to the dwelling; e.g. attached garages and lean-tos.

Coverage A- Dwelling

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Coverage A Dwelling includes equipment used to service the dwelling, such as the ____ ___, water softener or the heating oil tank.

A/C compressor

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_____ _____is coverage for detached structures on the premises. These are structures that are physically separated from the dwelling by clear space. (detached garages, detached gazebos, detached sheds, fencing, stand-alone mailboxes, lamp-posts)

Coverage B (“Other Structures”)

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There is only __% of the dwelling coverage allotted to Other Structures. For example, if the insured has a Dwelling Policy with $100,000 coverage for the dwelling, there is only $10,000 coverage for any/all losses to Other Structures (per claim).

10%

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Under the DP-2 and DP-3, this 10% is in addition to the Dwelling limit of liability. Under the DP-1, the 10% is ______ in the dwelling limit of liability.

included

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____ ______is not coverage for buildings; this is coverage for the insured’s belongings.It is optional, not automatic.

Coverage C – Personal Property (also called “Contents”)

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Property coverage under a dwelling policy is based on _____ _____ _____, not replacement cost.

Actual Cash Value

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Coverage C covers the personal property of the ______, not personal property of tenants.

Insured

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Under Coverage C, ___ and ____ are covered, but only while on the premises.

rowboats and canoes

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Coverage A, B and C (above) are examples of “___ ____”. ___ ____is physical loss to tangible property.

Direct Loss

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The dwelling policy also covers “___ ___” – ___ ____is an economic loss that is intangible.

indirect loss

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This coverage pays the insured for lost rental revenue. It pays when, for example, the insured’s rental property is damaged and a tenant has to move out and is therefore no longer paying rent.

Coverage D- Fair Rental Value

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Under Coverage D If the reason for the loss of rental value is an order by a civil authority (such as a mandatory evacuation), the insured can receive up to ___ ____of compensation maximum.

Two Weeks

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This coverage pays for additional living expenses incurred by the insured (not the tenant).

Coverage E – Additional Living Expense

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This is coverage for removal of debris. Important notes: a) A peril insured against must cause the loss. b) It covers debris of covered property.

Debris Removal

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This is coverage for temporary repairs made/necessary measures taken solely to protect the property from further damage after a covered peril.

Reasonable Repairs

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this gives an additional 10% of coverage A for increased costs of repair due to the enforcement of any law or code that regulates construction, remodeling, etc.

Ordinance or Law

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Notes about Ordinance or Law: this is only in the DP-2 and DP-3! – no Ordinance or Law coverage on the ____

DP-1

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pays up to $500 if the fire department is called to protect property from a peril insured against.

Fire Department Service Charge

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the value of damaged trees, shrubs and plants are covered up to a maximum of 5% of Coverage A, and a maximum of $500 for any one tree, shrub or plant, when damaged by a covered peril.windstorm and hail loss to trees, shrubs, etc. is not covered

Trees, Shrubs and Other Plants

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there’s an additional 10% in addition to the coverage C limits for improvements the insured makes at his/her expense to the dwelling (if he/she is a tenant).

Improvements, alterations and Additions

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War and Nuclear Hazard b) Flood c) Water back-up from sewers or drains d) Water e) Earthquake, landslide, sinkhole f) Power failure off the premises. g) Neglect and intentional loss

General exclusions under the dwelling program

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The ___ _____lays out some very important details, such as the duties of the insured and the insurer after a loss, how losses are settled, how mortgage companies factor into a loss settlement, etc.

Conditions section

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This is about the requirement that the insured must be in a position to suffer an economic loss if an insured item were damaged.

Insurable interest

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this section specifies how the Dwelling policy will interact with the other policy; the Dwelling policy will only pay the percentage of the loss that it’s limit bears to the total limits of all policies covering the loss.

Other insurance

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The insurance company is only obligated to pay on a claim if the insured “follows the rules” after a loss. The conditions section lays out exactly what these “rules” – more precisely duties - are.

Insured’s Duties after Loss

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important duties of the insured after a loss:

a. Give prompt notice, must file a claim within a reasonable timeframe b. Protect property against more damage c. Keep records of expenses d. Cooperate with investigation e. Show damaged property to the insurer f. Compile a detailed list of damage

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If an insurer requests a proof of loss form the insured has ___ days to comply.

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The _____ ______says that any changes that broaden coverage on the edition of the policy that the insured holds will automatically apply without additional premiums.

Liberalization Clause

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If an insured intentionally conceals or misrepresents facts, the policy is voided and no coverage is given.

Concealment, Fraud or Misrepresentation

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Buildings and Other Structures (Coverage A and B) is settled at _____ ______.

Replacement Cost

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the insurance company will only pay the Actual Cash Value of the loss until they receive _____ that the repairs have been completed.

Proof

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This endorsement gives the same coverage as the Liability portion of a homeowners' policy. Note – this can be added as an endorsement, or purchased as a “stand-alone” policy.

Personal Liability Endorsement

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because the dwelling policies do not cover ____, this is a popular endorsement.

Theft Endorsement

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Two types of theft coverage:

a) Limited Theft Coverage – covers property stolen from the insured premises b) Broad Theft Coverage – covers for property that’s stolen either on or off the premises

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___ ___ ___covers a dwelling or building under Coverage A while it’s being built. Insured must advise the insurer when construction is complete for an adjustment of premium. Occupancy is permitted for 30 days after completion.

Dwelling Under Construction

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for an additional premium, this endorsement annually increases coverage A by 4%, 6% or 8%.

Automatic Increase Endorsement

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if the insured recovers property that’s been paid for by the insurer after a claim, the insured must notify the insurer, and the claim will be adjusted accordingly.

Recovered Property

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A stand-alone lamp post in the front yard would be considered:

Coverage B

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A windstorm causes damage on a property covered by a DP-2 form. There is downed fencing, some furniture in the dwelling is water stained, and a cloth awning is blown away. What, if anything, is covered?

The Fencing Only

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Richard Ramsey's house is covered under a DP-1 policy with a $100,000 Coverage A limit of liability. A fire destroys the dwelling and a $30,000 detached mother-in-law building. How much can Mr. Ramsey recover from the insurance company?

$100,000

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An insured has a DP-2 with $100,000 limit of liability. She loses five trees during a hailstorm. Each tree is worth $250. How much can she receive if she makes a claim?

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A detached garage would be considered:

Coverage B

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Which type of Personal Property IS covered under Coverage C -- Personal Property?

computers and electronics

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How much flood coverage is available under a Dwelling policy?

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