Property and Casualty - Kaplan Financial Education€¦ · iii LESSON ONE Basic Terms and Concepts...
192
Class Notes 3 rd Edition Texas Property and Casualty
Transcript of Property and Casualty - Kaplan Financial Education€¦ · iii LESSON ONE Basic Terms and Concepts...
Class Notes
3rd Edition
Texas
Property and Casualty
TX_P&C_ClassNotes_3e.indb 1 1/27/2014 12:43:27 PM
At press time, this edition contains the most complete and accurate information currently available. Owing to the nature of license examinations, however, information may have been added recently to the actual test that does not appear in this edition. Please contact the publisher to verify that you have the most current edition.
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TEXAS PROPERTY AND CASUALTY CLASS NOTES, 3RD EDITION ©2014 Kaplan, Inc. All rights reserved.
The text of this publication, or any part thereof, may not be reproduced in any manner whatsoever without written permission from the publisher.
If you find imperfections or incorrect information in this product, please visit www.kfeducation.com and submit an errata report.
Published in January 2014 by Kaplan Financial Education. Printed in the United States of America.
ISBN: 978-1-4754-2423-2 / 1-4754-2423-X
PPN: 3200-4958
TX_P&C_ClassNotes_3e.indb 2 1/27/2014 12:43:27 PM
iii
L E S S O N O N E Basic Terms and Concepts 1
L E S S O N T W O The Insurance Contract 7
L E S S O N T H R E E Overview of Property and Casualty Insurance 17
L E S S O N F O U R The Insurance Company 27
L E S S O N F I V E Insurance Regulations 33
L E S S O N S I X Personal Auto Policy 47
L E S S O N S E V E N Dwelling Policy 59
L E S S O N E I G H T Homeowners Policy 67
L E S S O N N I N E Residual Markets and Other Miscellaneous Coverages 81
L E S S O N T E N Commercial Policies 89
L E S S O N E L E V E N Marine Insurance 97
L E S S O N T W E L V E Business Liability Coverages 103
L E S S O N T H I R T E E N Farm Insurance 115
L E S S O N F O U R T E E N Commercial Auto Insurance 121
L E S S O N F I F T E E N Crime Insurance and Bonds 127
L E S S O N S I X T E E N Package Policies 135
L E S S O N S E V E N T E E N Workers’ Compensation 143
Lesson Reviews, Answers and Rationales 151
Glossary 177
Contents
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TX_P&C_ClassNotes_3e.indb 4 1/27/2014 12:43:27 PM
Lesson OneBasic Terms and Concepts
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2Le
sson
One
Ba
sic
Term
s an
d C
once
pts
Less
onO
neLe
sson
One
Bas
ic T
erm
s an
d C
once
pts
© 2
014
Kap
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Uni
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ity S
choo
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rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Insu
ranc
e •T
he tr
ansf
er o
f ris
k th
roug
h a
lega
l con
tract
–Fro
m in
sure
d (c
usto
mer
)—1st
party
–To
insu
rer (
insu
ranc
e co
mpa
ny)—
2ndpa
rty•B
ased
upo
n pr
inci
ple
of in
dem
nity
–To
rest
ore
to p
re-lo
ss c
ondi
tion
–No
bette
r, no
wor
se
© 2
014
Kap
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nal a
nd C
ontin
uing
Edu
catio
n2
Prop
erty
Ver
sus
Cas
ualty
Insu
ranc
e
•Pro
perty
insu
ranc
e–C
over
s in
sure
d’s
real
pro
perty
(stru
ctur
es) a
nd
pers
onal
pro
perty
(mov
eabl
e st
uff)
agai
nst
dam
age
or lo
ss re
sulti
ng fr
om c
over
ed c
ause
s of
loss
cal
led
peril
s•C
asua
lty in
sura
nce
–Cov
ers
insu
red’
s no
n-pr
oper
ty lo
sses
© 2
014
Kap
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vers
ity S
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rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
pp
y–L
egal
liab
ility
to o
ther
s—3rd
party
Pers
onal
Lin
es V
ersu
s C
omm
erci
al
Line
sP
erso
nal l
ines
: Ins
uran
ce fo
r fam
ilies
and
in
divi
dual
s–A
uto
–Hom
eow
ners
–Boa
ts–R
ecre
atio
nal v
ehic
les
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
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3Le
sson
One
Ba
sic
Term
s an
d C
once
pts
Pers
onal
Ver
sus
Com
mer
cial
Lin
es
Com
mer
cial
line
s: In
sura
nce
for
busi
ness
es–C
omm
erci
al a
uto
–C
omm
erci
al p
rope
rty–C
omm
erci
al li
abilit
y–W
orke
rs’ c
ompe
nsat
ion
© 2
014
Kap
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Uni
vers
ity S
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l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Ris
k•U
ncer
tain
ty o
f fin
anci
al lo
ss–P
ure
risk
•Cha
nce
of lo
ss o
nly
–Spe
cula
tive
risk
•Cha
nce
of lo
ss o
r gai
n
•Ins
uran
ce c
over
s pu
re ri
sks
only
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Law
of L
arge
Num
bers
•Ins
uran
ce c
ompa
nies
take
on
man
y ris
ks w
ith a
n ex
pect
atio
n of
pay
ing
clai
ms
Thi
ih
li
dh
h•T
he q
uest
ion
is h
ow m
any
clai
ms
and
how
muc
h w
ill th
ey c
ost
•Ins
urer
s em
ploy
peo
ple
calle
d ac
tuar
ies
to
estim
ate
clai
ms
usin
g a
mat
hem
atic
al c
once
pt
know
n as
the
law
of l
arge
num
bers
© 2
014
Kap
lan
Uni
vers
ity S
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rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–As
the
num
ber o
f hom
ogen
ous
(sim
ilar)
loss
ex
posu
res
incr
ease
s, th
e m
ore
accu
rate
cla
ims
can
be p
redi
cted
from
the
grou
p
Peril
sA
peril
cau
ses
a lo
ss–C
omm
on c
ause
s of
loss
incl
ude
fire,
win
d,
light
ning
, and
so
on–C
over
age
can
be p
rovi
ded
in o
ne o
f tw
o w
ays
•Nam
ed p
eril
(spe
cifie
d pe
rils)
: Lis
ts th
e pe
rils
that
are
co
vere
d in
the
polic
y•O
pen
peril
(all
risk)
: Cov
er a
ll pe
rils
exce
pt th
ose
spec
ifica
lle
clde
db
the
polic
© 2
014
Kap
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vers
ity S
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ssio
nal a
nd C
ontin
uing
Edu
catio
n8
spec
ifica
lly e
xclu
ded
by th
e po
licy
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4Le
sson
One
Ba
sic
Term
s an
d C
once
pts
Haz
ard
•Haz
ards
are
not
cau
ses
of lo
ss b
ut a
re
thin
gs th
at in
crea
se th
e ch
ance
of a
per
il ha
ppen
ing
happ
enin
g•T
ypes
of h
azar
ds–P
hysi
cal:
Visi
ble
char
acte
ristic
•Exa
mpl
e: A
dea
d tre
e in
the
yard
–Mor
al: D
isho
nest
tend
enci
esE
lI
ii
td
it
© 2
014
Kap
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ity S
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nd C
ontin
uing
Edu
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n9
•Exa
mpl
e: In
surin
g a
conv
icte
d ar
soni
st–M
oral
e: A
ttitu
de o
f car
eles
snes
s •E
xam
ple:
Lea
ving
key
s in
an
unlo
cked
car
Type
s of
Los
s •D
irect
: Im
med
iate
phy
sica
l dam
age
to p
rope
rty–D
amag
e to
a h
ouse
cau
sed
by a
torn
ado
Dt
dt
llii
itht
–Dam
age
to a
car
due
to c
ollis
ion
with
a tr
ee–D
amag
e to
a re
tail
stor
e ca
used
by
a fir
e •I
ndire
ct: L
oss
that
hap
pens
afte
r the
dire
ct lo
ss
but d
ue to
the
loss
of u
se o
f the
pro
perty
. Als
o ca
lled
cons
eque
ntia
l. –A
dditi
onal
livin
gex
pens
es
© 2
014
Kap
lan
Uni
vers
ity S
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rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Add
ition
al li
ving
exp
ense
s–R
enta
l car
exp
ense
–Los
s of
inco
me
Insu
rabl
e In
tere
st•F
or a
n in
sura
nce
polic
y to
pay
, the
re m
ust
be a
n in
sura
ble
inte
rest
—fin
anci
al ri
sk o
f lo
ss–E
xist
at t
he ti
me
of lo
ss fo
r pro
perty
and
ca
sual
ty lo
sses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Prox
imat
e C
ause
•The
firs
t cau
se in
an
unbr
oken
cha
in o
f ev
ents
–“H
ad it
not
bee
n fo
r thi
s oc
curr
ing,
this
wou
ld
no
t hav
e oc
curr
ed”
•Pro
xim
ate
caus
e is
impo
rtant
whe
n de
term
inin
g co
vera
ge in
a c
laim
•Typ
ical
lyif
the
prox
imat
eca
use
isco
vere
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
•Typ
ical
ly if
the
prox
imat
e ca
use
is c
over
ed,
all r
esul
ting
dam
age
is c
over
ed
TX_P&C_ClassNotes_3e.indb 4 1/27/2014 12:43:28 PM
5Le
sson
One
Ba
sic
Term
s an
d C
once
pts
Prox
imat
e C
ause
Exa
mpl
e•L
ight
ning
hits
a h
ouse
cau
sing
a fi
re in
the
kitc
hen.
The
kitc
hen
is a
lso
dam
aged
by
wat
er w
hen
the
firef
ight
ers
put o
ut th
e fir
e.
•Wha
t is
the
prox
imat
e ca
use?
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
TX_P&C_ClassNotes_3e.indb 5 1/27/2014 12:43:28 PM
TX_P&C_ClassNotes_3e.indb 6 1/27/2014 12:43:28 PM
Lesson TwoThe Insurance Contract
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8Le
sson
Tw
o Th
e In
sura
nce
Con
trac
t
Less
onTw
oLe
sson
Tw
oTh
e In
sura
nce
Con
trac
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Elem
ents
of L
egal
Con
trac
t (C
ALC
)
•Com
pete
nt p
artie
s–
App
lican
t mus
t be
18 +
san
e +
sobe
r
•Agr
eem
ent
–C
ompo
sed
of th
e of
fer (
insu
red
com
plet
es a
pplic
atio
n)
and
acce
ptan
ce (i
nsur
er is
sues
pol
icy)
•Leg
al p
urpo
se—
trans
fer o
f ris
k is
lega
l• C
onsi
dera
tion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Con
side
ratio
n–
Exc
hang
e of
val
ues
(insu
red
give
s pr
emiu
m a
nd
info
rmat
ion,
the
insu
rer g
ives
a p
rom
ise
to p
ay in
the
futu
re)
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•R
epre
sent
atio
ns–
Info
rmat
ion
belie
ved
to b
e tru
e–
Ans
wer
s to
que
stio
ns b
y th
e in
sure
d ar
e re
pres
enta
tions
•M
isre
pres
enta
tion
–In
form
atio
n th
at is
not
true
. Has
no
effe
ct o
n th
ein
sure
r’sde
cisi
onto
issu
eth
epo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
the
insu
rers
dec
isio
n to
issu
e th
e po
licy
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•M
ater
ial m
isre
pres
enta
tion
–In
form
atio
n th
at is
not
true
but
wou
ld h
ave
caus
ed th
e in
sure
r not
to is
sue
the
polic
y–
Usu
ally
is c
once
aled
(int
entio
nally
hid
den)
by
the
insu
red.
May
voi
d th
e po
licy
•Fra
ud–
Anal
l-out
effo
rtby
one
party
tode
ceiv
ean
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
An a
llou
t effo
rt by
one
par
ty to
dec
eive
and
ch
eat t
he o
ther
TX_P&C_ClassNotes_3e.indb 8 1/27/2014 12:43:29 PM
9Le
sson
Tw
o Th
e In
sura
nce
Con
trac
t
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•W
arra
nty
–Writ
ten
into
the
polic
y–G
uara
ntee
s an
insu
red
will
do (o
r not
do)
so
met
hing
–Usu
ally
onl
y fo
und
in c
omm
erci
al p
olic
ies
–A b
reac
h of
a w
arra
nty
may
voi
d th
e po
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Lega
l Iss
ues
Affe
ctin
g In
sura
nce
Con
trac
ts•B
inde
r: Te
mpo
rary
con
tract
of i
nsur
ance
pe
ndin
g is
sue
of th
e po
licy
–Usu
ally
issu
ed b
y th
e ag
ent
–May
be
writ
ten
or v
erba
l–G
ood
for u
p to
30
days
in T
exas
–Can
be
canc
elle
d by
the
insu
rer
Doe
sno
tgua
rant
eea
polic
yw
illbe
issu
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
–Doe
s no
t gua
rant
ee a
pol
icy
will
be is
sued
–Cea
ses
auto
mat
ical
ly if
a p
olic
y is
is
sued
/dec
lined
Polic
y St
ruct
ure
(DIC
E)•T
here
are
four
maj
or p
arts
to a
n in
sura
nce
polic
y, e
ach
serv
ing
its o
wn
func
tion
–Dec
lara
tions
–Ins
urin
g ag
reem
ent
–Con
ditio
ns–E
xclu
sion
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Dec
lara
tions
(DIC
E)•M
ay a
lso
be c
alle
d th
e de
clar
atio
ns p
age,
de
clar
atio
ns s
heet
, or f
ace
of th
e po
licy
•Tai
lors
the
polic
y to
mee
t the
spe
cific
ne
eds
of a
n in
sure
d•C
onta
ins
the
six
Ps
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_P&C_ClassNotes_3e.indb 9 1/27/2014 12:43:29 PM
10
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Info
rmat
ion
on th
e D
ecla
ratio
ns:
Six
Ps•P
olic
y nu
mbe
r•P
artie
s–N
amed
insu
red
and
insu
rer
–Mor
tgag
ee o
r lie
n ho
lder
(if a
pplic
able
)•P
rope
rty d
escr
iptio
n an
d its
loca
tion
•Pol
icy
term
(effe
ctiv
e an
d ex
pira
tion
date
s)–M
ostp
olic
ies
are
one
year
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–Mos
t pol
icie
s ar
e on
e ye
ar•P
olic
y lim
its a
nd d
educ
tible
s•P
rem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Lim
its•L
imit
of li
abilit
y–
Max
imum
amou
nt o
f cov
erag
e ag
reed
to b
e pa
idpe
rlos
spe
r los
s•A
ggre
gate
lim
it–
Max
imum
amou
nt o
f the
tota
l of a
ll cl
aim
s pa
idpe
r pol
icy
perio
d–
Agg
rega
tes
are
usua
lly fo
und
only
on
com
mer
cial
po
licie
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
p
Ded
uctib
le•A
lso
calle
d a
rete
ntio
n or
rete
ntio
n lim
it•R
equi
res
the
insu
red
to p
ay a
spe
cific
am
ount
or
flpe
rcen
tage
of l
oss
•Ins
urer
pay
s in
exc
ess
of d
educ
tible
•The
effe
ct o
f add
ing
or in
crea
sing
a d
educ
tible
–R
educ
es p
rem
ium
–R
educ
es fr
eque
ncy
of c
laim
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 10 1/27/2014 12:43:29 PM
11
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Prem
ium
•The
con
side
ratio
n pa
id b
y th
e in
sure
d is
ca
lled
the
prem
ium
•Eac
h da
y of
the
polic
y te
rm th
at p
asse
s,
the
insu
rer e
arns
mor
e of
the
prem
ium
•If a
pol
icy
is te
rmin
ated
prio
r to
the
expi
ratio
n da
te, t
he in
sure
r may
be
requ
ired
tore
turn
the
unea
rned
prem
ium
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
requ
ired
to re
turn
the
unea
rned
pre
miu
m
Insu
ring
Agr
eem
ent (
DIC
E)•C
onta
ins
the
insu
rer’s
pro
mis
e to
pay
w
hich
incl
udes
the
cove
red
peril
s if
a pr
oper
ty p
olic
y–N
amed
per
ils–O
pen
peril
s–C
ombi
natio
n of
nam
ed p
erils
and
ope
n pe
rils
•Ift
hepo
licy
cove
rslia
bilit
yth
ein
sure
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
•If t
he p
olic
y co
vers
liab
ility
, the
insu
rers
du
ty to
pay
for a
def
ense
for t
he in
sure
d is
co
vere
d he
re.
Con
ditio
ns (D
ICE)
•Con
tain
s th
e du
ties
and
right
s of
the
parti
es,
such
as
Id’
dti
ith
tf
l–
Insu
red’
s du
ties
in th
e ev
ent o
f a lo
ss–
Insu
rer’s
sub
roga
tion
right
s–
Mor
tgag
ee’s
righ
ts•O
ther
pro
visi
ons
in c
ondi
tions
–Te
rmin
atio
n pr
ovis
ions
Lttl
ti
ii
ldi
thi
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–Lo
ss s
ettle
men
t pro
visi
ons
incl
udin
g ot
her i
nsur
ance
cl
ause
s an
d di
sput
e re
solu
tion
proc
esse
s–
Terr
itory
whe
re c
over
age
appl
ies
Insu
red’
s D
utie
s A
fter a
Los
s•U
nder
mos
t pol
icie
s, th
e in
sure
d’s
dutie
s in
the
even
t of a
loss
requ
ires
Pt
tifi
tift
hl
tth
i–
Pro
mpt
not
ifica
tion
of th
e lo
ss to
the
insu
rer
–C
oope
ratio
n w
ith th
e in
sure
r–
Sub
mis
sion
of a
pro
of o
f los
s or
sw
orn
stat
emen
t (w
ithin
91
days
in T
exas
)—if
requ
ired
•In
addi
tion,
pro
perty
pol
icie
s re
quire
insu
red
toP
rote
ctth
epr
oper
tyfro
mfu
rther
dam
age
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
–P
rote
ct th
e pr
oper
ty fr
om fu
rther
dam
age
–P
rovi
de a
n in
vent
ory
of d
amag
ed p
rope
rty
TX_P&C_ClassNotes_3e.indb 11 1/27/2014 12:43:29 PM
12
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Insu
rer’s
Sub
roga
tion
Rig
hts
•If t
he in
sure
d ge
ts th
eir i
nsur
ance
com
pany
to
pay
for d
amag
es c
ause
d by
som
eone
els
e th
enTh
ih
thi
htt
tht
–Th
e in
sure
r now
has
the
right
to re
cove
r the
am
ount
pa
id fo
r the
loss
from
the
at-fa
ult p
arty
and
take
any
fu
rther
lega
l act
ion
nece
ssar
y–
The
dedu
ctib
le is
retu
rned
to th
e in
sure
d if
the
insu
rer i
s ab
le to
reco
ver f
rom
the
at-fa
ult p
arty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Mor
tgag
e C
laus
e•R
ight
s of
mor
tgag
ee (l
ende
r)–P
ay th
e pr
emiu
m/fi
le a
pro
of o
f los
s–R
ecei
ve c
laim
pay
men
t up
to th
eir i
nsur
able
in
tere
st–R
ecei
ve a
can
cella
tion
notic
e•N
othi
ng th
e in
sure
d do
es, e
ven
dish
ones
tly,
can
prev
entt
hem
ortg
agee
from
colle
ctin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
can
prev
ent t
he m
ortg
agee
from
col
lect
ing
unde
r the
pol
icy
Term
inat
ions
of P
olic
ies
•Tw
o ty
pes
of te
rmin
atio
ns–
Can
cella
tions
Oh
thi
di
lt
t•O
ccur
whe
n th
e in
sure
d or
insu
rer c
ance
ls c
ontra
ct
befo
re e
nd o
f pol
icy
perio
d–
Non
-ren
ewal
s•O
ccur
s at
end
of p
olic
y pe
riod
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
Can
cella
tions
•Ins
urer
may
can
cel s
ubje
ct to
sta
te re
gula
tions
–10
-day
adv
ance
d w
ritte
n no
tice
to th
e in
sure
d is
usu
ally
re
quire
dre
quire
d–
Insu
red
rece
ives
a fu
ll re
fund
of t
he u
near
ned
prem
ium
w
ithou
t pen
alty
—ca
lled
a pr
o ra
ta c
ance
llatio
n
•Ins
ured
may
can
cel a
t any
tim
e–
No
adva
nce
notic
e is
requ
ired
–In
sure
d m
ay n
ot g
et a
com
plet
e re
fund
of t
he u
near
ned
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
Insu
red
may
not
get
a c
ompl
ete
refu
nd o
f the
une
arne
d pr
emiu
m—
calle
d a
shor
t-rat
e ca
ncel
latio
n
TX_P&C_ClassNotes_3e.indb 12 1/27/2014 12:43:30 PM
13
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Non
rene
wal
s•I
nsur
er m
ay n
onre
new
sub
ject
to s
tate
re
gula
tions
–30
-day
adv
ance
d w
ritte
n no
tice
to th
e in
sure
d is
usu
ally
re
quire
d–
No
adju
stm
ent i
n pr
emiu
m s
ince
the
polic
y la
sts
to
natu
ral e
xpira
tion
date
•Ins
ured
may
non
rene
w a
t any
tim
eN
dti
ii
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
–N
o ad
vanc
e no
tice
is re
quire
d–
No
adju
stm
ent i
n pr
emiu
m s
ince
the
polic
y la
sts
to
natu
ral e
xpira
tion
date
Dis
pute
Res
olut
ion
Proc
esse
s•A
ppra
isal
: Dea
ls w
ithdi
sagr
eem
ents
on
the
valu
e of
the
loss
Bi
–B
asic
pro
cess
•Eac
h se
lect
s a
com
pete
nt a
ppra
iser
—ea
ch p
arty
pa
ys fo
r the
ir di
sint
eres
ted
appr
aise
r•A
ppra
iser
s se
lect
an
umpi
re—
shar
e co
sts
•App
rais
ers
and
umpi
re d
eter
min
e re
solu
tion
(bin
ding
)•A
rbitr
atio
n:D
eals
with
disa
gree
men
tson
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
•Arb
itrat
ion:
Dea
ls w
ithdi
sagr
eem
ents
on
cove
rage
issu
es
Oth
er In
sura
nce
•Thi
s pr
ovis
ion
appl
ies
whe
n th
e in
sure
d ha
s m
ore
than
one
pol
icy
cove
ring
the
sam
e lo
ss–P
reve
nts
the
insu
red
from
bei
ng o
verp
aid
–Prin
cipl
e of
inde
mni
ty s
ays
to re
stor
e bu
t not
ga
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Oth
er In
sura
nce
•The
re a
re th
ree
solu
tions
that
can
be
used
1.P
ro ra
ta li
abili
ty: P
olic
ies
pay
prop
ortio
nate
ly to
the
tota
llos
sas
the
amou
ntof
cove
rage
bear
sto
the
tota
l los
s as
the
amou
nt o
f cov
erag
e be
ars
to th
e to
tal c
over
age
2.C
ontri
butio
n by
equ
al s
hare
s: A
ll in
sure
rs s
hare
eq
ually
up to
the
limit
of th
e lo
west
pol
icy;
then
, re
mai
ning
insu
rers
sha
re a
ccor
ding
ly u
ntil
all l
imits
ar
e m
et o
r the
loss
is p
aid
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
TX_P&C_ClassNotes_3e.indb 13 1/27/2014 12:43:30 PM
14
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Oth
er In
sura
nce
3. P
rimar
y an
d ex
cess
: –P
rimar
y po
licy
pays
firs
t –E
xces
s po
licy
pays
afte
r prim
ary
limits
are
ex
haus
ted
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Oth
er In
sura
nce
Exam
ple
•An
insu
red
owns
a b
uild
ing
and
insu
res
it w
ith
two
diffe
rent
insu
ranc
e co
mpa
nies
$200
0ih
CA
–$25
,000
cov
erag
e w
ith C
ompa
ny A
–$75
,000
cov
erag
e w
ith C
ompa
ny B
•The
pro
perty
suf
fers
a $
40,0
00 fi
re lo
ss•H
ow m
uch
will
each
com
pany
pay
?
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
Pro
Rat
a Li
abili
ty S
olut
ion
•If b
oth
polic
ies
pay
on a
pro
rata
liab
ility
ba
sis
–To
tal p
olic
y lim
its: $
100,
000
•Ins
urer
A: ¼
of p
olic
y lim
its (2
5,00
0/10
0,00
0)•I
nsur
er B
: ¾of
pol
icy
limits
(75,
000/
100,
000)
–To
tal c
ost o
f fire
loss
: $40
,000
•Ins
urer
A p
ays
¼ x
$40
,000
= $
10,0
00 o
f los
s¾
$0
000
$30
000
f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
•Ins
urer
B p
ays
¾ x
$40
,000
=$3
0,00
0 of
loss
–Th
e lo
ss p
aym
ent c
alcu
latio
ns a
re p
ropo
rtion
al
Con
trib
utio
n by
Equ
al S
hare
s So
lutio
n •I
f bot
h po
licie
s co
ntrib
ute
in e
qual
sha
res
–To
tal c
ost o
f fire
loss
: $40
,000
•Ins
urer
A p
ays
1/2
of lo
ss ($
20,0
00)
•Ins
urer
B p
ays
1/2
of lo
ss ($
20,0
00)
–Th
e re
quire
d pa
ymen
ts a
re s
plit
even
ly b
etw
een
the
com
pani
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
TX_P&C_ClassNotes_3e.indb 14 1/27/2014 12:43:30 PM
15
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Prim
ary
and
Exce
ss S
olut
ion
•If o
ne p
olic
y is
prim
ary
(Pol
icy
A) a
nd
anot
her e
xces
s (P
olic
y B
)–
Then
for a
$40
,000
loss
•Pol
icy
A pa
ys $
25,0
00 (u
ntil
exha
uste
d)•P
olic
y B
pay
s re
mai
ning
loss
of $
15,0
00–
The
prim
ary
alw
ays
pays
firs
t unt
il it
is e
xhau
sted
, the
n th
e ex
cess
pay
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
Cov
erag
e Te
rrito
ry•W
here
cov
erag
e ap
plie
s•P
olic
ies
may
list
a s
peci
fic te
rrito
ry–M
any
polic
ies
rest
rict c
over
age
to th
e U
nite
d S
tate
s an
d C
anad
a•O
ther
pol
icie
s m
ay in
dica
te th
e te
rrito
ry is
w
orld
wid
e or
sim
ply
not s
tate
a s
peci
fic te
rrito
ry,
ther
eby
impl
ying
the
terri
tory
is a
nyw
here
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
Oth
er C
omm
on C
ondi
tions
•Ass
ignm
ent
–In
sure
d m
ay n
ot tr
ansf
er th
e po
licy
to a
noth
er p
erso
n l
ih
iitt
tun
less
insu
rer h
as g
iven
writ
ten
cons
ent
•Lib
eral
izat
ion
clau
se–
Bro
aden
s or
ext
ends
cov
erag
e ei
ther
due
to c
ompa
ny
volu
ntar
y ac
tion
or le
gal d
eter
min
atio
n–
No
addi
tiona
l pre
miu
m is
cha
rged
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
•Leg
al a
ctio
ns a
gain
st u
s –
Insu
red
may
sue
the
insu
rer w
ithin
two
year
s an
d on
e da
y fro
m th
e da
te o
f los
s in
Tex
as
Excl
usio
ns (D
ICE)
•Con
tain
s th
e pr
oper
ty a
nd th
e pe
rils
that
are
NO
T co
vere
d, fo
r exa
mpl
eFl
d–F
lood
–Con
traba
nd–I
nten
tiona
l act
s by
the
insu
red
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
TX_P&C_ClassNotes_3e.indb 15 1/27/2014 12:43:31 PM
16
Less
on T
wo
The
Insu
ranc
e C
ontr
act
Endo
rsem
ents
•Cha
nges
a p
olic
y to
–Add
cov
erag
e–M
odify
cov
erag
e–T
ake
away
cov
erag
e•O
nly
an a
utho
rized
offi
cer o
f the
com
pany
can
ch
ange
a p
olic
y. T
he in
sure
d or
age
nt c
an
requ
est a
cha
nge.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
g
Cer
tific
ate
of In
sura
nce
•Doc
umen
t iss
ued
by th
e ag
ent o
r com
pany
–Ver
ifies
cov
erag
e–L
ists
:•I
nsur
ed(s
) nam
e•E
ffect
ive
date
of i
nsur
ance
•Typ
e of
insu
ranc
e•D
olla
r am
ount
s of
cov
erag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
–NO
T A
N IN
SU
RA
NC
E C
ON
TRA
CT
TX_P&C_ClassNotes_3e.indb 16 1/27/2014 12:43:31 PM
Lesson ThreeOverview of Property and Casualty Insurance
TX_P&C_ClassNotes_3e.indb 17 1/27/2014 12:43:31 PM
18
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Less
on T
hree
Ove
rvie
w o
f Pro
pert
y an
d C
asua
lty In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Intr
oduc
tion
toIn
trod
uctio
n to
Pr
oper
ty In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Ove
rvie
w o
f Pro
pert
y In
sura
nce
•Ins
ures
dam
age
to p
rope
rty o
wne
d by
in
divi
dual
s an
d bu
sine
sses
–R
eal p
rope
rty (b
uild
ings
and
oth
er s
truct
ures
) –P
erso
nal p
rope
rty (m
ovea
ble
stuf
f and
oth
er
prop
erty
not
atta
ched
to a
stru
ctur
e)•C
onsi
dere
d to
be
a fir
st-p
arty
cov
erag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Iden
tifyi
ng In
sure
d Pr
oper
ty•S
peci
fic c
over
age
–P
rope
rty a
nd lo
catio
n ar
e sp
ecifi
ed–
Eac
h bu
ildin
g is
list
ed fo
r its
ow
n lim
it–
Con
tent
s of
eac
h bu
ildin
g ha
s its
ow
n lim
it
•Bla
nket
cov
erag
e–
Sin
gle
limit
of in
sura
nce
•All
build
ings
at a
partm
ent c
ompl
ex
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
•Con
tent
s of
all
furn
iture
sto
re lo
catio
ns•P
erso
nal p
rope
rty b
elon
ging
to a
n in
divi
dual
TX_P&C_ClassNotes_3e.indb 18 1/27/2014 12:43:31 PM
19
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Com
mon
Prov
isio
nsC
omm
on P
rovi
sion
sfo
r Pro
pert
y In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Loss
Val
uatio
n•T
he p
roce
ss o
f det
erm
inin
g th
e va
lue
of th
e lo
ss–R
epla
cem
ent c
ost
•Tod
ay’s
cos
t to
fully
repl
ace
lost
or d
amag
ed p
rope
rty
with
like
kin
d or
qua
lity
with
out d
educ
tion
for
depr
ecia
tion
(due
to a
ge, w
ear a
nd te
ar)
–Act
ual C
ash
Valu
e (A
CV
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
•Rep
lace
men
t cos
t min
us d
epre
ciat
ion
Loss
Val
uatio
n•A
gree
d va
lue/
stat
ed a
mou
nt–V
alue
is a
gree
d up
on a
t tim
e of
pol
icy
issu
ance
–App
rais
al o
ften
requ
ired
–Exa
mpl
es: a
ntiq
ues
and
clas
sic
cars
•Val
ued
polic
y (li
quid
ated
dem
and)
–Whe
n a
build
ing
is to
tally
des
troye
d by
fire
, the
in
sure
dha
sth
erig
htto
dem
and
the
polic
ylim
its
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
insu
red
has
the
right
to d
eman
d th
e po
licy
limits
as
val
ue. D
oes
not a
pply
to p
erso
nal p
rope
rty
(con
tent
s)
Loss
Val
uatio
n•M
arke
t val
ue–T
he a
mou
nt d
eter
min
ed b
y a
buye
r and
a s
elle
r–S
eldo
m u
sed
in in
sura
nce
–Whe
n a
loss
occ
urs,
the
insu
ranc
e co
mpa
ny is
no
t buy
ing
the
prop
erty
from
the
insu
red.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_P&C_ClassNotes_3e.indb 19 1/27/2014 12:43:31 PM
20
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Loss
Val
uatio
n•P
air a
nd s
et—
parti
al d
amag
e–S
ubtra
ct th
e va
lue
of w
hat r
emai
ns a
fter t
he
loss
from
the
valu
e of
the
pair
or s
et b
efor
e th
e lo
ss–P
olic
y pa
ys th
e di
ffere
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Tota
l Los
s Ve
rsus
Par
tial L
oss
•Tot
al lo
ss–C
osts
mor
e to
repa
ir or
repl
ace
the
prop
erty
th
an th
e no
rmal
val
ue•P
artia
l los
s: A
ny lo
ss th
at is
not
a to
tal l
oss
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Coi
nsur
ance
•Req
uire
s th
e in
sure
d to
car
ry a
min
imum
am
ount
of
insu
ranc
e (c
alle
d in
sura
nce
to v
alue
) N
lli
80%
fl
–Nor
mal
ly is
80%
of r
epla
cem
ent c
ost
–If t
he m
inim
um re
quire
d is
car
ried,
cla
ims
are
paid
in fu
ll up
to p
olic
y lim
its–I
f the
min
imum
is n
ot c
arrie
d, p
artia
l los
ses
are
NO
T pa
id in
full
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Coi
nsur
ance
For
mul
aS
tep
1: D
eter
min
e in
sura
nce
requ
ired
Ste
p 2:
Do
they
car
ry a
t lea
st th
is a
mou
nt?
py
yS
tep
3: If
no,
app
ly th
e fo
llow
ing
form
ula
×Lo
ss =
Cla
im p
aym
ent–
dedu
ctib
leIn
sura
nce
carr
ied
Insu
ranc
e re
quire
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 20 1/27/2014 12:43:32 PM
21
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Coi
nsur
ance
Que
stio
nTh
e in
sure
d pu
rcha
ses
$40,
000
insu
ranc
e on
a
build
ing
with
a re
plac
emen
t cos
t of $
100,
000.
The
po
licy
has
anm
inim
um80
%re
quire
men
tand
apo
licy
has
an m
inim
um 8
0% re
quire
men
t and
a
$500
ded
uctib
le.
If th
e in
sure
d ha
s a
$20,
000
loss
, how
muc
h w
ill th
e co
mpa
ny p
ay?
Ste
p 1:
How
muc
h in
sura
nce
is re
quire
d?
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Ste
p 2:
Did
they
car
ry th
is m
uch?
Ste
p 3:
If n
o, a
pply
the
coin
sura
nce
form
ula
Coi
nsur
ance
Ans
wer
Ste
p 1:
How
muc
h in
sura
nce
is re
quire
d?$1
00,0
00 ×
.80
= $
80,0
00S
tep
2: D
id th
ey c
arry
this
muc
h?p
yy
No,
the
insu
red
only
bou
ght
$40,
000
of in
sura
nce
Ste
p 3:
If n
o, a
pply
the
coin
sura
nce
form
ula
×$2
0,00
0
=
$10,
000
–$5
00 d
educ
tible
$40,
000
$80
000
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
$9,5
00 p
aid
$80,
000
(RC
x C
oins
uran
ce %
)
Vaca
nt V
ersu
s U
nocc
upie
d•V
acan
t –
Em
pty
build
ing
(no
peop
le, n
o co
nten
ts)
–In
sure
d pe
naliz
ed a
fter 6
0 da
ys o
f vac
ancy
•May
not
be
cove
red
for l
osse
s su
ch a
s va
ndal
ism
but
wou
ld s
till
be c
over
ed fo
r a fi
re lo
ss.
•Uno
ccup
ied
–N
o pe
ople
pre
sent
whe
n th
e lo
ss o
ccur
s, b
ut c
onte
nts
rem
ain
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
rem
ain
–N
o lo
ss o
f cov
erag
e
Aba
ndon
men
t•I
nsur
ed c
anno
t aba
ndon
par
tially
dam
aged
pr
oper
ty a
nd e
xpec
t to
be p
aid
for i
ts fu
ll va
lue
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 21 1/27/2014 12:43:32 PM
22
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Salv
age
Valu
e•A
fter p
ayin
g th
e in
sure
d fo
r a lo
ss, a
s if
it w
as to
tally
des
troye
d,th
e in
sure
d m
ust
give
the
insu
rer w
hat's
left
•App
lies
to to
tal l
osse
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Intr
oduc
tion
toC
asua
ltyIn
trod
uctio
n to
Cas
ualty
In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Intr
oduc
tion
to C
asua
lty In
sura
nce
•Pay
s a
third
par
ty to
who
m th
e in
sure
d is
le
gally
liab
le•M
ost c
omm
on c
asua
lty c
over
age
is
liabi
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
Def
initi
on o
f Lia
bilit
y•I
ndiv
idua
ls a
nd o
rgan
izat
ions
may
be
held
le
gally
resp
onsi
ble
for a
ctio
n re
sulti
ng in
bo
dily
inju
ry o
r pro
perty
dam
age
to o
ther
s•L
iabi
lity
insu
ranc
e is
cal
led
third
-par
ty
cove
rage
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_P&C_ClassNotes_3e.indb 22 1/27/2014 12:43:32 PM
23
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Type
s of
Lia
bilit
y•C
rimin
al li
abili
ty–
Pro
secu
ted
by th
e go
vern
men
t–
Not
cov
ered
by
liabi
lity
insu
ranc
e
•Civ
il lia
bilit
y–
Act
ions
bro
ught
by
inju
red
parti
es–
Can
be
cove
red
by li
abili
ty in
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Civ
il Li
abili
ty•T
ort:
A ci
vil w
rong
–In
tent
iona
l•E
xam
ples
: Lib
el, s
land
er, f
alse
arr
est,
wro
ngfu
l ev
ictio
n –
Uni
nten
tiona
l•F
ailu
re to
use
pro
per c
are
that
resu
lts in
bod
ily in
jury
or
pro
perty
dam
age
(neg
ligen
ce)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Bec
omin
g Li
able
•Dire
ct li
abili
ty: I
nsur
ed is
the
wro
ngdo
er
(tortf
easo
r)•V
icar
ious
liab
ility
: Ins
ured
is re
spon
sibl
e fo
r ac
tions
of t
he w
rong
doer
–P
aren
t res
pons
ible
for a
ctio
ns o
f min
or c
hild
–E
mpl
oyer
liab
le fo
r act
ions
of e
mpl
oyee
s–
Bar
liab
le fo
r act
ions
of i
ntox
icat
ed c
usto
mer
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Bec
omin
g Li
able
•Con
tract
ual l
iabi
lity:
Insu
red
assu
mes
an
othe
r’s li
abilit
y un
der a
writ
ten
agre
emen
t•A
bsol
ute
liabi
lity:
Lia
bilit
y w
ithou
t fau
lt–C
hild
dro
wns
in p
ool
–Bus
ines
s bl
ows
up a
bui
ldin
g–W
ild a
nim
al e
scap
es c
age
and
mau
ls
pers
on
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
pers
on•S
trict
liab
ility:
Pro
duct
def
ect c
laim
s
TX_P&C_ClassNotes_3e.indb 23 1/27/2014 12:43:32 PM
24
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Neg
ligen
ce•T
he fa
ilure
to d
o (o
r not
do)
som
ethi
ng th
at
ordi
naril
y sh
ould
be
(or n
ot b
e) d
one
that
re
sults
in a
loss
–Rea
sona
bly
Pru
dent
Per
son
Rul
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Elem
ents
of N
eglig
ence
•Leg
al d
uty:
Ow
e an
obl
igat
ion
to a
ct o
r not
ac
t•B
reac
h of
dut
y: F
ailu
re to
com
ply
with
the
duty
•Act
ual l
oss:
Ano
ther
suf
fers
a lo
ss•P
roxi
mat
e ca
use:
The
bre
ach
of d
uty
is th
e f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
dire
ct c
ause
of t
he lo
ss
Type
s of
Inju
ries
and
Dam
ages
Aris
ing
from
Lia
bilit
y•B
odily
inju
ry–
Incl
udes
pai
n an
d su
fferin
g
•Pro
perty
dam
age
–In
clud
es lo
ss o
f use
•Per
sona
l inj
ury
–D
amag
e to
a p
erso
n’s
char
acte
r or r
eput
atio
n–
Exa
mpl
es:L
ibel
,sla
nder
,and
wro
ngfu
levi
ctio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
Exa
mpl
es: L
ibel
, sla
nder
, and
wro
ngfu
l evi
ctio
n
Com
mon
Prov
isio
nsC
omm
on P
rovi
sion
sfo
r Cas
ualty
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 24 1/27/2014 12:43:33 PM
25
Less
on T
hree
O
verv
iew
of
Prop
erty
and
Cas
ualty
Insu
ranc
e
Dut
y to
Def
end
•The
insu
rer m
ust d
efen
d th
e in
sure
d fro
m a
cl
aim
eve
n if
the
fact
s to
det
erm
ine
liabi
lity
have
yet
to b
e sh
own.
How
ever
, the
cla
im
mus
t be
invo
lvin
g an
act
ivity
that
wou
ld b
e co
vere
d if
the
insu
red
is e
vent
ually
foun
d to
be
resp
onsi
ble.
•App
lies
even
tofri
volo
uscl
aim
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
•App
lies
even
to fr
ivol
ous
clai
ms
Acc
iden
tA
n ev
ent t
hat i
s su
dden
and
une
xpec
ted
–Fi
nanc
ial l
oss
occu
rs–
The
spec
ific
time
and
plac
e ca
n be
pro
ven
(a
car
wre
ck)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
Occ
urre
nce
An
even
t tha
t hap
pens
ove
r tim
e–
Con
tinuo
us o
r rep
eate
d ex
posu
re to
a h
arm
ful c
ondi
tion
–R
esul
ts in
inju
ry o
r dis
ease
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
Dam
ages
for T
ort L
iabi
lity
•Com
pens
ator
y: T
o in
dem
nify
the
inju
red
party
–S
peci
al—
pays
act
ual m
onet
ary
dam
ages
•Exa
mpl
e: M
edic
al e
xpen
ses
or lo
st w
ages
–G
ener
al—
pays
for n
on-e
cono
mic
loss
es•E
xam
ple:
Pai
n an
d su
fferin
g
•Pun
itive
: To
puni
sh w
rong
doer
due
to g
ross
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
negl
igen
ce–
Awar
ded
by th
e co
urts
–U
sual
ly n
ot c
over
ed b
y in
sura
nce
TX_P&C_ClassNotes_3e.indb 25 1/27/2014 12:43:33 PM
TX_P&C_ClassNotes_3e.indb 26 1/27/2014 12:43:33 PM
Lesson FourThe Insurance Company
TX_P&C_ClassNotes_3e.indb 27 1/27/2014 12:43:33 PM
28
Less
on F
our
The
Insu
ranc
e C
ompa
ny
Less
onFo
urLe
sson
Fou
rTh
e In
sura
nce
Com
pany
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Adm
itted
Vers
usN
onad
mitt
edA
dmitt
ed V
ersu
s N
onad
mitt
edIn
sura
nce
Car
riers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Adm
itted
Ver
sus
Non
adm
itted
Adm
itted
car
rier
–A
lso
calle
d au
thor
ized
in
sure
r
Non
adm
itted
car
rier
–A
lso
calle
d un
auth
oriz
ed
insu
rer
insu
rer
–Is
sued
a C
ertif
icat
e of
A
utho
rity
(i.e.
, lic
ense
) to
tran
sact
bus
ines
s in
th
e st
ate
insu
rer
–N
ot re
quire
d to
get
a
certi
ficat
e of
aut
horit
y in
th
e st
ate
–C
an o
nly
trans
act
surp
lus
lines
insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Cer
tific
ate
of A
utho
rity
•Iss
ued
by th
e TD
I•M
akes
the
insu
ranc
e co
mpa
ny a
n p
yad
mitt
ed, o
r als
o ca
lled
auth
oriz
ed, i
nsur
er
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 28 1/27/2014 12:43:33 PM
29
Less
on F
our
The
Insu
ranc
e C
ompa
ny
Surp
lus
Line
s In
sura
nce
•Ins
uran
ce n
ot u
sual
ly c
over
ed b
y ad
mitt
ed
com
pani
es d
ue to
thei
r hig
h ris
k•I
n Te
xas,
an
agen
t mus
t hav
e a
surp
lus
lines
lice
nse
to s
ell s
urpl
us li
nes
insu
ranc
e•P
olic
ies
and
rate
s ar
e no
t reg
ulat
ed•A
n un
auth
oriz
ed (s
urpl
us) i
nsur
er is
stil
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
subj
ect t
o so
me
Texa
s re
gula
tions
Surp
lus
Line
s C
ondi
tions
•Sur
plus
line
s in
sura
nce
may
not
be
obta
ined
sol
ely
for p
urpo
ses
of g
ettin
g a
low
er p
rem
ium
than
an
auth
oriz
ed/a
dmitt
ed
insu
rer c
ould
pro
vide
•Cov
erag
e ca
n on
ly b
e pl
aced
with
an
unau
thor
ized
car
rier o
nly
afte
r a d
ilige
nt
sear
chof
auth
oriz
edor
adm
itted
insu
rers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
sear
ch o
f aut
horiz
ed o
r adm
itted
insu
rers
Dom
icile
ofD
omic
ile o
fIn
surin
g O
rgan
izat
ions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Dom
icile
•Whe
n de
term
inin
g th
e do
mic
ile o
f an
insu
rer,
com
pare
the
insu
rer’s
bas
e or
ho
me
offic
e w
ith t
he p
olic
yhol
der’s
loca
tion
–D
omes
tic: I
n th
e sa
me
stat
e–
Fore
ign:
In a
noth
er s
tate
–A
lien:
In a
noth
er c
ount
ry
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_P&C_ClassNotes_3e.indb 29 1/27/2014 12:43:34 PM
30
Less
on F
our
The
Insu
ranc
e C
ompa
ny
Type
sof
Type
s of
Insu
ring
Org
aniz
atio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Stoc
k In
sure
rs•O
wne
d by
thei
r sto
ckho
lder
s/sh
areh
olde
rs•I
ncor
pora
ted
as a
for-
prof
it co
mpa
ny•M
anag
ed b
y a
boar
d of
dire
ctor
s ch
osen
by
the
stoc
khol
ders
/sha
reho
lder
s•I
ssue
s no
npar
ticip
atin
g (n
onpa
r) po
licie
s–P
olic
yhol
ders
do
not p
artic
ipat
e in
pro
fits
•Div
iden
ds,i
fany
,are
paid
tost
ockh
olde
rsif
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Div
iden
ds, i
f any
, are
pai
d to
sto
ckho
lder
s if
a pr
ofit
is m
ade
and
are
taxa
ble
•Div
iden
ds a
re n
ot g
uara
ntee
d
Mut
ual I
nsur
ers
•Ow
ned
by th
eir p
olic
yhol
ders
•Mut
uals
are
inco
r por
ated
and
man
aged
by
pg
ya
boar
d of
dire
ctor
s ch
osen
by
the
polic
yhol
ders
•Iss
ues
parti
cipa
ting
(par
) pol
icie
s–P
olic
yhol
ders
par
ticip
ate
in p
rofit
sP
tii
tidi
idd
til
tf
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
•Par
ticip
atin
g di
vide
nds
are
a pa
rtial
retu
rn o
f pr
emiu
ms
and
are
not t
axab
le
•Div
iden
ds a
re n
ot g
uara
ntee
d
Self-
Insu
ranc
e•B
usin
ess
orga
niza
tions
that
set
up
thei
r ow
n sa
ving
s ac
coun
ts to
pay
cla
ims
for
prop
erty
dam
age
or li
abili
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 30 1/27/2014 12:43:34 PM
31
Less
on F
our
The
Insu
ranc
e C
ompa
ny
Gov
ernm
entI
nsur
ance
Gov
ernm
ent I
nsur
ance
Prog
ram
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Res
idua
l Mar
kets
•Gov
ernm
ents
(fed
eral
and
sta
te) h
elp
prov
ide
insu
ranc
e th
at is
not
ord
inar
ily
avai
labl
e fro
m p
rivat
e in
sure
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Res
idua
l Mar
kets
•Fed
eral
pro
gram
s–
Nat
iona
l Flo
od In
sura
nce
Pro
gram
(NFI
P)
–Fe
dera
l cro
p/ha
il in
sura
nce
•Sta
te p
rogr
ams
–Te
xas
Aut
o In
sura
nce
Pla
n A
ssoc
iatio
n (T
AIP
A)
–Te
xas
Win
dsto
rm In
sura
nce
Ass
ocia
tion
(TW
IA)
–Jo
int U
nder
writ
ing
Ass
ocia
tion
(JU
A)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
–Fa
ir A
cces
s to
Insu
ranc
e R
equi
rem
ents
(FA
IR)
TX_P&C_ClassNotes_3e.indb 31 1/27/2014 12:43:34 PM
TX_P&C_ClassNotes_3e.indb 32 1/27/2014 12:43:34 PM
Lesson FiveInsurance Regulations
TX_P&C_ClassNotes_3e.indb 33 1/27/2014 12:43:34 PM
34
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Less
onFi
veLe
sson
Fiv
eIn
sura
nce
Reg
ulat
ions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Reg
ulat
ion
of th
e In
sura
nce
Bus
ines
s•T
hree
maj
or c
hann
els
of re
gula
tion
of th
e in
sura
nce
indu
stry
are
–Fed
eral
regu
latio
n–S
tate
regu
latio
n (p
rimar
ily)
–Sel
f-reg
ulat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Fede
ral R
egul
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Fede
ral R
egul
atio
n•F
eder
al ju
risdi
ctio
n–A
pplie
s to
indi
vidu
als
or c
ompa
nies
who
se
activ
ities
affe
ct in
ters
tate
com
mer
ce, w
hich
in
clud
es m
ost i
nsur
ance
act
ivity
–But
onl
y to
the
exte
nt th
at s
uch
busi
ness
is n
ot
regu
late
d by
sta
te la
w
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 34 1/27/2014 12:43:34 PM
35
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Fede
ral R
egul
atio
n•T
here
are
sev
eral
impo
rtant
sou
rces
of
fede
ral r
egul
atio
n–F
air C
redi
tRep
ortin
g A
ct–T
erro
rism
Ris
k In
sura
nce
Act
–Gra
mm
Lea
ch B
liley
Act
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Fair
Cre
dit R
epor
ting
Act
•May
als
o be
refe
rred
to a
s FC
RA
•Pur
pose
: To
prot
ect c
onsu
mer
s (in
sure
ds)
pp
()
whe
n ad
vers
e ac
tion
(incr
ease
in ra
tes)
re
sulti
ng fr
om a
revi
ew o
f cre
dit
•Ins
uran
ce c
ompa
nies
em
ploy
per
sons
ca
lled
unde
rwrit
ers
who
use
cre
dit h
isto
ry
and
othe
rsou
rces
ofin
form
atio
nto
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
and
othe
r sou
rces
of i
nfor
mat
ion
to
eval
uate
a ri
sk a
nd a
ssig
n a
rate
Fair
Cre
dit R
epor
ting
Act
•Con
sum
er’s
righ
ts–
Age
nt is
requ
ired
to g
ive
writ
ten
and
verb
al d
iscl
osur
e f
’i
httt
if
liti
of c
onsu
mer
’s ri
ghts
at t
ime
of a
pplic
atio
n–
Con
sum
er m
ay re
ques
t a c
opy
of th
e re
port
from
the
cred
it bu
reau
in th
e ev
ent o
f an
adve
rse
actio
n–
Con
sum
er m
ay c
halle
nge
the
accu
racy
of t
he re
port’
s co
nten
ts to
the
cred
it bu
reau
–C
onsu
mer
may
obt
ain
the
iden
tity
of o
ther
s re
ques
ting
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
yy
qg
info
rmat
ion
abou
t the
m fr
om th
e cr
edit
bure
au
Terr
oris
m R
isk
Insu
ranc
e A
ct•T
he fe
dera
l gov
ernm
ent p
ays
insu
ranc
e co
mpa
nies
for t
erro
rism
loss
es c
over
ed in
so
me
com
mer
cial
insu
ranc
e po
licie
s•H
as to
be
certi
fied
by th
e S
ecre
tary
of
Sta
te, S
ecre
tary
of t
he T
reas
ury,
and
the
Atto
rney
Gen
eral
as
an e
ligib
le a
ct—
not
the
pres
iden
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
the
pres
iden
t•W
ill n
ot p
ay m
ore
than
$10
0 bi
llion
in th
e ag
greg
ate
TX_P&C_ClassNotes_3e.indb 35 1/27/2014 12:43:35 PM
36
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Terr
oris
m R
isk
Insu
ranc
e A
ct•F
or th
is la
w to
app
ly, th
e ac
t mus
t–
Be
one
that
is in
jurio
us to
life
, pro
perty
, or i
nfra
stru
ctur
eH
ave
resu
lted
inda
mag
ew
ithin
the
Uni
ted
Sta
tes
or–
Hav
e re
sulte
d in
dam
age
with
in th
e U
nite
d S
tate
s,or
ou
tsid
e th
e U
nite
d S
tate
s in
the
case
of a
n ai
r car
rier,
nava
l ves
sel,
or o
n th
e pr
emis
es o
f a U
S m
issi
on–
Hav
e be
en c
omm
itted
by
an in
divi
dual
or i
ndiv
idua
ls
actin
g on
beh
alf o
f any
fore
ign
pers
on o
r for
eign
in
tere
st, a
s pa
rt of
an
effo
rt to
coe
rce
the
civi
lian
popu
latio
nof
the
Uni
ted
Sta
tes
orto
influ
ence
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
popu
latio
n of
the
Uni
ted
Sta
tes
or to
influ
ence
the
polic
y or
affe
ct th
e co
nduc
t of t
he U
nite
d S
tate
s go
vern
men
t by
coer
cion
.
Gra
mm
Lea
ch B
liley
Act
(GLB
A)
•R
equi
res
finan
cial
inst
itutio
ns (i
nclu
ding
insu
rers
) to
prov
ide
the
cust
omer
with
not
ice
if th
ey s
hare
non
-pub
lic
info
rmat
ion
amon
g af
filia
tes
and
othe
r thi
rd p
artie
sg
p•
Allo
ws
the
cust
omer
to o
pt o
ut—
inst
ruct
the
com
pany
to
not s
hare
info
rmat
ion
with
oth
ers
•G
LBA
also
forc
ed s
tate
s to
dev
elop
uni
form
lice
nsin
g la
ws
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Stat
eR
egul
atio
nSt
ate
Reg
ulat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
pone
nts
of S
tate
Reg
ulat
ion
•Sta
te le
gisl
atur
e pa
sses
the
stat
utes
(law
s)–T
exas
Insu
ranc
e C
ode
•Tex
as D
epar
tmen
t of I
nsur
ance
mak
es
rule
s an
d re
gula
tions
nec
essa
ry to
enf
orce
th
e la
w p
asse
d by
the
legi
slat
ure
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 36 1/27/2014 12:43:35 PM
37
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Com
mis
sion
er•R
uns
the
Texa
s D
epar
tmen
t of I
nsur
ance
• App
oint
ed b
y go
vern
or fo
r a tw
o-ye
ar te
rm
ppy
gy
endi
ng F
ebru
ary
1st o
f eac
h od
d nu
mbe
red
year
•App
rove
d by
sta
te s
enat
e•D
oes
not w
rite
insu
ranc
e la
ws
(the
stat
e )
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
legi
slat
ure
writ
es la
ws)
•Can
hav
e no
fina
ncia
l int
eres
t in
any
insu
rer
Pow
ers
and
Dut
ies
of C
omm
issi
oner
•Mak
es re
ason
able
rule
s an
d re
gula
tions
to
enfo
rce
the
law
•Hire
s ap
prop
riate
peo
ple
and
dele
gatin
g au
thor
ity a
ccor
ding
ly•I
ssue
s in
sura
nce
licen
ses
and
certi
ficat
es o
f au
thor
ity•C
ondu
ctin
gin
vest
igat
ions
and
exam
inat
ions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Con
duct
ing
inve
stig
atio
ns a
nd e
xam
inat
ions
•Sub
poen
as w
itnes
ses
and
adm
inis
ter o
aths
fo
r hea
rings
Pow
ers
and
Dut
ies
of C
omm
issi
oner
•Iss
ues
ceas
e an
d de
sist
ord
ers
•Im
pose
s pe
nalti
es fo
llow
ing
hear
ings
pp
gg
(incl
udin
g fin
es, s
uspe
nsio
ns, p
roba
tion,
an
d re
voca
tion)
•App
rove
s in
sura
nce
polic
y fo
rms
sold
w
ithin
the
stat
ef
f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
•App
rove
s ra
tes
for r
egul
ated
line
s of
in
sura
nce
–Pro
tect
s ag
ains
t unr
easo
nabl
e pr
ofits
Inve
stig
atio
ns a
nd E
xam
inat
ions
•Fi
nanc
ial a
nd m
arke
t con
duct
exa
min
atio
ns o
f in
sure
rsO
nce
ever
yfiv
eye
ars
orm
ore
ofte
nif
deem
ed–
Onc
e ev
ery
five
year
s, o
r mor
e of
ten
if de
emed
ne
cess
ary
–In
sure
r pay
s fo
r aud
it an
d re
ceiv
es p
rem
ium
tax
cred
it–
New
insu
rers
exa
min
ed e
very
yea
r, or
as
dete
rmin
edby
the
Com
mis
sion
er
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
dete
rmin
ed b
y th
e C
omm
issi
oner
•A
gent
s ar
e no
t nor
mal
ly e
xam
ined
unl
ess
cons
umer
co
mpl
aint
s ar
e re
ceiv
ed
TX_P&C_ClassNotes_3e.indb 37 1/27/2014 12:43:36 PM
38
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Texa
s Pr
oper
ty a
nd C
asua
lty
Insu
ranc
e G
uara
nty
Ass
ocia
tion
•Pro
tect
s cl
aim
ants
and
pol
icyh
olde
rs in
the
even
t of i
nsur
er in
solv
ency
(can
’t pa
y cl
aim
s)•C
ompo
sed
of a
ll in
sure
rs a
utho
rized
to
trans
act b
usin
ess
with
in th
e st
ate
–C
ompa
nies
with
out a
cer
tific
ate
of a
utho
rity
do n
ot
parti
cipa
te (s
urpl
us li
nes)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
pp
(p
)•I
nsur
eds
cove
red
by s
urpl
us li
nes
polic
ies
do n
ot
have
pro
tect
ions
pro
vide
d by
the
Gua
rant
y A
ssoc
iatio
n fo
r adm
itted
insu
rers
Texa
s Pr
oper
ty a
nd C
asua
lty
Insu
ranc
e G
uara
nty
Ass
ocia
tion
•Gov
erne
d by
a b
oard
of d
irect
ors
–Fi
ve m
embe
rs fr
om in
sure
rs, f
our m
embe
rs fr
om p
ublic
•Ass
essm
ent
–A
utho
rized
insu
rers
in th
e st
ate
are
requ
ired
to p
ay in
to
the
fund
. The
am
ount
they
pay
is b
ased
upo
n th
eir
shar
e of
the
mar
ket i
n Te
xas
–Fa
ilure
to p
ay m
ay re
sult
in re
voca
tion
of in
sure
r’s
certi
ficat
eof
auth
ority
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
certi
ficat
e of
aut
horit
y
Fina
ncia
l Str
engt
h R
atin
gs•A
repo
rt ca
rd fo
r ins
uran
ce c
ompa
nies
•Bas
ed o
n an
alys
is o
f com
pany
’s c
laim
s,
yp
y,
inve
stm
ents
, man
agem
ent,
prof
its, a
nd
othe
r fac
tors
•Priv
ate
com
pani
es (n
ot T
DI)
that
pub
lish
thes
e ra
tings
incl
ude
AM
Bt(
At
F)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
–A.M
. Bes
t (A+
+ to
F)
–Moo
dy’s
–S
tand
ard
and
Poo
r’s
Rat
e R
egul
atio
n•T
wo
com
mon
met
hods
•Prio
r app
rova
l: In
sure
r mus
t obt
ain
appr
oval
from
the
Dt
tbf
ith
tD
epar
tmen
t bef
ore
usin
g th
e ra
tes
•File
and
use
: Ins
urer
file
s th
e ra
tes
with
the
Dep
artm
ent a
nd m
ay b
egin
usi
ng th
e ra
tes
imm
edia
tely
–M
ost i
nsur
ance
is fi
le a
nd u
se in
Tex
as–
TDI c
ould
eve
ntua
lly d
eclin
e th
e ra
te in
crea
se a
nd o
rder
the
com
pany
topa
ya
refu
nd
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
com
pany
to p
ay a
refu
nd
TX_P&C_ClassNotes_3e.indb 38 1/27/2014 12:43:36 PM
39
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Lice
nsin
gof
Age
nts
Lice
nsin
g of
Age
nts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Age
nt R
egul
atio
n•D
efin
ition
of a
gent
–Any
one
who
sol
icits
insu
ranc
e or
aid
s in
pl
acin
g ris
ks, d
eliv
erin
g po
licie
s, o
r co
llect
ing
prem
ium
s on
beh
alf o
f an
insu
ranc
e co
mpa
ny•A
gent
s re
pres
ent t
heir
com
pani
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Age
nt R
egul
atio
n•F
unct
ions
of a
n ag
ent
–Eva
luat
e cu
stom
ers’
nee
ds a
nd re
com
men
d (
lii)
i(s
olic
it) a
ppro
pria
te c
over
ages
–Bin
d ris
ks–R
ecei
ve p
rem
ium
s fro
m in
sure
ds–R
ecei
ve c
omm
issi
ons
from
insu
rer
–Del
iver
polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Del
iver
pol
icie
s
Lice
nsin
g R
equi
rem
ents
•At l
east
18
year
s of
age
•Suc
cess
full y
pas
s ap
plic
able
exa
my
ppp
•Sub
mit
appl
icat
ion
and
pay
licen
se fe
es•S
ubm
it to
a b
ackg
roun
d ch
eck
•Kee
p ad
dres
s cu
rren
t–A
gent
mus
t not
ify C
omm
issi
oner
of a
cha
nge
in
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
gy
gad
dres
s w
ithin
30
days
TX_P&C_ClassNotes_3e.indb 39 1/27/2014 12:43:36 PM
40
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Res
iden
ts V
ersu
s N
onre
side
nts
•R
esid
ent a
gent
lice
nse
–A
llow
s a
resi
dent
(liv
es in
Tex
as) t
o se
ll in
sura
nce
in
Texa
sTe
xas
•N
onre
side
nt a
gent
lice
nse
–A
llow
s a
nonr
esid
ent (
does
not
live
in T
exas
) to
sell
insu
ranc
e in
Tex
as–
Rec
ipro
city
agr
eem
ents
are
in p
lace
bet
wee
n m
ost
stat
es—
mea
ns th
e no
nres
iden
t doe
sn’t
have
to ta
ke
thT
(ifth
lid
ith
ih
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
the
Texa
s ex
am (i
f the
y ar
e lic
ense
d in
thei
r hom
e st
ate)
if th
eir s
tate
lets
Tex
ans
(lice
nsed
in T
exas
) get
a
nonr
esid
ent l
icen
se w
ithou
t hav
ing
to ta
ke th
eir s
tate
ex
am
Age
nt’s
Lic
ense
Typ
es•T
empo
rary
lice
nse
–
Issu
ed fo
r per
iod
of 9
0 da
ys—
no re
new
al–
Can
onl
y ha
ve o
ne e
very
six
mon
ths
–C
anno
t be
paid
any
com
mis
sion
s fo
r the
sal
e of
co
ntro
lled
busi
ness
–R
equi
red
to h
ave
a co
mpa
ny o
r age
nt s
pons
or–
Mus
t com
plet
e 40
hou
rs o
f stu
dy w
ithin
14
days
of
appl
ying
fort
helic
ense
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
appl
ying
for t
he li
cens
e–
No
test
requ
ired
Age
nt’s
Lic
ense
Typ
es•
Em
erge
ncy
licen
se–
Issu
ed to
a fa
mily
mem
ber w
hen
an a
gent
die
s or
be
com
esdi
sabl
edbe
com
es d
isab
led
–Is
sued
for a
per
iod
of 9
0 da
ys b
ut c
an b
e re
new
ed–
No
test
requ
ired
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
Age
nt’s
Lic
ense
Typ
es•G
ener
al li
nes
prop
erty
cas
ualty
age
nt
–C
an s
olic
it an
insu
ranc
e co
ntra
ct fo
r all
pers
onal
and
co
mm
erci
allin
esof
busi
ness
com
mer
cial
line
s of
bus
ines
s•P
erso
nal l
ines
age
nt
–C
an s
olic
it an
insu
ranc
e co
ntra
ct fo
r per
sona
l lin
es
busi
ness
onl
y (n
o co
mm
erci
al li
nes)
•Ins
uran
ce s
ervi
ce re
pres
enta
tive
(ISR
) –
Sal
arie
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
–P
erfo
rms
dutie
s on
ly in
the
offic
e in
clud
ing
quot
es
TX_P&C_ClassNotes_3e.indb 40 1/27/2014 12:43:37 PM
41
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Age
nt’s
Lic
ense
Typ
es•L
imite
d lin
es–
Allo
ws
the
agen
t to
sell
only
one
type
of i
nsur
ance
suc
h as
pers
onal
auto
insu
ranc
eas
per
sona
l aut
o in
sura
nce
•Ris
k m
anag
er–
Exa
min
es, a
sses
ses,
and
eva
luat
es ri
sks
to a
ssis
t in
the
redu
ctio
n of
risk
for t
hose
see
king
insu
ranc
e–
Doe
s no
t per
mit
licen
see
to re
ceiv
e co
mm
issi
ons
from
th
esa
leof
insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
the
sale
of i
nsur
ance
Age
nt’s
Lic
ense
Typ
es•M
anag
ing
Gen
eral
Age
nt (M
GA
)—A
man
agin
g ge
nera
l age
nt m
ay re
pres
ent o
ne o
r m
ore
com
pani
es a
nd m
ay:
–Iss
ue p
olic
ies
–Han
dle
the
adju
stm
ent o
f los
ses
–App
oint
and
supe
rvis
epr
oper
ty a
nd c
asua
lty
agen
ts w
ho se
ll in
sura
nce
for t
he co
mpa
nies
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
MGA
repr
esen
ts
Age
nt’s
Lic
ense
Typ
esM
anag
ing
Gen
eral
Age
nt•
An
insu
rer m
ay n
ot a
ccep
t bus
ines
s fro
m a
m
anag
ing
gene
ral a
gent
and
the
agen
t may
not
pl
ace
busi
ness
with
the
insu
rerw
ithou
taw
ritte
npl
ace
busi
ness
with
the
insu
rer w
ithou
t a w
ritte
n co
ntra
ct. T
he c
ontra
ct m
ust b
e m
ade
avai
labl
e fo
r in
spec
tion
by T
DI.
•Th
e m
anag
ing
gene
ral a
gent
mus
t rep
ort e
ach
appo
intm
ent b
y an
insu
rer t
o th
e TD
I and
mus
t als
o re
port
term
inat
ions
of a
ppoi
ntm
ents
.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
ppp
•Th
e M
GA
licen
se is
not
a s
ellin
g lic
ense
. The
ag
ents
app
oint
ed b
y th
e M
GA
do th
e ac
tual
sel
ling
of in
sura
nce.
Lice
nsin
g of
Par
tner
ship
s,
Cor
pora
tions
, and
Ban
ks•B
usin
ess
and
finan
cial
ent
ities
wis
hing
to
be li
cens
ed m
ust m
eet t
he fo
llow
ing
crite
ria–
At l
east
one
par
tner
or o
ffice
r of t
he b
usin
ess
mus
t be
indi
vidu
ally
lice
nsed
bef
ore
the
busi
ness
can
app
ly fo
r a
licen
se–
Mus
t hav
e a
$25,
000
bond
or a
$25
0,00
0 er
rors
and
om
issi
ons
(E&
O) p
olic
y to
cov
er m
ista
kes
–B
anks
mus
t kee
p in
sura
nce
oper
atio
ns s
epar
ate
and
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
Ban
ks m
ust k
eep
insu
ranc
e op
erat
ions
sep
arat
e an
d di
stin
ct fr
om b
anki
ng o
pera
tions
TX_P&C_ClassNotes_3e.indb 41 1/27/2014 12:43:37 PM
42
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Lice
nse
Ren
ewal
s•M
ost l
icen
ses
rene
w e
very
two
year
son
th
e an
nive
rsar
y da
te (f
ew e
xcep
tions
)•I
f a li
cens
e la
pses
–M
ay re
new
with
in 9
0 da
ys—
subj
ect t
o a
50%
late
fee
(pen
alty
)–
Lice
nse
expi
res
afte
r 90
days
. May
app
ly fo
r a n
ew
licen
se w
ithou
t hav
ing
to re
test
up
to o
ne y
ear f
ollo
wing
ex
pira
tion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
expi
ratio
n–
Afte
r lic
ense
exp
ired
for o
ne y
ear o
r mor
e—m
ust a
pply
fo
r a n
ew li
cens
e an
d re
test
Con
tinui
ng E
duca
tion
(CE)
•30
hour
s re
quire
d du
ring
licen
se c
ycle
•50%
in a
cla
ssro
om s
ettin
g or
cla
ssro
om
geq
uiva
lent
•Tw
o ho
urs
of e
thic
s•K
eep
reco
rds
for f
our y
ears
in c
ase
of a
udit
by C
omm
issi
oner
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
•No
grac
e pe
riod
give
n fo
r com
plet
ing
CE
Act
ing
With
out a
Lic
ense
•A p
erso
n w
ithou
t an
insu
ranc
e pr
oduc
er’s
lic
ense
may
not
–Sol
icit
or s
ell i
nsur
ance
–Rec
eive
com
mis
sion
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
Term
inat
ion
of A
ppoi
ntm
ent
•A
ll te
rmin
atio
n of
app
oint
men
ts m
ust b
e re
porte
d to
TD
I–
If an
age
ncy
cont
ract
has
bee
n in
pla
ce tw
o ye
ars
or
long
erag
enti
sen
title
dto
asi
xm
onth
adva
nce
long
er, a
gent
is e
ntitl
ed to
a s
ix-m
onth
adv
ance
no
tice
•Age
nt m
ay w
aive
the
notic
e–
Insu
rer m
ust r
enew
all
polic
ies
durin
g th
at s
ix-m
onth
pe
riod
but N
OT
requ
ired
to a
ccep
t new
bus
ines
s•
The
reas
on fo
r ter
min
atio
n m
ust b
e pr
ovid
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
p•
Loss
of a
ppoi
ntm
ent d
oes
NO
T re
sult
in lo
ss o
f lic
ense
TX_P&C_ClassNotes_3e.indb 42 1/27/2014 12:43:37 PM
43
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Fidu
ciar
y R
espo
nsib
ilitie
s•
Due
to re
spon
sibi
litie
s an
d du
ties
of a
n ag
ent,
they
ar
e he
ld in
a fi
duci
ary
capa
city
(a p
ositi
on o
f fin
anci
al
trust
and
conf
iden
ce)
trust
and
con
fiden
ce)
•P
rope
r han
dlin
g of
pre
miu
m m
onie
s is
sub
ject
to
stat
e la
ws,
rule
s, a
nd re
gula
tions
•A
ny m
isap
prop
riatio
n of
thes
e fid
ucia
ry fu
nds
is
subj
ect t
o st
ate
pena
lties
and
fine
s•
Any
com
min
glin
gof
fund
sis
stric
tlypr
ohib
ited
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
Any
com
min
glin
g of
fund
s is
stri
ctly
pro
hibi
ted
–C
omm
ingl
ing
is m
ixin
g co
mpa
ny p
rem
ium
s w
ith th
e ag
ents
per
sona
l or b
usin
ess
asse
ts
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•
The
TDI m
ay o
rder
any
of t
he fo
llowi
ng d
isci
plin
ary
actio
ns–
Issu
ea
ceas
ean
dde
sist
orde
r–
Issu
e a
ceas
e an
d de
sist
ord
er–
Pla
ce o
n pr
obat
ion
–S
uspe
nd a
lice
nse
–R
evok
e a
licen
se–
Ref
use
to is
sue
or re
new
a li
cens
e–
Levy
a fi
ne (c
ivil
pena
lty)—
up to
$25
,000
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
y(
py)
p$
,•
An
agen
t has
20
days
to re
ques
t a h
earin
g. T
he T
DI m
ust
give
the
agen
t at l
east
10
days
adv
ance
d no
tice
of th
e he
arin
g da
te.
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•
Rea
sons
for d
isci
plin
ary
actio
ns in
clud
e–P
rovi
ding
inco
rrec
t, m
isle
adin
g, o
r mat
eria
lly
ti
fti
ith
lili
tiun
true
info
rmat
ion
in th
e lic
ense
app
licat
ion
–Vio
latin
g in
sura
nce
law
s, re
gula
tions
, or o
rder
s –M
isap
prop
riatin
g or
con
verti
ng m
oney
–Hav
ing
been
con
vict
ed o
f a fe
lony
•I
f alre
ady
licen
sed,
mus
t not
ify C
omm
issi
oner
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
with
in 3
0 da
ys–U
sing
frau
dule
nt, c
oerc
ive,
or d
isho
nest
pra
ctic
es
Dis
cipl
inar
y A
ctio
ns:
Pena
lties
and
Fin
es•C
ease
and
des
ist o
rder
–C
an b
e is
sued
by
Com
mis
sion
er–
The
orde
r pro
hibi
ts th
e in
divi
dual
or e
ntity
from
co
ntin
uing
that
pra
ctic
e–
Failu
re to
com
ply
can
resu
lt in
sub
stan
tial f
ines
in T
exas
•Age
nts—
up to
$1,
000
per v
iola
tion,
$5,
000
max
imum
•Ins
urer
s—up
to $
25,0
00
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n40
TX_P&C_ClassNotes_3e.indb 43 1/27/2014 12:43:38 PM
44
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Exam
ples
of D
isci
plin
ary
Act
ions
•Lic
ense
den
ial
–D
ue to
crim
inal
pas
t—do
not
reap
ply
for f
ive
year
s
•Lic
ense
revo
catio
n or
rene
wal
refu
sed
–D
ue to
vio
latio
n of
insu
ranc
e la
ws,
mis
appr
opria
tion
of
fund
s, o
r def
raud
a p
olic
yhol
der—
cann
ot re
appl
y fo
r fiv
e ye
ars
•Lic
ense
sus
pens
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n41
–S
topp
ed fr
om s
ellin
g fo
r a p
erio
d of
tim
e
Exam
ples
of D
isci
plin
ary
Act
ions
•F
ailu
re to
com
plet
e co
ntin
uing
edu
catio
n–$
50 fi
ne p
er h
our n
ot c
ompl
eted
•Per
form
ing
agen
t dut
ies
with
out l
icen
se
–Cla
ss B
mis
dem
eano
r –$
500
fine,
no
licen
se fo
r fiv
e ye
ars
–Wou
ld b
e re
ferre
d to
the
Atto
rney
Gen
eral
f
ti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n42
for p
rose
cutio
n
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Con
trolle
d bu
sine
ss–P
olic
ies
for t
he a
gent
, rel
ativ
es, o
r bus
ines
s i
asso
ciat
es–H
avin
g a
licen
se s
olel
y fo
r the
pur
pose
of
sellin
g co
ntro
lled
busi
ness
is n
ot a
llow
ed–L
aw a
llow
s up
to 7
5% o
f an
agen
t’s b
usin
ess
to
com
e fro
m c
ontro
lled
sour
ces
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n43
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Reb
atin
g or
unl
awfu
l ind
ucem
ent
–Giv
ing
(or o
fferin
g) s
omet
hing
of v
alue
–To
indu
ce th
e pu
rcha
se o
f ins
uran
ce•F
alse
or d
ecep
tive
adve
rtisi
ng–E
xam
ple:
gua
rant
ee o
f div
iden
ds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n44
TX_P&C_ClassNotes_3e.indb 44 1/27/2014 12:43:38 PM
45
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Tw
istin
g–U
sing
mis
repr
esen
tatio
n to
indu
ce a
per
son
to d
rop
exis
ting
insu
ranc
e co
vera
ge a
nd
purc
hase
new
insu
ranc
e w
ith a
new
pr
oduc
er a
nd c
ompa
ny w
hen
it is
not
in th
e be
st in
tere
sts
of th
at p
erso
n•U
nfai
r com
paris
on
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n45
p–D
o no
t mak
e un
fair
or in
com
plet
e co
mpa
rison
s be
twee
n po
licie
s an
d fe
atur
es
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Def
amat
ion
–Mak
ing
oral
or w
ritte
n st
atem
ents
that
are
fa
lse,
mal
icio
us, o
r der
ogat
ory
to th
e fin
anci
al c
ondi
tion
of a
ny in
sure
r or a
gent
•Dis
para
gem
ent
–Dis
hone
sty
abou
t com
petit
ion
incl
udin
g th
eir
serv
ices
orbu
sine
ssm
etho
ds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n46
serv
ices
or b
usin
ess
met
hods
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Tes
timon
ials
–M
ust b
e ge
nuin
e–
Mus
t rep
rese
nt th
e cu
rren
t opi
nion
of a
utho
r
•Boy
cott,
coe
rcio
n, a
nd in
timid
atio
n–
Pur
chas
e of
insu
ranc
e m
ust b
e vo
lunt
ary
•Fal
se u
se o
f sta
tistic
s–
Mus
tbe
verif
iabl
ytru
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n47
Mus
t be
verif
iabl
y tru
e–
Sou
rce
mus
t be
iden
tifie
d
Unf
air T
rade
(Mar
ketin
g) P
ract
ices
•Unf
air d
iscr
imin
atio
n–I
nsur
ers
are
allo
wed
to c
harg
e ra
tes
gba
sed
upon
age
or g
ende
r. H
owev
er,
usin
g fa
ctor
s su
ch a
s ra
ce, r
elig
ion,
or
coun
try o
f orig
in is
not
allo
wed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n48
TX_P&C_ClassNotes_3e.indb 45 1/27/2014 12:43:38 PM
46
Less
on F
ive
Insu
ranc
e R
egul
atio
ns
Unf
air C
laim
s Pr
actic
es•U
nfai
r cla
ims
settl
emen
t pra
ctic
es in
clud
e, b
ut
are
not l
imite
d to
, the
follo
win
g:–M
isre
pres
entin
g fa
cts
rega
rdin
g co
vera
ge–N
ot a
ttem
ptin
g in
goo
d fa
ith to
brin
g ab
out
prom
pt, f
air,
and
equi
tabl
e se
ttlem
ent w
hen
liabi
lity
has
beco
me
reas
onab
ly c
lear
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n49
Unf
air C
laim
s Pr
actic
es•U
nfai
r cla
ims
settl
emen
t pra
ctic
es in
clud
e, b
ut
are
not l
imite
d to
, the
follo
win
g:–R
efus
ing
to p
ay c
laim
s w
ithou
t con
duct
ing
a re
ason
able
inve
stig
atio
n–R
equi
ring
clai
man
t to
prod
uce
fede
ral
inco
me
tax
retu
rns
for i
nves
tigat
ion
unle
ss
the
clai
m is
a fi
re lo
ss o
r los
s of
inco
me
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n50
clai
m
Unf
air C
laim
s Pr
actic
es•A
djus
ters
mus
t mee
t the
follo
win
g tim
e re
quire
men
ts in
Tex
as–
15 d
ays
to a
ckno
wle
dge
clai
m, c
omm
ence
in
vest
igat
ion,
and
requ
est a
ll in
form
atio
n (p
roof
of
loss
not
ice)
–15
bus
ines
s da
ys to
acc
ept o
r den
y th
e cl
aim
onc
e al
l req
uire
d in
form
atio
n is
rece
ived
–5
busi
ness
day
s to
writ
e th
e ch
eck
afte
r lia
bilit
y is
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n51
5 bu
sine
ss d
ays
to w
rite
the
chec
k af
ter l
iabi
lity
is
dete
rmin
ed–
The
abov
e re
quire
men
ts m
ay b
e m
odifi
ed if
su
spec
ted
arso
n or
if a
wea
ther
-rel
ated
cat
astro
phe
Cla
ims
Adj
uste
r•A
per
son
repr
esen
ting
the
insu
ranc
e co
mpa
ny w
ho n
egot
iate
s an
d se
ttles
(pay
s)
clai
ms
•Sub
ject
to u
nfai
r cla
ims
prac
tices
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n52
TX_P&C_ClassNotes_3e.indb 46 1/27/2014 12:43:39 PM
Lesson SixPersonal Auto Policy
TX_P&C_ClassNotes_3e.indb 47 1/27/2014 12:43:39 PM
48
Less
on S
ix
Pers
onal
Aut
o Po
licy
Less
onSi
xLe
sson
Six
Pe
rson
al A
uto
Polic
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Cov
ered
Aut
os•O
wne
d ve
hicl
es (m
ust b
e sc
hedu
led)
–P
rivat
e pa
ssen
ger a
utos
–P
icku
p tru
cks
and
vans
•Siz
e re
quire
men
t is
25,0
00 lb
s or
less
•For
per
sona
l use
, not
bus
ines
s–
Exc
eptio
n: F
arm
veh
icle
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Cov
ered
Aut
os•N
on-o
wne
d ve
hicl
es—
som
e au
tom
atic
co
vera
ge fo
r non
owne
d ve
hicl
es; h
owev
er,
the
vehi
cle
owne
r’s in
sura
nce
is u
sual
ly
prim
ary
–B
orro
wed
veh
icle
s–
Ren
ted
vehi
cles
–Te
mpo
rary
sub
stitu
te (w
hile
ow
ned
auto
bei
ng re
paire
d)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Cov
ered
Aut
os•T
raile
rs h
itche
d to
insu
red
vehi
cle
–A
utom
atic
ally
cov
ered
for l
iabi
lity
only
–E
xam
ples
: Tra
ilers
for b
oats
, hor
ses,
cam
per,
utili
ty
traile
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 48 1/27/2014 12:43:39 PM
49
Less
on S
ix
Pers
onal
Aut
o Po
licy
Pers
ons
Insu
red
•Nam
ed in
sure
d (in
the
decl
arat
ions
)–
Aut
omat
ical
ly in
clud
es re
side
nt s
pous
e–
A no
nres
iden
t spo
use
may
not
be
cove
red
•Res
iden
t fam
ily m
embe
r–
Rel
ated
by
bloo
d, m
arria
ge, o
r ado
ptio
n–
Incl
udes
war
ds o
r fos
ter c
hild
ren
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Pers
ons
Insu
red
•Any
per
son
driv
ing
with
insu
red’
s pe
rmis
sion
–In
clud
es re
side
nt s
pous
e’s
perm
issi
on
•Any
per
son
or o
rgan
izat
ion
with
lega
l lia
bilit
y–
Exa
mpl
e: L
ien
hold
er o
n ve
hicl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Pers
onal
Aut
o Po
licy
Ove
rvie
w•C
over
ages
the
insu
red
can
choo
se–P
art A
: Lia
bilit
y–P
art B
1: M
edic
al P
aym
ents
–Par
t B2:
Tex
as P
erso
nal I
njur
y P
rote
ctio
n–P
art C
: Uni
nsur
ed/U
nder
insu
red
Mot
oris
t–P
art D
: Dam
age
to Y
our A
uto
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Part
A -
Liab
ility
Cov
erag
e•T
hird
par
ty c
over
age
•Pay
s le
gal o
blig
atio
ns o
n be
half
of th
e in
sure
d•C
over
s bo
dily
inju
ry o
r pro
perty
dam
age
to o
ther
s w
ithin
the
limits
of t
he p
olic
y•P
ays
all c
laim
s ha
ndlin
g co
sts
(with
out l
imits
) in
clud
ing
atto
rney
s fe
es if
the
insu
red
is s
ued
(whe
ther
at f
ault
or n
ot)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
•Doe
s no
t cov
er th
e in
sure
d’s
inju
ries
or d
amag
e
TX_P&C_ClassNotes_3e.indb 49 1/27/2014 12:43:39 PM
50
Less
on S
ix
Pers
onal
Aut
o Po
licy
Bod
ily In
jury
•Def
initi
on o
f bod
ily in
jury
incl
udes
bod
ily
harm
, sic
knes
s, o
r dis
ease
, inc
ludi
ng d
eath
•Cov
ers
inju
ries
caus
ed b
y in
sure
d in
clud
ing
–M
edic
al e
xpen
ses
–Lo
st w
ages
–
Pai
n an
d su
fferin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Prop
erty
Dam
age
•Def
initi
on o
f pro
perty
dam
age
incl
udes
ph
ysic
al in
jury
to, d
estru
ctio
n of
, or l
oss
of
use
of ta
ngib
le p
rope
rty•C
over
s da
mag
es c
ause
d by
insu
red
incl
udin
g–
Dam
age
to a
noth
er v
ehic
le (i
nclu
ding
loss
of u
se)
–D
amag
eto
abu
ildin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Dam
age
to a
bui
ldin
g–
Dam
age
to a
wal
l or f
ence
Fina
ncia
l Res
pons
ibili
ty L
aws
•Tex
as M
otor
Veh
icle
Saf
ety
Res
pons
ibili
ty
Act
•Req
uire
s pr
oof o
f abi
lity
to s
atis
fy a
liab
ility
cl
aim
aga
inst
a p
erso
n as
resu
lt of
an
acci
dent
•Way
s to
mee
t req
uire
men
ts in
Tex
asB
tli
bilit
ib
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
–B
uy a
uto
liabi
lity
insu
ranc
e or
a b
ond
–D
epos
it m
oney
with
the
stat
e–
Sel
f-ins
ure
Lim
its o
f Lia
bilit
y:
Texa
s M
inim
ums
Spl
it lim
it$3
0,00
0 fo
r bod
ily in
jury
, per
per
son
30/6
0/25
$60,
000
for b
odily
inju
ry, p
er a
ccid
ent
$25,
000
for p
rope
rty d
amag
e, p
er
ac
cide
nt
Com
bine
d si
ngle
lim
it•$
85,0
00 s
ingl
e lim
it pe
r acc
iden
t
Cb
thb
dil
ij
dt
OR
OR
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
limit
$85,
000
• Cov
ers
both
bod
ily in
jury
and
pro
perty
dam
age
BI a
nd P
D p
aid
out o
f sam
e po
licy
limit
TX_P&C_ClassNotes_3e.indb 50 1/27/2014 12:43:39 PM
51
Less
on S
ix
Pers
onal
Aut
o Po
licy
Prac
tice
Que
stio
n•
Dia
ne is
insu
red
on a
n au
to p
olic
y w
ith
liabi
lity
cove
rage
•
She
is li
able
for t
he fo
llow
ing
dam
ages
in a
tw
o ca
r acc
iden
t –
$10,
000
for t
he in
jure
d dr
iver
of o
ther
car
–$3
5,00
0 fo
r the
inju
red
pass
enge
r–
$30,
000
for t
he d
amag
e to
oth
er v
ehic
le
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
$,
g
•H
ow m
uch
will
Dia
ne’s
pol
icy
pay?
Prac
tice
Ans
wer
: Spl
it Li
mits
How
muc
h w
ill D
iane
’s p
olic
y pa
y if
she
has
liabi
lity
limits
of 3
0/60
/25?
Am
ount
of D
amag
esIn
sura
nce
Pays
Inju
red
driv
er: $
10,0
00
Inju
red
pass
enge
r: $3
5,00
0Ve
hicl
eda
mag
e:$3
0,00
0
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Vehi
cle
dam
age:
$30
,000
To
tal P
aid
Prac
tice
Ans
wer
: Com
bine
d Si
ngle
Li
mits
How
muc
h w
ill D
iane
’s p
olic
y pa
y if
she
has
a co
mbi
ned
sing
le li
mit
of $
85,0
00 fo
r lia
bilit
y?
Am
ount
of D
amag
esIn
sura
nce
Pays
Inju
red
driv
er: $
10,0
00
Inju
red
pass
enge
r: $3
5,00
0
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
jued
pass
ege
$35,
000
Vehi
cle
dam
age:
$30
,000
To
tal P
aid
Supp
lem
enta
ry (A
dditi
onal
) Pay
men
ts
•Bon
ds–P
rem
ium
s fo
r app
eal a
nd b
ail b
onds
(up
to
$250
)•L
oss
of e
arni
ngs
–Up
to $
200
per d
ay–F
or lo
ss o
f ins
ured
’s e
arni
ngs
only
bec
ause
of
atte
ndan
ceat
hear
ings
ortri
als
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
atte
ndan
ce a
t hea
rings
or t
rials
•Int
eres
t –I
nter
est o
n ju
dgm
ents
whi
le in
app
eal
TX_P&C_ClassNotes_3e.indb 51 1/27/2014 12:43:40 PM
52
Less
on S
ix
Pers
onal
Aut
o Po
licy
Supp
lem
enta
ry P
aym
ents
•E
xpen
ses
–Ins
ured
’s re
ason
able
exp
ense
s fo
r atte
ndin
g co
urt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Liab
ility
: Exc
lusi
ons
•Use
of a
veh
icle
with
out p
erm
issi
on–
Doe
s no
t app
ly to
fam
ily m
embe
rs u
sing
cov
ered
aut
os
db
thi
dow
ned
by th
e in
sure
d
•Use
of a
veh
icle
use
d as
a p
ublic
or l
iver
y co
nvey
ance
(e.g
., ta
xi o
r cou
rier)
–Li
very
mea
ns d
eliv
ery
for a
fee
–S
hare
-the-
expe
nse
carp
ool i
s al
low
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
•Use
of a
veh
icle
in p
rear
rang
ed ra
cing
or
spee
d co
ntes
ts
Liab
ility
: Exc
lusi
ons
•Los
s ca
used
inte
ntio
nally
by
insu
red
•Dam
a ge
to p
rope
rty o
wne
d or
bei
ng
gp
py
gtra
nspo
rted
by in
sure
d•M
otor
ized
vehi
cles
with
few
er th
an fo
ur
whe
els
–Mot
orcy
cles
may
be
cove
red
by u
sing
an
dt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
endo
rsem
ent
Oth
er In
sura
nce
Cla
use
•Any
insu
ranc
e th
e co
mpa
ny p
rovi
des
for a
ve
hicl
e th
at is
not
ow
ned
by th
e in
sure
d,
will
be
cons
ider
ed e
xces
s to
oth
er
insu
ranc
e–F
or e
xam
ple,
Jes
s bo
rrow
s M
ary’
s ca
r and
is
invo
lved
in a
n ac
cide
nt (M
ary’
s in
sura
nce
is
prim
ary;
Jes
s’s
insu
ranc
e is
exc
ess)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
py
)–T
he in
sura
nce
polic
y of
the
car o
wne
r is
prim
ary
cove
rage
TX_P&C_ClassNotes_3e.indb 52 1/27/2014 12:43:40 PM
53
Less
on S
ix
Pers
onal
Aut
o Po
licy
Out
-of-S
tate
Cov
erag
e•A
pplie
s w
hen
an in
sure
d is
trav
elin
g in
to
anot
her s
tate
•The
insu
red’
s po
licy
will
pro
vide
the
high
er
of th
e fo
llow
ing:
–Th
e lia
bilit
y lim
its p
urch
ased
by
the
insu
red
–Th
e lim
its re
quire
d by
the
stat
e in
whi
ch th
e in
sure
d is
tra
velin
g
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Med
ical
Pay
men
ts•P
ays
for i
njur
ies
to th
e fo
llow
ing
–In
sure
d oc
cupy
ing
an a
uto
or a
s a
pede
stria
n•O
ccup
ying
: In
the
vehi
cle,
upo
n th
e ve
hicl
e, o
r get
ting
in, o
nto,
out
of,
or o
ff of
the
vehi
cle
–In
sure
d’s
gues
t pas
seng
ers
•Pay
s–
Reg
ardl
ess
of fa
ult
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
–U
p to
thre
e ye
ars
Med
ical
Pay
men
ts•P
ays
for t
he fo
llow
ing
–M
edic
al e
xpen
ses
–Fu
nera
l exp
ense
s
•Min
imum
lim
it if
purc
hase
d—$5
00 p
er
pers
on
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Texa
s Pe
rson
al In
jury
Pro
tect
ion
(PIP
)
•Pay
s fo
r inj
urie
s to
the
follo
win
g–
Insu
red
occu
pyin
g an
aut
o or
as
a pe
dest
rian
–In
sure
d’s
gues
t pas
seng
ers
•Pay
s–
Reg
ardl
ess
of fa
ult
–U
p to
thre
e ye
ars
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
TX_P&C_ClassNotes_3e.indb 53 1/27/2014 12:43:40 PM
54
Less
on S
ix
Pers
onal
Aut
o Po
licy
Texa
s Pe
rson
al In
jury
Pro
tect
ion
(PIP
)
•Pay
s fo
r the
follo
win
g–
Med
ical
and
fune
ral e
xpen
ses
–80
% o
f los
t wag
es–
Ess
entia
l ser
vice
s (la
wn
mow
ing,
hou
se c
lean
ing)
A pe
rson
can
not c
olle
ct b
oth
lost
wag
es
and
esse
ntia
l ser
vice
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Texa
s Pe
rson
al In
jury
Pro
tect
ion
(PIP
)
•Lim
its–
Min
imum
—$2
,500
per
per
son
•Mus
t be
incl
uded
with
min
imum
lim
its in
all
liabi
lity
polic
ies
issu
ed in
Tex
as, u
nles
s re
ject
ed in
writ
ing
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
Uni
nsur
ed a
nd U
nder
insu
red
Mot
oris
ts C
over
age
(UM
/UIM
)•P
aym
ents
to in
sure
d an
d gu
est p
asse
nger
s fo
r–
Bod
ily in
jury
–P
rope
rty d
amag
e •$
250
dedu
ctib
le a
pplie
s
•Inj
ury
or d
amag
e m
ust b
e ca
used
by
negl
igen
tthi
rdpa
rty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
negl
igen
t thi
rd p
arty
Uni
nsur
ed a
nd U
nder
insu
red
Mot
oris
ts C
over
age
(UM
/UIM
)•U
nins
ured
mot
oris
t (U
M)
–P
rovi
des
cove
rage
whe
n at
-faul
t thi
rd p
arty
doe
s no
t car
ry li
abili
ty in
sura
nce
–In
clud
es a
hit-
and-
run
•Phy
sica
l con
tact
with
oth
er v
ehic
le m
ust o
ccur
–P
hant
om v
ehic
les
are
not c
onsi
dere
d to
be
unin
sure
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
TX_P&C_ClassNotes_3e.indb 54 1/27/2014 12:43:40 PM
55
Less
on S
ix
Pers
onal
Aut
o Po
licy
Uni
nsur
ed a
nd U
nder
insu
red
Mot
oris
ts C
over
age
(UM
/UIM
)•U
nder
insu
red
mot
oris
t (U
IM)
–P
rovi
des
cove
rage
whe
n at
-faul
t thi
rd p
arty
doe
s no
t car
ry e
noug
h lia
bilit
y in
sura
nce
•Exc
ess
cove
rage
ove
r at-f
ault
driv
er’s
insu
ranc
e•P
ays
afte
r the
insu
red
has
colle
cted
from
the
at-
faul
t par
ties
liabi
lity
insu
ranc
e–
Sub
ject
to s
ubro
gatio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
Uni
nsur
ed a
nd U
nder
insu
red
Mot
oris
ts C
over
age
(UM
/UIM
)•A
vaila
ble
limits
–M
inim
um•S
plit
limits
—30
/60/
25•C
ombi
ned
sing
le li
mit—
$85,
000
–M
axim
um—
cann
ot e
xcee
d lim
it pu
rcha
sed
for l
iabi
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
Uni
nsur
ed a
nd U
nder
insu
red
Mot
oris
ts C
over
age
(UM
/UIM
)•M
ust b
e in
clud
ed in
all
liabi
lity
polic
ies
issu
ed in
Tex
as, u
nles
s th
e in
sure
d re
ject
s th
e co
vera
ge in
writ
ing
•Rej
ectio
n m
ay b
e –
In it
s en
tiret
y–
Just
the
prop
erty
dam
age
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
Phys
ical
Dam
age
Cov
erag
e•C
over
age
prov
ided
for d
amag
e to
–I
nsur
ed v
ehic
les
–Non
owne
d ve
hicl
es•S
umm
ary
of c
over
ages
A.C
ollis
ion
B.O
ther
than
col
lisio
n (c
ompr
ehen
sive
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
C.T
rans
porta
tion
expe
nses
TX_P&C_ClassNotes_3e.indb 55 1/27/2014 12:43:41 PM
56
Less
on S
ix
Pers
onal
Aut
o Po
licy
Phys
ical
Dam
age
Cov
erag
e•C
ollis
ion
–Cov
ers
spec
ified
per
ils o
nly
pp
y•C
ollis
ion
with
ano
ther
veh
icle
or o
bjec
t•U
pset
of t
he v
ehic
le (o
vertu
rned
veh
icle
)–D
educ
tible
app
lies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
Phys
ical
Dam
age
Cov
erag
e•C
ompr
ehen
sive
•Ope
n pe
rils—
all p
erils
cov
ered
unl
ess
excl
uded
•E
xam
ples
of c
over
ed p
erils
–Fire
, exp
losi
on, w
ind,
and
hai
l–E
arth
quak
e an
d flo
od–V
anda
lism
and
thef
tG
lb
k
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
–Gla
ss b
reak
age
–Con
tact
with
bird
or a
nim
al•D
educ
tible
is c
omm
on
Phys
ical
Dam
age:
Exc
lusi
ons
•Som
e of
the
mos
t com
mon
exc
lusi
ons
incl
ude
–Sou
nd/v
ideo
equ
ipm
ent u
nles
s pe
rman
ently
in
stal
led
($1,
500
if pe
rman
ently
inst
alle
d)–P
erso
nal p
rope
rty in
the
car
–Cus
tom
ized
equ
ipm
ent
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
Phys
ical
Dam
age:
Exc
lusi
ons
•Som
e of
the
mos
t com
mon
exc
lusi
ons
incl
ude
–Wea
r and
tear
–Mec
hani
cal o
r ele
ctric
al b
reak
dow
n or
failu
re–R
oad
dam
age
to ti
res
–War
Fi
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
–Fre
ezin
g
TX_P&C_ClassNotes_3e.indb 56 1/27/2014 12:43:41 PM
57
Less
on S
ix
Pers
onal
Aut
o Po
licy
Tran
spor
tatio
n Ex
pens
es C
over
age
•If c
ompr
ehen
sive
and
col
lisio
n co
vera
ge is
pu
rcha
sed,
this
pay
s th
e co
st o
f sub
stitu
te
trans
porta
tion
for a
n in
sure
d in
the
even
t of
a co
vere
d lo
ss. L
imite
d to
$20
per
day
, up
to $
600
max
imum
per
loss
.•I
f a th
eft l
oss,
ther
e is
a 4
8-ho
ur w
aitin
g pe
riod
befo
reco
vera
gebe
gins
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
perio
d be
fore
cov
erag
e be
gins
•A s
epar
ate
cove
rage
is a
vaila
ble
that
pay
s on
ly fo
r ren
tal r
eim
burs
emen
t
Phys
ical
Dam
age:
Los
s Se
ttlem
ent
•Aut
o cl
aim
s se
ttled
at a
ctua
l cas
h va
lue,
an
d in
sure
r will
–To
tal t
he v
ehic
le w
hen
repa
ir co
sts
exce
ed v
ehic
le
valu
e–
Rep
air w
hen
repa
ir co
st is
less
than
veh
icle
val
ue–
Rep
lace
whe
n in
sure
r can
find
ano
ther
veh
icle
of l
ike
kind
and
qua
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
Whe
nac
quire
dIf
phys
ical
dam
age
cove
rage
isin
clud
edIf
No
phys
ical
dam
age
cove
rage
isin
clud
ed
New
ly A
cqui
red
Vehi
cles
Whe
n ac
quire
d as
an
“add
ition
al”
vehi
cle
cove
rage
is in
clud
ed
(col
lisio
n/co
mp)
on
insu
red'
s ex
istin
g po
licy,
co
vera
ge is
as
follo
ws
cove
rage
is in
clud
ed
(col
lisio
n/co
mp)
on
insu
red'
s ex
istin
g po
licy,
co
vera
ge is
as
follo
ws
Aut
omat
ic c
over
age
prov
ided
for
14 d
ays
4 da
ys
Broa
dest
cov
erag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
Type
of c
over
age
appl
ied
to v
ehic
lesh
own
for a
ny v
ehic
le
liste
d on
the
polic
y de
clar
atio
ns p
age
$500
ded
uctib
le
Not
ify in
sure
r to
add
vehi
cle
to p
olic
yW
ithin
14
days
With
in 4
day
s
New
ly A
cqui
red
Vehi
cles
•Aut
omat
ic c
over
age
for r
epla
cem
ent
vehi
cles
–Sam
e co
vera
ges
appl
y to
new
veh
icle
as
wer
e on
the
car i
t rep
lace
d fo
r 14
days
•Exc
eptio
n: L
iabi
lity
will
ext
end
until
the
end
of th
e po
licy
perio
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n40
TX_P&C_ClassNotes_3e.indb 57 1/27/2014 12:43:41 PM
58
Less
on S
ix
Pers
onal
Aut
o Po
licy
Insu
red’
s D
utie
s Fo
llow
ing
a Lo
ss
•Coo
pera
te w
ith in
sure
r•N
otif y
pol
ice
if hi
t and
run
yp
•Pro
tect
dam
aged
pro
perty
•Pro
mpt
not
ice
of lo
ss to
insu
rer
•Per
mit
insu
rer t
o in
spec
t and
app
rais
e da
ma g
ed p
rope
rty b
efor
e it
is re
paire
d or
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n41
gp
py
pre
plac
ed•N
otify
pol
ice
prom
ptly
if v
ehic
le s
tole
n
Gen
eral
Pro
visi
ons
•Inc
eptio
n of
cov
erag
e—12
:01
am•T
errit
oryy
–Inc
lude
s U
nite
d S
tate
s, it
s te
rrito
ries
and
poss
essi
ons,
and
Can
ada
–No
cove
rage
in M
exic
o
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n42
Gen
eral
Pro
visi
ons
•Can
cella
tion
–Ins
ured
may
can
cel a
t any
tim
e–I
nsur
er d
urin
g th
e th
e fir
st 6
0 da
ys o
f a n
ew
polic
y m
ay c
ance
l with
a 1
0-da
y no
tice
for
•Und
erw
ritin
g re
ason
s, a
nd
•Non
paym
ent o
f pre
miu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n43
Gen
eral
Pro
visi
ons
•Can
cella
tion
–Afte
r a n
ew p
olic
y ha
s be
en in
forc
e fo
r mor
e th
an 6
0 da
ys, o
r is
a re
new
al p
olic
y, th
e in
sure
r ca
n ca
ncel
with
a 1
0-da
y no
tice
for t
he
follo
win
g re
ason
s:•N
onpa
ymen
t of p
rem
ium
s•A
n in
sure
d or
any
regu
lar d
river
has
thei
r driv
ers
lid
dk
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n44
licen
se s
uspe
nded
or r
evok
ed•I
nsur
ed fi
les
a fra
udul
ent c
laim
•The
veh
icle
regi
stra
tion
is s
uspe
nded
or r
evok
ed
TX_P&C_ClassNotes_3e.indb 58 1/27/2014 12:43:41 PM
Lesson SevenDwelling Policy
TX_P&C_ClassNotes_3e.indb 59 1/27/2014 12:43:41 PM
60
Less
on S
even
D
wel
ling
Polic
y
Less
onSe
ven
Less
on S
even
Dw
ellin
g Po
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Dw
ellin
g Po
licy
Elig
ibili
ty•R
esid
entia
l pro
perti
es–O
wne
r or t
enan
t occ
upie
d –O
ne to
four
uni
ts (f
amili
es)
•No
farm
s•M
obile
hom
es (b
y en
dors
emen
t)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Dw
ellin
g Po
licy
Ove
rvie
w•M
onol
ine
polic
y–P
rope
rty c
over
age
only
py
gy
–No
liabi
lity
(unl
ess
endo
rsed
)–N
o th
eft c
over
age
(unl
ess
endo
rsed
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Dw
ellin
g Po
licy
Cov
erag
es•F
or d
irect
loss
es, t
he in
sure
d ca
n ch
oose
to
insu
re–
Dw
ellin
g–
Oth
er s
truct
ures
–P
erso
nal P
rope
rty
•For
indi
rect
loss
es, t
he in
sure
d ca
n ch
oose
to
insu
re
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
–Lo
ss o
f ren
tal v
alue
–C
ost o
f add
ition
al li
ving
exp
ense
s
TX_P&C_ClassNotes_3e.indb 60 1/27/2014 12:43:42 PM
61
Less
on S
even
D
wel
ling
Polic
y
Dw
ellin
g Po
licy:
Cov
erag
e A
•Dw
ellin
g–
Add
ition
s at
tach
ed to
it–
Bui
ldin
g eq
uipm
ent
–Fi
xtur
es•S
cree
n do
ors
and
win
dow
s•O
utdo
or e
quip
men
t use
d to
ser
vice
pre
mis
es (e
.g.,
law
nmow
er)
•Mat
eria
lsan
dsu
pplie
sus
edfo
rrep
airs
or
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
•Mat
eria
ls a
nd s
uppl
ies
used
for r
epai
rs o
r co
nstru
ctio
n
Dw
ellin
g Po
licy:
Cov
erag
e B
•Oth
er (a
ppur
tena
nt) s
truct
ures
(lim
it is
10%
×
Cov
erag
e A)
–D
etac
hed
build
ings
and
stru
ctur
es–
Fenc
es–
Det
ache
d ga
rage
–U
tility
she
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Dw
ellin
g Po
licy:
Cov
erag
e C
•Per
sona
l pro
perty
–H
ouse
hold
and
per
sona
l pro
perty
–Lo
cate
d at
the
prem
ises
–O
ther
pro
perty
in in
sure
d’s
cust
ody
–S
tude
nt’s
pro
perty
at a
dor
mito
ry
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Dw
ellin
g Po
licy:
Cov
erag
e C
•Per
sona
l pro
perty
not
cov
ered
–B
usin
ess
equi
pmen
t sto
red
on p
rem
ises
–P
ets
(e.g
., do
gs, c
ats,
bird
s, a
nd fi
sh)
–A
ircra
ft–
Mot
or v
ehic
les
(e.g
., ca
r in
the
gara
ge)
–B
oats
(som
e ex
cept
ions
)–
Acc
ount
s, b
ills,
cur
renc
y, e
vide
nces
of d
ebt,
deed
s,
mon
eyse
curit
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
mon
ey, s
ecur
ities
–P
rope
rty o
f ren
ters
(exc
ept r
esid
ent r
elat
ives
)
TX_P&C_ClassNotes_3e.indb 61 1/27/2014 12:43:42 PM
62
Less
on S
even
D
wel
ling
Polic
y
Dw
ellin
g Po
licy:
Cov
erag
e D
•Fai
r ren
tal v
alue
–Lo
ss o
f ren
tal i
ncom
e ca
used
by
a co
vere
d pe
ril–
Is a
n in
dire
ct lo
ss b
ecau
se o
f los
s of
use
of t
he d
welli
ng
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Dw
ellin
g Po
licy:
Cov
erag
e E
•Add
ition
al li
ving
exp
ense
–M
otel
bill
s, re
stau
rant
bill
s, la
undr
y co
sts,
and
so
on–
Due
to lo
ss o
f use
of t
he d
wel
ling
caus
ed b
y a
cove
red
peril
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Dw
ellin
g Po
licy:
Oth
er C
over
ages
•Deb
ris re
mov
al•R
ente
rs im
prov
emen
ts, a
dditi
ons,
bet
term
ents
•Wor
ldw
ide
cove
rage
of p
erso
nal p
rope
rty–U
p to
10%
of C
over
age
C•T
empo
rary
repa
irs to
the
dwel
ling
caus
ed b
y a
cove
red
peril
•Pro
perty
rem
oval
(30
days
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Pro
perty
rem
oval
(30
days
)•F
ire d
epar
tmen
t ser
vice
cha
rge
Dw
ellin
g Po
licy:
Oth
er C
over
ages
•Tre
es, s
hrub
s, a
nd o
ther
pla
nts
–5%
of C
over
age
A –U
p to
$50
0 pe
r pla
nt–C
over
s lo
sses
by
certa
in p
erils
suc
h as
fire
and
va
ndal
ism
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 62 1/27/2014 12:43:42 PM
63
Less
on S
even
D
wel
ling
Polic
y
Dw
ellin
g Po
licy:
DP–
1 (B
asic
)•M
ost b
asic
and
leas
t exp
ensi
ve fo
rm•L
osse
s ar
e pa
id o
n an
act
ual c
ash
valu
e p
basi
s•A
utom
atic
ally
cov
ers
thes
e pe
rils
–Fi
re–
Ligh
tnin
g–
Inte
rnal
expl
osio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
–In
tern
al e
xplo
sion
Dw
ellin
g Po
licy:
DP–
1 (B
asic
)•E
xten
ded
cove
rage
(EC
)–A
vaila
ble
for a
dditi
onal
pre
miu
m–O
ptio
nal p
erils
add
ed to
a b
asic
dw
ellin
g po
licy
that
alre
ady
has
fire
rela
ted
peril
s–C
over
s th
e pe
rils
of W
CS
HAV
VE
R
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Exte
nded
Cov
erag
e (W
CSH
AVVE
R)
•W
inds
torm
—in
clud
es to
rnad
oes
and
hurr
ican
es•
Civ
il co
mm
otio
n •
Sm
oke
•H
ail
•A
ircra
ft•
Vehi
cles
—no
t ow
ned
by th
e in
sure
d•
Volc
anic
eru
ptio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
p•
Exp
losi
on•
Rio
t
Dw
ellin
g Po
licy:
DP–
1 (B
asic
)•V
anda
lism
or m
alic
ious
mis
chie
f–
Avai
labl
e fo
r an
addi
tiona
l pre
miu
m–
Opt
iona
l per
ils a
dded
to a
bas
ic d
wel
ling
polic
y th
at
alre
ady
has
exte
nded
cov
erag
e–
Doe
s no
t cov
er th
eft
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 63 1/27/2014 12:43:42 PM
64
Less
on S
even
D
wel
ling
Polic
y
Dw
ellin
g Po
licy:
DP–
2 (B
road
)•C
over
s al
l the
per
ils a
vaila
ble
in th
e ba
sic
form
, plu
s–
Dam
age
caus
ed b
y bu
rgla
rs (n
o th
eft)
–Fa
lling
obj
ects
–A
ccid
enta
l dis
char
geor
ove
rflow
of w
ater
and
ste
am–
Free
zing
of p
lum
bing
, hea
ting,
air
cond
ition
ing,
or
sprin
kler
sys
tem
sA
rtific
ially
gene
rate
del
ectri
calc
urre
nt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
–A
rtific
ially
gen
erat
ed e
lect
rical
cur
rent
–D
amag
e ca
used
by
the
wei
ght o
f peo
ple,
ice,
sle
et, o
r sn
ow
Dw
ellin
g Po
licy:
DP–
3 (S
peci
al)
•Ope
n pe
rils
for d
wel
ling
and
othe
r st
ruct
ures
–E
xclu
des
the
peril
s of
•Pow
er in
terr
uptio
n of
f pre
mis
es•F
lood
•Ear
th m
ovem
ent
•Bui
ldin
g co
de/o
rdin
ance
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
•Bro
ad p
erils
for p
erso
nal p
rope
rty
Dw
ellin
g Po
licy:
DP–
3 (S
peci
al)
•The
ft co
vera
ge–T
heft
of b
uild
ing
item
s (d
wel
ling
fixtu
res)
is
cove
red
–The
ft of
per
sona
l pro
perty
is n
ot c
over
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
Dw
ellin
g Fo
rms
Sum
mar
yB
asic
(DP
-1)
Bro
ad (D
P–2
)S
peci
al (D
P–3
)
•Fi
rean
dre
late
dpe
rils
Incl
udes
all
basi
c pe
rils,
pl
usC
over
ages
A, B
, D, a
nd
E a
re o
pen
peril
s•
Fire
and
rela
ted
peril
s
•E
xten
ded
cove
rage
*
(WC
SHAV
VER
)
•Va
ndal
ism
& M
alic
ious
M
isch
ief*
•A
ccid
enta
l dis
char
ge
•Fa
lling
obj
ects
•Fr
eezi
ng
•A
rtific
ially
gen
erat
ed
cu
rren
t•
Wei
ght o
f peo
ple,
ice,
sl
eet
orsn
ow
Exc
lude
s
•P
ower
inte
rrup
tion
off
pr
emis
es
•Fl
ood
•E
arth
quak
e
•La
wan
dor
dina
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
slee
t, or
sno
w•
Dam
age
caus
ed b
y bu
rgla
rs (n
ot th
eft)
•La
w a
nd o
rdin
ance
Cov
erag
e C
is b
road
*opt
iona
l
TX_P&C_ClassNotes_3e.indb 64 1/27/2014 12:43:43 PM
65
Less
on S
even
D
wel
ling
Polic
y
Peril
s N
ot C
over
ed If
Dw
ellin
g Va
cant
•Cer
tain
per
ils a
re n
ot c
over
ed if
dw
ellin
g re
mai
ns v
acan
t for
mor
e th
an 6
0 da
ys–V
anda
lism
or m
alic
ious
mis
chie
f–A
ccid
enta
l dis
char
ge o
r wat
er o
verfl
ow–B
urgl
ar d
amag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Endo
rsem
ents
•The
ft of
per
sona
l pro
perty
•Lia
bilit
yy•M
obile
hom
es–C
an in
sure
the
hom
e an
d pe
rson
al p
rope
rty–A
ny o
ther
pro
perty
requ
ires
an e
ndor
sem
ent—
such
as
a de
tach
ed g
arag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
–Doe
s no
t ins
ure
wea
r and
tear
TX_P&C_ClassNotes_3e.indb 65 1/27/2014 12:43:43 PM
TX_P&C_ClassNotes_3e.indb 66 1/27/2014 12:43:43 PM
Lesson EightHomeowners Policy
TX_P&C_ClassNotes_3e.indb 67 1/27/2014 12:43:43 PM
68
Less
on E
ight
H
omeo
wne
rs P
olic
y
Less
onEi
ght
Less
on E
ight
Hom
eow
ners
Pol
icy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Ove
rvie
w a
nd E
ligib
ility
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Hom
eow
ners
: Ove
rvie
w•P
acka
ge p
olic
y—au
tom
atic
ally
con
tain
s–
Sec
tion
I: P
rope
rty•D
wel
ling,
oth
er s
truct
ures
, and
per
sona
l pro
perty
•Los
s of
use
(inc
lude
s fa
ir re
ntal
val
ue a
nd a
dditi
onal
liv
ing
expe
nses
)•T
heft
–S
ectio
n II:
Lia
bilit
y•P
erso
nall
iabi
lity
(BI/P
D)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•Per
sona
l lia
bilit
y (B
I/PD
)•M
edic
al p
aym
ents
Hom
eow
ners
: Elig
ibili
ty•R
esid
entia
l pro
perti
es–M
ust b
e ow
ner-
occu
pied
(exc
ept f
or re
nter
s)
–One
to fo
ur fa
mily
uni
ts•N
o fa
rm d
wel
lings
•Dw
ellin
gs u
nder
con
stru
ctio
n (b
y en
dors
emen
t)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 68 1/27/2014 12:43:43 PM
69
Less
on E
ight
H
omeo
wne
rs P
olic
y
Def
initi
ons
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Hom
eow
ners
: Def
initi
ons
•Ins
ured
incl
udes
–N
amed
insu
red
and
resi
dent
spo
use
–R
esid
ent f
amily
mem
bers
–P
erso
ns u
nder
the
age
of 2
1 an
d in
the
care
of t
he
insu
red
(e.g
., fo
reig
n ex
chan
ge s
tude
nt)
–Fu
ll tim
e st
uden
ts u
nder
of t
he a
ge o
f 24
that
wer
e re
side
nts
befo
re le
avin
g fo
r sch
ool
–Le
galr
epre
sent
ativ
ein
the
even
toft
hein
sure
d's
deat
h
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Lega
l rep
rese
ntat
ive
in th
e ev
ent o
f the
insu
red
s de
ath
Hom
eow
ners
: Def
initi
ons
•Ins
ured
loca
tion
incl
udes
–R
esid
ence
pre
mis
es d
escr
ibed
on
decl
arat
ions
–Te
mpo
rary
resi
denc
es–
Pre
mis
es re
nted
for o
ther
than
bus
ines
s us
e –
Vaca
nt la
nd–
Land
on
whi
ch a
resi
denc
e is
bei
ng b
uilt
–C
emet
ery
plot
s or
bur
ial v
aults
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Hom
eow
ners
: Pol
icy
Num
bers
•Ow
n a
hous
e an
d liv
e th
ere
–H
O–2
(Bro
ad)
–H
O–3
(Spe
cial
) –
HO
–5 (C
ompr
ehen
sive
)–
HO
–8 (M
odifi
ed F
orm
)
•Ren
t a h
ouse
, apa
rtmen
t, or
con
dom
iniu
m–
HO
–4 (R
ente
rs)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
•Ow
n a
cond
omin
ium
uni
t and
live
ther
e–
HO
–6 (C
ondo
min
ium
Uni
t Ow
ners
)
TX_P&C_ClassNotes_3e.indb 69 1/27/2014 12:43:43 PM
70
Less
on E
ight
H
omeo
wne
rs P
olic
y
Hom
eow
ners
: Pol
icy
Num
bers
•HO
–2 (B
road
For
m)
–Bro
ad n
amed
per
il co
vera
ge•H
O–3
(Spe
cial
For
m)
–Ope
n pe
rils
cove
rage
on
real
pro
perty
–Bro
ad n
amed
per
il co
vera
ge o
n pe
rson
al
prop
erty
Mt
fld
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–Mos
t com
mon
form
sol
d
Hom
eow
ners
: Pol
icy
Num
bers
•HO
–4 (T
enan
ts o
r Ren
ters
For
m)
–Ren
ter o
f sin
gle-
fam
ily h
ome,
con
do,
apar
tmen
t, or
mob
ile h
ome
–Bro
ad n
amed
per
ils c
over
age
for p
erso
nal
prop
erty
and
loss
of u
se–A
lso
cove
rs te
nant
impr
ovem
ents
and
be
tterm
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Ess
entia
lly th
e sa
me
as H
O–2
, but
no
cove
rage
fo
r stru
ctur
es (C
over
age
A an
d B
)
Hom
eow
ners
: Pol
icy
Num
bers
•HO
–5 (C
ompr
ehen
sive
For
m)
–All
prop
erty
cov
erag
es a
re o
pen
peril
–Eve
n co
vers
mys
terio
us d
isap
pear
ance
–Ver
y ex
pens
ive
–Not
sol
d of
ten
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Hom
eow
ners
: Pol
icy
Num
bers
•HO
–6 (C
ondo
min
ium
Uni
t Ow
ner’s
For
m)
–Sim
ilar t
o H
O–4
in th
at c
onte
nts
is p
rimar
y co
vera
ge n
eed
–Bro
ad n
amed
per
il co
vera
ge o
n pe
rson
al
prop
erty
(Cov
erag
e C
)•D
oes
not i
nsur
e th
e ou
tsid
e st
ruct
ure
but
may
insu
reth
ein
side
wal
ls
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
may
insu
re th
e in
side
wal
ls
TX_P&C_ClassNotes_3e.indb 70 1/27/2014 12:43:44 PM
71
Less
on E
ight
H
omeo
wne
rs P
olic
y
Hom
eow
ners
: Pol
icy
Num
bers
•HO
–8 (M
odifi
ed F
orm
)–F
or o
lder
hom
es(w
here
repl
acem
ent c
ost f
ar
exce
eds
mar
ket v
alue
)–B
asic
nam
ed p
erils
cov
erag
e–L
oss
settl
emen
t is
actu
al c
ash
valu
e (A
CV
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Hom
eow
ners
: Cau
ses
of L
oss
•The
per
ils c
over
ed u
nder
hom
eow
ners
po
licy
are
very
sim
ilar t
o th
e dw
ellin
g po
licy
–Bas
ic–B
road
–Spe
cial
•Exc
eptio
n: T
heft
is a
lway
s co
vere
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Sect
ion
I:Se
ctio
n I:
Prop
erty
Cov
erag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Cov
erag
e A
: Dw
ellin
g•C
over
s dw
ellin
g (n
ot th
e la
nd) a
nd a
nyth
ing
atta
ched
to d
wel
ling
plus
per
man
ent
fixtu
res
–B
uilt-
in a
pplia
nces
–P
lum
bing
, ele
ctric
al w
iring
, hea
ting,
and
cen
tral a
ir co
nditi
onin
g
•Cov
ers
mat
eria
ls a
nd s
uppl
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
–O
n re
side
nce
prem
ises
–U
sed
to c
onst
ruct
, alte
r, or
repa
ir pr
emis
es
TX_P&C_ClassNotes_3e.indb 71 1/27/2014 12:43:44 PM
72
Less
on E
ight
H
omeo
wne
rs P
olic
y
Cov
erag
e B
: Oth
er S
truc
ture
s•1
0% o
f Cov
erag
e A
•Stru
ctur
es o
n th
e pr
emis
es s
et a
part
from
p
pth
e dw
ellin
g by
cle
ar s
pace
(app
urte
nant
)–
Det
ache
d ga
rage
s–
Sto
rage
she
ds–
Fenc
es–
Gaz
ebos
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
–S
wim
min
g po
ols
Cov
erag
e C
: Per
sona
l Pro
pert
y•U
nsch
edul
ed p
erso
nal p
rope
rty o
wne
d or
us
ed b
y an
insu
red
anyw
here
in th
e w
orld
–Lim
it of
f pre
mis
es fo
r oth
er re
side
nces
—gr
eate
r of
10%
of C
over
age
C o
r $1,
000
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Cov
erag
e C
: Per
sona
l Pro
pert
y•A
lso
cove
rs–P
rope
rty o
f dep
ende
nt s
tude
nts
at c
olle
ge–P
rope
rty o
f oth
ers
at re
side
nce
prem
ises
(e
.g.,
gues
ts)
–Pro
perty
of r
esid
ence
em
ploy
ees
•Doe
s N
OT
cove
r pro
perty
of t
enan
ts o
r bo
arde
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
boar
ders
Spec
ial C
over
age
C L
imits
•Mos
t pai
d pe
r cla
im•T
hese
lim
itatio
ns a
pply
onl
y to
per
il of
thef
tpp
yy
p–J
ewel
ry, w
atch
es, a
nd fu
rs—
$1,5
00–F
irear
ms
and
rela
ted
equi
pmen
t—$2
,500
–Silv
erw
are,
gol
dwar
e, a
nd p
ewte
rwar
e—$2
,500
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_P&C_ClassNotes_3e.indb 72 1/27/2014 12:43:44 PM
73
Less
on E
ight
H
omeo
wne
rs P
olic
y
Spec
ial C
over
age
C L
imits
•The
se li
mita
tions
app
ly to
all
cove
red
peril
s–
Mon
ey, b
ullio
n, b
ank
note
s, e
tc.—
$200
–S
ecur
ities
, dee
ds, a
nd e
vide
nces
of d
ebt—
$1,5
00–
Wat
ercr
aft,
traile
rs, a
nd e
quip
men
t—$1
,500
–B
usin
ess
prop
erty
on
prem
ises
—$2
,500
–B
usin
ess
prop
erty
aw
ay fr
om p
rem
ises
—$5
00
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Cov
erag
e C
: Exc
lusi
ons
•Arti
cles
sep
arat
ely
desc
ribed
and
insu
red
on th
is o
r oth
er p
olic
ies
•Ani
mal
s, b
irds,
fish
•Mot
or v
ehic
les
•Airc
raft
•Pro
perty
of r
oom
ers
and
boar
ders
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Cov
erag
e D
: Los
s of
Use
•Cov
ers
–A
dditi
onal
livi
ng e
xpen
ses—
the
nece
ssar
y in
crea
sed
id
hid
ii
hbi
tbl
dex
pens
e in
curr
edw
hen
resi
denc
e is
uni
nhab
itabl
e du
e to
a c
over
ed lo
ss•P
ays
for n
orm
al s
tand
ard
of li
ving
(e.g
., ho
tel,
laun
drom
at, c
ost o
f eat
ing
out)
•Cov
ered
onl
y du
ring
time
of re
stor
atio
n–
Fair
rent
al v
alue
(los
s of
rent
al in
com
e) if
par
t of
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
()
pdw
ellin
g is
tena
nt o
ccup
ied
•Exa
mpl
e -D
uple
x
Cov
ered
Per
ilsPo
licy
Form
Cov
erag
e A
Cov
erag
e B
Cov
erag
e C
HO
-2
HO
-3
HO
-4
HO
-5
HO
-6
HO
-8
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
TX_P&C_ClassNotes_3e.indb 73 1/27/2014 12:43:44 PM
74
Less
on E
ight
H
omeo
wne
rs P
olic
y
Sect
ion
I: A
dditi
onal
Cov
erag
es
•Deb
ris re
mov
al–P
ays
reas
onab
le e
xpen
ses
for c
lean
up o
f da
mag
e ca
used
by
a co
vere
d pe
ril
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
Sect
ion
I: A
dditi
onal
Cov
erag
es•P
rope
rty re
mov
ed–A
lso
calle
d pr
eser
vatio
n of
pro
perty
–Cov
ers
rem
oved
pro
perty
if th
reat
ened
by
a co
vere
d pe
ril–C
over
ed fo
r any
dire
ct c
ause
of l
oss
for 3
0 da
ys•R
easo
nabl
ere
pairs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
•Rea
sona
ble
repa
irs–P
reve
nt fu
rther
dam
age
to c
over
ed p
rope
rty
Sect
ion
I: A
dditi
onal
Cov
erag
es•L
oss
asse
ssm
ent
–P
ays
of lo
sses
to p
rope
rty jo
intly
own
ed b
y th
e in
sure
d d
iti
and
an a
ssoc
iatio
n–
Up
to $
1,00
0
•Fire
dep
artm
ent s
ervi
ce c
harg
e–
Res
iden
ces
loca
ted
outs
ide
city
lim
its o
r fire
pro
tect
ion
dist
ricts
Ut
$500
ill
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
–U
p to
$50
0 pe
r ser
vice
cal
l
Sect
ion
I: A
dditi
onal
Cov
erag
es•
Tree
s, s
hrub
s, a
nd o
ther
pla
nts
–$5
00 p
er tr
ee, s
hrub
, or p
lant
due
to a
cov
ered
il
peril
–S
ubje
ct to
max
imum
5%
of C
over
age
A pe
r oc
curr
ence
–
$1,0
00 fo
r deb
ris re
mov
al o
f all
felle
d tre
es, s
hrub
s,
and
plan
ts d
ue to
a c
over
ed p
eril
Sft
hil
dfi
liht
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n28
–S
ome
of th
e pe
rils
cove
red—
fire,
ligh
tnin
g,
vand
alis
m–
Som
e of
the
peril
s ex
clud
ed—
win
d, h
ail,
freez
ing
TX_P&C_ClassNotes_3e.indb 74 1/27/2014 12:43:45 PM
75
Less
on E
ight
H
omeo
wne
rs P
olic
y
Sect
ion
I: A
dditi
onal
Cov
erag
es
•$5,
000
limit
for g
rave
mar
kers
–D
amag
e to
gra
ve m
arke
rs a
nd m
auso
leum
s ca
used
by
ild
dC
Ca
peril
cov
ered
und
er C
over
age
C
•Gla
ss o
r saf
ety
glaz
ing
mat
eria
l–
Cov
ers
brea
kage
of g
lass
that
is p
art o
f a b
uild
ing
incl
udin
g w
indo
ws
or s
torm
doo
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
Sect
ion
I: A
dditi
onal
Cov
erag
es•C
redi
t car
d, fo
rger
y, a
nd c
ount
erfe
it m
oney
–$50
0 m
axim
um c
over
age
–No
dedu
ctib
le a
pplie
s –A
dditi
onal
cov
erag
e fo
r los
ses
due
to•T
heft
or u
naut
horiz
ed c
redi
t or d
ebit
card
use
•Acc
epta
nce
of c
ount
erfe
it m
oney
•Che
ckfo
rger
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n30
•Che
ck fo
rger
y
Sect
ion
I: A
dditi
onal
Cov
erag
es
•Col
laps
e–C
over
ed if
loss
is c
ause
d by
any
of t
he
follo
win
g:•H
idde
n de
cay
•Hid
den
inse
cts
or v
erm
in•W
eigh
t of c
onte
nts,
equ
ipm
ent,
anim
als,
or p
eopl
e•W
eigh
t of r
ain
or s
now
on
a ro
of
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
•Use
of d
efec
tive
cons
truct
ion
met
hods
or m
ater
ials
–Doe
s N
OT
cove
r col
laps
e du
e to
ear
th
mov
emen
t
Sect
ion
I: St
anda
rd E
xclu
sion
s•F
lood
•Bac
kup
of s
ewer
or d
rain
p•E
arth
quak
ean
d ot
here
arth
mov
emen
t su
ch a
s la
ndsl
ide,
mud
flow,
min
e su
bsid
ence
, and
sin
khol
es•O
rdin
ance
or l
aw: I
ncre
ased
cos
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
asso
ciat
ed w
ith a
cts
regu
latin
g co
nstru
ctio
n, re
pair,
or d
emol
ition
•Pow
er fa
ilure
occ
urrin
g of
f pre
mis
es
TX_P&C_ClassNotes_3e.indb 75 1/27/2014 12:43:45 PM
76
Less
on E
ight
H
omeo
wne
rs P
olic
y
Sect
ion
I: C
ondi
tions
•Dut
ies
afte
r a lo
ss
–Pro
mpt
not
ifica
tion
of in
sure
r –P
olic
e re
port
if lo
ss b
y th
eft
–Pro
tect
pro
perty
from
furth
er d
amag
e–C
oope
rate
with
insu
rer i
n th
e in
vest
igat
ion
–Pro
vide
inve
ntor
y of
dam
aged
pro
perty
–Sub
mit
proo
f of l
oss
if re
ques
ted—
with
in 9
1
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
pq
days
in T
exas
–Sep
arat
e th
e da
mag
ed p
rope
rty fr
om th
e un
dam
aged
Sect
ion
I: C
ondi
tions
•Los
s se
ttlem
ent
–Rep
lace
men
t cos
t for
Cov
erag
es A
and
B
(stru
ctur
es),
if 80
% c
oins
uran
ce is
met
–AC
V p
aid
for C
over
age
C (p
erso
nal p
rope
rty),
incl
udin
g aw
ning
s, c
arpe
t, ap
plia
nces
, an
tenn
ae, g
rave
mar
kers
, stru
ctur
es th
at a
re
not b
uild
ings
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
Ded
uctib
le•A
pplie
s to
loss
es u
nder
Cov
erag
es A
, B,
and
C o
n a
per l
oss
basi
s•D
oes
not a
pply
to lo
ss o
f use
(Cov
erag
e D
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
Sect
ion
II:Se
ctio
n II:
Liab
ility
Cov
erag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 76 1/27/2014 12:43:45 PM
77
Less
on E
ight
H
omeo
wne
rs P
olic
y
Sect
ion
II: L
iabi
lity
Cov
erag
e•C
over
age
E: P
erso
nal l
iabi
lity
–Pro
vide
s in
sure
d pr
otec
tion
agai
nst l
egal
ly
oblig
ated
cla
ims
for b
odily
inju
ry a
nd p
rope
rty
dam
age
to o
ther
s•E
xam
ples
: Dog
bite
s, in
jurie
s on
pre
mis
es d
ue to
in
sure
d’s
negl
igen
ce, p
erso
nal a
ctiv
ities
suc
h as
an
erra
nt g
olf s
hot
Nd
dtib
lli
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
–No
dedu
ctib
le a
pplie
s
Sect
ion
II: L
iabi
lity
Cov
erag
e•C
over
age
F: M
edic
al p
aym
ents
to o
ther
s –M
edic
al p
aym
ents
to o
ther
s co
vers
loss
es u
p to
th
ree
year
s fro
m th
e da
te o
f acc
iden
t with
out
rega
rd to
faul
t•$
1,00
0 pe
r per
son—
can
be in
crea
sed
•Med
ical
exp
ense
s: M
edic
al, s
urgi
cal,
x-ra
y, d
enta
l, am
bula
nce,
hos
pita
l, nu
rsin
g, p
rost
hetic
dev
ices
, and
fu
nera
lexp
ense
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
fune
ral e
xpen
ses
Sect
ion
II: A
dditi
onal
Cov
erag
es
•Inc
lude
d at
no
addi
tiona
l cos
t–$
1,00
0 fo
r dam
age
to p
rope
rty o
f oth
ers—
no
flt
faul
t–S
uppl
emen
tary
pay
men
ts (B
AIL
ED
) •B
onds
•Aid
to o
ther
s (im
med
iate
)•I
nter
est o
n ju
dgm
ents
•Los
tinc
ome
tote
stify
inco
urt(
$250
/day
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
•Los
t inc
ome
to te
stify
in c
ourt
($25
0/da
y)•E
xpen
ses
requ
ired
by th
e in
sure
r (tra
vel t
o co
urt)
•Def
ense
cos
ts
Sect
ion
II: S
tand
ard
Excl
usio
ns•I
nten
tiona
l los
s –
Insu
red’
s ac
tions
or a
t dire
ctio
n of
insu
red
–C
hild
und
er a
ge 1
3 pr
esum
ed in
capa
ble
of
unde
rsta
ndin
g co
nseq
uenc
es
•Per
sona
l inj
ury
–In
sure
d’s
actio
ns w
hich
dam
age
anot
her’s
cha
ract
er o
r re
puta
tion
(libe
l or s
land
er)
Mb
difi
db
dt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n40
–M
ay b
e m
odifi
ed b
y en
dors
emen
t
•Com
mun
icab
le d
isea
se
TX_P&C_ClassNotes_3e.indb 77 1/27/2014 12:43:45 PM
78
Less
on E
ight
H
omeo
wne
rs P
olic
y
Sect
ion
II: S
tand
ard
Excl
usio
ns•I
njur
y to
an
insu
red
•Dam
a ge
to p
rope
rty o
wne
d by
insu
red
gp
py
y•B
usin
ess
liabi
lity
–May
be
mod
ified
by
endo
rsem
ent
•Bod
ily in
jury
pay
able
und
er w
orke
rs’
com
pens
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n41
Sect
ion
II: S
tand
ard
Excl
usio
ns•A
ircra
ft lia
bilit
y•M
otor
veh
icle
liab
ilit y
—ge
nera
lly e
xclu
ded,
y
gy
,ex
cept
–Mot
oriz
ed g
olf c
art i
f on
the
golf
cour
se–V
ehic
le d
esig
ned
to a
ssis
t the
han
dica
pped
–Veh
icle
use
d to
mai
ntai
n th
e in
sure
d’s
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n42
prem
ises
Sect
ion
II: S
tand
ard
Excl
usio
ns•W
ater
craf
t lia
bilit
y—ge
nera
lly e
xclu
ded,
un
less
the
insu
red
owns
a s
mal
l boa
t suc
h as –
Kay
aks
and
cano
es–
Sai
lboa
ts le
ss th
an 2
6 fe
et lo
ng–
Boa
ts w
ith a
n ou
tboa
rd m
otor
of 2
5 hp
or
less
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n43
–B
oats
with
an
inbo
ard
mot
or o
f 50
hp o
r le
ss
Endo
rsem
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 78 1/27/2014 12:43:46 PM
79
Less
on E
ight
H
omeo
wne
rs P
olic
y
Hom
eow
ners
: End
orse
men
ts•E
arth
quak
e–A
dds
cove
rage
due
to e
arth
quak
es, l
ands
lides
, vo
lcan
ic e
rupt
ions
, and
ear
th m
ovem
ents
–All
dam
age
occu
rring
with
in a
72-
hour
per
iod
is
cons
ider
ed th
e sa
me
even
t (a
sing
le lo
ss)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n45
Hom
eow
ners
End
orse
men
ts•P
erm
itted
inci
dent
al o
ccup
anci
es–F
or a
n in
sure
d th
at h
as a
n in
cide
ntal
bus
ines
s in
the
hom
e (e
.g.,
pian
o te
ache
r)–D
elet
es th
e do
llar l
imita
tion
for b
usin
ess
prop
erty
und
er C
over
age
C ($
2500
)–E
limin
ates
the
excl
usio
n fo
r bus
ines
s pu
rsui
ts
unde
r the
pol
icy’
s lia
bilit
y se
ctio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n46
py
y
Hom
eow
ners
End
orse
men
ts•S
ched
uled
per
sona
l pro
perty
end
orse
men
t–
Allo
ws
insu
red
to s
ched
ule
item
s no
t ade
quat
ely
dd
CC
cove
red
unde
r Cov
erag
e C
Jew
elry
Furs
Fine
arts
Cam
eras
Silv
erw
are
Sta
mp
colle
ctio
nsC
oin
colle
ctio
nsG
olfe
quip
men
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n47
Cam
eras
Mus
ical
inst
rum
ents
Gol
f equ
ipm
ent
Hom
eow
ners
End
orse
men
ts•S
ched
uled
per
sona
l pro
perty
end
orse
men
t (c
ontin
ued)
–Ite
ms
are
sche
dule
d fo
r an
appr
aise
d va
lue
or a
gree
d va
lue
–O
pen
peril
s co
vera
ge, i
nclu
ding
bre
akag
e an
d m
yste
rious
dis
appe
aran
ce–
Usu
ally
no
dedu
ctib
le a
pplie
s–
May
also
bew
ritte
nas
ase
para
tepo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n48
–M
ay a
lso
be w
ritte
n as
a s
epar
ate
polic
y (p
erso
nal a
rticl
es fl
oate
r)—
calle
d in
land
mar
ine
insu
ranc
e
TX_P&C_ClassNotes_3e.indb 79 1/27/2014 12:43:46 PM
TX_P&C_ClassNotes_3e.indb 80 1/27/2014 12:43:46 PM
Lesson NineResidual Markets and Other Miscellaneous Coverages
TX_P&C_ClassNotes_3e.indb 81 1/27/2014 12:43:46 PM
82
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Less
on N
ine
Res
idua
lMar
kets
and
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Floo
d Po
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Floo
d: N
atio
nal F
lood
Insu
ranc
e Pr
ogra
m
(NFI
P)•P
erils
of f
lood
exc
lude
d un
der m
ost
prop
erty
pol
icie
s (i.
e., h
omeo
wne
rs)
•Fed
eral
gov
ernm
ent c
reat
ed a
resi
dual
m
arke
t cal
led
the
Nat
iona
l Flo
od In
sura
nce
Pro
gram
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Floo
d: E
ligib
ility
•Mos
t bui
ldin
g ty
pes
on p
erm
anen
t fo
unda
tions
are
elig
ible
•Com
mun
ity m
ust a
pply
to p
artic
ipat
e•P
artic
ipat
ing
com
mun
ities
mus
t agr
ee to
ad
opt f
lood
con
trol m
easu
res
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 82 1/27/2014 12:43:46 PM
83
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Floo
d: R
egul
ar P
rogr
am•
Floo
d in
sura
nce
rate
map
is p
repa
red
for
unde
rwrit
ing
and
ratin
g pu
rpos
esD
iid
iti
tifi
bd
–D
ivid
es c
omm
unity
into
spe
cific
zon
es b
ased
on
prob
abili
ty o
f flo
odin
g •
Com
mun
ity a
gree
s to
ado
pt fl
ood
cont
rol
•R
atin
g be
com
es a
ctua
rial b
ased
•Li
mits
of c
over
age
avai
labl
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–O
ne to
four
fam
ily d
wel
ling
•$25
0,00
0—st
ruct
ure
•$10
0,00
0—co
nten
ts
Wai
ting
Perio
ds a
nd D
educ
tible
s•W
aitin
g pe
riods
–30
-day
wai
ting
perio
d ap
plie
s on
initi
al p
olic
ies
and
tt
ili
iti
tili
requ
ests
to in
crea
se li
mits
on
an e
xist
ing
polic
y –
No
wai
ting
perio
d w
hen
the
purc
hase
of f
lood
insu
ranc
e is
mad
e in
con
nect
ion
with
a m
ortg
age
loan
–A
gent
doe
s no
t hav
e bi
ndin
g au
thor
ity
•Ded
uctib
les
$100
0d
dtib
lli
tl
tb
ildi
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
–$1
,000
ded
uctib
le a
pplie
s se
para
tely
to b
uild
ing
and
cont
ents
–H
ighe
r ded
uctib
les
avai
labl
e
Def
initi
on o
f Flo
od•T
empo
rary
inun
datio
n of
two
or m
ore
acre
s of
nor
mal
ly d
ry la
nd a
rea
or o
f tw
o or
mor
e pr
oper
ties
from
–O
verfl
ow o
f inl
and
or ti
dal w
ater
s–
Unu
sual
and
rapi
d ac
cum
ulat
ion
or ru
noff
of s
urfa
ce
wat
ers
from
any
nat
ural
sou
rce
•The
refo
re, o
verfl
ow o
f bat
htub
s an
d w
ashi
ng
mac
hine
sw
ould
notb
ea
flood
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
mac
hine
s w
ould
not
be
a flo
od–
Mud
flow
Floo
d In
sura
nce:
Exc
lusi
ons
•Per
sona
l pro
perty
out
side
•Not
hing
bel
ow g
roun
d is
cov
ered
by
the
fld
li(
fi
ib
)flo
od p
olic
y (e
.g.,
furn
iture
in a
bas
emen
t)–
Exc
eptio
n: F
urna
ces
or o
ther
per
man
ent f
ixtu
res
•Mot
or v
ehic
les
(e.g
., ca
rs)
•Ind
irect
loss
(i.e
., ad
ditio
nal l
ivin
g ex
pens
es)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
)•E
arth
mov
emen
t•S
ewer
bac
kup
(unl
ess
caus
ed b
y flo
odin
g)
TX_P&C_ClassNotes_3e.indb 83 1/27/2014 12:43:47 PM
84
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Floo
d Po
licy:
Oth
er P
rovi
sion
s•A
ssig
nmen
t–
NFI
P al
low
s th
e as
sign
men
t of a
floo
d po
licy
to a
new
ow
ner
•Rem
oval
–P
rope
rty re
mov
ed fo
r pre
serv
atio
n an
d pr
otec
tion
from
fu
rther
floo
d, c
over
ed u
p to
45
days
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Oth
er R
esid
ual M
arke
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Texa
s A
uto
Insu
ranc
e Pl
an A
ssoc
iatio
n (T
AIP
A)
•Pur
pose
: Res
idua
l mar
ket c
reat
ed b
y le
gisl
atur
e–
For p
erso
ns o
r bus
ines
ses
who
•Are
una
ble
to o
btai
n au
to in
sura
nce
in th
e op
en
(vol
unta
ry) m
arke
t•H
ave
been
dec
lined
two
times
–
Equ
itabl
e di
strib
utio
n of
insu
reds
to in
sure
rs b
ased
on
mar
kets
hare
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
mar
ket s
hare
•All
auth
oriz
ed a
uto
insu
rers
mus
t pa
rtici
pate
Texa
s A
uto
Insu
ranc
e Pl
an A
ssoc
iatio
n (T
AIP
A)
•TA
IPA
allo
ws
insu
reds
to p
urch
ase
min
imum
lim
its–
Liab
ility
(spl
it lim
its o
nly—
30/6
0/25
)–
Per
sona
l inj
ury
prot
ectio
n ($
2,50
0)
•Mus
t rej
ect i
n w
ritin
g if
not d
esire
d–
Uni
nsur
ed/u
nder
insu
red
mot
oris
ts (3
0/60
/25)
•M
ust r
ejec
t in
writ
ing
if no
t des
ired
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
•Phy
sica
l dam
age
is n
ot a
vaila
ble
TX_P&C_ClassNotes_3e.indb 84 1/27/2014 12:43:47 PM
85
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Texa
s A
uto
Insu
ranc
e Pl
an A
ssoc
iatio
n (T
AIP
A)
•Ann
ual p
olic
ies
only
•Ins
urer
rece
ivin
g as
sign
men
t mus
t ins
ure
gg
the
risk
for t
hree
yea
rs•I
nsur
er u
ses
a th
ree-
year
exp
erie
nce
perio
d an
d su
rcha
rges
the
polic
y ba
sed
upon
MV
R a
ctiv
ity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Texa
s W
inds
torm
Insu
ranc
e A
ssoc
iatio
n (T
WIA
)•R
esid
ual m
arke
t cre
ated
by
Texa
s le
gisl
atur
e•P
rovi
des
win
dsto
rm a
nd h
ail c
over
age
in
14
cou
ntie
s al
ong
the
Texa
s co
ast
•Use
d w
hen
the
dwel
ling,
hom
eow
ners
, or
com
mer
cial
pro
perty
pol
icie
s ex
clud
e w
inds
torm
cove
rage
due
toth
ehu
rric
ane
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
win
dsto
rm c
over
age
due
to th
e hu
rric
ane
expo
sure
FAIR
Pla
ns•R
esid
ual m
arke
t cre
ated
by
the
fede
ral
gove
rnm
ent a
nd im
plem
ente
d by
the
stat
e go
vern
men
t to
prov
ide
Fair
Acc
ess
to
Insu
ranc
e R
equi
rem
ents
(FA
IR)
•Und
erse
rved
are
as b
y ZI
P co
de w
ill b
e de
sign
ated
by
the
Com
mis
sion
er, t
here
by
qual
ifyin
gco
mm
uniti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
qual
ifyin
g co
mm
uniti
es
FAIR
Pla
ns•I
nsur
eds
mee
ting
unde
rwrit
ing
crite
ria a
nd
decl
ined
twic
e by
aut
horiz
ed in
sure
rs
cann
ot b
e de
clin
ed b
y th
e pl
an•A
ll au
thor
ized
pro
perty
insu
rers
in th
e st
ate
mus
t par
ticip
ate
in th
is re
sidu
al m
arke
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 85 1/27/2014 12:43:47 PM
86
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Join
t Und
erw
ritin
g A
ssoc
iatio
n (J
UA
)
•Res
idua
l mar
ket c
reat
ed b
y Te
xas
legi
slat
ure
form
edic
al m
alpr
actic
e in
Tex
as•T
his
is a
vol
unta
ry, u
ninc
orpo
rate
d as
soci
atio
n of
adm
itted
liab
ility
insu
rers
•Max
imum
lim
its a
vaila
ble
$1 m
illio
n pe
r oc
curr
ence
/$3
mill
ion
aggr
egat
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Um
brel
laan
dU
mbr
ella
and
Ex
cess
Lia
bilit
y Po
licie
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Exce
ss a
nd U
mbr
ella
Lia
bilit
y Po
licie
s
•Bot
h um
brel
la a
nd e
xces
s po
licie
s ar
e w
ritte
n w
ith h
igh
liabi
lity
limits
(incr
emen
ts
of $
1 m
illio
n)•D
esig
ned
to b
e ca
tast
roph
ic p
rote
ctio
n ov
er o
ther
per
sona
l or c
omm
erci
al
unde
rlyin
g po
licie
sU
nder
lyin
gpo
licie
sw
illbe
writ
ten
with
high
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
–Und
erly
ing
polic
ies
will
be w
ritte
n w
ith h
igh
limits
(usu
ally
$30
0,00
0 or
mor
e)
Und
erly
ing
Polic
ies
•Per
sona
l um
brel
las
requ
ire u
nder
lyin
g –
Per
sona
l lia
bilit
y –
Per
sona
l aut
o lia
bilit
y–
Wat
ercr
aft l
iabi
lity
(if a
pplic
able
)
•Com
mer
cial
um
brel
las
requ
ire u
nder
lyin
g–
Bus
ines
s lia
bilit
y–
Com
mer
cial
aut
o lia
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
–E
mpl
oyer
s lia
bilit
y
TX_P&C_ClassNotes_3e.indb 86 1/27/2014 12:43:48 PM
87
Less
on N
ine
Res
idua
l Mar
kets
and
Oth
er M
isce
llane
ous
Cov
erag
es
Cla
im S
ettle
men
t: Sc
enar
io 1
•C
laim
is c
over
ed o
n bo
th u
nder
lyin
g po
licy
and
umbr
ella
/exc
ess
polic
y–U
nder
lyin
g po
licy
is p
rimar
y an
d pa
ys fi
rst
–Um
brel
la/e
xces
s po
licy
pays
afte
r und
erly
ing
exha
uste
d (n
o de
duct
ible
app
lies)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
Cla
im S
ettle
men
t: Sc
enar
io 2
•C
laim
is c
over
ed o
nly
by u
mbr
ella
/exc
ess
polic
y, b
ut n
ot c
over
ed b
y un
derly
ing
polic
y–
Insu
red
pays
a s
elf i
nsur
ed re
tent
ion
(SIR
), w
hich
act
s lik
e a
dedu
ctib
le–
Um
brel
la/e
xces
s po
licy
pays
rem
aind
er o
f cla
im u
ntil
it be
com
es e
xhau
sted
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Cla
im S
ettle
men
t: Sc
enar
io 3
•If a
n un
derly
ing
polic
y la
pses
, the
um
brel
la
or e
xces
s po
licy
still
pay
s as
if th
e un
derly
ing
polic
y is
in fo
rce
•Exa
mpl
e–
Insu
red
has
a $5
00,0
00 b
oato
wne
rs p
olic
y th
at la
psed
an
d a
$1,0
00,0
00 u
mbr
ella
pol
icy
–In
sure
d ha
s a
boat
ing
acci
dent
that
cau
ses
third
par
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
inju
ries
of $
800,
000
–U
mbr
ella
pay
s $3
00,0
00 a
nd in
sure
d is
resp
onsi
ble
for
the
rem
aind
er
Wat
ercr
aft
•Per
sona
l—bo
ats
less
than
26
feet
in
leng
th. L
imite
d us
e in
the
Gul
f.•Y
acht
—la
rger
per
sona
lly o
wne
d bo
ats.
No
com
mer
cial
use
.•M
arin
e—bo
ats
used
for c
omm
erci
al
purp
oses
. Inc
lude
s sh
ips
that
car
ry
pass
enge
rsor
carg
o
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
pass
enge
rs o
r car
go.
TX_P&C_ClassNotes_3e.indb 87 1/27/2014 12:43:48 PM
TX_P&C_ClassNotes_3e.indb 88 1/27/2014 12:43:48 PM
Lesson TenCommercial Policies
TX_P&C_ClassNotes_3e.indb 89 1/27/2014 12:43:48 PM
90
Less
on T
en
Com
mer
cial
Pol
icie
s
Less
onTe
nLe
sson
Ten
Com
mer
cial
Pol
icie
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mon
Con
ditio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mon
Con
ditio
ns•C
hang
es (e
ndor
sem
ents
)–
Onl
y th
e fir
st n
amed
insu
red
has
the
right
to re
ques
t hch
ange
s
•Pay
men
t of p
rem
ium
s–
Firs
t nam
ed in
sure
d ha
s re
spon
sibi
lity
for p
aym
ent o
f pr
emiu
ms
•Can
cella
tions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
–Fi
rst n
amed
rece
ives
the
notic
e–
Onl
y th
e fir
st n
amed
insu
red
can
requ
est c
ance
llatio
n
Com
mon
Con
ditio
ns•E
xam
inat
ion
of b
ooks
and
reco
rds
–In
sure
r has
the
right
to e
xam
ine
and
audi
t the
insu
red’
s b
kith
tti
tth
fti
tibo
oks
with
out n
otic
e up
to th
ree
year
s af
ter e
xpira
tion
•Ins
pect
ions
and
sur
veys
–In
sure
r can
insp
ect a
nd m
ake
reco
mm
enda
tions
re
gard
ing
insu
rabi
lity
and
how
to re
duce
pre
miu
ms
(loss
pre
vent
ion
mea
sure
s) a
t any
tim
e
Tf
fi
htd
dti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
•Tra
nsfe
r of r
ight
s an
d du
ties
–M
ust b
e in
writ
ing
and
appr
oved
by
insu
rer
TX_P&C_ClassNotes_3e.indb 90 1/27/2014 12:43:48 PM
91
Less
on T
en
Com
mer
cial
Pol
icie
s
Com
mer
cial
Pro
pert
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mer
cial
Pro
pert
y•F
or d
irect
loss
es–
Bui
ldin
g an
d pe
rson
al p
rope
rty c
over
age
•For
indi
rect
loss
es–
Loss
of b
usin
ess
inco
me
cove
rage
–E
xtra
exp
ense
cov
erag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Bui
ldin
g an
d Pe
rson
al P
rope
rty
•Cov
ers
dire
ct p
hysi
cal l
oss
of o
r dam
age
to
prop
erty
due
to a
cov
ered
per
il•P
rope
rty m
ay b
e –S
ched
uled
–Bla
nket
(one
lim
it on
pol
icy
for a
ll pr
oper
ty)
•Prim
arily
cov
ers
the
insu
red’
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
–Bui
ldin
g–B
usin
ess
pers
onal
pro
perty
Bui
ldin
g C
over
age
•Cov
ers
build
ings
and
oth
er s
truct
ures
de
scrib
ed o
n th
e de
clar
atio
ns, i
nclu
ding
–B
uild
ing
addi
tions
–P
erm
anen
tly in
stal
led
fixtu
res,
mac
hine
ry a
nd
equi
pmen
t–
Out
door
fixt
ures
–P
erso
nal p
rope
rty u
sed
to s
ervi
ce o
r mai
ntai
n th
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
prem
ises
(e.g
., la
wn
mow
ers,
fire
ext
ingu
ishe
rs)
–N
ewly
acq
uire
d or
con
stru
cted
bui
ldin
gs fo
r up
to
30 d
ays
TX_P&C_ClassNotes_3e.indb 91 1/27/2014 12:43:49 PM
92
Less
on T
en
Com
mer
cial
Pol
icie
s
Bus
ines
s Pe
rson
al P
rope
rty
•Cov
ers
busi
ness
per
sona
l pro
perty
whe
n lo
cate
d in
or o
n th
e bu
ildin
g, o
r in
the
open
w
ithin
100
feet
of t
he b
usin
ess
prem
ises
–Fu
rnitu
re, f
ixtu
res,
sto
ck, a
nd o
ther
per
sona
l pr
oper
ty–
Impr
ovem
ents
and
bet
term
ents
mad
e to
the
prem
ises
(if i
nsur
ed is
a te
nant
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
–Li
mite
d co
vera
ge fo
r per
sona
l pro
perty
of o
ther
s (n
ot b
elon
ging
to a
cus
tom
er) i
n th
e ca
re, c
usto
dy,
or c
ontro
l of t
he in
sure
d—$2
500
Prop
erty
Exc
lusi
ons
•Som
e pr
oper
ty e
xclu
ded
by b
uild
ing
and
pers
onal
pro
perty
cov
erag
e–L
and
–Fou
ndat
ions
, und
ergr
ound
pip
es, a
nd d
rain
s–D
etac
hed
outd
oor s
igns
–Acc
ount
s, b
ills,
and
cur
renc
yA
nim
als
(exc
epto
wne
das
stoc
k)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Ani
mal
s (e
xcep
t ow
ned
as s
tock
)
Add
ition
al C
over
ages
•Deb
ris re
mov
al–P
ays
up to
25%
of a
mou
nt p
aid
for t
he d
irect
lo
ss–A
dditi
onal
$10
,000
is a
vaila
ble
•Pre
serv
atio
n of
pro
perty
–Up
to 3
0 da
ysO
utdo
orpr
oper
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
•Out
door
pro
perty
–Up
to $
1,00
0 fo
r sig
ns a
ttach
ed to
the
build
ing
–Up
to $
250
per t
ree,
shr
ub, o
r pla
nt
Bui
ldin
g an
d Pe
rson
al P
rope
rty
•Vac
ancy
pro
visi
on–B
uild
ings
vac
ant m
ore
than
60
cons
ecut
ive
days
bef
ore
the
dam
age
or lo
ss s
uspe
nd
cove
rage
for v
anda
lism
, spr
inkl
er le
akag
e,
glas
s br
eaka
ge, w
ater
dam
age,
or t
heft.
Fire
is
still
cove
red.
•Los
s va
luat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
–Typ
ical
ly a
ctua
l cas
h va
lue
unle
ss m
odifi
ed–O
ptio
ns in
clud
e re
plac
emen
t cos
t and
sta
ted
valu
e co
vera
ge a
vaila
ble
by e
ndor
sem
ent
TX_P&C_ClassNotes_3e.indb 92 1/27/2014 12:43:49 PM
93
Less
on T
en
Com
mer
cial
Pol
icie
s
Bus
ines
s In
terr
uptio
n C
over
age
•Ind
irect
loss
cov
erag
e fo
r bus
ines
s du
e to
a
dire
ct p
hysi
cal l
oss
at th
e in
sure
d lo
catio
n–
Loss
of b
usin
ess
inco
me
•Pay
s fo
r los
t inc
ome
due
to b
usin
ess
inte
rrup
tion
–E
xtra
exp
ense
•Pay
s fo
r ext
ra e
xpen
ses
such
as
tem
pora
rily
mov
ing
thb
it
thl
ti
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
the
busi
ness
to a
noth
er lo
catio
n•C
ost o
f por
tabl
e bu
ildin
gs a
t the
insu
red
loca
tion
to
keep
the
busi
ness
ope
n
Bui
lder
’s R
isk
•Cov
ers
build
ings
und
er c
onst
ruct
ion
(com
mer
cial
, res
iden
tial,
or fa
rm)
•In
addi
tion
to th
e bu
ildin
g, c
over
age
incl
udes
–Fo
unda
tion
–B
uild
ing
mat
eria
ls a
nd s
uppl
ies
with
in 1
00 fe
et o
f the
pr
emis
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
–Fi
xtur
es, m
achi
nery
, and
equ
ipm
ent u
sed
to s
ervi
ce th
e bu
ildin
g
Bui
lder
’s R
isk
Excl
usio
ns•L
awns
, tre
es, s
hrub
s, o
r pla
nts
•Out
side
, una
ttach
ed s
igns
,g
•Doe
s no
t cov
er li
abili
ty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Bui
lder
’s R
isk
•Cov
erag
e is
writ
ten
for o
ne y
ear,
but e
nds
whe
n–9
0 da
ys h
ave
elap
sed
sinc
e co
nstru
ctio
n
com
plet
ed–B
uild
ing
is o
ccup
ied
or p
ut to
inte
nded
use
–Ins
ured
’s in
tere
st c
ease
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 93 1/27/2014 12:43:49 PM
94
Less
on T
en
Com
mer
cial
Pol
icie
s
Bui
lder
’s R
isk
•100
% c
oins
uran
ce—
cove
rage
bas
ed o
n es
timat
ed fi
nish
ed v
alue
•Tw
o co
vera
ge c
hoic
es a
vaila
ble
–Com
plet
ed v
alue
: Bas
ed o
n es
timat
ed
com
plet
ed v
alue
–Bui
lder
’s ri
sk re
porti
ng: i
ncre
ases
as
valu
e of
bu
ildin
gun
derc
onst
ruct
ion
incr
ease
s(re
quire
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
build
ing
unde
r con
stru
ctio
n in
crea
ses
(req
uire
s m
onth
ly re
port
of v
alue
)
Cau
ses
of L
oss
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Cau
se o
f Los
s: B
asic
•Inc
lude
s th
e na
med
per
ils o
f–F
ire a
nd li
ghtn
ing
–Ext
ende
d co
vera
ge (W
CS
HAV
VE
R)
•Win
dsto
rm, c
ivil
com
mot
ion,
sm
oke,
hai
l, ai
rcra
ft,
vehi
cles
, vol
cani
c er
uptio
n, e
xplo
sion
, rio
t –V
anda
lism
–Spr
inkl
er le
akag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
pg
–Sin
khol
e co
llaps
e
Cau
se o
f Los
s: B
road
•I
nclu
des
all t
he n
amed
per
ils in
bas
ic, p
lus
–Acc
iden
tal d
isch
arge
or o
verfl
ow o
f wat
er o
r st
eam
,–C
ontin
uous
see
page
and
free
zing
exc
lude
d,–F
allin
g ob
ject
s,–L
imite
d m
old,
and
–Col
laps
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
Col
laps
e•C
over
s co
llaps
e by
hid
den
term
ite d
amag
e, p
eopl
e,
wei
ght o
f ice
, sle
et, o
r sno
w•D
oes
NO
T co
ver c
olla
pse
by s
hifti
ng s
oil
TX_P&C_ClassNotes_3e.indb 94 1/27/2014 12:43:50 PM
95
Less
on T
en
Com
mer
cial
Pol
icie
s
Cau
se o
f Los
s: S
peci
al
•Ins
ures
aga
inst
all
peril
s no
t spe
cific
ally
ex
clud
ed•E
xclu
des
–Flo
od a
nd e
arth
quak
e–O
rdin
ance
and
law
–Exp
losi
on o
f boi
lers
, pip
es, a
nd e
ngin
esM
hi
lbkd
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
–Mec
hani
cal b
reak
dow
n–T
heft
of b
uild
ing
mat
eria
ls n
ot a
ttach
ed to
the
build
ing
TX_P&C_ClassNotes_3e.indb 95 1/27/2014 12:43:50 PM
TX_P&C_ClassNotes_3e.indb 96 1/27/2014 12:43:50 PM
Lesson ElevenMarine Insurance
TX_P&C_ClassNotes_3e.indb 97 1/27/2014 12:43:50 PM
98
Less
on E
leve
n M
arin
e In
sura
nce
Less
onEl
even
Less
on E
leve
nM
arin
e In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Mar
ine
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Nat
ionw
ide
Mar
ine
Def
initi
on•C
reat
ed b
y th
e N
atio
nal A
ssoc
iatio
n of
In
sura
nce
Com
mis
sion
ers
•Out
lines
type
s of
pro
perty
con
side
red
to b
e el
igib
le fo
r mar
ine
insu
ranc
e•U
nder
this
def
initi
on, t
he ri
sks
are
divi
ded
into
six
cat
egor
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Six
Cat
egor
ies
of E
ligib
le P
rope
rty
•Oce
an m
arin
e–E
xpor
ts–I
mpo
rts•I
nlan
d m
arin
e–D
omes
tic s
hipm
ents
–Ins
trum
enta
litie
s of
tran
spor
tatio
n or
co
mm
unic
atio
nbr
idge
stu
nnel
spi
pelin
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
com
mun
icat
ion—
brid
ges,
tunn
els,
pip
elin
es–C
omm
erci
al p
rope
rty fl
oate
rs–P
erso
nalp
rope
rty fl
oate
rs
TX_P&C_ClassNotes_3e.indb 98 1/27/2014 12:43:50 PM
99
Less
on E
leve
n M
arin
e In
sura
nce
Ove
rvie
w o
f Inl
and
Mar
ine
Insu
ranc
e
•Man
y in
land
mar
ine
polic
es a
re c
alle
d “fl
oate
rs”
–Cov
ers
mob
ile p
rope
rty w
here
ver i
t may
be
loca
ted
•Mos
t cov
erag
es a
re o
pen
peril
s•C
over
age
is u
sual
ly w
orld
wid
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Com
mer
cial
Flo
ater
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Bai
lee
Liab
ility
•Cov
ers
dam
ages
to c
usto
mer
’s p
rope
rty–B
aile
e: T
akes
pos
sess
ion
of b
ailo
r’s p
rope
rty
(e.g
., dr
y cl
eane
rs o
r tel
evis
ion
repa
ir sh
op)
–Bai
lor:
Ow
ner o
f the
pro
perty
that
giv
es u
p te
mpo
rary
pos
sess
ion
for a
par
ticul
ar p
urpo
se
(e.g
., cu
stom
er)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Phys
icia
n’s
and
Surg
eon’
s Eq
uipm
ent
Floa
ter
•Cov
ers
–Med
ical
and
den
tal i
nstru
men
ts o
n an
d of
f the
pr
emis
es–F
urni
ture
and
fixt
ures
at t
he o
ffice
–Ins
ured
’s in
tere
st in
impr
ovem
ents
and
be
tterm
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_P&C_ClassNotes_3e.indb 99 1/27/2014 12:43:51 PM
10
0Le
sson
Ele
ven
Mar
ine
Insu
ranc
e
Con
trac
tor’s
Equ
ipm
ent F
loat
er•C
over
s co
ntra
ctor
s’ s
mal
l and
larg
e to
ols,
m
achi
nery
, and
equ
ipm
ent w
hich
is
com
mon
ly m
oved
from
loca
tion
to lo
catio
n•I
tem
s ca
n be
spe
cific
ally
sch
edul
ed
(usu
ally
larg
er, e
xpen
sive
item
s) o
r co
vere
d un
der b
lank
et c
over
age
(usu
ally
sm
alle
rle
ssex
pens
ive
item
s)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
smal
ler,
less
exp
ensi
ve it
ems)
•Cov
ered
terr
itory
is th
e U
nite
d S
tate
s,
Pue
rto R
ico,
and
Can
ada
Inst
alla
tion
Floa
ter
•Pro
vide
s co
vera
ge fo
r bus
ines
ses
who
se
oper
atio
ns in
volv
e th
e in
stal
latio
n of
pr
oduc
ts•C
over
s ite
ms
–Afte
r lea
ving
the
reta
il lo
catio
n–W
hile
in tr
ansi
tU
ntil
perm
anen
tlyin
stal
led
and
test
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Unt
il pe
rman
ently
inst
alle
d an
d te
sted
•Afte
r tes
ting,
the
item
then
bec
omes
the
resp
onsi
bilit
y of
the
cust
omer
Acc
ount
s R
ecei
vabl
e Fl
oate
r •C
over
s lo
ss re
sulti
ng fr
om th
e da
mag
e or
de
stru
ctio
n of
acc
ount
s re
ceiv
able
reco
rds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Valu
able
Pap
ers
and
Rec
ords
Flo
ater
•Cov
ers
loss
to s
peci
fic v
alua
ble
pape
rs a
nd
reco
rds
–E
xam
ples
: Map
s, b
luep
rints
, film
s, il
lust
ratio
ns, a
nd
draw
ings
•Pol
icy
cont
ains
a re
cept
acle
war
rant
y–
Req
uire
s th
e in
sure
d to
kee
p al
l pap
ers
and
reco
rds
in
firep
roof
con
tain
ers
whe
n no
t bei
ng u
sed,
oth
erw
ise
loss
esca
used
byfir
ew
illno
tbe
cove
red
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
loss
es c
ause
d by
fire
will
not
be
cove
red
–R
ecep
tacl
e is
des
crib
ed o
n th
e de
clar
atio
ns p
age
TX_P&C_ClassNotes_3e.indb 100 1/27/2014 12:43:51 PM
10
1Le
sson
Ele
ven
Mar
ine
Insu
ranc
e
Jew
eler
’s B
lock
Flo
ater
•Writ
ten
for j
ewel
ers
to s
peci
fical
ly c
over
ce
rtain
item
s•P
rope
rty c
over
ed in
clud
es–P
rope
rty h
eld
for s
ale
–Pro
perty
in tr
ansi
t by
com
mon
car
rier
–Pro
perty
on
exhi
bit
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Com
mer
cial
Art
icle
s Fl
oate
r•C
over
s in
tere
sts
of th
e ow
ner o
f co
mm
erci
al–C
amer
as–M
usic
al in
stru
men
ts–R
elat
ed e
quip
men
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Equi
pmen
t Dea
lers
Flo
ater
•Pro
vide
s co
vera
ge fo
r dea
lers
of m
obile
ag
ricul
tura
l equ
ipm
ent a
nd c
onst
ruct
ion
equi
pmen
t•C
over
s–D
eale
r’s s
tock
in tr
ade
–Pro
perty
of o
ther
’s in
the
care
, cus
tody
, and
co
ntro
loft
hede
aler
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
cont
rol o
f the
dea
ler
Sign
s C
over
age
Floa
ter
•Com
mer
cial
pro
perty
onl
y pr
ovid
es li
mite
d co
vera
ge fo
r out
door
sig
ns (i
.e.,
$1,0
00 fo
r at
tach
ed o
utdo
or s
igns
)•T
his
inla
nd m
arin
e co
ntra
ct c
over
s a
spec
ified
am
ount
for a
ny s
ign
sche
dule
d–I
nsur
ed’s
sig
ns (e
.g.,
neon
, flu
ores
cent
, au
tom
atic
orm
echa
nica
lele
ctric
sign
san
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
auto
mat
ic, o
r m
echa
nica
l ele
ctric
sig
ns a
nd
light
s)
TX_P&C_ClassNotes_3e.indb 101 1/27/2014 12:43:51 PM
10
2Le
sson
Ele
ven
Mar
ine
Insu
ranc
e
Elec
tron
ic D
ata
Proc
essi
ng (E
DP)
Fl
oate
r•C
over
s–
Ele
ctro
nic
equi
pmen
t (i.e
., ha
rdw
are)
–M
edia
(i.e
., so
ftwar
e)–
Dat
a
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Polic
ies
for P
rope
rty
in T
rans
it•T
rip tr
ansi
t pol
icy
–U
sed
to in
sure
a s
ingl
e sh
ipm
ent o
f goo
ds (o
ne ti
me,
)
one
way
)–
Cov
erag
e ex
tend
s fro
m ti
me
and
poin
t of o
rigin
atio
n to
tim
e an
d po
int o
f des
tinat
ion
•Ann
ual t
rans
it po
licy
–C
over
s al
l of t
he in
sure
d’s
inco
min
g an
d ou
tgoi
ng
ship
men
tsth
roug
hout
the
year
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
ship
men
ts th
roug
hout
the
year
Polic
ies
for P
rope
rty
in T
rans
it•M
otor
truc
k ca
rgo
polic
y–
Cov
ers
the
carg
o on
ly, n
ot th
e tru
ck–
May
be
writ
ten
as
•Tru
cker
s co
ntra
ct–
For a
car
rier h
aulin
g ot
hers
’ pro
perty
–A
lso
calle
d co
mm
on c
arrie
r car
go li
abilit
y
•Ow
ner’s
or s
hipp
er’s
con
tract
–Fo
r an
owne
r of t
he g
oods
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
g
TX_P&C_ClassNotes_3e.indb 102 1/27/2014 12:43:52 PM
Lesson TwelveBusiness Liability Coverages
TX_P&C_ClassNotes_3e.indb 103 1/27/2014 12:43:52 PM
10
4Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Less
onTw
elve
Less
on T
wel
veB
usin
ess
Liab
ility
Cov
erag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Type
s of
Bus
ines
s Li
abili
ty•B
usin
esse
s m
ay b
ecom
e le
gally
liab
le fo
r in
jurie
s an
d da
mag
es to
oth
ers
in m
any
diffe
rent
situ
atio
ns•T
here
are
man
y di
ffere
nt b
usin
ess
liabi
lity
polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Thre
e Pa
rtie
s in
Lia
bilit
y In
sura
nce
•Tw
o pa
rties
to th
e lia
bilit
y co
ntra
ct–F
irst p
arty
: Ins
ured
or p
olic
yhol
der
–Sec
ond
party
: Ins
urer
or i
nsur
ance
com
pany
•A p
arty
to th
e cl
aim
, but
not
a p
arty
to th
e co
ntra
ct–T
hird
par
ty: C
laim
ant (
pers
on w
ho c
olle
cts
insu
ranc
epr
ocee
dsdu
eto
lega
llia
bilit
yof
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
insu
ranc
e pr
ocee
ds d
ue to
lega
l lia
bilit
y of
the
insu
red)
Com
mer
cial
Gen
eral
Lia
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 104 1/27/2014 12:43:52 PM
10
5Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Com
mer
cial
Gen
eral
Lia
bilit
y•T
his
is th
e br
oade
st o
f the
bus
ines
s lia
bilit
y po
licie
s in
that
it c
over
s m
any
diffe
rent
risk
ex
posu
res
•It p
ays
the
actu
al d
amag
es th
at a
n in
sure
d be
com
es o
blig
ated
to a
third
par
ty fo
r–
Bod
ily in
jury
and
pro
perty
dam
age
–C
over
age
A–
Per
sona
linj
ury
and
adve
rtisi
ngin
jury
–C
over
age
B
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Per
sona
l inj
ury
and
adve
rtisi
ng in
jury
C
over
age
B–
Med
ical
pay
men
ts (r
egar
dles
s of
faul
t) –
Cov
erag
e C
Who
Is a
n In
sure
d?•N
amed
insu
red
–If
sole
pro
prie
tors
hip,
als
o in
clud
es s
pous
e–
If pa
rtner
ship
, als
o in
clud
es p
artn
ers
and
thei
r spo
uses
–If
corp
orat
ion,
als
o in
clud
es d
irect
ors
and
offic
ers
for
busi
ness
act
s
•Ins
ured
’s e
mpl
oyee
s fo
r bus
ines
s ac
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Cov
erag
es o
f the
CG
L•C
over
age
A: B
odily
inju
ry (B
I) an
d pr
oper
ty
dam
age
(PD
)–P
rovi
des
cove
rage
for t
he in
sure
d’s
lega
l lia
bilit
y fo
r bod
ily in
jury
or p
rope
rty d
amag
e to
ot
hers
–Typ
es o
f cov
ered
exp
osur
es•P
rem
ises
or o
pera
tions
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
•Pro
duct
s or
com
plet
ed o
pera
tions
•Fire
lega
l lia
bilit
y•H
ost l
iquo
r lia
bilit
y
Prem
ises
Exp
osur
es•B
odily
inju
ry to
a th
ird p
arty
or d
amag
e to
a
third
par
ty’s
pro
perty
as
a re
sult
of th
e co
nditi
on o
f, or
aris
ing
out o
f the
use
of,
an
insu
red’
s pr
emis
es–
No
cove
rage
for b
odily
inju
ry o
r pro
perty
dam
age
to th
e in
sure
d or
em
ploy
ees
•Exa
mpl
es o
f pre
mis
es c
laim
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
pp
–C
usto
mer
slip
s on
wet
floo
r–
Hot
el g
uest
falls
dow
n st
airs
TX_P&C_ClassNotes_3e.indb 105 1/27/2014 12:43:52 PM
10
6Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Ope
ratio
ns E
xpos
ures
•Bod
ily in
jury
to a
third
par
ty o
r dam
age
to a
th
ird p
arty
’s p
rope
rty a
s a
resu
lt of
op
erat
ions
eith
er o
n or
aw
ay fr
om th
e in
sure
d’s
busi
ness
pre
mis
es•E
xam
ples
of o
pera
tions
cla
ims
–E
mpl
oyee
dam
ages
cus
tom
er’s
aut
o w
hile
load
ing
–D
eliv
ery
boy
onbi
cycl
ein
jure
spe
dest
rian
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Del
iver
y bo
y on
bic
ycle
inju
res
pede
stria
n–
Plu
mbe
r dam
ages
cus
tom
er’s
cou
nter
top
whi
le
inst
allin
g di
shw
ashe
r
Prod
ucts
Exp
osur
es•B
odily
inju
ry to
a th
ird p
arty
or d
amag
e to
a
third
par
ty’s
pro
perty
as
a re
sult
of a
pr
oduc
t tha
t a b
usin
ess
man
ufac
ture
d or
so
ld
–N
orm
ally
not
a p
rodu
ct c
laim
unl
ess
it ha
ppen
s aw
ay
from
the
insu
reds
pre
mis
es•E
xcep
tion:
Foo
d co
nsum
ed a
t a re
stau
rant
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
•Exa
mpl
es o
f pro
duct
s cl
aim
s–
Toys
hav
ing
lead
pai
nt c
ause
chi
ld to
bec
ome
ill–
Cus
tom
er g
ets
sick
afte
r con
sum
ing
spoi
led
soup
Com
plet
ed O
pera
tions
Exp
osur
es
•Bod
ily in
jury
to a
third
par
ty o
r dam
age
to a
th
ird p
arty
’s p
rope
rty a
s a
resu
lt of
wor
k th
at w
as c
ompl
eted
neg
ligen
tly a
nd p
ut to
its
inte
nded
use
•Exa
mpl
es o
f com
plet
ed o
pera
tions
cla
ims
–Im
prop
erly
inst
alle
d di
shw
ashe
r ove
rflow
s ca
usin
g da
mag
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
g–
Impr
oper
ly re
paire
d m
icro
wav
e ca
uses
inju
ries
Fire
Leg
al L
iabi
lity
Expo
sure
s•F
ire d
amag
e to
the
land
lord
’s b
uild
ing
as a
re
sult
of th
e ne
glig
ence
of t
he in
sure
d te
nant
–A
pplie
s to
the
porti
on o
f bui
ldin
g in
the
insu
red’
s ca
re,
cust
ody,
or c
ontro
l
•Exa
mpl
e of
a fi
re le
gal l
iabi
lity
clai
m–
An
empl
oyee
of a
bur
ger r
esta
uran
t in
the
food
cou
rt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
negl
igen
tly c
ause
a fi
re d
amag
ing
the
rent
ed m
all
spac
e
TX_P&C_ClassNotes_3e.indb 106 1/27/2014 12:43:53 PM
10
7Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Hos
t Liq
uor L
egal
Lia
bilit
y•B
odily
inju
ry to
a th
ird p
arty
or d
amag
e to
a
third
par
ty’s
pro
perty
as
a re
sult
of a
ho
stin
g a
party
whe
re a
gue
st b
ecom
es
into
xica
ted
–A
pplie
s to
an
insu
red
noti
n th
e bu
sine
ss o
f m
anuf
actu
ring,
sel
ling,
or s
ervi
ng a
lcoh
olic
bev
erag
es
•Exa
mpl
e of
hos
t liq
uor l
egal
liab
ility
cla
im
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
pq
gy
–A
n in
sura
nce
agen
t pro
vide
s al
coho
lic b
ever
ages
at a
ho
liday
par
ty a
nd a
n in
toxi
cate
d cl
ient
get
s in
jure
d w
hen
invo
lved
in a
n au
tom
obile
acc
iden
t
Cov
erag
es o
f the
CG
L•C
over
age
B: P
erso
nal i
njur
y an
d ad
verti
sing
inju
ry li
abili
ty–
Invo
lves
dam
age
to a
noth
er’s
cha
ract
er o
r rep
utat
ion
–P
rote
cts
insu
red
agai
nst l
iabi
lity
aris
ing
out o
f cer
tain
of
fens
es s
uch
as•L
ibel
(writ
ten
defa
mat
ion)
•Sla
nder
(spo
ken
defa
mat
ion)
Inva
sion
ofpr
ivac
yan
dw
rong
fule
vict
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
•Inv
asio
n of
priv
acy
and
wro
ngfu
l evi
ctio
n•F
alse
arr
est
Cov
erag
es o
f the
CG
L•C
over
age
C: M
edic
al p
aym
ents
–C
over
s m
edic
al e
xpen
ses
for b
odily
inju
ry to
ot
hers
–Pay
s w
ithou
t reg
ard
to fa
ult
–Cla
ims
mus
t be
repo
rted
with
in o
ne y
ear o
f ac
cide
nt–B
odily
inju
ry to
insu
red
or e
mpl
oyee
s no
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
yj
yp
yco
vere
d
CG
L Li
mits
of L
iabi
lity
•The
are
six
lim
its o
f lia
bilit
y un
der t
he C
GL
–P
rodu
cts
and
com
plet
ed o
pera
tions
agg
rega
te
–G
ener
al a
ggre
gate
–P
er o
ccur
renc
e lim
it (C
over
age
A)
–P
er p
erso
n or
org
aniz
atio
n lim
it (C
over
age
B)
–P
er p
erso
n lim
it (C
over
age
C)
–P
er fi
re li
mit
(for f
ire le
gal l
iabi
lity
clai
ms
unde
r C
over
age
A)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
Cov
erag
e A
)
TX_P&C_ClassNotes_3e.indb 107 1/27/2014 12:43:53 PM
10
8Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
CG
L Li
mits
of I
nsur
ance
•The
two
aggr
egat
e lim
its a
ct a
s se
para
te
chec
kboo
ks to
pay
cla
ims
–P
rodu
cts
and
com
plet
ed o
pera
tions
agg
rega
te•P
ays
for a
ll pr
oduc
ts a
nd c
ompl
eted
ope
ratio
ns
clai
ms
durin
g a
spec
ific
polic
y pe
riod
until
the
limit
is
exha
uste
d–
Gen
eral
agg
rega
te•P
ays
fora
llot
herc
laim
sdu
ring
asp
ecifi
cpo
licy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
•Pay
s fo
r all
othe
r cla
ims
durin
g a
spec
ific
polic
y pe
riod
until
the
limit
is e
xhau
sted
CG
L Li
mits
of L
iabi
lity
•The
rem
aini
ng fo
ur li
mits
rest
rict t
he
amou
nt th
at is
pai
d fo
r par
ticul
ar ty
pes
clai
ms
paid
und
er th
e tw
o ag
greg
ates
–P
er o
ccur
renc
e lim
it fo
r bod
ily in
jury
or p
rope
rty
dam
age
clai
ms
–P
er fi
re li
mit
for f
ire le
gal l
iabi
lity
clai
ms
–P
er p
erso
n or
org
aniz
atio
n lim
it fo
r per
sona
l inj
ury
or
adve
rtisi
ngin
jury
clai
ms
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
adve
rtisi
ng in
jury
cla
ims
–P
er p
erso
n lim
it fo
r med
ical
pay
men
ts c
laim
s
Supp
lem
enta
ry P
aym
ents
•C
over
age
paid
in a
dditi
on to
liab
ility
lim
its
(BA
ILE
D)
–B
onds
•Pre
miu
ms
for a
ppea
l and
bai
l bon
ds
•Up
to $
250
for b
ail b
onds
–A
id (f
irst a
id)
•Cov
ers
only
imm
edia
te m
edic
al c
are
Cf
f
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
•Cov
erag
e m
ay b
e re
imbu
rsed
afte
r the
fact
–In
tere
st
•Int
eres
t on
judg
men
ts w
hile
in a
ppea
l
Supp
lem
enta
ry P
aym
ents
(BA
ILED
) –
Loss
of e
arni
ngs
•Up
to $
250
per d
ay fo
r los
s of
insu
red’
s ea
rnin
gs o
nly
beca
use
ofat
tend
ance
athe
arin
gsor
trial
sbe
caus
e of
atte
ndan
ce a
t hea
rings
or t
rials
–E
xpen
ses
•Ins
ured
’s re
ason
able
exp
ense
s fo
r atte
ndin
g co
urt a
s w
ell a
s ot
her c
osts
taxe
d ag
ains
t the
insu
red
–D
efen
se c
osts
•C
osts
ass
ocia
ted
with
insu
red’
s de
fens
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_P&C_ClassNotes_3e.indb 108 1/27/2014 12:43:53 PM
10
9Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
CG
L Ex
clus
ions
•Exp
ecte
d or
inte
nded
inju
ry•L
iquo
r lia
bilit
y, if
in th
e bu
sine
ss o
f m
anuf
actu
ring,
sel
ling,
or s
ervi
ng a
lcoh
olic
be
vera
ges
–H
ost l
iquo
r lia
bilit
y is
not
exc
lude
d•I
njur
ies
to e
mpl
oyee
s(e
.g.,
thos
e co
vere
d un
der w
orke
rs’ c
ompe
nsat
ion)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
•Inj
urie
s or
dam
ages
aris
ing
out o
f mos
t au
to, w
ater
craf
t, or
avi
atio
n ex
posu
res
CG
L Ex
clus
ions
•Pol
lutio
n•P
rofe
ssio
nal l
iabi
lity
(e.g
., m
edic
al
mal
prac
tice,
err
ors,
and
om
issi
ons)
•D
amag
e to
pro
perty
of c
usto
mer
s in
the
care
, cus
tody
, or c
ontro
l of t
he in
sure
d (b
aile
e ris
k)•P
r odu
ct re
call
expe
nses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
Pro
duct
reca
ll ex
pens
es•C
ontra
ctua
l lia
bilit
y, e
xcep
t inc
iden
tal
cont
ract
s
Inci
dent
al C
ontr
acts
(LEA
SE)
•O
nly
the
follo
win
g co
ntra
cts
are
insu
red
–Le
ase
of p
rem
ises
–Ea
sem
ent o
r lic
ense
agr
eem
ent
–A g
reem
ents
with
mun
icip
aliti
es a
s re
quire
d by
ord
inan
ce–
Side
track
agr
eem
ents
–El
evat
orm
aint
enan
ceag
reem
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Elev
ator
mai
nten
ance
agr
eem
ents
Prof
essi
onal
Lia
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 109 1/27/2014 12:43:54 PM
11
0Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Prof
essi
onal
Lia
bilit
y•C
over
s pr
ofes
sion
als
who
mak
e m
ista
kes
resu
lting
in h
arm
to a
third
par
ty•D
oes
not c
over
inte
ntio
nal a
cts
or fr
aud
by
the
insu
red
•Can
hav
e a
“con
sent
to s
ettle
cla
use”
re
quiri
ng th
e in
sure
r to
get t
he p
erm
issi
on
ofth
ein
sure
dbe
fore
payi
nga
clai
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n25
of th
e in
sure
d be
fore
pay
ing
a cl
aim
Type
s of
Pro
fess
iona
l Lia
bilit
y In
sura
nce
•Mal
prac
tice
–Pro
tect
s ph
ysic
ians
, sur
geon
s, a
nd d
entis
tsag
ains
t cla
ims
aris
ing
out o
f the
ser
vice
s th
ey
prov
ide,
or f
ail t
o pr
ovid
e•E
rror
s an
d om
issi
ons
(E&
O)
–Pro
tect
s in
sura
nce
agen
tsag
ains
t cla
ims
aris
ing
out o
f sol
iciti
ng o
r fai
ling
to s
olic
it
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n26
gg
gap
prop
riate
cov
erag
e
Type
s of
Pro
fess
iona
l Lia
bilit
y In
sura
nce
•Dire
ctor
s an
d of
ficer
s (D
&O
)–
Pro
tect
s di
rect
ors
and
offic
ers
who
com
mit
ii
lf
lt
nonc
rimin
al w
rong
ful a
cts
•Fid
ucia
ry li
abili
ty–
Pro
tect
s em
ploy
ee b
enef
it pl
an a
dmin
istra
tors
aga
inst
cl
aim
s of
neg
ligen
ce o
r aga
inst
err
ors
and
omis
sion
s in
th
e ha
ndlin
g of
fund
s (e
.g.,
pens
ion
plan
s)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n27
Empl
oym
ent P
ract
ices
Lia
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 110 1/27/2014 12:43:54 PM
11
1Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Empl
oym
ent P
ract
ices
Lia
bilit
y•C
over
s em
ploy
ers
agai
nst s
exua
l ha
rass
men
t, w
rong
ful t
erm
inat
ion,
and
di
scrim
inat
ion
clai
ms
•Onl
y po
licy
that
cov
ers
disc
rimin
atio
n cl
aim
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n29
Liqu
or L
iabi
lity
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Liqu
or L
iabi
lity
•Als
o ca
lled
dram
sho
p lia
bilit
y•P
rote
cts
any
insu
red
in th
e bu
sine
ss o
f y
man
ufac
turin
g, d
istri
butin
g, s
ellin
g, o
r se
rvin
g al
coho
lic b
ever
ages
•Pay
s fo
r bod
ily in
jury
and
pro
perty
dam
age
loss
es c
ause
d by
into
xica
ted
cust
omer
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n31
Occ
urre
nce
Vers
us C
laim
s-M
ade
Polic
ies
•B
usin
ess
liabi
lity
polic
ies
may
be
writ
ten
in tw
o di
ffere
nt w
ays
Occ
urre
nce
cont
ract
–O
ccur
renc
e co
ntra
ct•M
ost c
omm
on c
ontra
ct fo
r com
mer
cial
gen
eral
lia
bilit
y–
Cla
ims-
mad
e co
ntra
ct•M
ost c
omm
on c
ontra
ct fo
r pro
fess
iona
l lia
bilit
y,
pollu
tion
liabi
lity
and
othe
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n32
pollu
tion
liabi
lity,
and
oth
ers
•Th
e ba
sic
diffe
renc
e be
twee
n th
e tw
o co
ntra
cts
is w
hen
the
cove
rage
is tr
igge
red
or w
hen
cove
rage
is
act
ivat
ed
TX_P&C_ClassNotes_3e.indb 111 1/27/2014 12:43:54 PM
11
2Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Occ
urre
nce
Con
trac
t•T
he p
rimar
y di
stin
guis
hing
feat
ure
of th
e oc
curr
ence
con
tract
is th
e oc
curr
ence
tri
gger
–C
over
s bo
dily
inju
ry a
nd p
rope
rty d
amag
e to
oth
ers
that
oc
curs
dur
ing
the
polic
y pe
riod
rega
rdle
ss o
f whe
n th
e cl
aim
is a
ctua
lly re
porte
d an
d fil
ed
•Cov
erag
e m
ay a
pply
eve
n if
the
insu
red
gets
sue
d af
terp
olic
yha
sex
pire
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n33
afte
r pol
icy
has
expi
red
–“W
hen
did
the
inju
ry o
r dam
age
occu
r?”
Occ
urre
nce
CG
L Ex
ampl
e•A
bus
ines
s w
as in
sure
d un
der t
wo
diffe
rent
lia
bilit
y po
licie
s ov
er th
e co
urse
of f
our
year
s•E
ach
polic
y w
as w
ritte
n us
ing
an
occu
rren
ce c
ontra
ct
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n34
AB
C M
utua
lXY
Z C
asua
lty
1998
2000
2002
Occ
urre
nce
CG
L Ex
ampl
e•A
cus
tom
er is
inju
red
in S
epte
mbe
r of
1999
. The
insu
red
was
sue
d in
Oct
ober
20
00.
•Whi
ch c
ompa
ny is
resp
onsi
ble
for t
he
clai
m? AB
CM
tl
XYZ
Clt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n35
AB
C M
utua
lXY
Z C
asua
lty
1998
2000
2002
Loss
Occ
urre
dCl
aim M
ade
Cla
ims-
Mad
e C
GL
Con
trac
t•T
here
are
thre
e di
stin
guis
hing
feat
ures
of
the
clai
ms-
mad
e co
ntra
ct—
the
trigg
er,
the
retro
activ
e da
te, a
nd th
e ex
tend
ed
repo
rting
per
iod
–Tr
igge
r is
whe
n a
clai
m is
mad
e du
ring
the
polic
y pe
riod
–H
owev
er, t
he in
jury
or d
amag
e m
ust o
ccur
afte
r the
re
troac
tive
date
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n36
•A re
troac
tive
date
is th
e fir
st d
ate
the
insu
rer b
ecom
es
resp
onsi
ble
for i
njur
ies
and
dam
ages
TX_P&C_ClassNotes_3e.indb 112 1/27/2014 12:43:55 PM
11
3Le
sson
Tw
elve
Bu
sine
ss L
iabi
lity
Cov
erag
es
Cla
ims-
Mad
e Ex
ampl
e•A
bus
ines
s w
as in
sure
d un
der t
wo
diffe
rent
lia
bilit
y po
licie
s ov
er th
e co
urse
of f
our
year
s •E
ach
polic
y w
as w
ritte
n us
ing
a cl
aim
s-m
ade
cont
ract
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n37
1998
07/0
1/19
9920
02
Sure
Bet
Ins.
Co.
6 mon
ths
Retro
activ
e Dat
e
WeC
are
Ins.
Co.
01/0
1/20
00
Cla
ims-
Mad
e Ex
ampl
e•A
cus
tom
er is
inju
red
in N
ovem
ber o
f 199
9.
The
insu
red
was
sue
d in
May
200
0.
•Whi
ch c
ompa
ny is
resp
onsi
ble
for t
he
clai
m?
Sure
Bet
Ins.
Co.
WeC
are
Ins.
Co.
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n38
1998
2002
Loss
Occ
urre
dCl
aim M
ade
07/0
1/19
9901
/01/
2000
Cla
ims-
Mad
e C
GL
•Ext
ende
d re
porti
ng p
erio
d (a
lso
calle
d “ta
il”)
–E
xten
ds c
laim
cov
erag
e af
ter a
pol
icy
expi
res
(doe
s no
t in
clud
e an
ythi
ng th
at h
appe
ns a
fter t
he e
xpira
tion)
•A b
asic
five
-yea
r tai
l is
auto
mat
ical
ly in
clud
ed–
If an
occ
urre
nce
is re
porte
d to
the
insu
rer w
hile
the
polic
y is
in
forc
e or
with
in 6
0 da
ys a
fter t
he p
olic
y ex
pira
tion,
the
insu
red
is n
ow c
over
ed fo
r a c
laim
from
that
occ
urre
nce
for u
p to
five
ye
ars
afte
rthe
polic
yex
pire
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n39
year
s af
ter t
he p
olic
y ex
pire
s
•An
unlim
ited
exte
nded
cla
im p
erio
d ca
n be
pur
chas
ed
for a
n ad
ditio
nal p
rem
ium
TX_P&C_ClassNotes_3e.indb 113 1/27/2014 12:43:55 PM
TX_P&C_ClassNotes_3e.indb 114 1/27/2014 12:43:55 PM
Lesson ThirteenFarm Insurance
TX_P&C_ClassNotes_3e.indb 115 1/27/2014 12:43:55 PM
11
6Le
sson
Thi
rtee
n Fa
rm In
sura
nce
Less
onTh
irtee
nLe
sson
Thi
rtee
nFa
rm In
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Farm
Insu
ranc
e•F
arm
ers’
bus
ines
ses
and
hom
es a
re o
ften
at th
e sa
me
loca
tion,
so
they
nee
d in
sura
nce
that
will
cov
er b
oth
thei
r per
sona
l an
d bu
sine
ss e
xpos
ures
to lo
ss.
•The
farm
and
ranc
h po
licy
is v
ery
sim
ilar t
o a
hom
eow
ners
pol
icy
exce
pt th
at it
als
o co
vers
busi
ness
prop
erty
and
busi
ness
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
cove
rs b
usin
ess
prop
erty
and
bus
ines
s lia
bilit
y.
Farm
Pro
pert
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Farm
Pro
pert
y C
over
age
Pers
onal
•C
over
age
A—
dwel
ling
–Ins
ures
the
hom
e an
d an
y at
tach
ed s
truct
ures
or
fixt
ures
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 116 1/27/2014 12:43:55 PM
11
7Le
sson
Thi
rtee
n Fa
rm In
sura
nce
Farm
Pro
pert
y C
over
age
Pers
onal
•Cov
erag
e B
—ot
her p
rivat
e st
ruct
ures
ap
purte
nant
to d
wel
lings
(with
in 2
50 fe
et)
–Cov
erag
e in
clud
es fe
nces
, gar
ages
, and
st
ruct
ures
use
d fo
r dw
ellin
g pu
rpos
es–C
over
age
excl
udes
farm
bui
ldin
gs a
nd o
ther
bu
sine
ss-re
late
d ex
posu
res
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Farm
Pro
pert
y C
over
age
Pers
onal
•Cov
erag
e C
—ho
useh
old
pers
onal
pro
perty
–Cov
ers
mov
eabl
e pr
oper
ty re
late
d to
the
hom
e lik
e th
e ho
me
owne
rs p
olic
y. T
he c
over
age
is
wor
ldw
ide.
–Doe
s no
t cov
er fa
rm p
erso
nal p
rope
rty
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Farm
Pro
pert
y C
over
age
Pers
onal
•Cov
erag
e D
—lo
ss o
f use
–C
over
s ad
ditio
nal l
ivin
g ex
pens
es a
nd lo
ss o
f re
ntal
inco
me
like
the
hom
eow
ners
that
resu
lts
from
loss
of u
se o
f the
hom
e–D
oes
not c
over
any
add
ition
al e
xpen
ses
rela
ted
to th
e fa
rm o
pera
tion
or a
ny lo
ss o
f far
m
inco
me
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Farm
Pro
pert
y C
over
age
Com
mer
cial
•E
xam
ples
of f
arm
per
sona
l pro
perty
incl
ude
–
Farm
pro
duct
s (h
arve
sted
and
sto
red) f
(•D
oes
not i
nsur
e cr
ops
whi
le in
the
field
(Fed
eral
C
rop
Insu
ranc
e)–
Mac
hine
ry a
nd e
quip
men
t –
Live
stoc
k an
d ot
her a
nim
als
–P
oultr
y (tu
rkey
s ex
clud
ed)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
–Ve
hicl
es in
cide
ntal
to fa
rm u
se
•Tra
ctor
s or
truc
ks li
cens
ed fo
r roa
d us
e ar
e no
t co
vere
d
TX_P&C_ClassNotes_3e.indb 117 1/27/2014 12:43:56 PM
11
8Le
sson
Thi
rtee
n Fa
rm In
sura
nce
Farm
Pro
pert
y C
over
age
Com
mer
cial
•Cov
erag
e E
—sc
hedu
led
farm
per
sona
l pr
oper
ty–P
rope
rty m
ust b
e ite
miz
ed a
nd li
mits
sho
wn
on
the
decl
arat
ions
(dec
lare
d va
lue)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Farm
Pro
pert
y C
over
age
Com
mer
cial
•Cov
erag
e F—
unsc
hedu
led
farm
per
sona
l pr
oper
ty
–Cov
ers
farm
per
sona
l pro
perty
on
a bl
anke
t ba
sis
both
on
and
off t
he in
sure
d pr
emis
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Farm
Pro
pert
y C
over
age
Com
mer
cial
•Cov
erag
e G
—ba
rns,
out
build
ings
, and
ot
her f
arm
stru
ctur
es
–Cov
ers
barn
s, s
ilos,
fenc
es, r
adio
equ
ipm
ent,
and
othe
r far
m b
uild
ings
and
stru
ctur
es th
at a
re
not d
wel
lings
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Farm
Lia
bilit
y
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 118 1/27/2014 12:43:56 PM
11
9Le
sson
Thi
rtee
n Fa
rm In
sura
nce
Farm
Lia
bilit
y C
over
age
•Cov
erag
e fo
r lia
bilit
y ar
isin
g ou
t of f
arm
ing
oper
atio
ns o
r per
sona
l act
iviti
es–C
over
age
H—
bodi
ly in
jury
and
pro
perty
da
mag
e lia
bilit
y–C
over
age
I—pe
rson
al a
nd a
dver
tisin
g in
jury
lia
bilit
y–C
over
age
J—m
edic
al p
aym
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
gp
y
Farm
Lia
bilit
y C
over
age
•Who
is a
n in
sure
d un
der f
arm
liab
ility
?–
Nam
ed in
sure
d an
d re
side
nt s
pous
e–
Res
iden
t fam
ily–
Per
sons
und
er th
e ag
e of
21
and
in th
e ca
re o
f the
in
sure
d–
Farm
em
ploy
ees
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Farm
Lia
bilit
y C
over
age
•Exc
lusi
ons
incl
ude
–Pol
luta
nts
–Inj
ury
to c
ompe
nsat
ed fa
rm e
mpl
oyee
s–M
otor
veh
icle
s ex
cept
thos
e sp
ecifi
cally
de
scrib
ed in
the
polic
y–A
ircra
ft sp
rayi
ng/c
rop
dust
ing
–Ins
ured
’sw
orke
rs’c
ompe
nsat
ion
oblig
atio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Insu
red
s w
orke
rs c
ompe
nsat
ion
oblig
atio
ns
and
liabi
lity
for b
odily
inju
ry to
the
insu
red’
s em
ploy
ees
Farm
Lia
bilit
y C
over
age
•Exc
lusi
ons
incl
ude
–The
insu
red’
s pe
rform
ance
or f
ailu
re to
per
form
cu
stom
farm
ing
oper
atio
ns fo
r oth
ers,
if re
ceip
ts
for t
he c
usto
m fa
rmin
g ex
ceed
s $2
,000
per
ye
ar•C
usto
m fa
rmin
g in
volv
es h
iring
som
eone
to c
ompl
ete
spec
ific
farm
ing
oper
atio
ns, s
uch
as ti
llage
, pla
ntin
g,
harv
estin
gan
dha
ying
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
harv
estin
g, a
nd h
ayin
g
TX_P&C_ClassNotes_3e.indb 119 1/27/2014 12:43:56 PM
12
0Le
sson
Thi
rtee
n Fa
rm In
sura
nce
Farm
End
orse
men
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Farm
End
orse
men
ts•C
usto
m fa
rmin
g lia
bilit
y co
vera
ge–A
dds
cove
rage
for c
usto
m fa
rmin
g, w
hich
is
gene
rally
exc
lude
d if
rece
ipts
exc
eed
$2,0
00 in
th
e pr
evio
us y
ear
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
TX_P&C_ClassNotes_3e.indb 120 1/27/2014 12:43:56 PM
Lesson FourteenCommercial Auto Insurance
TX_P&C_ClassNotes_3e.indb 121 1/27/2014 12:43:56 PM
12
2Le
sson
Fou
rtee
n C
omm
erci
al A
uto
Insu
ranc
e
Less
onFo
urte
enLe
sson
Fou
rtee
nC
omm
erci
al A
uto
Insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Bus
ines
sA
uto
Bus
ines
s A
uto
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Bus
ines
s A
uto
•Mos
t com
mon
com
mer
cial
aut
o co
vera
ge•P
rovi
des
prot
ectio
n fo
r ris
k ex
posu
res
pp
aris
ing
out o
f the
ow
ners
hip,
mai
nten
ance
or
use
of a
n au
tom
obile
for b
usin
ess
use
•Tw
o co
vera
ges
incl
uded
to c
hoos
e fro
m—
liabi
lity
and
phys
ical
dam
age
O
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
•Oth
er c
over
ages
may
be
adde
d by
en
dors
emen
t—m
edic
al p
aym
ents
, PIP
, and
U
M/U
IM
Bus
ines
s A
uto
•The
insu
red
can
be
–An
indi
vidu
al–A
par
tner
ship
–A li
mite
d lia
bilit
y co
mpa
ny–A
cor
pora
tion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
TX_P&C_ClassNotes_3e.indb 122 1/27/2014 12:43:57 PM
12
3Le
sson
Fou
rtee
n C
omm
erci
al A
uto
Insu
ranc
e
Bus
ines
s A
uto
Sym
bols
•Sym
bols
indi
cate
whi
ch c
lass
ifica
tion
of
auto
s ha
ve a
par
ticul
ar c
over
age
–S
ymbo
l 1: A
ny a
uto
(bro
ades
t sym
bol)
–S
ymbo
l 7: S
ched
uled
aut
os o
nly
–S
ymbo
l 8: H
ired
auto
s on
ly (r
enta
l car
s, li
mou
sine
s)–
Sym
bol 9
: Non
owne
d au
tos
only
(em
ploy
ee o
wne
d ve
hicl
e us
ed to
pic
k up
bus
ines
s su
pplie
s)S
ymbo
l19:
Mob
ileeq
uipm
ent(
bulld
ozer
fork
lift)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
–S
ymbo
l 19:
Mob
ile e
quip
men
t (bu
lldoz
er, f
orkl
ift)
Liab
ility
Cov
erag
e•P
ays
for l
egal
obl
igat
ions
for B
I and
PD
•Ins
ured
incl
udes
–Th
e na
med
insu
red
–A
nyon
e us
ing
a co
vere
d au
to w
ith p
erm
issi
on
•An
empl
oyee
driv
ing
his/
her o
wn
car f
or
busi
ness
pur
pose
s is
not
an
insu
red
Incl
udes
addi
tiona
lpay
men
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
•Inc
lude
s ad
ditio
nal p
aym
ents
Liab
ility
Exc
lusi
ons
•Inj
urie
s su
stai
ned
by a
n em
ploy
ee•M
obile
equ
ipm
ent
qp
–E
xcep
t whe
n m
obile
equ
ipm
ent i
s be
ing
trans
porte
d us
ing
a ve
hicl
e ap
prov
ed fo
r use
on
the
high
way
•Pol
lutio
n–
Exc
ept f
luid
s ne
cess
ary
for t
he o
pera
tion
of th
e au
to
•Org
aniz
edra
cing
orst
untin
gac
tiviti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Org
aniz
ed ra
cing
or s
tunt
ing
activ
ities
Phys
ical
Dam
age
Cov
erag
e•C
ollis
ion
•Oth
er th
an c
ollis
ion
(com
preh
ensi
ve)
(p
)O
R
•Spe
cifie
d ca
uses
of l
oss
–Le
ss e
xpen
sive
sub
stitu
te fo
r com
preh
ensi
ve–
Cov
ers
only
nam
ed p
erils
(fire
, lig
htni
ng, e
xplo
sion
, th
eft,
win
dsto
rm, h
ail,
earth
quak
e, fl
ood,
and
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
vand
alis
m)
TX_P&C_ClassNotes_3e.indb 123 1/27/2014 12:43:57 PM
12
4Le
sson
Fou
rtee
n C
omm
erci
al A
uto
Insu
ranc
e
Gar
age
Gar
age
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Gar
age
•The
gar
age
polic
y is
des
igne
d sp
ecifi
cally
fo
r veh
icle
rela
ted
busi
ness
es–
Aut
o de
aler
s–
Aut
o bo
dy s
hops
–A
uto
mec
hani
c sh
ops
–A
uto
glas
s or
sou
nd s
hops
–Tr
uck
and
truck
-trac
tor d
eale
rsC
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–C
omm
erci
al tr
aile
r dea
lers
Gar
age
•Thr
ee c
over
ages
to c
hoos
e–
Gar
age
liabi
lity
–G
arag
ekee
pers
–P
hysi
cal d
amag
e
•Med
ical
pay
men
ts, p
erso
nal i
njur
y pr
otec
tion,
and
uni
nsur
ed/u
nder
insu
red
mot
oris
ts c
over
a ges
may
be
adde
d by
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
gy
yen
dors
emen
t
Gar
age
Liab
ility
•B
road
liab
ility
cov
erag
e fo
r the
follo
win
g ex
posu
res
–A
uto
liabi
lity
–B
usin
ess
liabi
lity,
incl
udin
g•P
rem
ises
and
ope
ratio
ns li
abili
ty•P
rodu
cts
and
com
plet
ed o
pera
tions
liab
ility
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
TX_P&C_ClassNotes_3e.indb 124 1/27/2014 12:43:57 PM
12
5Le
sson
Fou
rtee
n C
omm
erci
al A
uto
Insu
ranc
e
Gar
agek
eepe
rs C
over
age
•Bai
lee
cove
rage
des
igne
d to
cov
er th
e bu
sine
ss fo
r dam
age
to c
usto
mer
’s
prop
erty
aris
ing
out o
f ope
ratio
ns o
f the
bu
sine
ss
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Phys
ical
Dam
age
Cov
erag
e•C
ollis
ion
•Oth
er th
an c
ollis
ion
(com
preh
ensi
ve)
(p
)O
R
•Spe
cifie
d ca
uses
of l
oss
–Le
ss e
xpen
sive
sub
stitu
te fo
r com
preh
ensi
ve–
Cov
ers
only
nam
ed p
erils
(fire
, lig
htni
ng, e
xplo
sion
, th
eft,
win
dsto
rm, h
ail,
earth
quak
e, fl
ood,
and
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
vand
alis
m)
Endo
rsem
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mer
cial
Aut
o En
dors
emen
ts•
Add
ition
al in
sure
d—le
ssor
(los
s pa
yee)
–
Cov
ers
sche
dule
d le
ased
aut
os a
s “o
wne
d” ra
ther
th
an“h
ired”
or“b
orro
wed
”aut
oth
an h
ired
or
borr
owed
aut
o•
Aut
o m
edic
al p
aym
ents
•
Texa
s pe
rson
al in
jury
pro
tect
ion
•U
nins
ured
and
und
erin
sure
d m
otor
ists
•
Driv
e ot
her c
ar c
over
age—
Ext
ends
the
com
pany
in
sura
nce
toco
vert
hepe
rson
nam
edin
this
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
insu
ranc
e to
cov
er th
e pe
rson
nam
ed in
this
en
dors
emen
t whi
le d
rivin
g an
aut
o th
at d
oes
not
belo
ng to
them
(bor
row
a fr
iend
s ca
r)
TX_P&C_ClassNotes_3e.indb 125 1/27/2014 12:43:58 PM
TX_P&C_ClassNotes_3e.indb 126 1/27/2014 12:43:58 PM
Lesson FifteenCrime Insurance and Bonds
TX_P&C_ClassNotes_3e.indb 127 1/27/2014 12:43:58 PM
12
8Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Less
onFi
fteen
Less
on F
iftee
nC
rime
Insu
ranc
e an
d B
onds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Crim
e In
sura
nce
•Crim
e co
vera
ge c
an b
e pr
ovid
ed a
s a
sepa
rate
pol
icy
or a
s pa
rt of
a p
acka
ge
polic
y•T
he c
rime
(per
il) c
over
ed w
ill b
e de
fined
in
the
crim
e co
ntra
ct
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Crim
e: D
efin
ition
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Thef
t•T
he u
nlaw
ful t
akin
g of
pro
perty
from
an
othe
r with
out t
he o
wne
r’s c
onse
nt•B
road
def
initi
on in
clud
es b
urgl
ary,
saf
e bu
rgla
ry, r
obbe
ry, l
arce
ny, e
mbe
zzle
men
t, an
d fo
rger
y•D
oes
not i
nclu
de “m
yste
rious
di
sapp
eara
nce”
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
disa
ppea
ranc
e
TX_P&C_ClassNotes_3e.indb 128 1/27/2014 12:43:58 PM
12
9Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Bur
glar
y •T
heft
of p
rope
rty fr
om in
side
the
prem
ises
•Re q
uire
s vi
sibl
e ev
iden
ce o
f for
ced
entry
or
qy
exit
•Act
ual e
ntry
is n
ot re
quire
d
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Rob
bery
•The
ft of
pro
perty
from
an
indi
vidu
al in
po
sses
sion
of t
he p
rope
rty•I
nvol
ves
face
-to-fa
ce c
onfro
ntat
ion
betw
een
robb
er a
nd v
ictim
•Req
uire
s vi
olen
ce, t
hrea
t, or
fear
(alth
ough
w
eapo
n is
not
nec
essa
ry)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Mys
terio
us D
isap
pear
ance
•A s
ituat
ion
in w
hich
an
artic
le o
f pro
perty
is
know
n to
hav
e di
sapp
eare
d bu
t it i
s im
poss
ible
to d
eter
min
e ho
w o
r whe
n it
occu
rred
•The
ft m
ust b
e ru
led
out
•Mys
terio
us d
isap
pear
ance
is n
ot th
eft
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Oth
er C
rime
Def
initi
ons
•Cus
todi
an–
Per
son
havi
ng th
e in
sure
d pr
oper
ty in
side
the
prem
ises
–E
xam
ple:
Cas
hier
in a
sup
erm
arke
t (no
t a ja
nito
r)
•Mes
seng
er–
Per
son
havi
ng th
e in
sure
d pr
oper
ty o
utsi
de th
e pr
emis
es–
Exa
mpl
e: S
tore
man
ager
mak
ing
a de
posi
t at t
he b
ank
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
TX_P&C_ClassNotes_3e.indb 129 1/27/2014 12:44:01 PM
13
0Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Crim
e C
over
age
Con
trac
ts
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Empl
oyee
The
ft •A
lso
calle
d em
ploy
ee d
isho
nest
y co
vera
ge•C
over
s th
eft o
f mon
e y, s
ecur
ities
, and
oth
er
y,,
prop
erty
by
empl
oyee
s•M
ay b
e w
ritte
n in
thre
e di
ffere
nt w
ays
–Nam
ed s
ched
ule—
cove
rs e
mpl
oyee
s lis
ted
only
Piti
hd
lj
btit
lli
td
l
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Pos
ition
sch
edul
e—co
vers
job
title
s lis
ted
only
–Bla
nket
cov
erag
e—co
vers
loss
cau
sed
by a
ny
empl
oyee
Forg
ery
or A
ltera
tion
•Cov
ers
loss
es c
ause
d by
out
side
par
ties
who
forg
e or
alte
r the
nam
ed in
sure
d’s
chec
ks, d
rafts
, pro
mis
sory
not
es, o
rder
s, o
r di
rect
ions
to p
ay m
oney
•E
mpl
oyee
act
s ar
e ex
clud
ed
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
Bon
ds
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 130 1/27/2014 12:44:02 PM
13
1Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Bon
d: D
efin
ition
•A b
ond
is a
gua
rant
ee th
at a
spe
cific
dut
y w
ill b
e di
scha
rged
or a
spe
cific
obl
igat
ion
fulfi
lled;
oth
erw
ise,
a p
enal
ty w
ill b
e pa
id•T
here
are
thre
e pa
rties
invo
lved
in th
e bo
nd p
roce
ss—
the
prin
cipa
l, th
e ob
ligee
, an
d th
e su
rety
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Prin
cipa
l•T
he p
arty
who
pro
mis
es to
do,
or n
ot d
o, a
sp
ecifi
c th
ing
–Thi
s is
the
pers
on o
r com
pany
that
is b
onde
d (e
mpl
oyee
, con
tract
or, b
usin
ess
owne
r)•M
ay a
lso
be c
alle
d th
e ob
ligor
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
Obl
igee
•The
par
ty to
who
m th
e pr
inci
pal m
akes
the
prom
ise
and
for w
hose
pro
tect
ion
the
bond
is
bei
ng w
ritte
n–R
ecei
ves
the
bene
fit (e
mpl
oyer
, pro
ject
ow
ner,
cust
omer
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
Sure
ty•T
he p
arty
who
agr
ees
to b
e re
spon
sibl
e fo
r lo
ss th
at m
ay re
sult
if th
e pr
inci
pal d
oes
not
keep
his
pro
mis
e (p
ays
the
pena
lty)
–The
bon
ding
com
pany
, whi
ch m
ay s
omet
imes
be
an
insu
ranc
e co
mpa
ny•A
lso
know
n as
the
guar
anto
r
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 131 1/27/2014 12:44:02 PM
13
2Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Sure
ty B
ond
Type
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Con
trac
t Bon
ds•P
urch
ased
by
cont
ract
ors
•Con
tract
bon
ds g
uara
ntee
the
fulfi
llmen
t of
gco
ntra
ct o
blig
atio
ns•T
ypes
of c
ontra
ct b
onds
: Bid
bon
d,
perfo
rman
ce b
ond,
pay
men
t bon
d, a
nd
com
plet
ion
bond
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Type
s of
Con
trac
t Bon
ds•B
id b
onds
: Gua
rant
ees
that
the
bidd
ing
cont
ract
or (p
rinci
pal),
if s
elec
ted,
will
dt
kth
tt
dill
fi
hth
unde
rtake
the
cont
ract
and
will
furn
ish
othe
r ne
cess
ary
bond
s (in
clud
ing
perfo
rman
ce, a
nd
paym
ent b
onds
) for
the
proj
ect
•Per
form
ance
bon
d: G
uara
ntee
s th
at th
e co
ntra
ctor
(prin
cipa
l) w
ill co
mpl
ete
the
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
cont
ract
in c
ompl
ianc
e w
ith th
e te
rms
of th
e co
ntra
ct
Type
s of
Con
trac
t Bon
ds•P
aym
ent b
ond:
Gua
rant
ees
that
bill
s fo
r la
bor a
nd m
ater
ials
will
be
paid
and
that
th
e pr
oper
ty w
ill b
e tu
rned
ove
r to
the
owne
r fre
e of
any
fina
ncia
l atta
chm
ents
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
TX_P&C_ClassNotes_3e.indb 132 1/27/2014 12:44:02 PM
13
3Le
sson
Fift
een
Crim
e In
sura
nce
and
Bond
s
Type
s of
Jud
icia
l Bon
ds•C
ourt
bond
s: P
erm
it so
meo
ne to
see
k a
rem
edy
in a
cou
rt of
equ
ity; t
he p
arty
see
king
th
di
thi
il
dt
it
the
rem
edy
is th
e pr
inci
pal,
and
party
aga
inst
w
hom
the
actio
n is
take
n is
the
oblig
ee•F
iduc
iary
bon
ds: G
uara
ntee
s th
e pe
rform
ance
of
fidu
ciar
ies
entru
sted
with
the
prop
erty
of
othe
rs (e
.g.,
exec
utor
of w
ill)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
•Bai
l bon
d: G
uara
ntee
s an
acc
used
per
son
will
appe
ar in
cou
rt at
des
igna
ted
time
and
plac
e
Lice
nse
and
Perm
it B
onds
•Req
uire
d of
thos
e th
at m
ust o
btai
n lic
ense
s
or
per
mits
from
citi
es, t
owns
, or p
oliti
cal
bdi
ii
bf
thd
ithsu
bdiv
isio
ns b
efor
e th
ey c
an p
roce
ed w
ith
vario
us a
ctiv
ities
•U
sual
ly g
uara
ntee
that
the
prin
cipa
l will
co
mpl
y w
ith s
tatu
tes,
regu
latio
ns, o
r
or
dina
nces
that
regu
late
thei
r act
iviti
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
•Typ
es o
f bus
ines
ses
need
ing
thes
e bo
nds:
N
otar
ies,
car
dea
lers
, ele
ctric
ians
and
man
y m
any
mor
e
Sure
ty B
onds
and
Sub
roga
tion
Rig
hts
•All
bond
cla
ims
have
sub
roga
tion
pote
ntia
l•T
he o
bli g
ee a
lway
s ha
s th
e rig
ht o
f firs
t g
yg
reco
very
aga
inst
the
prin
cipa
l•A
fter t
he o
blig
ee, t
hen
the
sure
ty m
ay
subr
ogat
e fro
m th
e pr
inci
pal
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
Fide
lity
Bon
ds•G
uara
ntee
s to
the
oblig
ee th
e fid
elity
or
hone
sty
of th
e pr
inci
pal
–A b
lank
et e
mpl
oyee
fide
lity
bond
wou
ld p
rote
ct
the
oblig
ee(e
mpl
oyer
) aga
inst
dis
hone
sty
by
it’s
empl
oyee
s si
mila
r to
empl
oyee
thef
t crim
e in
sura
nce
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n24
TX_P&C_ClassNotes_3e.indb 133 1/27/2014 12:44:03 PM
TX_P&C_ClassNotes_3e.indb 134 1/27/2014 12:44:03 PM
Lesson SixteenPackage Policies
TX_P&C_ClassNotes_3e.indb 135 1/27/2014 12:44:03 PM
13
6Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Less
onSi
xtee
nLe
sson
Six
teen
Pack
age
Polic
ies
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mer
cial
Pac
kage
Pol
icy
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Com
mer
cial
Pac
kage
Pol
icy
Ove
rvie
w
•The
CP
P is
a v
ery
flexi
ble
polic
y th
at is
as
sem
bled
bas
ed u
pon
the
insu
red’
s co
vera
ge re
quire
men
ts a
nd c
an b
e us
ed b
y m
any
diffe
rent
bus
ines
ses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Com
mer
cial
Pac
kage
Pol
icy
Ove
rvie
w
•Cov
erag
e pa
rts c
an in
clud
e–
Bui
ldin
g an
d bu
sine
ss p
erso
nal p
rope
rty (L
esso
n 10
)–
Bus
ines
s lia
bilit
y (L
esso
n 12
) –
Com
mer
cial
aut
o (L
esso
n 14
)–
Com
mer
cial
inla
nd m
arin
e (L
esso
n 11
)–
Equ
ipm
ent b
reak
dow
n (L
esso
n 11
)–
Com
mer
cial
crim
e (L
esso
n 15
)F
dh
(L13
)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n4
–Fa
rm a
nd ra
nch
(Les
son1
3)
TX_P&C_ClassNotes_3e.indb 136 1/27/2014 12:44:03 PM
13
7Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Com
mer
cial
Pac
kage
Pol
icy
Ove
rvie
w
•Thr
ee li
nes
of in
sura
nce
that
can
not b
e in
clud
ed in
a c
omm
erci
al p
acka
ge p
olic
y (C
PP
) and
are
alw
ays
sepa
rate
pol
icie
s–
Wor
kers
’ com
pens
atio
n –
Oce
an m
arin
e–
Avia
tion
insu
ranc
e
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Bus
ines
sow
ners
Polic
yB
usin
esso
wne
rs P
olic
y(B
OP)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Bus
ines
sow
ners
Pol
icy
Ove
rvie
w
•Pre
pack
aged
con
tract
and
com
bine
s–P
rope
rty c
over
ages
(Sec
tion
I)–L
iabi
lity
cove
rage
s (S
ectio
n II)
•Des
igne
d to
mee
t the
insu
ranc
e ne
eds
of
smal
l bus
ines
ses
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
Elig
ible
Bus
ines
ses
(OA
RS)
•Offi
ces
and
offic
e co
ndom
iniu
m
asso
ciat
ions
–Six
sto
ries
or le
ss–1
00,0
00 s
quar
e fe
et o
r les
s–E
xam
ples
: Ins
uran
ce a
gent
, law
yer,
acco
unta
nt•A
partm
ents
and
resi
dent
ial c
ondo
min
ium
as
soci
atio
ns
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
asso
ciat
ions
–Six
sto
ries
or le
ss–6
0 un
its o
r les
s
TX_P&C_ClassNotes_3e.indb 137 1/27/2014 12:44:04 PM
13
8Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Elig
ible
Bus
ines
ses
(OA
RS)
•Ret
ail/m
erca
ntile
risk
s–
25,0
00 s
quar
e fe
et o
r les
s–
Exa
mpl
es: H
ardw
are
stor
e, d
ress
sho
p, li
quor
sto
re,
bake
ry
•Ser
vice
or p
roce
ssin
g ris
ks–
25,0
00 s
quar
e fe
et o
r les
s–
Exa
mpl
es: B
arbe
r sho
p, s
hoe
repa
ir, ta
ilor,
and
ilt
tt
hl
bd
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
spec
ialty
con
tract
ors
such
as
plum
bers
and
car
pent
ers,
bu
t not
gen
eral
con
tract
ors
Inel
igib
le B
usin
esse
s•T
hese
type
s of
bus
ines
ses
are
not e
ligib
le
for a
BO
P an
d ar
e co
vere
d by
oth
er
insu
ranc
e co
ntra
cts
such
as
a C
PP
–A
uto
repa
ir sh
ops
or s
ervi
ce s
tatio
ns–
Bar
s an
d re
stau
rant
s se
rvin
g al
coho
l–
Man
ufac
turin
g ris
ks–
Pla
ces
of a
mus
emen
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
–Fi
nanc
ial i
nstit
utio
ns (b
ank,
sav
ings
, and
loan
)
Sect
ion
I: Pr
oper
ty C
over
ages
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Prop
erty
Cov
erag
e O
verv
iew
•Cov
erag
e is
ver
y si
mila
r to
othe
r com
mer
cial
pr
oper
ty c
ontra
cts
•Loc
atio
ns a
nd li
mits
list
ed o
n th
e de
clar
atio
ns•C
over
s bu
ildin
gs a
nd b
usin
ess
pers
onal
pr
oper
ty
•Typ
ical
ly w
ritte
n S
peci
al (o
pen
peril
s)B
asic
and
Bro
adar
eal
soav
aila
ble
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
–Bas
ic a
nd B
road
are
als
o av
aila
ble
•Sta
ndar
d de
duct
ible
is $
500,
but
can
in
crea
sed
TX_P&C_ClassNotes_3e.indb 138 1/27/2014 12:44:04 PM
13
9Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Bui
ldin
g C
over
age
•C
over
age
incl
udes
–Bui
ldin
gs a
nd s
truct
ures
–Per
man
ently
inst
alle
d fix
ture
s, m
achi
nery
, and
eq
uipm
ent
–Per
sona
l pro
perty
use
d to
mai
ntai
n th
e pr
emis
es–E
xten
ded
to c
over
new
ly a
cqui
red
build
ings
for
30 d
ays
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
•R
epla
cem
ent c
ost c
over
age
if 80
% in
sura
nce-
to-
valu
e re
quire
men
t is
met
(lik
e ho
meo
wne
rs)
Bus
ines
s Pe
rson
al P
rope
rty
Cov
erag
e
•Cov
ers
prop
erty
in o
r on
the
build
ing
used
in
the
cour
se o
f bus
ines
s, in
clud
ing
–Pro
perty
in th
e op
en w
ithin
100
feet
–Ext
erio
r bui
ldin
g gl
ass
–Ten
ants
’ im
prov
emen
ts a
nd b
ette
rmen
ts–E
xten
ded
to c
over
new
ly a
cqui
red
loca
tions
for
30da
ys
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
30 d
ays
Prop
erty
Not
Cov
ered
•Cov
ered
pro
perty
doe
s no
t inc
lude
–Det
ache
d ou
tdoo
r sig
ns*
–Lan
d, w
ater
, gro
win
g cr
ops,
law
ns–M
oney
and
sec
uriti
es*
–Con
traba
nd–A
ircra
ft, a
utom
obile
s, m
otor
truc
ks
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
* C
an p
urch
ase
optio
nal c
over
ages
fo
r an
addi
tiona
l pre
miu
m
Excl
uded
Per
ils•F
lood
•Ear
th m
ovem
ent
•Gov
ernm
enta
l act
ion
•Nuc
lear
haz
ard
•Ord
inan
ce o
r law
•War
and
milit
ary
actio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
War
and
mili
tary
act
ion
TX_P&C_ClassNotes_3e.indb 139 1/27/2014 12:44:04 PM
14
0Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Add
ition
al C
over
ages
•I
nclu
ded
for n
o ad
ditio
nal p
rem
ium
–D
ebris
rem
oval
–B
usin
ess
inco
me
and
extra
exp
ense
cov
erag
e–
$2,5
00 fo
r for
gery
and
alte
ratio
n*–
$1,0
00 fo
r atta
ched
out
door
sig
ns*
–P
rese
rvat
ion
of p
rope
rty (r
emov
al) f
or 3
0 da
ys
*Ch
hih
liit
fdd
itil
i
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
* Can
pur
chas
e hi
gher
lim
its fo
r an
addi
tiona
l pre
miu
m
Opt
iona
l Cov
erag
es
•May
be
adde
d fo
r an
addi
tiona
l pre
miu
m–O
utdo
or s
igns
–Mon
ey a
nd s
ecur
ities
–Em
ploy
ee d
isho
nest
y–M
echa
nica
l bre
akdo
wn
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
Sect
ion
II:
Liab
ility
Cov
erag
es
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Liab
ility
Cov
erag
e O
verv
iew
•Thi
rd p
arty
cov
erag
e•C
over
a ge
is v
ery
sim
ilar t
o co
mm
erci
al
gy
gene
ral l
iabi
lity
–Bod
ily in
jury
and
pro
perty
dam
age
–Per
sona
l inj
ury
and
adve
rtisi
ng in
jury
–Med
ical
pay
men
ts to
oth
ers—
paid
rega
rdle
ss
offa
ult
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
of fa
ult
–Sup
plem
enta
ry (a
dditi
onal
) pay
men
ts (B
AIL
ED
)
TX_P&C_ClassNotes_3e.indb 140 1/27/2014 12:44:05 PM
14
1Le
sson
Six
teen
Pa
ckag
e Po
licie
s
Endo
rsem
ents
•H
ired
auto
and
non
-ow
ned
auto
liab
ility
–C
over
s th
e in
sure
d’s
liabi
lity
for
Hire
dau
to(e
gre
ntal
car
limou
sine
)•H
ired
auto
(e.g
., re
ntal
car
, lim
ousi
ne)
•Non
owne
d au
to (e
.g.,
empl
oyee
use
s th
eir
pers
onal
car
to m
ake
a ba
nk d
epos
it fo
r the
bu
sine
ss)
•P
rote
ctiv
e sa
fegu
ards
(war
rant
y)–
Insu
red
prom
ises
toha
vean
oper
atio
nalb
urgl
aror
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
–In
sure
d pr
omis
es to
hav
e an
ope
ratio
nal b
urgl
ar o
r fir
e al
arm
; fai
lure
to d
o so
cou
ld re
sult
in n
o co
vera
ge–
Writ
ten
in th
e co
ntra
ct
Endo
rsem
ents
•Ear
thqu
ake
–A
dds
cove
rage
for e
arth
quak
es, l
ands
lides
, vol
cani
c ti
dth
ter
uptio
ns, a
nd e
arth
mov
emen
ts–
Occ
urre
nces
with
in a
168
hou
r tim
e pe
riod
will
be
treat
ed a
s if
they
wer
e a
sing
le lo
ss
•Val
uabl
e pa
pers
and
reco
rds
–A
dds
cove
rage
for v
alua
ble
pape
rs a
nd re
cord
s lik
e m
aps
blue
prin
tsfil
ms
illus
tratio
nsan
ddr
awin
gs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
map
s, b
luep
rints
, film
s, il
lust
ratio
ns, a
nd d
raw
ings
TX_P&C_ClassNotes_3e.indb 141 1/27/2014 12:44:05 PM
TX_P&C_ClassNotes_3e.indb 142 1/27/2014 12:44:05 PM
Lesson Seventeen Workers’ Compensation
TX_P&C_ClassNotes_3e.indb 143 1/27/2014 12:44:05 PM
14
4Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Less
onSe
vent
een
Less
on S
even
teen
Wor
kers
’ Com
pens
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
Ove
rvie
w o
f Wor
kers
' Com
pens
atio
n
•Sys
tem
of b
enef
its fo
r mos
t wor
kers
who
su
ffer j
ob re
late
d in
jurie
s or
dis
ease
–P
aid
rega
rdle
ss o
f fau
lt–B
enef
its to
be
rece
ived
are
writ
ten
in th
e la
w
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n2
Excl
usiv
e R
emed
y •I
f the
em
ploy
er h
as w
orke
rs c
ompe
nsat
ion,
th
e pa
ymen
ts m
ade
by th
e in
sura
nce
or th
e em
ploy
er a
re th
e on
ly b
enef
its to
be
paid
–Th
is m
eans
that
an
inju
red
empl
oyee
can
’t su
e–
Exc
eptio
n: If
em
ploy
er fa
ils to
pro
vide
wor
kers
' co
mpe
nsat
ion,
then
em
ploy
ee c
an s
ue
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n3
Texa
s W
orke
rs' C
ompe
nsat
ion
Ben
efits
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n
TX_P&C_ClassNotes_3e.indb 144 1/27/2014 12:44:05 PM
14
5Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Com
puls
ory
Vers
us E
lect
ive
•Te
xas
is a
n el
ectiv
e st
ate
–E
mpl
oyer
may
dec
ide
not t
o bu
y w
orke
rs’
com
pens
atio
nin
sura
nce
orbe
appr
oved
fors
elf
com
pens
atio
n in
sura
nce
or b
e ap
prov
ed fo
r sel
f in
sura
nce
–E
mpl
oyee
als
o ha
s th
e rig
ht to
reje
ct th
e co
vera
ge
with
in fi
ve d
ays
of h
ire–
Exc
eptio
n: E
mpl
oyer
s pe
rform
ing
cont
ract
wor
k fo
r th
e go
vern
men
t mus
thav
e w
orke
rs' c
ompe
nsat
ion
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n5
Ben
efits
Pro
vide
d•I
n Te
xas,
ben
efits
are
–M
edic
al b
enef
its d
ue to
the
inju
ry
–Dis
abilit
y/lo
ss o
f inc
ome
bene
fits
–Sur
vivo
r inc
ome
–Bur
ial b
enef
its
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n6
Med
ical
Ben
efits
•P
ays
reas
onab
le a
nd n
eces
sary
med
ical
ex
pens
es, i
nclu
ding
(but
not
lim
ited
to)
–E
mer
genc
y se
rvic
es–
Doc
tor a
nd s
urgi
cal
–H
ospi
tal
–M
edic
al re
habi
litat
ion
(phy
sica
l the
rapy
)
•Ben
efit
is p
ayab
le im
med
iate
ly (w
ith n
o
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n7
wai
ting
perio
d) a
nd it
con
tinue
s fo
r the
in
jure
d em
ploy
ee’s
life
time,
if n
eces
sary
Dis
abili
ty/L
oss
of In
com
e B
enef
its
•Int
ende
d to
repl
ace
a po
rtion
of l
ost i
ncom
e,
but n
ot a
ll of
it•B
enef
it is
bas
ed o
n em
ploy
ee’s
ave
rage
w
eekl
y w
age
(for t
he 1
3 w
eeks
prio
r to
inju
ry)
•Ben
efits
are
pai
d to
the
empl
oyee
wee
kly
but
do n
ot b
egin
unt
il th
e 8t
hda
y. If
the
disa
bilit
y la
sts
long
er th
an tw
o w
eeks
, the
em
ploy
ee w
ill
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n8
g,
py
rece
ive
paym
ent f
or th
e fir
st w
eek.
TX_P&C_ClassNotes_3e.indb 145 1/27/2014 12:44:06 PM
14
6Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Surv
ivor
and
Bur
ial B
enef
its•S
urvi
vor i
ncom
e be
nefit
s ar
e pa
id w
eekl
y (n
o w
aitin
g pe
riod)
to th
e w
orke
rs le
gal
bene
ficia
ry•B
uria
l ben
efit—
up to
$6,
000
is p
aid
to th
e pe
rson
who
pai
d th
e bu
rial c
ost
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n9
Voca
tiona
l Reh
abili
tatio
n B
enef
its
•Des
igne
d to
ass
ist i
njur
ed w
orke
rs w
ith
disa
bilit
ies
to re
turn
to th
e w
orkf
orce
by
prov
idin
g–T
rain
ing
–Job
pla
cem
ent a
ssis
tanc
e•P
rovi
ded
by th
e D
epar
tmen
t of A
ssis
tive
Reh
abili
tatio
nS
ervi
ces
(DA
RS
)and
not
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n10
Reh
abili
tatio
n S
ervi
ces
(DA
RS
) and
not
paid
by
wor
kers
' com
pens
atio
n in
Tex
as
Wor
kers
' Com
pens
atio
n In
sura
nce
Polic
y
•Con
tract
con
sist
s of
sev
eral
cov
erag
e pa
rts:
–Par
t 1: W
orke
rs' c
ompe
nsat
ion
–Par
t 2: E
mpl
oyer
’s li
abilit
y–P
art 3
: Oth
er s
tate
s’ in
sura
nce
–Par
t 4: Y
our d
utie
s in
inju
ry o
ccur
sP
art5
:Pre
miu
m
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n11
–Par
t 5: P
rem
ium
–Par
t 6: C
ondi
tions
Part
1: W
orke
rs' C
ompe
nsat
ion
•Pro
vide
s be
nefit
s fo
r inj
urie
s an
d oc
cupa
tiona
l dis
ease
suf
fere
d by
em
ploy
ees
aris
ing
out o
f the
ir em
ploy
men
t–M
ust b
e fro
m w
ork-
rela
ted
caus
es•I
s ca
lled
a st
atut
ory
bene
fit b
ecau
se it
pay
s th
e be
nefit
s w
ritte
n in
to th
e w
orke
rs
com
pens
atio
nla
w
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n12
com
pens
atio
n la
w•D
oes
not p
ay fo
r pai
n an
d su
fferin
g lo
sses
TX_P&C_ClassNotes_3e.indb 146 1/27/2014 12:44:06 PM
14
7Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Wor
kers
' Com
pens
atio
n Ex
clus
ions
: Te
xas
•Inj
urie
s no
t cov
ered
–Em
ploy
ee’s
willf
ul in
tent
ion
to in
jure
sel
f –N
on-jo
b re
late
d by
third
par
ty–V
olun
tary
, off-
duty
recr
eatio
n ac
tivity
–Inj
ury
whi
le in
toxi
cate
d (.0
8% o
r hig
her)
or
caus
ed b
y ille
gal d
rugs
–Act
ofG
od(u
nles
sjo
bpu
tem
ploy
eeat
grea
ter
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n13
Act
of G
od (u
nles
s jo
b pu
t em
ploy
ee a
t gre
ater
ris
k)–H
orse
play
Part
1: W
orke
rs' C
ompe
nsat
ion
•Occ
upat
iona
l dis
ease
–A
dis
ease
that
is d
ue to
cau
ses
and
cond
ition
s th
at a
re c
hara
cter
istic
of a
par
ticul
ar tr
ade
or
occu
patio
n–A
dis
ease
that
the
empl
oyee
is n
ot o
rdin
arily
su
bjec
ted
to a
way
from
his
em
ploy
men
t–E
xam
ples
incl
ude
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n14
•Bla
ck lu
ng•A
sbes
tosi
s•C
hem
ical
bur
n
Part
2: E
mpl
oyer
’s L
iabi
lity
•Pro
vide
s co
vera
ge to
the
insu
red
(em
ploy
er)
for s
ums
the
insu
red
beco
mes
lega
lly
bli
td
tb
fk
lt
dob
ligat
ed to
pay
bec
ause
of a
wor
k-re
late
d in
jury
or o
ccup
atio
nal d
isea
se•A
pplie
s in
situ
atio
ns th
at a
re n
ot c
over
ed b
y w
orke
rs' c
ompe
nsat
ion
law
s•A
n em
ploy
ee w
ho is
una
ble
to c
olle
ct w
orke
rs'
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n15
py
com
pens
atio
n un
der s
tate
law
may
stil
l sue
th
e em
ploy
er fo
r dam
ages
(e.g
., ex
empt
em
ploy
men
ts)
Exem
pt E
mpl
oym
ents
: Tex
as•A
Tex
as e
mpl
oyer
is n
ot n
orm
ally
abl
e to
bu
y st
ate
wor
kers
' com
pens
atio
n be
nefit
s fo
r exe
mpt
em
ploy
men
ts–
Dom
estic
em
ploy
ees
–C
asua
l lab
orer
s –
Cer
tain
farm
and
ranc
h w
orke
rs–
Em
ploy
ees
cove
red
by fe
dera
l wor
kers
' com
pens
atio
n
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n16
TX_P&C_ClassNotes_3e.indb 147 1/27/2014 12:44:06 PM
14
8Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Part
2: E
mpl
oyer
’s L
iabi
lity
•Cov
erag
e is
pro
vide
d fo
r the
follo
win
g–
Sui
ts b
y ex
empt
em
ploy
ees
–S
uits
by
inju
red
empl
oyee
s cl
aim
ing
an e
mpl
oyer
’s
gros
s ne
glig
ence
–
Sui
ts b
roug
ht b
y sp
ouse
s or
dep
ende
nts
of in
jure
d w
orke
rs
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n17
Part
3: O
ther
Sta
tes’
Insu
ranc
e•M
akes
the
polic
y pr
ovid
e co
vera
ge in
st
ates
oth
er th
an T
exas
•M
ay b
e ne
eded
whe
n an
em
ploy
er h
as
loca
tions
in s
ever
al s
tate
s. T
he la
ws
and
bene
fits
are
diffe
rent
in e
very
sta
te.
•Cov
ers
only
the
stat
es li
sted
in th
e de
clar
atio
ns(a
lso
calle
din
form
atio
npa
ge)
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n18
decl
arat
ions
(als
o ca
lled
info
rmat
ion
page
)
Texa
s M
utua
l Ins
uran
ce C
ompa
ny
•Com
pete
s w
ith p
rivat
e in
sure
rs•I
nsur
er o
f las
t res
ort (
cann
ot re
fuse
any
l
)em
ploy
er)
•Cre
ated
by
the
Texa
s le
gisl
atur
e an
d go
vern
ed
by a
nin
e m
embe
r boa
rd a
ppoi
nted
by
the
gove
rnor
for s
ix-y
ear t
erm
s–F
ive
mem
bers
from
insu
rers
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n19
–Fou
r mem
bers
from
the
gene
ral p
ublic
•Any
lice
nsed
pro
perty
and
cas
ualty
age
nt m
ay
writ
e bu
sine
ss w
ith T
exas
Mut
ual
Part
5: P
rem
ium
•Wor
kers
' com
pens
atio
n ra
tes
are
base
d on
pe
r $10
0 of
pay
roll
for e
ach
appl
icab
le jo
b cl
assi
ficat
ion
•The
initi
al w
orke
rs' c
ompe
nsat
ion
prem
ium
is
a d
epos
it pr
emiu
m b
ased
on
estim
ated
ex
posu
res
(pay
roll
per c
lass
ifica
tion)
Apr
emiu
mau
diti
sco
nduc
ted
atth
een
dof
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n20
•A p
rem
ium
aud
it is
con
duct
ed a
t the
end
of
the
polic
y pe
riod
to a
djus
t the
pre
miu
m
base
d on
act
ual e
xpos
ures
TX_P&C_ClassNotes_3e.indb 148 1/27/2014 12:44:07 PM
14
9Le
sson
Sev
ente
en
Wor
kers
’ Com
pens
atio
n
Expe
rienc
e R
atin
g•T
he g
oal o
f exp
erie
nce
ratin
g is
to
enco
urag
e lo
ss c
ontro
l and
saf
ety
by
mod
ifyin
g th
e pr
emiu
m b
ased
on
loss
es
incu
rred
–
An
expe
rienc
e m
odifi
catio
n fa
ctor
for t
he a
vera
ge
wor
kers
' com
pens
atio
n ris
k is
1.0
0–
Exp
erie
nce
mod
ifier
s of
less
than
1.0
0 re
war
d th
e i
df
fbl
lhi
t
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n21
insu
red
for f
avor
able
loss
his
tory
–E
xper
ienc
e m
odifi
ers
of g
reat
er th
an 1
.00
pena
lize
the
insu
red
for u
nfav
orab
le lo
ss h
isto
ry
Impo
rtan
t Dea
dlin
es: T
exas
•Em
ploy
ee m
ust n
otify
em
ploy
er w
ithin
30
days
of w
hen
empl
oyee
kne
w o
r sho
uld
have
kno
wn
of a
n in
jury
or d
isea
se•E
mpl
oyee
mus
t app
ly fo
r ben
efits
with
in
one
year
of i
njur
y da
te•C
arrie
r mus
t beg
in p
ayin
g be
nefit
s w
ithin
15
days
ofin
jury
repo
rt
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n22
15 d
ays
of in
jury
repo
rt•L
egal
ben
efic
iary
has
one
yea
r to
file
a de
ath
clai
m
Seco
nd (S
ubse
quen
t) In
jury
Fun
d
•If a
sub
sequ
ent i
njur
y ad
ded
to a
pre
viou
s in
jury
pro
duce
s a
lifet
ime
inco
me
bene
fit,
the
seco
nd in
jury
fund
sub
sidi
zes
the
clai
m•F
unde
d by
unc
laim
ed d
eath
ben
efits
in
Texa
s
© 2
014
Kap
lan
Uni
vers
ity S
choo
l of P
rofe
ssio
nal a
nd C
ontin
uing
Edu
catio
n23
TX_P&C_ClassNotes_3e.indb 149 1/27/2014 12:44:07 PM
TX_P&C_ClassNotes_3e.indb 150 1/27/2014 12:44:07 PM
Class NotesLesson Reviews, Answers and Rationales
TX_P&C_ClassNotes_3e.indb 151 1/27/2014 12:44:07 PM
152
L E S S O N S O N E A N D T W O R E V I E W
1. Which of the following statements best defines a hazard?A. A condition that increases the chance of
a lossB. The uncertainty of a lossC. The cause of a lossD. An unpredictable loss
2. All of the following options are examples of insurable interest EXCEPTA. a person’s interest in property being bought
on contractB. a tenant’s interest in improvements made
to a leased buildingC. a TV repairman’s interest in a customer’s
TV which has been repaired but is still on premises
D. an individual’s interest in property her parents will someday leave to her
3. Which of the following terms is defined as the uncertainty of future outcome?A. RiskB. HazardC. PerilD. Cause
4. Which of the following statements about a mortgagee’s rights under a property form is NOT correct?A. No act by the insured will jeopardize the
mortgagee’s rights.B. The mortgagee may file a proof of loss if
the insured fails to do so.C. The mortgagee is entitled to receive prior
notice of a policy’s cancellation.D. The mortgagee may abandon the insured
property to the insurance company.
5. The procedure for resolving a disagreement between an insured and an insurance company about a loss is described in which of the follow-ing parts of an insurance policy?A. DeclarationsB. Insuring agreementC. ConditionsD. Exclusions
6. According to the terms of the mortgage condi-tion, the mortgageeA. may have to pay the premium if the
insured doesn’tB. can file a proof of loss, when the insured
fails to do so, to protect its rights under the policy
C. may have coverage under the policy even if something the insured does causes a claim to be denied
D. all of the above
7. A heavy snowfall causes the roof over the insured living room to collapse. The insurance company asks her to move her belongings out of the living room to protect them from further damage and put a tarp over the roof until it can be repaired. The insurance company also asks her to complete a proof of loss form listing the items that were damaged. This is an example of the application of what policy condition?A. AppraisalB. AbandonmentC. Duties after lossD. Duty to defend
TX_P&C_ClassNotes_3e.indb 152 1/27/2014 12:44:07 PM
153
8. An insured’s home is demolished in a fire that started when a neighbor misdirected the fireworks he set off to celebrate the 4th of July. The insured’s insurance company pays her for the damage and then files suit against the neighbor to recover the amount it paid for the loss. This is an example of the application of what policy condition?A. LiberalizationB. SubrogationC. AbandonmentD. Assignment
9. Three policies apply to a $30,000 loss. Policy A’s limit of insurance is $100,000, Policy B’s limit is $50,000, and Policy C’s limit is $150,000. Use the pro rata method to determine how much Policy C would pay for the loss.A. $15,000B. $20,000C. $25,000D. $30,000
TX_P&C_ClassNotes_3e.indb 153 1/27/2014 12:44:07 PM
154
L E S S O N S T H R E E A N D F O U R R E V I E W
1. A sudden and unexpected event that is nor-mally identifiable as to time and place is best described asA. an accidentB. a liabilityC. negligenceD. an occurrence
2. Which of the following terms best describes continuous and repeated exposure to condi-tions that are neither expected nor intended by the insured?A. NegligenceB. LiabilityC. AccidentD. Occurrence
3. Which of the following is NOT an element of negligence?A. Proximate causeB. Harm has occurredC. Intentional actD. Owes a duty
4. Which of the following describes an insurance company doing business in a state other than the one where it is incorporated?A. NonadmittedB. DomesticC. ForeignD. Alien
5. The type of insurance company in which the policyholder is considered an owner with the right to vote and share in the profits isA. a stock companyB. a mutual companyC. a reciprocal companyD. a Lloyd’s association
6. S is purchasing a commercial property policy to cover a commercial building valued at $100,000. The policy includes an 80% coinsur-ance clause. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of at leastA. $100,000B. $90,000C. $80,000D. $20,000
7. Which of the following is TRUE of liability policies?A. They pay on behalf of the insured.B. They pay only when the insured is proven
negligent in court.C. They pay on behalf of the insured and
defend the insured against real and alleged claims.
D. They defend the insured against real and alleged claims, pay on behalf of the insured, and pay only when the insured is proven negligent in court.
TX_P&C_ClassNotes_3e.indb 154 1/27/2014 12:44:07 PM
155
L E S S O N F I V E R E V I E W
1. Business written on the producer’s own life or interests is known asA. controlled businessB. personal businessC. conflicted businessD. producer business
2. Most insurance regulation takes place atA. the international levelB. the national levelC. the state levelD. the local level
3. Insurance laws are written byA. the federal governmentB. the state legislatureC. the state Department of InsuranceD. the Commissioner
4. To become licensed as an insurance producer, an individual must be at least ageA. 16B. 18C. 21D. 25
5. The federal governmentA. is the primary authority for regulating the
business of insuranceB. does not get involved in regulating the
business of insuranceC. has the right to regulate the business of
insurance to the extent that such business is not regulated by state law
D. is the only authority for regulating the business of insurance
6. The Commissioner of Insurance has all of the following powers EXCEPTA. conducting investigations and
examinationsB. making reasonable rules and regulationsC. writing insurance lawD. approving insurance policy forms sold
within the state
7. Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known asA. insurance associationsB. department associationsC. liability associationsD. guaranty associations
8. Which of the following is considered an unfair claims practice?A. Splitting a commission with a prospectB. Failing to affirm or deny coverage within a
reasonable time after proof of lossC. Convincing a policyowner to lapse or
surrender an existing policy to sell another policy
D. Making any oral or written statement that is false, maliciously critical, or calculated to injure a competing producer
9. Which of the following individuals is most likely to be granted a temporary license?A. Georgia, whose insurance producer-
husband passed away unexpectedly, leaving her with a business to either learn or sell
B. Kim, who wants to try selling insurance on a temporary basis before investing the time and money into being licensed
C. Dave, an employee of a business entity, when the individual designated as the licensee in the business entity is disabled in an auto accident and unable to return to work for several months
D. Lee, whose insurance producer-fiancée was recalled to active duty by the Navy and appointed Lee her designee
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1. A policyholder would expect to find which of the following information in the insuring agreement section of an auto policy?A. Bodily injury limits of liabilityB. The insurance company’s promise to pay
on the behalf of the insuredC. Exclusions regarding certain uses of the
autoD. The obligations of the insured in the event
of a loss
2. Auto limits of 25/50/10 meanA. $25,000 BI for each person, $50,000 BI for
each occurrence, and $10,000 PD for each occurrence
B. $25,000 BI for each person, $50,000 BI for each occurrence, and $10,000 medical payments for each occurrence
C. $25,000 BI total for all passengers, $50,000 PD for each occurrence, and $10,000 total medical payments for each occurrence
D. a total of $85,000 is the maximum amount that will be paid to a claimant
3. An insured has an automobile policy with a combined single limit of $500,000 for bodily injury and property damage. After an accident, a court awards $300,000 bodily injury and $25,000 property damage to Claimant A, and $200,000 bodily injury and $25,000 property damage to Claimant B. In this situation, the insurance company’s limit for liability isA. $300,000B. $350,000C. $500,000D. $550,000
4. Mr. Adams carries a personal auto policy with bodily injury limits of $15,000/$30,000. His wife is driving his insured vehicle and negli-gently injures Mr. Bates. Mr. Bates is awarded $27,000 from Mrs. Adams as the driver and $3,000 from Mr. Adams as the owner. The company incurred $4,000 in expenses handling the case for Mr. and Mrs. Adams. What total payment does Mr. Adam’s policy make?A. $15,000B. $19,000C. $30,000D. $34,000
5. How much will the personal auto policy pay for a rental car if the insured vehicle was stolen?A. $20 per day, up to $600B. $25 per day, up to $650C. $15 per day, up to $450D. Nothing
6. Medical payments coverage provides protec-tion for all of the following EXCEPTA. the insuredB. the insured’s familyC. passengers in the insured’s vehicleD. occupants of a vehicle that is struck by the
insured’s vehicle
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L E S S O N S S E V E N , E I G H T , A N D N I N E R E V I E W
1. A dwelling property policy can be used to insure all of the following EXCEPTA. farmsB. rental homesC. duplexesD. lake cabins
2. Under the DP-1, the insured may opt to have property covered againstA. fire, lightning, and internal explosionB. all of the perils described in A, plus the
extended coverage perilsC. all of the perils described in A, plus the
extended coverage perils and vandalism and malicious mischief
D. any of the above
3. Which of the following forms provides open perils coverage for the dwelling and other structures?A. Basic, broad, and special formsB. Broad and special formsC. Special formD. Household contents form
4. An insured’s HO-2 Form has a $100,000 coverage limit on the dwelling and a $50,000 personal property limit with a $250 deductible. If jewelry valued at $15,000 is stolen from the insured’s premises, the insured will collect a maximum of which of the following amounts?A. $1,000B. $1,250C. $1,400D. $1,500
5. Kim Smith has insured her home under a $100,000 HO-3 Form. If she has a fire loss of $15,000 to her unattached garage, her standard homeowners policy will provide coverage for which of the following amounts?A. $5,000B. $7,500C. $10,000D. $15,000
6. The homeowners form that provides open peril coverage on the dwelling and broad coverage on personal property isA. the HO-2B. the HO-3C. the HO-4D. the HO-6
7. Assume the following items were stolen from the insured’s home. Which one of these losses would be fully covered under Coverage C of the homeowners policy, assuming the loss was for the full value of the property described?A. An antique gun valued at $5,000B. A $2,000 laptop computer the insured uses
for her in-home accounting businessC. A $3,000 mink stoleD. A $2,000 ruby and diamond ring
8. Under the National Flood Insurance Plan (NFIP), which of the following would be a covered loss?A. Water damage from a burst water pipeB. Water damage from a drainage canalC. Overflow of a bath tubD. A leaking washing machine
9. Personal insureds who need more liability cov-erage than that provided by a certain policy or who want coverage for losses that are excluded by a certain policy should purchaseA. a difference in conditions policyB. a personal umbrella policyC. a surety bondD. a personal excess policy
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1. Which causes of loss form provides open peril coverage?A. BasicB. BroadC. SpecialD. Both basic and broad
2. Loss caused by sprinkler leakage is covered under which commercial property causes of loss forms?A. BasicB. BroadC. SpecialD. All of the above
3. Which commercial property causes of loss forms cover(s) collapse?A. BasicB. BroadC. SpecialD. Both broad and special
4. Which of the following would be covered under the builders risk coverage form?A. Building under constructionB. Foundation of the building under
constructionC. Fixtures, machinery, and equipment used
to service the building if they will become a permanent part of the building and are located within 100 feet of the building
D. All of the above
5. Which of the following policy forms would best protect a business that must keep operating at any cost after a loss?A. Extra expenseB. Business incomeC. Gross earningD. Contingent business interruption
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L E S S O N E L E V E N R E V I E W
1. Which statement is NOT correct regarding inland marine policies?A. Instrumentalities of transportation and
communications are insurable.B. Many inland marine policies also cover the
bailee exposures of the business.C. Mobile equipment such as bulldozers,
forklifts, and road graders may be covered.D. Buildings and personal property at fixed
locations may be covered.
2. Inland marine insurance is commonly used to insure all of the following items EXCEPTA. automobilesB. valuable papersC. camera equipmentD. jewelry
3. Which of the following provides for the prop-erty of customers?A. Customers property liability policyB. Customers protective liability policyC. Customers scheduled property policyD. Bailee policy
4. Physician’s and surgeon’s equipment floaters provide coverageA. on premises onlyB. off premises onlyC. both on and off premisesD. coverage is not available due to the high
dollar value of said equipment
5. Which floater would insure the cargo being transported by an independent truck owner?A. Trip transit policyB. Bailee’s customerC. Motor truck cargo—truckers formD. Installation floater
6. The motor truck cargo policyA. insures a truck carrier for liability arising
out of the transportation of cargoB. covers any loss to cargo in transit,
regardless of whether the carrier is liable for damage
C. insures the shipper for all incoming or outgoing shipments during the policy term
D. provides coverage for a shipper on a single shipment of goods
7. The installation floater covers property in all of the following situations EXCEPT A. at a store location awaiting the installer to
pick up the propertyB. in transit to an installation siteC. while being testedD. while being installed
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L E S S O N T W E L V E R E V I E W
1. Coverage under an occurrence commercial general liability (CGL) form is triggered A. when the claim is first made against the
insured during the policy periodB. by BI or PD that occurs during the policy
periodC. after the claimant notifies the insured of
the damages causedD. before the claimant notifies the insured of
the damages caused
2. Which of the following statements about the 60-day basic extended reporting period is NOT true?A. It becomes effective automatically if
needed when a claims-made policy expires.B. The insured must request it in writing
within 60 days after the policy expires.C. It does not require an additional premium.D. No separate endorsement is required to
provide this extended reporting period.
3. What is the purpose of a retroactive date in the claims-made form?A. Extends the period of time in which a
claim may be covered under the policyB. Stipulates a date as the first date on which
an event may occur and be covered by the new policy if a claim is filed
C. Extends the policy periodD. Shortens the policy period
4. Which of the following is a personal and ad-vertising injury?A. Broken legB. DeathC. Calling a client a cheat and a fraudD. Dog bite
5. Which of the following would typically NOT be excluded under Coverage A of the commer-cial general liability policy?A. Property damage to property owned by the
insuredB. Property damage to property in the care,
custody, or control of the insuredC. Liability assumed under an incidental
contractD. A personal and advertising injury
6. Which of the following are excluded under Coverage A of the commercial general liability (CGL)?A. Damage the insured causes intentionallyB. Pollution losses caused by the insuredC. Liquor liability for those in the business of
serving liquorD. All of the above
7. The ABC Contracting Company built a porch on a building for a customer. One year after the porch was completed it collapsed, causing injury to the homeowner. This type of accident would be considered A. a premises lossB. a products and completed operations
liability lossC. a contractual liability lossD. a personal injury loss
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1. Which of the following statements about farm insurance is NOT correct?A. Farmers may buy monoline policies or a
package policy to cover both their personal and commercial exposures.
B. Farm liability usually covers farm employees as insureds, but does not cover them as claimants if they were to get injured.
C. Most farm insurance will cover the farmer’s crops planted in the fields.
D. A well house providing water to the dwelling is covered as an appurtenant structure and not as a farm building.
2. Employers who want to cover employees’ use of their own cars in the employer’s business should opt to have liability coverage apply to which of the following groups of autos?A. FleetB. NonownedC. MiscellaneousD. Owned
3. Which of the following businesses might be covered under a garage coverage form?A. Used car dealerB. Catering companyC. Auto body shopD. Service station
4. Which of the following coverages is NOT in-cluded in an unendorsed garage coverage form?A. GaragekeepersB. Uninsured motoristsC. LiabilityD. Physical damage
5. All of the following could be an insured loss by farm insurance EXCEPTA. damage to crops by floodingB. a tractor fireC. when a tornado destroys a barnD. fire damage to a silo
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1. In a store, all of the following situations would be considered theft EXCEPTA. merchandise being stolen with evidence of
forced entryB. a clerk witnessing a customer shoplifting
merchandiseC. a clerk being robbed at gunpointD. the store’s year-end inventory coming up
short by 5%
2. Employee theft provides coverage for theft of money, securities, and other property by employees. There are three schedules available; they include all of the following EXCEPTA. a named scheduleB. a named position scheduleC. a position scheduleD. a blanket coverage
3. Three parties to a bond areA. the principal, obligee, and suretyB. the obligor, principal, and suretyC. the principal, obligee, and obligorD. the beneficiary, obligor, and principal
4. A bid bond A. guarantees that if the obligee is awarded
the contract, the obligee will enter into and furnish a performance bond
B. guarantees that if the principal is awarded the contract, the principal will enter into and furnish the performance bond
C. guarantees the lending institution that the supplier will furnish the material to the bidder
D. guarantees the work will commence on schedule
5. A performance bondA. guarantees the obligee that the principal
will complete the contract as drawnB. guarantees the principal that the obligee
will complete the contract as drawnC. guarantees that the principal will be paid
by the obligee on timeD. none of the above
6. Which of the following must be TRUE in a burglary?A. Property must be taken from a custodian or
watchperson.B. There must be no evidence of force or
violence.C. The burglary must involve acts of a
convicted felon.D. There must be unlawful entry or exit from
the premises with visible evidence.
7. The judge orders a person in jail to post a bond to be released. What is the person in jail called?A. ObligeeB. BaileeC. SuretyD. Principal
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1. Which of the following statements concerning the commercial package policy is NOT cor-rect?A. Almost all commercial risks are eligible for
coverage under the commercial package policy.
B. The insured can choose a variety of eligible commercial coverages to tailor the package to fit his specific business insurance needs.
C. A complete commercial package policy includes common policy declarations, common policy conditions, and two or more coverage parts.
D. A commercial package policy can include ocean marine and aviation insurance.
2. Which of the following is NOT contained in the common policy declarations?A. Conditions specifying the insured’s duties
following a lossB. The policy periodC. A description of the business being
coveredD. The insured’s premium for each coverage
part purchased
3. Which of the following businesses would be eligible for a businessowners policy?A. Auto body shopB. WholesalerC. Branch bankD. Barber shop
4. Businessowners policies (BOP) are package policies designed for small and medium sized businesses. However, some risks with special exposures are not eligible for a BOP. Which of the following would be eligible for coverage under a BOP?A. A bar and restaurantB. An automobile repair shopC. A small bank or financial institutionD. A small retail store
5. What is the amount of fire legal liability cover-age on the businessowners policy?A. $75,000B. $100,000C. $50,000D. $25,000
6. Exterior signs are generally excluded on the businessowners policy (BOP). However, signs attached to the building are covered for up toA. $500B. $1,000C. $1,500D. $2,000
7. Which of the following is TRUE about the businessowners policy?A. It gives the insured great flexibility in
picking coverages that can be included in the policy.
B. It can be written for almost any commercial insured.
C. It provides a prepackaged policy of property and liability coverage for certain types of small to medium size businesses.
D. It provides only property coverage.
8. Which of the following can be covered as busi-ness personal property under the businessown-ers policy?A. AirplanesB. StockC. Company carsD. Land
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1. Texas workers compensation coverage isA. compulsoryB. electiveC. mandatedD. reciprocal
2. Benefits under workers’ compensation for inju-ries to employees who have prior impairments are paid partially byA. the employer’s health insuranceB. the insurance CommissionerC. the second injury fundD. the Americans with Disabilities Act
3. All of the following are covered benefits in Texas EXCEPTA. training for a new jobB. unlimited medical billsC. loss of incomeD. burial up to $6,000
4. Premium costs for standard workers’ compensa-tion insurance are paid byA. employers onlyB. employees onlyC. employers and employees jointlyD. the Workers’ Compensation Board
5. Which of the following individuals is likely to have a valid workers’ compensation claim?A. A retired employee injured while visiting
his old workplaceB. An employee who suffers from a diabetic
coma from failure to take prescribed medicine
C. An employee injured in a car accident while driving to work
D. An employee who is injured in the company parking lot
6. Which of the following benefits are not paid under workers’ compensation laws?A. MedicalB. RehabilitationC. Disability incomeD. Pain and suffering
7. In most states, workers’ compensation laws applyA. only to workers in occupations that are
considered extremely hazardousB. to most workers, except those specifically
excluded by lawC. to full-time workers onlyD. to all full-time workers and to part-time
workers in occupations that are considered extremely hazardous
8. Payment to an injured employee is calledA. indemnityB. exclusive remedyC. restorationD. entitlement
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1. A. A hazard is a condition that increases the chance of a loss.
2. D. The fact that the property will someday be left to this individual does not give her an insurable interest at the present time.
3. A. Risk is defined as the uncertainty regarding loss/future outcome.
4. D. Neither the named insured nor the mortgagee may abandon the insured property to the insurance company.
5. C. The procedure for resolving a loss disagreement between an insured and an insurance company is found in the Conditions section of an insurance policy.
6. D. Lenders or mortgagees may have an insurable interest in property. The mortgage condition specifies the rights and duties of the mortgagee under the policy. For instance, if an insured fails to file a proof of loss, the mortgagee must do so after being notified by the insurer to protect its rights under the policy. In addition, the mortgagee may be expected to pay the premium if the insured fails to do so. The policy may provide that if some condition caused by the insured would result in the insurer denying coverage for a loss it would otherwise have covered, the mortgagee may still have protection under the policy.
7. C. Most insurance policies include conditions that specify what the insured and insurer must do when a loss occurs. The insured’s responsibilities after a loss include giving notice of claim to the agent or company, protecting property from further damage, and completing a proof of loss form.
8. B. The subrogation condition transfers the insured’s right to collect from a responsible third party to the insurance company.
9. A. Total amount from all policies insuring this loss = $300,000(A–$).
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1. A. A sudden and unexpected event that is normally identifiable as to time and place defines an accident.
2. D. Continuous and repeated exposure to conditions that are neither expected nor intended by the insured is best described as an occurrence.
3. C. Intentional acts are not considered negligence.
4. C. A foreign company is an insurance company doing business in a state other than the one where it is incorporated.
5. B. A mutual company is one which is owned by the company’s policyholders. The policyholders have the right to vote as well as share in the profits through the declaration of dividends by the company’s board of directors. Dividends are not guaranteed.
6. C. To avoid a coinsurance penalty in the event of a partial loss, S should purchase a policy with minimum limits of at least $80,000 ($100,000 × 80%).
7. C. Liability policies pay on behalf of the insured and defend the insured against real and alleged claims. In order for coverage to apply, negligence does not have to be proven in court.
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1. A. Business written on the producer’s own life or interests is known as controlled business.
2. C. Most insurance regulation takes place at the state level.
3. B. Insurance laws generally are written by the state legislature.
4. B. To become licensed as an insurance producer, an individual must be at least 18 years old.
5. C. The federal government has the right to regulate the business of insurance to the extent that such business is not regulated by state law.
6. C. The Commissioner of Insurance does not have the power to promulgate insurance laws.
7. D. Associations organized to protect claimants, policyholders, annuitants, and creditors of financially impaired insurers are known as guaranty associations.
8. B. Failing to affirm or deny coverage within a reasonable time after proof of loss is considered an unfair claims practice. The other practices listed are unfair marketing practices.
9. B. Kim is most likely to be granted a temporary license. An emergency license is used in the cases of death or disability.
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1. B. The insurance company’s promise to pay on the behalf of the insured is found in the insuring agreement section of an auto policy.
2. A. Auto limits of 25/50/10 means coverage limits of $25,000 bodily injury for each person, $50,000 bodily injury for each occurrence, and $10,000 property damage for each occurrence.
3. C. An auto policy with a combined single limit of $500,000 will pay out a maximum of $500,000 per occurrence for all bodily injury and property damages combined. Since the combined damages involved for this occurrence exceed the $500,000 limit, the insurance company’s liability limit for this occurrence is $500,000.
4. B. Mr. Adams’s auto policy will pay a maximum per person for bodily injury for any one occurrence of $15,000. The $4,000 in expenses incurred for handling the case falls under supplementary coverages and is paid in addition to the liability limits. The total payment made by Mr. Adams’s policy for this occurrence is $19,000 ($15,000 + $4,000).
5. A. The personal auto policy pays a maximum of $20 per day, up to $600 maximum per month, for a rental car if the insured vehicle is stolen.
6. D. Medical payments coverage provides protection for the named insured, family members, and passengers in the named insured’s auto for injuries received in an accident, regardless of who was at fault. It is not a form of liability coverage for injuries sustained by passengers in another auto involved in an accident with the insured.
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1. A. Farms are not eligible for a dwelling policy.
2. D. Under the DP-1, coverage for the extended coverage perils and vandalism and malicious mischief is optional. Coverage for fire, lightning, and internal explosion is automatically provided.
3. C. A special form provides open perils coverage for the dwelling and other structures, meaning that it provides coverage for risks of direct physical loss or damage except from those causes of loss specifically excluded in the policy.
4. B. The total limit that will be paid under the homeowners policy for theft of jewelry is $1,500. The standard deductible is considered to be $250. For this loss, the insured would collect a maximum of $1,250 ($1,500 – $250).
5. C. The standard amount of coverage under Coverage B of a homeowners policy is 10% of Coverage A ($100,000 × 10% = $10,000). Coverage B limits can be increased by endorsement.
6. B. The HO-3 provides open peril coverage on the dwelling and broad coverage on personal property.
7. B. Of the answer choices, only the $2,000 laptop computer (the homeowners policy covers business property on premises up to $2,500) would be fully covered. All of the other items are above the specific limits the homeowners policy provides for its specific categories.
8. B. Water from a drainage canal is off premises and temporary.
9. B. Personal umbrella policies provide catastrophic liability coverage for personal risks. Because the umbrella policy is not designed to handle usual or everyday exposures, the insured must have underlying liability coverage before an umbrella will be issued. The umbrella may cover certain losses that are excluded by the underlying insurance.
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1. C. The special form provides open perils coverage. The basic and broad causes of loss forms are named peril forms.
2. D. All of the causes of loss forms cover sprinkler leakage.
3. D. Collapse is not covered under the basic cause of loss form; however, it is covered under both the broad and special forms.
4. D. The builders risk coverage form covers the building under construction and its foundation. Fixtures, machinery, equipment used to service the building, and the insured’s building materials and supplies can be covered if they will become a permanent part of the building and are within 100 feet of the building. Liability is not covered.
5. A. Extra expense coverage is designed to provide coverage for the extra expense incurred when a business must keep operating at any and all costs after a loss.
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1. D. In order to be eligible for inland marine coverage, the property being insured must include an element of transportation. The items listed in choice D do not.
2. A. Inland marine insurance is not used to insure automobiles.
3. D. Bailee customers insurance provides coverage for customers’ property that is in the care, custody, and control of the insured.
4. C. The physician’s and surgeon’s equipment floater provides coverage both on and off the premises.
5. C. The motor truck cargo—truckers form would insure the cargo being transported by an independent trucker.
6. A. The motor truck cargo policy insures a truck carrier for liability arising out of the transportation of cargo.
7. A. The installation floater covers property while it is in transit until it is permanently installed and tested. It does not cover property at the store location which would be covered under the store’s building and business personal property policy.
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1. B. With an occurrence policy, the policy that was in effect at the time the loss occurred will apply to the loss, even if the injured party makes the claim years after the policy expired.
2. B. When a claims-made policy is terminated, a 60-day basic ERP automatically becomes available. The insured does not have to apply for it, and no premium is charged. It provides automatic coverage for any valid claim made during the 60 days after the policy expires, as long as the incident occurred between the expiring policy’s retroactive date and its expiration date.
3. B. The retroactive date stipulates the first date for which coverage applies. It is specifically indicated on the declarations page of the policy and (based upon the actual retroactive date) could provide protection against losses that occurred before the claims-made form was written.
4. C. Calling a client a cheat and a fraud is an example of a personal and advertising injury. The other answer choices are examples of bodily injury.
5. C. Coverage A excludes: property damage to property owned by the insured; property damage to property in the care, custody, or control of the insured; and personal and advertising injury. Liability assumed under an incidental contract is covered.
6. D. All of these losses are specifically excluded under Coverage A.
7. B. This is an example of a completed operations loss, which would be covered under the products and completed operations liability coverage.
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1. C. Most farm policies do not cover crops unless they have been harvested and stored. Crops that are still growing in the field typically need separate federal crop insurance.
2. B. To make sure they were properly covered, these employers should make sure they have nonowned auto liability coverage.
3. A. The garage coverage form is designed to cover vehicle dealers.
4. B. The garage coverage form includes liability, garagekeepers, and physical damage coverage. Medical payments, uninsured motorist, and underinsured motorists coverage is added by endorsement.
5. A. Farm insurance does not cover damage to crops while growing in the fields.
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1. D. A store’s year-end inventory shortage would not be considered theft.
2. B. The three schedules available for employee theft are named schedule, position schedule, and blanket coverage.
3. A. The three parties to a bond are the principal/obligor, the obligee/beneficiary, and the surety/guarantor.
4. B. A bid bond guarantees that if the principal is awarded the contract, the principal will enter into (undertake) the contract and furnish the performance bond (as well as any other bonds that may be necessary).
5. A. A performance bond guarantees the obligee that the principal will complete the contract in compliance with the terms (as drawn) of the contract.
6. D. Although burglary is not specifically defined in the crime forms, it still has a specific meaning in the insurance industry. Burglary is the taking of property from inside the premises by a person unlawfully entering or leaving the premises. There must be evidence of forcible entry or exit, such as marks made by tools, explosives, chemicals, or electricity. There is no requirement that the property be taken from a custodian or watchperson.
7. D. The party who makes the promise is called the principal or obligor.
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L E S S O N S I X T E E N A N S W E R S A N D R A T I O N A L E S
1. D. All the answer choices except D are correct statements. Ocean marine and aviation insurance are not eligible for the commercial property policy.
2. A. The common policy declarations contains all of this information except the insured’s duties in the event of the loss.
3. D. Of the answer choices given, the barber shop would be eligible for a businessowners policy.
4. D. A small retail store would be eligible for a businessowners policy. The other three answer choices are not.
5. C. The amount of fire legal liability coverage under the businessowners policy is $50,000.
6. B. The businessowners policy covers signs attached to the building for up to $1,000. This limit can be increased for an additional premium.
7. C. The businessowners policy is a packaged policy that includes both property and liability coverage for eligible small to medium size businesses.
8. B. Inventory, commonly called stock, is insurable business personal property.
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L E S S O N S E V E N T E E N A N S W E R S A N D R A T I O N A L E S
1. B. Except for contractors working for the government, workers’ compensation insurance is elective in Texas.
2. C. Second injury funds pay some of the costs in these type situations.
3. A. Training an injured employee for a new job is not a workers’ compensation benefit in Texas.
4. A. Premium costs for standard workers’ compensation insurance are paid by employers only.
5. D. The employee injured in the parking lot is at work.
6. D. Workers’ compensation laws pay benefits in four categories: disability/loss of income benefits, medical benefits, survivor/death benefits, and rehabilitation benefits. They do not pay benefits for pain and suffering.
7. B. Every state has some exempt classifications, but the majority of the nation’s employees are covered under workers’ compensation laws.
8. B. Payment of workers’ compensation benefits is called the employees’ “exclusive remedy.”
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AAbandonment condition A condition often con-
tained in property insurance policies that states that the insured cannot abandon damaged prop-erty to the insurer and demand to be reimbursed for its full value
Absolute liability Type of liability imposed by law on those participating in certain activities that are considered especially hazardous; a person involved in such operations may be held liable for the damages of another even though the indi-vidual was not negligent
Accident A loss that occurs at a specific time and place
Accounts receivable insurance Filed commercial inland marine form that insures against loss the insured suffers because of an inability to collect from customers when accounts receivable records are damaged or destroyed
Actual cash value (ACV) The cost to replace an item of property at the time of loss, less an allow-ance for depreciation; often used to determine the amount of reimbursement for a loss
Additional coverages Supplemental insurance coverages that apply only in certain circum-stances, have reduced or separate limits of liabil-ity, or require the insured to meet certain require-ments before they are applicable; also called coverage extensions, other coverages, and extended coverages
Additional insured An individual or company, in addition to the insured, who is listed in the dec-larations; an example is a mortgage company that has an insurable interest in the property insured
Additional insured—Lessor endorsement com-mercial auto endorsement used to make leased vehicles considered owned vehicles for coverage purposes
Admitted insurer See Authorized insurerAdverse selection The tendency of insureds with
a greater-than-average chance of loss to purchase insurance
Agent An individual or organization that legally rep-resents another; a state-licensed professional who represents the insurance company in the sale and servicing of insurance; the direct link between the insurance company and the policyholder
Aggregate limit Type of policy limit found in liabil-ity policies that limits coverage to a specified total amount for all losses occurring within the policy period
Agreed amount policy See Valued policyAgreed value condition Condition found in
some property insurance policies that stipulates a certain value that will meet the coinsurance requirement; if the policy limit equals or exceeds this amount, the insured will not be assessed a coinsurance penalty; also called stated amount condition
Agreement See Offer and acceptanceAlien company An insurance company incorpo-
rated in a country other than the United States that is doing business in the United States
All risk policy See Open peril policyA.M. Best Company Organization that rates the
financial stability of insurance companies doing business in the United States
Annual transit policy Nonfiled commercial inland marine transportation form that insures a property owner’s incoming or outgoing shipments of goods during a year
Application Questionnaire filled out by an agent and the prospect who is seeking insurance; the form contains information used to underwrite and rate the policy
Appraisal condition Policy condition that outlines a procedure for when the insured and insurer disagree on the amount of a loss—the insured and the insurer each select an appraiser; the two appraisers select an umpire; if the appraisers can-not agree on the amount of loss, the umpire is consulted; the amount agreed to by any two of the three parties is the amount paid for the loss
Appurtenant structures Buildings of lesser value that are on the same premises as the main build-ing insured under a property policy; they are usu-ally covered by the policy
Arbitration condition Policy condition that is similar to the appraisal condition; may be used to resolve other areas of disagreement besides those regarding the value of a loss
Assigned risk plan See Automobile insurance planAssignment condition Condition in insurance
policies that specifies that the policy cannot be transferred to another unless the company con-sents to the transfer in writing
Audit See Premium audit
Glossary
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178 Glossary
Authorized insurer Company that meets a state insurance department’s standards and is authorized to do business in that state; also called an admitted insurer
Automobile insurance plan A state-sponsored plan that provides automobile insurance to those who are uninsurable under standard auto insurance policies—Texas Auto Insurance Plan (TAIPA)
BBailee A person or organization that has temporary
possession of someone else’s personal propertyBailee’s customer policy Nonfiled commercial
inland marine form obtained by a bailee to cover loss or damage to customers’ property in the bailee’s custody without regard to liability
Bailment Delivery of property by the owner to some-one else to be held for some special purpose and then returned to the owner
Best’s Organization that rates the financial stability of insurance companies doing business in the United States
Bid bond Type of surety bond that guarantees that if a contractor’s bid is accepted, the contractor will enter into a contract and provide the required per-formance bond
Binder Oral or written statement that provides imme-diate insurance protection for a specified period; designed to provide temporary coverage until a policy is issued or denied
Blanket insurance Type of insurance policy that cov-ers more than one item of property at a single loca-tion or one or more items of property at multiple locations
Bodily injury (BI) Defined in most policies to include injury, sickness, disease, and death resulting from any of these at any time
Builders risk coverage form One of the commer-cial property coverage forms; covers commercial, residential, or farm buildings that are under con-struction
Builders risk reporting form Optional form used with the commercial property builders risk coverage form; allows insured to purchase a smaller amount of insurance that gradually increases as the value of the building under construction increases
Building and personal property coverage form Commercial property coverage form that covers buildings, the insured’s business personal property, and the personal property of others located at the business premises
Burglary As defined in crime insurance forms, the tak-ing of property by a person unlawfully entering or
leaving the premises as evidenced by visible signs of forced entry or exit
Business auto coverage form One of the commer-cial auto coverage forms; covers a business’s owned, nonowned, and hired autos against liability and physical damage losses
Business auto physical damage coverage form One of the commercial auto coverage forms; covers a business’s owned or hired business autos for physi-cal damage only
Business income coverage forms Commercial property coverage forms that pay for loss of income that the insured sustains due to a direct physical loss from a covered peril that forces the insured to sus-pend operations until the property can be repaired, rebuilt, or replaced with reasonable speed; available with or without extra expense coverage
Business liability Liability that arises out of the con-duct of a business
Businessowners policy (BOP) Package policy designed to provide broad property and liability cov-erage for small businesses; eligibility requirements are more strict than the CPP’s
CCancellation Termination of an insurance policy by
the insured or the insurance company during the policy period
Casualty insurance Line of insurance that includes a wide variety of unrelated coverages, including liabil-ity, auto, workers’ compensation, aviation, crime, and surety bonds
Causes of loss form Separate form used with the commercial property coverage part of the com-mercial package policy that lists covered perils and exclusions; several different versions provide increasingly broader coverage from basic to broad to special; a causes of loss form takes the place of the policy’s perils insured against provisions
Certificate of insurance Written form that verifies a policy has been written; provides a summary of the coverage provided under the policy
Claim adjuster Person employed by or acting on behalf of an insurance company to evaluate and settle insurance claims; the adjuster must determine the cause of loss, whether the loss is covered by the policy, the value of the loss, and the amount of loss payable by the policy
Claims-made form Commercial general liability cov-erage form that pays for BI or PD losses for which a claim was first made against the insured during the policy period
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179Glossary
Coinsurance Policy condition that requires an insured to pay part of a loss if the amount of insurance car-ried on property is less than a specified percentage of the value of the property at the time of loss
Coinsurance penalty The amount not paid by the insurance company because the insured failed to comply with the coinsurance condition
Collision coverage In auto insurance, a type of physi-cal damage coverage that covers loss that occurs when the insured auto strikes another object or vehicle; may also include upset or overturn of the insured auto
Combined single limit See Single limitCommercial articles coverage form Filed commer-
cial inland marine form that covers photographic equipment or musical instruments used commer-cially
Commercial auto coverage part A part of the commercial package policy that provides liability and physical damage coverage for a business’s autos, including garage, trucking, and motor carrier busi-nesses
Commercial blanket bond Type of fidelity bond that covers loss arising from the dishonesty of one or more employees acting separately or in collusion; the limit of liability applies separately to each loss, regardless of the number of employees involved
Commercial crime coverage part A part of the commercial package policy that covers various crime exposures of businesses
Commercial general liability (CGL) coverage part A part of the commercial package policy that provides liability coverage for businesses
Commercial inland marine insurance See Inland marine insurance
Commercial lines Insurance designed for businesses, institutions, or organizations
Commercial package policy (CPP) The insurance services office (ISO) commercial lines policy that contains two or more lines of insurance or two or more coverage parts; it will include some forms and/or endorsements that are common to all lines of insurance or coverage parts, as well as the individual forms and endorsements required for the individual coverages selected; the CPP can include almost any commercial coverage the insured might need, with the exception of ocean marine, aviation, and work-ers’ compensation insurance; most commercial risks are eligible for the CPP
Commercial property coverage part A part of the commercial package policy that provides insurance for a business’s real and business personal property
Commercial property floater risks Category of the nationwide definition that includes a number of commercial inland marine forms, such as Bailee’s customer forms, equipment forms, business floaters, and dealers policies
Commercial umbrella policy See Umbrella policyCommon policy conditions Form that must be
included in the commercial package policy; it con-tains conditions that apply to all coverages issued under the CPP
Common policy declarations Form that must be included in the commercial package policy; con-tains information about the insured that applies to all coverages issued under the CPP
Compensatory damages Damages that reimburse an injured party for losses that were actually sustained; see General damages and Special damages
Competent parties One of the requirements of a legal contract; states that for a contract to be valid, it must be made between parties who are considered competent under the law
Completion bond Type of surety bond that guaran-tees that when contractors borrow money to fund construction projects, the project will be carried out and the work will be delivered free and clear of liens or encumbrances
Comprehensive coverage In auto insurance, a broad physical damage coverage that covers all property losses except collision and those perils or property that are specifically excluded; also called other than collision coverage (OTC)
Concealment The withholding of a material fact involved in the contract on which the insurer relies
Conditions Portion of an insurance policy that describes the rights and duties of the insured and the insurance company under the policy
Consequential loss See Indirect lossConsideration A characteristic of a legal contract; the
thing of value exchanged for the performance prom-ised in the contract; with insurance contracts, the consideration that the insured gives is the premium payment; the consideration that the insurer gives is the promise to pay for certain losses suffered by the insured
Contract A legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration
Contract bonds Category of surety bonds that guar-antee the fulfillment of contractual obligations; includes bid bonds, labor and materials bonds, performance bonds, payment bonds, supply bonds, and completion bonds
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180 Glossary
Contractors equipment floater Nonfiled com-mercial inland marine form that covers the heavy machinery, equipment, and tools a contractor uses in business
Contribution by equal shares Type of other insur-ance condition found in liability policies; it calls for all insurers to contribute equally up to the limit of the policy having the smallest limit, whereupon that company stops paying; the other companies share in the remainder of the loss until the loss is paid in full or all policy limits are exhausted
Contribution by limits See Pro rata other insuranceCoverage extensions See Additional coveragesCoverage trigger Event that activates (triggers) cov-
erage under a commercial general liability coverage form Under the occurrence form, the coverage trig-ger is bodily injury or property damage that occurs during the policy period; under the claims-made form, the trigger is BI or PD that occurs on or after the retroactive date, if any, for which a claim is first made against an insured during the policy period
Custodian As defined in crime insurance forms, an insured, partner, or employee who has care and cus-tody of insured property within the premises; does not apply to watchpersons or janitors
DDamages Monetary compensation awarded by a court
to an injured partyDeclarations Section of an insurance contract that
shows who is insured, what property or risk is cov-ered, when and where the coverage is effective, and how much coverage applies
Deductible Dollar amount the insured must pay on each loss to which the deductible applies; the insur-ance company pays the remainder of each covered loss, up to the policy limits
Defense costs Legal expenses incurred by the insurer to defend suits brought against insureds; defense costs are paid in addition to payments for BI or PD claims
Definitions Section of an insurance policy that clari-fies the meaning of certain terms used in the policy.
Deposit premium Premium paid at the beginning of the policy period that is based on an estimate of what the final premium will be; this premium is adjusted based on reports submitted by the insured to the insurer; also called an estimated premium
Direct loss Financial loss resulting directly from a loss to property
Directors and officers liability insurance (D&O) Type of errors and omissions policy written for
directors and officers of corporations who may be sued as individuals by stockholders
Domestic company Insurance company doing busi-ness in the state in which it is incorporated
Domestic shipments Category of the nationwide definition that includes coverage for cargo in transit over land
Drive other car (DOC)—Broadened Coverage For Named Individuals Endorsement Commercial auto endorsement that extends the definition of a covered auto to include autos the named insured does not own, hire, or borrow while being used by the person named in the endorsement
Duties following loss Condition found in property-casualty policies that explains the insured’s responsi-bilities after a loss occurs
Dwelling policy Policy that provides property cover-age to individuals and families; covers dwellings, other structures, personal property, and fair rental value; some versions also cover additional living expense; the unendorsed policy does not provide liability coverage
EEarned premium Premium an insurance company has
actually earned by providing insurance protection for the designated period of time
Earthquake insurance Insurance that covers damage to a structure, its contents, or both as the result of an earthquake; available as a separate policy and as an endorsement to the dwelling, homeowners, and commercial property policies
Electronic data processing equipment floater Nonfiled commercial inland marine policy that provides open peril coverage for computer hardware, computer software, and data that is owned by the insured or in the insured’s care, custody, or control. Breakdown coverage, extra expense, and business interruption coverage may also be included
Employers liability coverage Coverage included in the Workers’ Compensation and Employers Liability policy that covers the employer’s liability at com-mon law arising out of employees’ work-related injuries and occupational diseases
Employment practices liability insurance Type of policy that covers a business’s losses arising out of wrongful termination, discrimination, sexual harass-ment, and other employment-related practices
Endorsement Document attached to an insurance policy that changes the policy in some way
Equipment dealers coverage form Filed com-mercial inland marine coverage form that covers mobile equipment and construction equipment
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181Glossary
dealers; covers the insured’s stock in trade as well as customer property in the insured’s care, custody, or control
Errors and omissions insurance (E&O) Profes-sional liability coverage that protects the insured against liability for committing an error or omission in the performance of professional duties
Estimated premium See Deposit premiumEstoppel Principle that states that if one intention-
ally or unintentionally creates the impression that a certain fact exists, and an innocent party relies on that impression and is injured as a result, the guilty party may be legally prohibited from asserting that the fact does not exist
Excess insurance When two or more policies or cov-erages apply to the same loss, the one that applies only after the limits of the primary coverage have been exhausted
Excess lines agent Agent licensed by the state to handle the placement of business with nonadmitted insurers; also called surplus lines agent
Exclusions Section of an insurance policy that lists property, perils, persons, or situations that are not covered under the policy
Exclusive remedy doctrine One of the precepts upon which the workers’ compensation system was founded; stipulates that the only means available to employees to receive compensation from employers for injuries covered by workers’ compensation laws is through the benefits mandated by those laws
Exemplary damages See Punitive damagesExperience modification factor In experience rat-
ing, the factor applied to reduce the premium when loss experience is better than expected
Experience rating Type of merit rating that deter-mines premium based on previous loss experience
Exports Category of the nationwide definition that includes risks eligible for ocean marine insurance
Exposure A condition or situation that presents a pos-sibility of loss
Extended coverages See Additional coveragesExtended reporting period (ERP) Period of time
provided by the claims-made commercial general liability coverage form during which coverage will be provided for claims made after the expiration date of the policy if certain conditions are met; the basic ERP runs 60 days and can be extended to five years; the supplemental ERP runs for an unlimited duration, but is available only by endorsement for an additional premium
Extra expense coverage form Commercial prop-erty coverage form that covers additional expenses incurred by the insured business to continue
operations following a direct loss by a peril insured against
FFair Credit Reporting Act Federal law that allows
consumers who are denied insurance because of information contained in a credit report to be noti-fied and allowed to obtain the information used in the report from the reporting agency
Fair access to insurance requirements (FAIR) plan Program established by law that makes property insurance available to insureds who might otherwise be uninsurable in the standard market
Farm coverage Part of the commercial package policy that provides property and liability insurance to farmers for both their personal and business expo-sures
Fidelity bond Class of bonds that guarantees an employee’s honest discharge of duty; written to pro-tect an insured from dishonest acts by employees
Fiduciary Person who stands in a special relationship of trust to another person
Fiduciary liability policy Insurance that protects people who manage private pension and employee benefit plans against liability for violation of the federal ERISA law
File and use Method of rate and form ratification used by some state insurance departments that allows a company to begin using forms or rates as soon as they are filed by the department; the department eventually reviews the filing and officially accepts or rejects it
Financial responsibility laws State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insur-ance is the usual method for providing this evidence to the state
First-named insured First person listed in the declarations as an insured; the first-named insured may have a higher level of duties or rights under the policy
First party loss Property insurance lossFloater Insurance policy that covers property wherever
it is locatedFlood insurance See National Flood Insurance ProgramForeign company An insurance company doing
business in a state other than the one in which it is incorporated
Fraud A deliberate misrepresentation that causes harm; an all-out effort by one party to deceive and cheat the other
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GGarage coverage form Commercial auto coverage
form that provides liability, garagekeepers, and phys-ical damage coverages for vehicle dealers, including dealers that have repair operations on the business premises
Garagekeepers insurance Coverage that is part of the garage coverage form; covers a garage risk’s legal liability for customers’ autos in the care, custody, or control of the garage; at the insured’s option and for an additional premium, can also apply without regard to fault
General damages Type of compensatory damages that reimburse the injured party for such things as pain and suffering and disfigurement.
HHazard Something that increases the chance of lossHired and nonowned auto liability endorse-
ment Businessowners policy endorsement used to cover hired or nonowned autos used by the business
Homeowners policy Personal multiline policy for homeowners that includes both property and liabil-ity coverages; there are different forms that provide varying degrees of property coverage; liability cover-age is the same in all forms
IImports Category of the nationwide definition that
includes risks eligible for ocean marine insuranceIncidental contract See Insured contractIncidental occupancy A business conducted in a
dwelling used primarily as a residence with no other businesses operating on the same premises; individ-ual insurers have specific guidelines about the types of incidental businesses permitted, but examples include business or professional offices and private schools or instructional studios
Indemnity Principle of insurance that provides that when a loss occurs, the insured should be restored to the approximate financial condition he occupied before the loss occurred, no better or no worse
Indirect loss Loss that is the result or consequence of a direct loss; also called a consequential loss
Inland marine insurance Form of insurance origi-nally designed as an extension of ocean marine coverage to insure transportation of goods over land; today it covers a variety of portable property, in addition to goods in transit; available as personal or commercial insurance; commercial inland marine insurance can be included in the commercial pack-age policy
Installation policy Nonfiled commercial inland marine policy that covers loss to machinery, equip-ment, building materials, and supplies in transit to or being used with or during the course of installa-tion, testing, building, renovating, or repair
Instrumentalities of transportation and com-munication Category of the nationwide definition that includes a variety of forms closely related to transportation or communication, such as bridges, pipelines, and television towers
Insurable interest Any actual, lawful, and substantial economic interest in the safety or preservation of the subject of the insurance from loss or destruction or financial damage or impairment
Insurance Contract or device for transferring the risk of loss from a person, business, or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums
Insurance Commissioner Head official of a state insurance department; may also be called an Insur-ance Director or Insurance Superintendent
Insurance department State department charged with controlling insurance matters within the state
Insurance guaranty association State funds created by law that pay claims of insurers domiciled in that state that become insolvent; funds are generated by making assessments against other insurers operating in the state
Insurance Services Office (ISO) Organization estab-lished for the benefit of its member insurance com-panies and other subscriber companies; ISO gathers statistics, provides loss costs, drafts policy forms and coverage provisions, and conducts inspections for rate-making purposes
Insured contract Term used in the CGL and busi-nessowners liability forms to describe contracts for which contractual liability coverage is available under the policy, such as leases, sidetrack agree-ments, and elevator maintenance agreements; also called incidental contract
Insuring agreement Section of an insurance policy that describes what is covered and the perils the policy insures against
JJewelers block coverage form Filed commercial
inland marine form for jewelers that covers the insured’s stock in trade and the property of others while it is on or off the premises
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Judicial bond Category of surety bond that guarantees that the principal will fulfill certain obligations set forth by law—includes fiduciary bonds and court bonds
LLabor and materials bond See Payment bondLaw of large numbers Principle that states that the
more examples used to develop any statistic, the more reliable the statistic will be
Legal liability coverage form Commercial property coverage form that covers the insured for liability arising out of negligent damage to the property of others while it is in the insured’s care, custody, or control
Legal purpose One of the characteristics of a legal contract; means that contracts are only enforceable if they are not obviously illegal, immoral, or against the public good
Liability insurance Type of insurance that protects an insured from financial loss arising out of liability claims by transferring the burden of financial loss from the insured to the insurance company
Liberalization condition Condition found in prop-erty insurance contracts that provides that if the insurer broadens coverage under a policy form or endorsement without requiring an additional pre-mium, then all existing similar policies or endorse-ments will be construed to contain the broadened coverage
License and permit bond Type of surety bond that is sometimes required in connection with the issuance of licenses by government agencies. They guarantee that the person who posts the bond will comply with all applicable laws pertaining to their activities
Limit of coverage, limit of insurance, limit of liability See Policy limit
Liquor liability coverage form CGL coverage form that provides coverage for liquor liability excluded by standard CGL policies for those who are in the business of manufacturing, distributing, selling, serv-ing, or furnishing alcoholic beverages
Loss payable condition See Mortgage conditionLoss provisions General term used to describe policy
conditions that specify what the insured and insurer must do after a loss
MMalpractice insurance Term used to describe profes-
sional liability insurance issued to medical profes-sionals or institutions
Market value The amount property could be sold for at the time of loss. May be used to determine the amount of reimbursement for a loss
Material fact A fact that would cause an insurer to decline a risk, charge a different premium, or change the provisions of the policy that was issued
Messenger As defined in crime insurance forms, an insured, partner, or employee who has care and cus-tody of insured property outside the premises
Misrepresentation Written or verbal misstatement of a material fact involved in the contract on which the insurer relies
Mobile home insurance Coverage that protects both a mobile home structure and its contents; some companies have mobile home package policies that provide property and liability insurance for own-ers of mobile homes. In addition, there is a mobile homeowners endorsement that can be attached to an HO-2 or HO-3 to modify coverage for mobile homeowners
Monoline company Insurance company that writes a single line of insurance
Monoline policy Insurance policy that provides one type of insurance coverage
Moral hazard Hazard created by an individual who would be willing to create a loss situation on pur-pose just to collect from the insurance company
Morale hazard Hazard created by an individual’s tendency to contribute to a loss through his own irresponsible actions or carelessness
Mortgage condition Condition found in property insurance policies that specifies the rights and duties of the mortgagee under the policy; also called the loss payable condition
Mortgagee rights Rights granted to a mortgagee under a property contract issued to a mortgagor by virtue of the mortgagee’s financial interest in the property
Multiline policy See Package policyMutual company Insurance company owned by its
policyholders; the policyholders share in profits made by the company through dividends or reduc-tions in future premiums
Mysterious disappearance Vanishing of property with no explanation
NNamed insured Person, business, or other entity
named in the declarations to whom the policy is issued.
Named peril policy Insurance policy that insures only against perils specifically listed in the policy; also called specified peril policy
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184 Glossary
National Association of Insurance Commission-ers (NAIC) Organization made up of individual state insurance commissioners whose purpose is to promote uniformity in regulation by drafting model laws and regulations
National flood insurance program Program run by the federal government that makes flood insurance available to eligible communities at subsidized rates; includes coverage for both buildings and personal property
Nationwide Definition Document that categorizes and classifies risks that are eligible for ocean or inland marine insurance
Negligence The lack of reasonable care that is required to protect others from the unreasonable chance of harm
No benefit to bailee condition Condition found in some property insurance contracts that states that a bailee is not covered under an insured’s policy while the bailee has possession of the insured’s property
Nonadmitted insurer Company that is not autho-rized to do business in a particular state; also called an unauthorized insurer
Nonconcurrency Situation that exists when the same property is covered by more than one policy, but the policies are not identical as to the extent of cover-age provided
Nonrenewal Decision made by an insured or insur-ance company to not continue coverage for another policy period after the current policy period expires
OObligee In bonds, the party to whom the principal
makes the promise and for whose protection the bond is written
Occurrence A loss that occurs at a specific time and place or over a period of time
Occurrence form Commercial general liability cover-age form that covers bodily injury or property dam-age that occurs during the policy period, regardless of when the claim is made
Offer and acceptance One of the elements of a legal contract; means that a contract must involve two parties: one who makes an offer and another who accepts the offer; also called agreement
Open peril policy Insurance policy that protects the insured from losses caused by any peril that is not specifically excluded by the policy; also called all risk and special coverage
Other coverages See Additional coveragesOther insurance condition Policy condition that
sets out how any other insurance that applies to the same loss will affect reimbursement under the
policy; see Contribution by equal shares, Excess insur-ance, Primary insurance, and Pro rata other insurance
Other than collision coverage (OTC) See Compre-hensive coverage
PPackage policy Policy that includes more than one
type of insurance coverage; also called a multiline policy
Pair or set condition Loss settlement condition found in property insurance contracts that states that when part of a set is damaged or destroyed, the insured will not be reimbursed for the value of the entire set; various methods are used to determine the amount of reimbursement
Payment bond Type of surety bond that guarantees bills for labor and materials will be paid to the con-tractor as they are due; also called labor and materials bond
Performance bond Type of surety bond that guaran-tees that jobs will be completed by the contractor according to the contract specifications
Peril The cause of lossPermitted incidental occupancies endorsement
Homeowners policy endorsement that covers the insured’s business activities conducted on the resi-dence premises
Personal articles form Personal inland marine form that provides scheduled coverage for nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections, and coin collections
Personal auto policy Auto policy that provides property and liability coverage for both owned and nonowned autos used, maintained, or operated by the insured and her family members
Personal injury Injury other than bodily injury aris-ing out of such things as libel, slander, false arrest, wrongful entry, violation of privacy, and malicious prosecution
Personal injury endorsement Homeowners policy endorsement that modifies the definition of bodily injury to include personal injury
Personal inland marine insurance See Inland marine insurance
Personal liability and medical payments to oth-ers endorsement Endorsement to the dwelling policy that provides liability coverage similar to that provided by Section II of the homeowners policy; may also be purchased as a separate policy
Personal lines Insurance coverages that protect indi-viduals and their families
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185Glossary
Personal property floater risks Category of the nationwide definition that includes risks eligible for personal inland marine insurance
Personal umbrella policy See Umbrella policyPersonal yacht insurance Type of personal water-
craft policy written for large pleasure boatsPhysical hazard Hazard that arises from the condi-
tion, occupancy, or use of the property itselfPhysicians and surgeons equipment form Filed
commercial inland marine form that covers medical instruments on and off the premises and furniture and fixtures at the doctor’s office against direct physical loss
Policy An insurance contractPolicy form See Coverage formPolicy limit Maximum amount the insurance company
will pay for a particular loss or for losses sustained during a period of time; also called limit of coverage, limit of insurance and limit of liability
Policy period The date and time specified in the dec-larations for when coverage begins and ends
Policy territory Place where coverage under a policy applies
Post-judgment interest Interest accruing on a judgment after an award has been made, but before payment is made by the insurance company; usually covered as a supplementary payment in liability policies
Prejudgment interest Interest awarded to compen-sate a third party for interest he might have earned if compensation had been received at the time of injury or damage, rather than at the time of judg-ment
Premises and operations Business liability exposure arising out of the business location or the activities of the business; covered under the CGL
Premium audit Survey of the insured’s financial records to gather information used to calculate the premium, such as exposures and limits
Primary insurance When two or more coverages or policies apply to the same loss, the one that pays first, up to its limit of liability or the amount of the loss, whichever is less
Principal In bonds, the party who promises to do or not do a specific thing; in agency law, the person or company being represented
Prior approval Method of rate and form ratification used by some state insurance departments that requires a company to obtain official approval before using new forms or rates
Producer General term used to describe someone who sells insurance, such as an agent, broker, or solicitor
Products and completed operations Business liability exposure arising out of defects in the com-pany’s products or completed operations; covered by the CGL
Professional liability Liability arising out of render-ing or failing to render services of a professional nature
Professional liability policy Insurance coverage issued to a professional that covers the rendering or failing to render services of a professional nature; policies are tailored to fit specific occupational needs
Proof of loss Form completed by an insured after a loss that provides an official inventory of damages
Property damage (PD) Damage to or destruction of property, including loss of use of the property
Property insurance Line of insurance that includes many types of coverages designed to handle the risk that a person will suffer financial loss because some-thing she owns is damaged or destroyed
Pro rata other insurance Method of handling insur-ance when more than one coverage applies to a loss; each coverage pays a portion of the loss in propor-tion to the relationship its limit of liability bears to the total limit of liability under all applicable insur-ance; also called contribution by limits
Protective safeguards endorsement Businessowners policy endorsement that requires the insured to maintain fire or security service on specified property as a condition of the policy
Proximate cause An action that, in a natural and continuous sequence, produces a loss
Punitive damages Type of damages intended to pun-ish the defendant and make an example out of her to discourage others from behaving the same way; also called exemplary damages
Pure risk A risk in which there is no chance of gain, only loss
RRate The basic charge an insurance company sets for
various types of insuranceReasonable person rule Principle of law that states
that each person must behave like a prudent person following those ordinary considerations that guide human affairs
Rebating Giving or offering some benefit other than those specified in the policy to induce a customer to buy insurance; rebating is illegal in most states
Repair cost The cost to repair a damaged or destroyed item of property. May be the basis of reimbursement for a loss
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186 Glossary
Replacement cost The cost to replace a damaged or destroyed item of property without deduction for depreciation; may be the basis of reimbursement for some losses
Reporting policy Type of policy that does not charge a flat premium; the insured pays a deposit premium, then submits periodic reports to the insurer show-ing the status of the factors on which the premium is based; from these status reports, premiums are calculated and charged against the deposit
Representation Statements on an insurance applica-tion that the applicant believes are true; a repre-sentation is not considered a matter to which the parties contract, so a policy cannot be voided on the basis of a representation
Residual market insurance Insurance that is not ordinarily available from private insurers and may be provided by the government; examples include flood insurance, which is provided by the federal government, and workers’ compensation benefits, which may be provided by state funds
Retention limit In an umbrella policy, the amount the insured must pay for a loss that is not covered by an underlying policy before the umbrella will begin to cover the loss; also called the self-insured retention
Retroactive date Under the claims-made CGL form, a date stipulated in the declarations as the first date on which an event may occur and be covered by the policy if a claim is filed
Risk The chance or uncertainty of lossRobbery In crime insurance, the taking or attempted
taking of property by one who has caused or threat-ened to cause bodily harm, or committed a wit-nessed, obviously unlawful act
SSalvage Damaged property that can be retrieved,
reconditioned, and sold to reduce an insured lossScheduled coverage Property that is specifically
listed in the declarations and covered for a specific amount; also called specific insurance
Scheduled personal property endorsement Homeowners policy endorsement that provides open peril, scheduled coverage for nine optional classes of property
Self-insurance Alternative to purchasing insurance where a company or individual assumes the risk of paying for its losses and sets aside the necessary funds to pay for such losses
Signs coverage form Filed commercial inland marine form that insures businesses against loss to neon, fluorescent, automatic, or mechanical electric signs and lights
Single limit One policy limit that applies to both BI and PD losses; may also be called a combined single limit
Special coverage See Open peril policySpecial damages Type of compensatory damages that
reimburse the injured party for direct and specific expenses involved in the loss, such as medical expenses and lost wages
Specific insurance See Scheduled coverageSpecified causes of loss One of the physical damage
coverage options in the commercial auto coverage forms; provides more limited coverage than com-prehensive coverage, insuring only against specified perils such as fire, flood, or explosion
Specified peril policy See Named peril policySpeculative risk A risk that may result in a loss or
gainSplit limits Policy limit that provides separate limits
for BI and PDStated amount condition See Agreed value conditionStatute of limitations Law that provides that certain
types of suits must be brought within a specified time of the occurrence to be valid under the law
Stock company An insurance company owned by its stockholders; profits are shared by the stockholders; policyholders are not entitled to share in company profits
Subrogation The transfer to the insurance company of the insured’s right to collect damages from another party
Supplemental extended reporting period See Extended reporting period
Supplementary payments Provide extra coverage over and above the insured’s limit of liability; com-monly included are defense costs, first aid expenses, bond premiums, and post-judgment interest
Surety In bonds, the party (often the insurance com-pany) that agrees to be responsible for loss that may result if the principal does not keep his promise
Surety bond Bond that guarantees that someone will perform faithfully whatever she agrees to do or that someone will make an agreed-upon payment to another party
Surplus lines agent See Excess lines agent
TTerrorism Risk Insurance Act of 2002 Federal
law designed to ensure that insurance coverage for terrorism losses under commercial lines policies will be available and affordable; it requires insurers to pay a specified amount for terrorism losses in a given calendar year; once that limit is reached, the federal
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187Glossary
government will reimburse insurers 85% of insured losses that exceed the limit
Theft In crime insurance, a broad term encompassing any unlawful taking of property, including burglary and robbery
Third party loss A liability lossTort A civil wrong for which monetary damages may
be provided; does not include losses arising out of contracts
Trip transit policy Nonfiled commercial inland marine policy that covers a single shipment of goods
Twisting Illegal activity in which an agent convinces a prospect to cancel existing insurance and buy another policy from the agent to the detriment of the prospect
UUmbrella policy Type of policy that provides broad
coverage for an insured’s liability over and above liability covered by an underlying contract; may also cover losses that are excluded by the underlying policy; available as personal or commercial insur-ance
Unauthorized insurer See Nonadmitted insurerUnderinsured motorists coverage Auto cover-
age that pays the difference between the insured’s actual damages for bodily injury and the amount of liability insurance carried by the at-fault driver; may be added to the personal or commercial auto policy by endorsement
Underwriting Insurance company function that involves researching and evaluating insurance applicants to decide which ones are acceptable to the company as insureds
Unfair discrimination Applying different standards to insureds that have the same risks of loss
Uninsured motorists coverage Automobile cover-age designed to provide protection for the insured if she is involved in an accident in which an uninsured motorist is at fault; uninsured motorists include those who do not carry insurance, motorists whose insurance does not meet the state’s minimum financial responsibility laws, drivers whose insur-ance companies are insolvent, and hit-and-run drivers who cannot be identified
Unoccupancy The absence of people from a premises; property coverage is often restricted if there are long periods of unoccupancy
VVacancy The absence of both people and property from
a premises; property coverage is often restricted when there are long periods of vacancy
Valuable papers and records insurance Filed com-mercial inland marine form that provides coverage for valuable papers such as manuscripts, blueprints, records, and other printed documents
Valuation Method used by the insurance company to determine the appropriate payment for a loss
Value reporting endorsement Endorsement used with the commercial property coverage part to pro-vide coverage based on the actual values of property at certain locations at specific times
Vandalism and malicious mischief (V&MM) Cov-erage provided in many property insurance policies that protects property against damage caused by vandals
Vicarious liability Liability that a person or busi-ness incurs because of the actions of others, such as family members or employees; also called imputed liability
WWaiver The intentional relinquishment of a known
rightWarranty A specific agreement between the insured
and the insurer that becomes a part of the insurance policy; a breach of warranty can void the policy
Watercraft package policy Package policy that provides property, liability, and medical payments coverage for losses arising out of the ownership, maintenance, or use of watercraft
Workers’ Compensation and Employers Liability Policy Insurance that covers an employer’s obliga-tions under workers’ compensation laws, which make the employer responsible for stated damages in the event of a work-related injury or illness; also covers the insured’s liability for work-related injuries under common law
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Notes
