State Farm License- Standard Fire Policy 100% Pass

State Farm License- Standard Fire Policy 100% Pass Standard Fire Policy - the policy written for both Personal Lines (residential home or dwelling) or as Commercial -Lines (official building) are the same! - fire insurance is another name for property insurance - can insure the building structure and/or the personal property. - not a HO policy since it does not cover theft of content and does not have liability coverage - never sold w/o adding Endorsement to the policy. (Endorsement is a form added to a policy that changes the policy's provision, usually with extra premium) what are the 4 parts of standard fire coverage? 1. Declaration (Dec Page): states the name of insurance comp (1st party) and the insured (2nd party); address of property; amount of coverage, premium, and policy period. 2. Insuring Agreement 3. Condition: The condition apply to both the insurer and the insured. Ex: the insured must notify the insurance comp in writing of any loss. Must do this in order for coverage to apply. 4. Exclusions: Something that never covered. Ex: war is not covered by standard fire policy. What are the things that are part of the insuring agreement? (standard fire policy) 1. Consideration Clause: the applicant 's consideration is the amount of the premium paid and the company's agreement to pay covered claims and abide by the provisions. REQUIRED TO MAKE A VALID CONTRACT. 2. Effective Time: policy starts and end @ 12:01 am on the Inception and Expiration date shown on Dec Page. Usually written for 1 year. 3. Effective Location: Location of the property insured 4. Policy Limit: In the event of a claim, the policy will never pay the insured more than the policy limit that is indicated in the Dec Page. 5. ACV: The depreciated value or also called "today's replacement cost minus depreciation." The policy will pay the insured the policy limit or the ACV whichever is less. The policy will depreciate a building at a rate of 1% per year up to max 40% (or 40 years). If the building is brand new, there is no depreciation and the replacement cost (R/C) is the same as the ACV. (Note that Property Insurance does pay claims on a replacement cost basis, but the Standard Fire Policy will not. They will only pay in ACV) 6. Company's Options: Insurance comp has the option to repair the property or to pay the claim with materials of like kind and quality whichever is best for the comp. 7. Direct Versus Indirect Losses: only covers Direct Losses. Ex: Fire Indirect losses are not covered. Ex: in the case of fire, the fire cause damage to the building is the direct cost. Now as a result of the fire, you can't operate your business until the repairs were completed. The loss of business income during this time is the indirect result of the fire and is NOT covered. 8. Insurable Interest: must exist at the time of lost. You cannot recover more than the interest you lost. You can name your bank as a mortgagee on the policy, so that the bank's equity interest (Collateral Security Interest) is also protected by the policy. 9. Perils: defines a a cause of loss. Standard Fire Policy cover only three perils: - Direct loss by Fire - Lighting - Removal What is Actual Cash Value (ACV) in Standard Fire Policy? Insurance company does not pay the replacement cost to replace the building at today's price. They ONLY pays the depreciated value of the structure. Insurance company will pay 1% per year and up to 40%. If the building is brand new, there is no depreciation and the replacement cost is the same as the ACV. Ex: a building is 10 years old. Meaning it depreciate by 10%. The replacement cost today is 100,000. So the ACV value paid by the insurance company is 90,000. Perils in Standard Fire Policy - standard fire policy is a "named perils" or "specified Peril" policy. If the perils is not listed in the Insuring Agreement, it is not covered. If your property is being hit by lighting or fire, then the coverage will applied. - you may apply for additional coverage called peril of removal (or All-risk coverage). - peril of removal: protect the dwelling and its content in the event of fire. The content that are removed from the premise to prevent damage in the fire is also covered. You must pay extra premium to apply the peril of removal and it must be listed in Declarations under Content Coverage. DO NOT ASSUME THAT STANDARD FIRE POLICY AUTOMATICALLY COVER THE CONTENT. When will the policy be void (cancelled)? Line 1 and 2 this happen when the insured willfully conceal or misrepresent any material fact concerning insurance when filling out application. Must fill out everything to the best of their knowledge. This is called "representation" What types of property are not covered by this policy? These lines (7-9) states that certain property are not covered even if it was damaged by fire. Line (11-24) states that the fire occur to this property was caused by war. In addition, if the insured neglects to use all reasonable means to save the property after a loss or when the property is endangered by fire in a neighboring premises, no coverage!! Line 24, no coverage for theft! No coverage for money! What are some conditions that cause coverage to be suspended? Line 28-37 Line 31: increase in hazard within the knowledge or control of the insured. What is the definition of rish? the Uncertainty of Loss What is the definition of peril? a Cause of Loss Ex: Fire Hazard something that increases the risk What does line 33 states? coverage is suspended if the structure is vacant or unoccupied beyond 60 consecutive days. On a standard fire policy, there is no coverage for either vacancy (yeeted!!!) or unoccupied after 60 days. That means if the house got burn down on the 61st day of vacancy, there are no coverage!! Note: An exception to this suspension of coverage is when a dwelling property form is added. It gran the permission for the premises to be vacant or unoccupied without time limit. Since dwelling property form is always added to the standard fire policy. Line 33, suspension of coverage, never really apply. What does lines 36 and 37 states? - There is no coverage for explosion or riot, unless fire ensues. Then, in that event, only the loss caused by fire is covered. - Explosions and riot are not Named Perils so they are not covered. What "lines" in the Standard Fire policy propose the cancellation of the policy? - Lines 56-67 - states that the insured may cancel the policy at any time by signing a Cancellation Receipt or sending back the original policy to the comp. - The insurance Comp will refund them any unearned premium on Short- Rate Basis. The Short Rate Penalty is applied. - If the company cancel you, the insured will be refund you all of the unearned premium on Pro-Rata Basis. - Cancellation for Nonpayment of premium is always considered Pro-Rata. And requires 10 days of advance notice. What are some conditions for Mortgagee Interests on the policy? - Line 68-85 - If the insured owes money to the bank (the Mortgagee) on a covered structure, the bank's interest may also be reflected on the policy at no extra charge. - Ex: You owe the bank 50,000 on a covered structure. ACV of 100,000. Your policy limit is 100,000. If the entire building is destroyed in a fire, the Standard Fire Policy will pay 50,000 to the bank to pay off the loan and 50,000 to the insured. If your policy limit is 70,000. Then the company will pay the bank 50,000 and pay you 20,000. If your policy limit is 120,000. The insurer will pay 50,000 to the bank and 50,000 to you since the ACV is 100,000. The comp will pay the ACV or the policy limit whichever is less. - if the insured fails to pay the premium on a policy in which the bank is named as Security Interest Holder, the bank can pay the premium on the behalf of the insured and charge the insured account. Collateral Security Interest - The bank's insurable interest position in the property. - The insurer will pay the bank the amount the insured still owe in case of a claim. What does lines 86-89 states? - contains the Other Insurance or Pro-Rata Liability Clause. This follows the Principle of Indemnity. - this clause protects insurance company from those who purchase more than one Property policy on the same structure in hope of doubling (or more) their claim payments. - states that in the event there is more than one policy in force on a structure at the time of loss, the loss will be shared by various insurance companies on Pro-Rata basis, whether collectible or not. - Ex: You have a building that suffers 10,000 in damage from fire. Company A written for 25,000; company for 50,000; company C for 25,000. The principle of Indemnity require that the 10,000 must be shared across three company. The Pro-Rata Liability clause focus on the percentage responsibility each company bears based on how much it is written. What does line 90-122 states? there are some conditions that the insured must meet in the event of loss such as the insured must notify the company immediately to protect the property from further damage. What is the Right of Appraisal? Line 123-140 states that if the insured or the insurer fail to agree on the amount to be paid for a claim. Each side can hire an apraisers. The two appraisers may hire another unrelated third party (umpire). we will go with the majority vote What line in the Standard Fire Policy states the company's options? Line 141-147 This give the company the right to salvage meaning after the insurer pays a claim, whatever is left belong to the company. what does lines 148 states? States that the insured may not walk away or "abandon" from the property after a loss without assisting the insurance company. What is the right to Subrogation and what lines reflect this in the Standard Fire Policy? - line 157-165 - refers to a Liability Insurance Concept. - If you have no Fire insurance and your neighbor negligently burned your house while he/she was burning trash. You will directly sue your neighbor. - Now if you have Fire Insurance, you can file a claim with your insurance company and they will pay you for it. Then your company will take the Right of Recovery you initially had against your neighbor and sue his/ her to get their money back. This is Subrogation. The company must prove the other party's negligent. - The purpose of subrogation is to keep the insured from collecting twice, from the company and from the negligent party. What can the fire policy be used to insure? It can be used to insure a dwelling structure of up to four units or a commercial structure, such as office building or apartment house. What must be included in the Standard Fire policy is insuring a dwelling structure? - An Endorsement must be attached to the policy to describe the type of dwelling and/or contents are covered and provide coverage for additional perils. - These Endorsements are Dwelling Property Form. What are the three Dwelling Property Form? - DP-1 (basic) - DP-2 (Broad) - DP-3 (special, or All-Risk) - One of these must be added when a dwelling is to be insured. - Purpose: to describe the types of dwelling and/or content that may be covered by the policy. What is commercial Building and Personal Property Form? - If the Standard Fire Policy is being written to the commercial structure instead of a dwelling, then use this form. - The purpose is to describe the type of commercial building/ and or business equipment or fixtures to be covered. Ex: Five-plex building will be considered commercial and not fit dwelling. Describe the coverage for DP-1 Coverage A - Dwelling - insurance will only apply to the coverage states on the Dec page and a premium which will be pay for it. - may be able to insure Contents only if the insured does not want to cover the dwelling. - if dwelling is included, then all structures "attached" are included. Ex: attached garage, AC, fixtures, etc. Descibe DP-1 Coverage B - Other structure - another name for outbuilding or unattached structure. - when apply the dwelling coverage then the extension of coverage will be apply automatically to the outbuilding. The outbuilding (coverage B) will be 10% of the dwelling (coverage A) - Note that the dwelling and the outbuilding together will add up to be 100% - Ex: if your house and your detached garage get burned. and the total cost to repair the dwelling is 100,000 and the garage is 10,000. Then, your garage will get paid 10,000 and you only have 90,000 left to repair the house DP-1 Coverage C - personal property - Content coverage (C stand for content) - excludes from coverage are all animals, aircraft, motor vehicles and boats - There is a 10% extension of coverage C away from the premises. Ex: you stay at a hotel in Costa Rica and all your clothes and Ipad get burn, then your coverage would extend under coverage C to that off -premises location. No additional charge/ anywhere in the world - if you have $50,000 of Content coverage, then 5000 (10%) would apply off premises. - still only has 3 perils of Fire, lighting, and removal. - no coverage for theft - calculated upon (ACV) DP1 Coverage D - fair rental value - an example of coverage for the indirect loss and time element coverage (meaning that the loss of income will occur over a period of time until the dwelling is repaired. - when the rented dwelling is damaged by fire or lightning, the tenant must move out until the dwelling is repaird. - The owner suffer the direct loss of fire or lightning and the indirect loss of rental income from the tenant who no longer pay the rent. - this coverage cover for this lost of income up to 20% of Coverage A ( it is not an addition to the policy limits) DP-1 Debris Removal - not an additional amount of insurance. - insurance comp will pay for the cleanup required after a fire has damaged the property. (this is often a major task and very expensive) DP-1 Deductible - all fire insurance policies have a deductible of $250 per occurence. The purpose is to discourage client from turning in minor claim. - the higher the deductible, the lower the premium DP1 - Extended coverage endorsement (ECE) - although this is part of the dwelling property form, think of it as a separate endoresment entirely. The purpose is to make the policy better by including additional perils. - Cost extra but must always added to the Standard Fire Policy. - insured must declare she wants ECE on Dec page DP1 - Wharvves (must memorize) - additional perils in ECE - Wharvves stand for: W- wind - direct damage by windstorm H - hail- direct damage done by hail A - Aircraft - A plane crashes on the structure R - riot and civil commotion - students tear down the structure V - vehicles - a car, not driven by the insured, hits the structure V - volcanic eruption - other than loss caused by earthquakes, shockwave, or tremor E- explosion - exposion from within or without, except by steam boilers or pipes S - smoke -from a heating or cooking unit, but not from a fireplace. DO NOT COVER FOR VANDALISM DP1 - vandalism or malicious mischief (VMM) - part of the dwelling property form but it is a separate endorsement entirely!! - cost extra and OPTIONAL coverage on fire insurance policy - the insured must state on the Dec page that he/s he wants this coverage and pay an extra premium in order to get this coverage. - Coverage: it cover willful malicious damage or destruction caused by others. Does not cover glass (windows), theft, burglary, or larceny. However, it does cover the damage done to the structure by the burglar. - There are no coverage for vandalism if the structure has been vacant for more than 60 days. Note: it will only be excluded under vacancy only, not unoccupancy. DP1 - general exclusions Includes: 1. Ordinance or Law: the insurer will not pay for loss to property caused by enforcement of any law or ordinance. 2. Earth movement: The policy covers volcanic eruption (WHARVVES), but it excludes any earth movement. If a fire or explosion is involved in the earth movement, then Direct Loss from these perils only may be covered. 3. Water Damage: does not cover flood, tidal, waves, and water that damage basement walls. 4. Power Failures: failure of power or other utility service is not covered if the failure takes pace off premises. But if the insured Peril causes power failure on the premises, then it will covered. 5. Neglect, War, Nuclear Hazard, Intentional Loss. Describe Flood Insurance - apply and purchased through the Federal government's National Flood Insurance Program. Then the local flood control district must be in place to help control possible flooding. - can be sold by P&C agent who takes the trouble to learn how the program works and obtain the necessary application and rate manuals. - Most Property insurance companies do NOT offer flood insurance since they know the risk is very high! DP1 additional conditions - these are additional coverage applying to the Dwelling Property Form. - called Liberalization clause: give the insurance company permission to broaden (make policy better) without notifying the insured as long as the change applies to all policyholders and no additional premium is charged. What is the dwelling property form? it includes: 1. Dwelling Property Basic Form 2. Extended Coverage Endorsement (ECE) 3. Vandalism and Malicious Mischief Endorsement (VMM) What is Dwelling Property Broad Form (DP2) - has more coverage and generally more expensive than DP-1. If the customer want to buy DP2 to attach to his or her standard fire policy, they do not need to buy DP1 at all. DP2 - other coverage 1. extension of coverage: DP1 will pay for other structures and rental value using the coverage A limit which had the potential to reduce coverage on the dwelling itself. DP2, however, put the Other Coverage as an addition to Coverage A. Ex: if you have coverage A for 100,000 and your dwelling and detached garage burned, you can receive a claim of 110,000. 2. Collapse: covers the risk of loss caused by perils named in the policy plus other Perils such as rain collect on the roof, hidden decay or hidden insect damage. This is an addition to limit (earthquake, landslide, mud flow are excluded) 3. Glass: cover breakage of window, unless the dwelling has been vacant for more than 60 days. Not an addition to limtis 4. Fire department service charge: the insured lives outside of an incorporated area may contract with a Fire Department for services. If the there is a charge for this service, the insured will pay up to $500 in addition to policy limits. No deductible DP- additional coverage ...