Policy Structure

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  1. Declarations
    The declarations contain ("declare") information unique to that particular policy. (personal information)
  2. Most exclusions serve at least one of the following purposes:
    • Eliminate or reduce overlapping coverage.
    • Remove coverage not needed by a typical insured.
    • Reduce the incentive to create losses and provide an incentive to prevent losses.
    • Remove coverage for uninsurable risks.
  3. Building Ordinance or Law Exclusion
    An ordinance or law exclusion eliminates coverage for the extra expenses, over and above the cost of replacing damaged property, that might be necessary to comply with such ordinances.
  4. Earth Movement or Earthquake Exclusion
    Earth movement is an excluded peril under most policies covering buildings and their contents. Insurers are reluctant to provide earthquake coverage in some regions because a severe earthquake can cause damage to many insured properties at the same time. Meanwhile, people in regions with little seismic activity usually are not interested in paying for earthquake protection.
  5. Nuclear Hazard Exclusion
    A nuclear incident could affect many properties at the same time.
  6. Flood Exclusion
    • Property insurance policies typically include a water damage exclusion that essentially serves as a flood exclusion. Insurers have found it necessary to state in detail the types of water damage to which the exclusion applies.
    • To avoid application of the concurrent causation doctrine when a loss involves more than one cause, policy provisions make it clear that many types of water damage are excluded regardless of whether they are caused by an act of nature. However, any direct loss by a fire or explosion that results from a flood is covered. (Although water extinguishes fires, floods can also cause fires or explosions by damaging gas pipes or electric lines.)
  7. Exclusions for Expected Losses
    • The causes of loss typically excluded in this category typically include perils such as:
    • wear and tear
    • deterioration
    • rust
    • smoke from industrial operations
    • damage by birds, vermin, rodents, insects, or animals owned by an insured
  8. Endorsements
    Endorsements attached to an insurance policy can modify it in various ways. Some add exclusions; others clarify or enlarge the coverage provided in the basic policy. The wording in an endorsement takes precedence over the wording in the policy to which it is attached.
  9. Components of an Insurance Policy
    • D-Declarations
    • I-Insuring Agreements
    • C-Conditions
    • E-Exclusions
    • D-Definitions
Card Set
Policy Structure
Lesson 11
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