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Coverage Glossary

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Personal Auto Coverage

Liability Coverage

The liability coverage of the personal auto policy provides protection against legal liability arising out of the ownership or operation of an automobile. The insuring agreement agrees to pay damages for bodily injury or property damage for which the insured is legally responsible because of an automobile accident. The liability limit can be written as a single limit that applies to both bodily injury and property damage. The policy can also be written with split limits in which the limits of insurance for bodily injury and property damage are stated separately. The insuring agreement also states that in addition to the payment of damages for which the insured is legally liable, the insurer also agrees to defend the insured for all legal defense costs. The defense cost is in addition to the policy limits.

Medical Payments Coverage

The insuring agreement states that the insurer will pay all reasonable and necessary medical and funeral expenses incurred by an insured because of bodily injury caused by an accident. Payment can be made for expenses incurred within three years from the date of the accident. The insured is the named insured and family members, and any other person injured while occupying a covered auto. Pedestrians or cyclists are also considered the insured when struck by a vehicle. These payments are made without regard to fault.

Uninsured/Underinsured Motorist Coverage

Uninsured Motorist Coverage

This insuring agreement pays for bodily injury to an insured who is injured by an uninsured motorist, a hit-and-run driver, or a driver whose insurer becomes insolvent. Some states offer coverage for property damage as part of the uninsured motorist coverage. Usually when property damage is added a deductible would apply.

Underinsured Motorist Coverage

This coverage can be added to the policy to supplement the uninsured motorist coverage. The coverage must be added to all automobiles listed on the policy, and it must be added for the same limit as the Uninsured Motorist Coverage. Underinsured motorist coverage applies when a negligent driver has liability limits at the time of an accident, but the liability limits carried may be insufficient to pay for damages that the negligent driver is responsible for. This is when the insured’s underinsured motorists coverage would apply and payment for the difference could be made. The two coverages are mutually exclusive and do not overlap or duplicate each other. An insured can collect under one coverage or the other depending on the situation, but not under both.

Physical Damage Coverages

Collision Coverage

This coverage provides protection against the upset of your auto or non-owned auto or a collision with another vehicle or object. Collision losses are paid regardless of fault.

Specified Cause of Loss Coverage

This coverage provides protection only for certain losses. The losses are fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, and the sinking, burning, collision, or derailment of a conveyance transporting the insured vehicle.

Comprehensive Coverage

This coverage provides protection against any loss or damage to a covered auto resulting from loss other than a collision or upset, or a loss specifically excluded. This coverage also provides for supplemental payments for transportation expenses in the event of total theft of a covered auto or a non-owned auto. The auto must be insured for comprehensive or specified cause of loss coverage. Coverage begins forty-eight hours after a theft of a covered auto. Payments end when the auto is returned to use or the insurer pays for its loss.

Endorsements

Extended Transportation Expense Coverage (Rental Reimbursement)

This coverage applies when a covered auto or non-owned auto is withdrawn from use more than twenty-four hours due to a loss, other then theft. The insuring agreement agrees to pay up to the stated amount for expenses incurred in renting a vehicle. The coverage usually carries a per day limit and a maximum amount limit.

Towing and Labor Coverage

This coverage pays for towing and labor cost each time a covered auto or non-owned auto is disabled, up to the stated amount.

Personal Injury Protection (PIP)

This is an endorsement that adds no-fault benefits. No-Fault means that in the event of an automobile accident, each party collects from his or her own insurer regardless of fault. No-fault benefits are limited to the injured person’s actual economic loss, and are paid as specified by the law of the insured’s state. Payment could be made for such losses as loss of earnings resulting from bodily injury and medical and funeral expenses. Other expenses can also be considered. The PIP endorsement is only available in certain states with No-Fault Laws. The endorsement applies only to bodily injury and not to property damage. (The state of Michigan is the exception to property damage.) No-Fault Laws vary widely from state to state.

Property

Homeowners

The homeowners policy provides protection against the financial consequences of personal losses. A homeowners policy is a combination of property and liability coverages. The homeowners policy is tailored to meet the needs of a homeowner. The following is a basic outline of the homeowners (HO-3) policy and the endorsements most widely used on the HO-3 policy. The HO-3 policy provides coverages for one or two family dwellings that are owner occupied. The HO-3 policy provides coverage against risks of direct physical loss to real property, except for those causes of loss that are specifically excluded. Personal property is covered against direct physical loss caused by a specified peril. In addition to the coverages stated under Section I, several additional coverages are included. Some of the coverages included are; debris removal, fire department charges, reasonable repairs charges, property removal charges, and coverage for trees, shrubs and plants. Coverage is also included for loss involving credit cards, forgery, and counterfeit money. These additional coverages are included to provide protection for the insured following a covered property loss. Each additional coverage has limitations and is subject to certain conditions.

Dwelling

This amount of insurance applies to the dwelling and attached structures. The limit of insurance for the dwelling is based on the value of the home and what it would cost to replace the home.

Other Structures

This coverage limit applies to detached structures such as a garage or storage shed. The limit of coverage is set at 10% of the dwelling. The insured can purchase a higher limit.

Personal Property

Coverage C provides worldwide coverage for personal property of the insured. Special limits apply to some types of property, and some property is excluded from coverage. The overall limit for coverage C is 50% of the dwelling limit. Coverage C can be modified in several ways with endorsements.

Loss of Use

This coverage applies in the event of a loss under Coverage A. If the insured was to temporarily lose use of the dwelling this coverage would apply. Payment would be made for expenses incurred to live elsewhere following a loss that makes the home unsuitable for living. Another method used to determine payment for loss of use is fair rental value, which is the amount of rent that could reasonably be charged for the premises, less any expenses that do not continue while the premises are unsuitable for living.

Personal Liability

Section II of the homeowners policy provides liability coverage for personal loss exposures. The insuring agreement under Coverage E provides liability coverage if a claim is made or suit is brought against an insured because of bodily injury or property damage. Coverage is provided for the residence premise as well as any other premises used by the insured, as a residence, permanently or temporarily. Liability coverage is provided for the named insured and members of the named insured’s household who are relatives. Personal liability has a basic limit of $100,000 per occurrence, which the insured may increase for an additional premium. In addition to the basic limit, Coverage E also provides additional coverages for expenses such as defense cost, expenses incurred providing first aid to others, damage to property of others and loss assessment charges. The additional coverages provided under Section E are subject to limitations and certain conditions.

Medical Payments

This coverage will pay the necessary medical expenses for bodily injury of others. Coverage applies to accidents that occur on the insured premises or any location when caused by action of the insured. The coverage has a basic limit of $1,000 per person. The insured may select higher limits.

Endorsements

  • Inflation Guard Endorsement
    When this endorsement is added to the policy, it increases the limit of coverage for A, B, C, and D. The insured selects the percentage of increase for the year and the limits are automatically increased at certain dates throughout the year.
  • Earthquake Coverage Endorsement
    Earthquake coverage is excluded under Section I of a homeowners policy. Adding this endorsement removes the exclusion and adds earthquake coverage which is subject to a deductible for each coverage under Section I.
  • Increase Other Structures Limit
    This endorsement increases the limit under coverage B, Other Structures. The limit for unattached structures on the residence premise would be increased, and the increase would be in addition to the limit already provided.
  • Increase Special Limits
    Certain types of personal property under Coverage C have special limits of liability. Adding this endorsement increases the limit for those particular types of property.
  • Scheduled Personal Property
    The scheduled personal property endorsement is used to provide coverage for risk of direct loss for such items as jewelry, furs, cameras, musical instruments, silverware, golfer’s equipment, fine arts, postage stamps and rare coins. Scheduled property can be insured for any amount the insured requires.
  • Personal Property Replacement Cost
    Property loss settlements under the homeowners policy are made on an actual cash value basis. When the replacement cost endorsement is added, the loss settlement payment would be sufficient to replace the item for the cost at the time of loss without deductions for depreciation

Condo Coverage

The H0-6 policy is a special form of homeowners insurance that was designed to meet the unique insurance requirements of owners of condominium units and cooperative apartments. An insured can only qualify for an H0-6 policy by being an owner occupant of a residential condominium unit or a cooperative apartment. The insured premises is defined as the unit where the insured resides, an H0-6 policy can not be used to insure a unit owned by the insured but rented or leased to others. The condominium unit is defined as the space between the walls, ceiling and floor. Sometimes unit owners are responsible for parts of the unit beyond the walls, ceiling and floor. Condominium unit owners also have an undivided interest with other unit owners in common areas of property. Common areas of property could include the land, stairways, halls, parking and storage areas, and the heating and cooling system. The unit owner’s responsibilities are usually outlined in the condominium agreement and bylaws. The major loss exposures for unit owners are loss to real property, loss to personal property, and legal liability. The following is a basic outline of the H0-6 policy and the endorsements most widely used on the H0-6 policy.

Dwelling

This coverage applies to the insured’s real property, which is the unit. Coverage is provided on a named perils basis and is separated into four categories. The first category includes alterations, appliances, fixtures, and improvements that are part of the building and contained within the residence premises such as built-in appliances and cabinets, electrical fixtures, and similar items of this nature. The second category relates to items of real property that pertain exclusively to the residence premises, such as exterior glass or trees and shrubs that may be located on a patio that is part of the residence premises. The third category includes property that is the responsibility of the unit owner to insure under an agreement of a corporation or association of property owners. Insurance for this category of property provides coverage for any portion of the common areas of the building that the association agreement states is the insurance responsibility of the unit owner. The final category of property relates to structures owned solely by the insured at the location of the residence premises but are not a part of the residence premises. This category could include a private garage that was not attached to the residence premises but located elsewhere in the condominium complex. The basic limit of liability under coverage A is $1,000, which can be increased if necessary. If the association or cooperative insurance policy is written on a bare walls basis, then the unit owner would have to provide coverage for the entire interior of the unit. It is important for the unit owner to review the condominium or cooperative association’s coverage to determine if the basic limit for Coverage A of the H0-6 policy is adequate.

Personal Property

This coverage limit applies to the personal property of the unit owner. The limit of insurance is selected by the unit owner. The unit owner’s personal property may include such items as furniture, clothing, television and stereo equipment, books, records compact discs and tapes. It could also include any items not considered part of the building structure. Items such as carpeting, if placed over finished flooring, would be considered personal property, but carpeting placed wall to wall over a rough subfloor or concrete slab is usually considered part of the building.

Loss of Use

This coverage is provided if a loss is caused by an insured peril to covered property or to the building containing the property, if it makes the residence premises unfit to live in. The limit of insurance is 40 percent of Coverage C limit.

Personal Liability

This provides coverage if a claim is made or suit is brought against the insured because of bodily injury or property damage caused by a covered occurrence. Personal liability has a basic limit of $100,000 per occurrence, which can be increased for an additional premium.

Medical Payments

This coverage will pay the necessary medical expenses that are incurred or medically ascertained within three years from the date of an accident causing bodily injury to someone other than an insured. Coverage applies to accidents that occur on the insured premises, or any location, when caused by action of the insured.

Endorsements The following endorsements relate specifically to the HO-6 policy.

  • Unit Owners: Special Coverages (A)
    This endorsement can be used to change Coverage A of the HO-6 to provide coverage for risk of direct loss. When this endorsement is used, all direct loss to real property, which is the unit, is covered unless specifically excluded.
  • Unit Owners: Rental to Others
    This endorsement provides property and liability coverage for the unit owner while the residence premises is regularly rented or held for rental to others. Theft coverage is provided for personal property at a rented condominium, however, high value items are not covered. Coverage for medical payments are also included.
  • Loss Assessment Coverage
    This endorsement increases the limit of liability for the loss assessment coverage provided in the policy.
  • Loss Assessment Coverage for Earthquake
    This endorsement provides coverage for loss assessment made against the unit owner by a corporation or association of property owners due to the peril of earthquake.
  • Unit Owners: Special Coverage (C)
    The H0-6 provides coverage on a named-peril basis, when this endorsement is added, Coverage C is changed to provide coverage for all direct loss to personal property unless specifically excluded.

Renters Coverage

The HO-4 renters policy is a combination of property and liability coverages. The HO-4 policy is tailored to meet the needs of a tenant. The following is a basic outline of the HO-4 Renters Policy and the endorsements most widely used on the HO-4 policy. The HO-4 policy provides coverage for a tenant of a single family residence or a tenant of an apartment. The policy focuses on loss to personal property and loss to additions. Coverage for legal liability is also included. The HO-4 policy does not include coverage for the dwelling and other structures because a tenant does not have an insurable interest in the building. However, the HO-4 policy provides coverage for building additions and alterations made by the tenant. Personal Property is covered against direct physical loss caused by a specified peril. In addition to the coverages provided under Section I of the policy, additional coverages are included for debris removal, fire department service charges, loss assessment charges, reasonable repair charges, and property removal charges. Payment is also made for loss involving credit cards, forgery, and counterfeit money. The additional coverages are included to provide additional protection in the event of certain peril losses. All additional coverages are subject to certain limitations and conditions.

Personal Property

This is the primary limit of insurance coverage for the H0-4 policy. Coverage C provides worldwide coverage for personal property of the insured. Special limits apply to some types of property, and some types of property are excluded from coverage. The insured selects the limit of coverage which is determined by the value of personal property owned.

Loss of Use

Coverage D applies if a peril insured against under Coverage C makes the residence unsuitable for living. Payment would be made for expenses incurred to live elsewhere following the loss. The limit for Coverage D is 20% of Coverage C.

Personal Liability

Section II of the renters policy provides liability coverage for personal loss exposures. The insuring agreement under Coverage E provides liability coverage if a claim is made or suit is brought against an insured because of bodily injury or property damage. Coverage is provided for the named insured and members of the insured’s household who are relatives. Personal Liability has a basic limit of $100,000 per occurrence. The insured may increase this limit for an additional premium. In addition to the basic limit, Coverage E also provides additional coverage for expenses such as defense cost, expenses incurred providing first aid to others, damage to property of others and loss assessment charges.

Medical Payments

This coverage will pay the necessary medical expense for bodily injury of others. Coverage applies to accidents that occur on the insured premises or any location when caused by action of the insured. This coverage has a basic limit of $1,000 per person. The insured may select higher limits for an additional premium.

Endorsements

  • Inflation Guard Endorsement
    When this endorsement is added to the policy it increases the limit of Coverage C and D. The insured selects the percentage of increase for the year and limits are automatically increased at certain dates throughout the year.
  • Earthquake Coverage Endorsement
    Earthquake coverage is excluded under Section I of the policy. Adding this endorsement removes the exclusion and adds earthquake coverage which is subject to a deductible for each coverage under Section I
  • Scheduled Personal Property
    The scheduled personal property endorsement is used to provide coverage for risk of direct loss for such items as jewelry, furs, cameras, musical instruments, silverware, golfer’s equipment, fine arts, postage stamps and rare coins. Scheduled property can be insured for any amount the insured requires.
  • Increase Special Limits
    Certain types of personal property under Coverage C has special limits of liability. Adding this endorsement increases the special limit
  • Building Additions/Alterations
    The policy provides additional coverage for building improvements or installations, made or acquired at the tenants expense. The basic limit is 10% of Coverage C limit, adding this endorsement increases the basic limit.
  • Water Bed Liability
    This endorsement provides coverage for liability arising out of an insured’s ownership or use of a water bed on the residence premises
  • Deductible
    The renter’s policy has a standard deductible of $250. The insured may reduce the deductible to $100 or increase it to $500, $1,000 or $2,500.

Valuable Articles

“Scheduled Personal Property ” – Insures for the loss, misplacement or theft of certain personal belongs such as jewelry, furs, silverware, fine art cameras, musical instruments, gold equipment, coins and stamps for a scheduled amount not subject to a deductible. Although scheduling property is more expensive than buying increased limits coverage, in the example of jewelry, it does not subject you to a $1,000 limit per item or a deductible. It also covers, in addition to theft, the misplacement of jewelry or the accidental loss of a stone from a jewelry setting.

Umbrella/Excess Liability

The Personal Umbrella Policy was designed to provide coverage in the event of a catastrophic claim, lawsuit, or judgment. Personal umbrella policies provide excess liability insurance over the insured’s basic primary policies, such as the homeowners, personal auto and boaters policies. Coverage is provided on a worldwide basis for the entire family. Umbrella policies pay only after the limits of the underlying primary policies are exhausted. Coverage is usually broader and applies to some loss exposures not covered by the primary policies. A typical umbrella policy will provide coverage on a single limit occurrence basis. Coverage is provided for bodily injury and property damage liability. Defense costs are also covered, normally in addition to the liability limit, and sometimes included as a part of the total limit. A self insured retention must be met when certain losses are covered under the umbrella policy but not covered under the primary policy. The insurer requires the insured to carry certain minimum amounts of liability insurance on primary policies. Coverage under a personal umbrella policy can vary depending on the insurer since there is not a standard personal umbrella policy form.

Personal Injury Liability

Under the personal umbrella policy, the personal injury liability coverage is usually broadly defined to include coverage for bodily injury, sickness, disease, disability, shock, mental anguish, and mental injury. Coverage is also included for false arrest and imprisonment, wrongful entry or eviction, malicious prosecution or humiliation, libel, slander, defamation of character or invasion of privacy, and even assault and battery, when not intentionally committed or directed by an insured.

Property Damage Liability

Under the personal umbrella policy, property damage liability is usually defined as injury or destruction of tangible property, which includes the loss of use of the property.

Self Insured Retention

The self insured retention is the amount of the loss the insured must pay before the umbrella policy would be required to respond. The retention would only apply when a loss is excluded from coverage under the primary policy, but not excluded under the umbrella policy.

Required Underlying Limits

This is a requirement of the insurer, it requires the insured to have certain minimum amounts of primary liability insurance before the umbrella policy can be written. Usually the required limits are $250,000 per person and $500,000 per occurrence on bodily injury liability and $50,000 for property damage liability under the auto policy. The personal liability insurance limits must be at least $100,000 under the homeowners policy. Insured’s that have a watercraft liability exposure are usually required to carry at least $300,000 in liability coverage. However, these required underlying limits can very among insurers.

Types of Insurance

  • Auto, including antiques and unusual risks
  • Homeowners
  • Apartment
  • Condominium
  • Personal Umbrella
  • Flood & Earthquake
  • Boat & Yacht Insurance
  • Jewelry, Fine Arts, Furs, & Collectibles

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