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1 Chapter 24
CHAPTER 24: Property Insurance
I. Dene Property Damage
A. Modem Fire Coverage Explain that lots and slabs are usually not insured.
B. Endorsements
II. Explain the concerns of a property owner for
Public Liability
III. Discuss Homeowner Policies, and dene Give examples of current area problems such
A. Policy Formats as mold.
B. Properties Covered
C. Perils Covered
D. Tenant's Policy
E. Condominium Policy
F. Liability Coverage
G. Medical Payments
H. Endorsements
IV. Explain the term "New for Old"
V. Explain how Lender Requirements affect the Discuss the lender's need for property insurance to
guaran-
need for insurance tee his security. Note that coverage may be only for the
VI. Discuss the advisability of Guaranteed mortgage amount.
Replacement Cost
VII. Explain the need for Flood Insurance under Explain where the Flood Prone Area map may be
obtained
federal law in your community.
VIII. Explain Landlord Policies
IX. Explain Policy Cancellation and policy
suspension
X. Discuss Policy Takeovers
This chapter is available only in Real Estate Principles hard copy text.
If you own real estate, you take the risk that your property may be damaged
due to re or other catastrophe. Additionally, there is the possibility that
someone may be injured while on your property and hold you responsible.
Insurance to cover losses from either of
these occurrences is available.
Chapter 24 2
Page Ref.
Soft Hard
back back Topic Teaching Tips
- 413 Opening Remarks Start this chapter with a general overview of the importance of
having adequate homeowner's insurance and the requirements
imposed by lenders.
- 413 Modem Fire Coverage Summary: Insured (person buying insurance), insurance premium
(payment), insurer (insurance company).
- 414 Homeowner Policies Local Distinction: Obtain a specimen HO policy (either a blank
one or perhaps your own and "white out" all pertinent informa
tion) as reference material.
- 414 Policy Formats Summary:
Section I = Property Section II = Liability
Local Distinction: Address the coverage of your specimen policy.
- 415 Perils Covered Expanding the Text: HO-l and HO-2 policies are named peril
policies, i.e., only the perils named in the policy are insured. This
is the opposite of an all-risks policy, such as the HO-5, where all
perils except those listed in the policy are insured.
- 416 Tenant's Policy Expanding the Text: Point out to students that replacing the
entire contents of an apartment can be expensive.
Should an uninsured tenant cause a fire which destroys several
apartments, tenants of the lost apartments cannot look to the
owner's insurance on the building for coverage of the tenant's
personal belongings. Owner's insurance only covers the building.
Tenants should always carry tenant's insurance to guard against
losses caused by others.
- 417 New for Old Summary: "Old for old" is actual cash value (new price minus
accumulated depreciation).
"New for old" is replacement cost.
- 419 Flood Insurance Expanding the text: "Rising water" is perceived to be flooding,
and not covered by typical homeowner policies (refer to the
exclusions under Perils Covered, discussed earlier in this chapter).
For instance, after a hurricane, insurance adjusters seek to
determine if the water damage is a result of rain coming into the
house after the roof was blown off, in which case, homeowner's
insurance covers the damage.
If the damage is a result of flooding (rising water), then the home
owners are protected only if they carry additional flood insurance.
The same principle applies to water damage after an earthquake.
3 Chapter 24
Page Ref.
Soft Hard
back back
- 419
Topic
Policy Cancellation
420 Policy Takeovers
421 Wrap-Up
Teaching Tips
Local Distinction: Some states have enacted legislation which
prohibits short rate cancellation penalties. In other words, the
unused premium on a canceled policy must be refunded pro rata.
Find out in reference to your state.
Stress: The insurance company must accept the insured prior to
his being able to take over the seller's policy because an insurable
interest must exist.
1. The policy holder is the insured and the insurance company is
the insurer? (True)
2. The terms endorsement, rider, and attachment are
synonymous? (True)
3. Section I of a standard HO policy addresses the property and
Section II addresses the owner's liability? (True)
4. HO-1 is a basic form policy, and HO-2 is a broad form policy
and both are named peril policies? (True)
5. HO-5 is an all-risk policy? (True)
6. HO-3 provides all-risk coverage on the dwelling and named
peril coverage on content? (True)
7. HO-4 provides coverage for tenants only? (True)
8. Actual cash value is, in effect, "old for old"? (True)
9. Flood insurance is underwritten by the federal government?
(True)
10. When the purchaser of a property takes over (assumes) a seller's
HO policy, the insurer must determine that he/she has an
insurable interest in the property? (True)
Chapter 24 4
