Class Notes

Property and CasualtyMinnesota

2nd Edition

MN_P&C_CN.indb 1 6/23/2011 8:56:11 AM

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.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought.

MINNESOTA PROPERTY AND CASUALTY CLASS NOTES, 2ND EDITION ©2011 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 June 2011 by Kaplan Financial Education. Printed in the United States of America.

ISBN: 978-1-4277-3581-2 / 1-4277-3581-6

PPN: 3200-1662

2809.0140 NOTICE TO STUDENTS: This educational offering is recognized by the Minnesota Commissioner of Commerce as satisfying 20 hours of credit toward property insurance licensing education requirements and 20 hours of credit toward casualty insurance licensing education requirements.

MN_P&C_CN.indb 2 6/23/2011 8:56:12 AM

iii

Contents

General Information v

Introduction xiii

L e s s o n o n e Fundamentals of Insurance 1

L e s s o n T w o overview of Property Insurance 21

L e s s o n T h r e e overview of Casualty Insurance 31

L e s s o n F o u r overview of Life Insurance and Annuities 39

L e s s o n F I v e overview of Accident and health Insurance 49

L e s s o n s I x Minnesota Insurance regulation 59

L e s s o n s e v e n Property and Casualty Provisions, Terms, and Concepts 85

L e s s o n e I G h T homeowners Insurance 101

L e s s o n n I n e Dwelling Insurance 113

L e s s o n T e n other Property Insurance 123

L e s s o n e L e v e n Minnesota Property Law 131

L e s s o n T w e L v e Commercial Property and Inland Marine Insurance 139

L e s s o n T h I r T e e n Personal Auto Insurance 155

L e s s o n F o u r T e e n umbrella Insurance and errors and omissions Insurance 177

L e s s o n F I F T e e n Commercial General Liability Insurance (CGL) 181

MN_P&C_CN.indb 3 6/23/2011 8:56:12 AM

iv Contents

L e s s o n s I x T e e n Commercial Auto Insurance, Commercial Crime Insurance, and Bonds 193

L e s s o n s e v e n T e e n The Businessowners Policy (BoP) 205

L e s s o n e I G h T e e n workers’ Compensation 213

Lesson reviews 223

True/False Questions 279

Glossary 329

Post-Test 333

Post-Test Answer Key 349

My Test results 351

Post-Test Answer sheet 353

MN_P&C_CN.indb 4 6/23/2011 8:56:13 AM

v

General Information

sChooL PoLICIes

In order to successfully complete the Property and Casualty Insur-ance education, each student must:

attend the 1. entire 20 hours of Minnesota Property Only and the entire 20 hours of Minnesota Casualty Only; and

sign each of the required student sign-in sheets confirming atten-2. dance in each session.

Smoking is restricted to designated areas:

St. Paul (Bandana Square): outside at least 20 feet away from any ■

building entrance

Bloomington (BLN Office Park): outside in courtyard ■

Plymouth (Four Seasons Mall): outside around the corner at ■

south end of building only

There are private phones available for your use in making local calls. As a courtesy to others, please limit calls in number and dura-tion (2–3 minutes).

There will be a 5-minute break every hour. Lunch breaks are one hour and will be taken approximately at noon.

Tape recording is prohibited. All rights reserved by Kaplan Finan-cial Education.

As a courtesy to others:

pagers and mobile phones must be silenced during class. Laptop ■

computers must be turned off;

please refrain from talking and other distracting behavior in the ■

classroom; and

no smoking or eating in the classrooms. ■

AreA eATInG esTABLIshMenTs

St. Paul (Bandana Square)

Gabe’s: east on Energy Park Drive at Lexington ■

Fast food on Snelling Avenue: go north towards Har Mar Mall, ■

or south to University Avenue

MN_P&C_CN.indb 5 6/23/2011 8:56:14 AM

vi General Information

Bloomington (BLN Office Park)

Cafeteria and convenience store: located on lower level ■

Fast food: west on 494 at Lyndale, Nicollet, and Portland exits ■

Mall of America: third floor food courts on north and south sides ■

Plymouth (Four Seasons Mall)

Four Seasons Mall: Marcello’s Pizza & Pasta, Bahn Thai Cuisine ■

Fast food and restaurants nearby on County Road 9, Nathan Lane, ■

and Rockford Road: Burger King, Wendy’s, Quiznos, Chili’s, Dairy Queen, Leeann Chin, Applebee’s, and McDonald’s

PArKInG

St. Paul (Bandana Square) parking ramp on east side of building ■

Bloomington (BLN Office Park) parking lot on east side of building, ■

underground parking, or 4-level ramp behind building

Plymouth (Four Seasons Mall) parking lot on west side of building ■

exAM InForMATIon For ALL InsurAnCe LICensInG CAnDIDATes

All insurance licensing examinations in Minnesota will be adminis-tered on PSI’s computerized testing system. Pre-registration for the test is required.

reGIsTer For The exAM

Before making an exam reservation, candidates should thoroughly review PSI’s Insurance Candidate Information Bulletin. This document is available on PSI’s Website at www.psiexams.com. It contains examina-tion content outlines and important information regarding eligibility and the examination and licensing application process.

Candidates may make an exam reservation by visiting the PSI Web-site (www.psiexams.com) or calling PSI at 800-733-9267. The school code is 590 (Kaplan Financial).

MN_P&C_CN.indb 6 6/23/2011 8:56:14 AM

viiGeneral Information

A list of PSI test centers is on the following pages of this workbook. Candidates should contact PSI to confirm specific locations and exami-nation schedules.

The fee is $45.00 per exam and must be paid at the time of reserva-tion. Fees can be paid by credit card, debit card, money order, or cashier’s check.

Before submitting an application for licensure, each applicant must submit a set of fingerprints to the Minnesota Department of Commerce for the purpose of conducting a state and national fingerprint-based crim-inal history record. Each candidate will be fingerprinted at the time of the exam. The fingerprinting is required as part of the criminal background check which is included in the license application process. Please check PSI’s Candidate Information Bulletin at www.psiexams.com for the cur-rent fingerprinting cost; fees must be paid on the date of the exam.

Candidates may cancel or reschedule an exam without penalty if the notice is received at least two days in advance.

whAT Do You neeD To BrInG?

Candidates must bring the following to the exam:

Two forms of identification. One must be a valid government-issued 1. ID with your signature and photo and the second must have your signature and preprinted legal name.

Proof of education (your course completion certificates).2.

Only non-programmable calculators are allowed into the testing center.

Note: If you are retaking your exam, you must bring proof of educa-tion or your failed test report.

ConTACT InForMATIon For The MInnesoTA DePArTMenT oF CoMMerCe

85 7th Place East, Suite 285 Telephone: 651-296-6319 (8:00 am – 4:30 pm)

St. Paul, MN 55101 Toll-free: 800-657-3978 (8:00 am – 4:30 pm)

Website: www.commerce.state.mn.us Fax: 651-284-4107

Email: licensing.commerce@state.mn.us

MN_P&C_CN.indb 7 6/23/2011 8:56:15 AM

viii General Information

PsI TesTInG CenTer LoCATIons

Duluth416 West Superior StreetDuluth, MN 55802Going South on Mesaba, turn left on First St. Turn right at N 6th

Ave. Turn left on Superior St. PSI is located on the right-hand side on the second block. It is half a block down from the Duluth Public Library.

Edina6550 York Ave., Suite 317Edina, MN 55435From MN-62 (Crosstown Highway) exit Xerxes Avenue and travel

south. Just past W 65th Street, turn right into the office complex. 6550 is a tall white building at the northwest corner of Xerxes and 66th Street.

Lake Elmo3275 Manning Ave. N (Lake Elmo Airport)Lake Elmo, MN 55042From I-94, exit on Manning Avenue/County Rd 15 (exit 253). Travel

north on Manning Avenue for approximately 3.6 miles. Turn east into the airport at Gate A—North Entrance. Follow the north entrance; turn right at the first street off the entrance road. PSI is in the brown Valters Aviation building.

Mankato3030 Airport Rd. (Mankato Regional Airport)Mankato, MN 56001From Mankato, head north on MN-22 for 2 miles. Turn right at 227th

St./County Hwy. 12. Follow Hwy. 12 for 2.7 miles, then turn right at Air-port Road.

Moorhead819 30th Ave. South, Suite 108Moorhead, MN, 56560From I-494 W, merge onto I-94 W/US-52 N toward St. Cloud (keep

left). Take the US-75 exit toward Moorhead. Turn left onto S 8th St. Turn left onto S 30th Ave.

MN_P&C_CN.indb 8 6/23/2011 8:56:15 AM

ixGeneral Information

Rochester3155 Superior Drive NWRochester, MN 55901From Highway 14, go North on Highway 52, exit at 55th Street NW

to go west. 55th Street NW/County Road 22/West Circle Drive will veer slightly left turning into 41st Avenue NW/ County Road 22/West Circle Drive. When you have gone 2.2 miles from 52 you will come to a traf-fic light at Valleyhigh Road NW. Turn right, then take the first, almost immediate left onto Superior Drive NW. Take the first right into the park-ing lot. Then take the second right so you are behind the units that are facing Superior Drive. PSI will be the second-to-last unit on your left.

St. Cloud1542 45th Ave. SE (St. Cloud Airport)St. Cloud, MN 56304From North: Enter US-10 east. Follow US-10 1.5 miles south onto

MN-23. Turn left on Deltone Rd/Co. 7 for 3 miles. From East: Enter MN-23 westbound until reaching the intersection with US-10. Enter US-10 east for 1.5 miles. Turn left on Deltone Rd/Co. 7 for 3 miles. From South: Enter US-10 West. Follow US-10 to Deltone Rd/Co. 7. Turn right onto Deltone Rd/Co. 7 for 3 miles. From West: Enter MN-23 eastbound. Follow MN-23 through the city of St. Cloud to the intersection with US-10. Enter US-10 east and follow for 1.5 miles. Turn left on Deltone Rd/Co. 7 for 3 miles.

As you come into the airport, you will come around a corner and the main terminal will be a yellow building that says flight training and pilot shop. This is the building the testing center is located in. You can park in the mail terminal or general aviation lot and walk to the yellow building.

Thief River Falls13892 Airport Dr. (Thief River Falls Regional Airport)Thief River Falls, MN 56701Take County Road #17 and go south of Thief River Falls 3 miles to

the Thief River Falls Regional Airport. Take a right into the airport and proceed to the first building on the right. A sign out front identifies the building. When entering the building, proceed to the office area.

Winona100 Galewski Dr. (Winona Airport)Winona, MN 55987On CR-17, go 6.7 mi. Turn left on Homer Rd. and go 0.7 mi. Bear

left on Highway 14 (US-14 W)—go 1.5 mi. Continue to follow US-14 W—go 2.4 mi. Continue on the Great River Rd. (US-61 N)—go 1.4 mi. Turn right on 54th Ave.—go 0.4 mi. Bear left on 54th Ave. Turn right

MN_P&C_CN.indb 9 6/23/2011 8:56:15 AM

x General Information

on Theurer Blvd.—go 0.1 mi. Turn left on Galewski Dr.—arrive at 106 Galewski Dr. on the right.

Woodbury6053 Hudson Rd, Suite 210Woodbury, MN 55125From I-94, exit Century Avenue and travel south. Turn left on Hud-

son Road (frontage road entrance to the Country Inn). At the “T” turn left (signage marked as Sherrie Road), then turn right into the entrance between Sinclair and Green Mill. 6053 is the three-story building directly ahead. Veer right around the south side of the building. The PSI entrance is on the east side of the building, marked as 6053—East Entrance.

Note: On Saturdays, use the West Entrance to the 6053 building. The entrance is on the 2nd floor. Suite 210 is down the corridor to the right.

An InTroDuCTIon To The Course

About the testYour exam will be administered by PSI testing services. Schedule your

exam online at www.psiexams.com or by phone at 800-733-9267.We recommend you take your exam within five days of completing

your classroom training, and encourage you to give yourself ample time after training to complete review assignments/activities.

The MN Producer’s Exam for Property and Casualty Insurance is comprised of 138 multiple-choice questions. A passing score of 70% or better is required on the computer-based exam. You will be given three hours to complete the test.

In addition to the number of exam questions specified, 5–15 non-scorable questions may be included. PSI uses these questions to collect statistical information for use on future exams. These questions will not be scored and the time taken to answer them will not count against examination time.

About this courseThis course has been developed to provide you with a high-level

introduction to the insurance industry along with license-specific mate-rial designed to prepare you for the exam as well as to sell Property and Casualty insurance.

Pace and focus: As there is a great deal to discuss in the time avail-able, we ask that you respect your instructor and peers by deferring per-sonal and hypothetical questions to classroom breaks. We also ask that

MN_P&C_CN.indb 10 6/23/2011 8:56:15 AM

xiGeneral Information

you refrain from personal activities that may be distracting to your peers (turn cell phones off).

Your recipe for success:

Be here ■ : In addition to satisfying the Commerce Department’s class-room requirement (attendance will be monitored), this course offers invaluable insights on the test. Return from breaks on time and be attentive during classroom discussion and lecture.

Outside activities ■ : Our in-class time will be devoted to lecture and instructor-led review activities. Prepare to invest 5–15 hours outside of class to ensure your success.

Complete ALL end of lesson review assignments and True/False ■

questions.

Review classroom content, by lesson, with attention to highlighted ■

items.

Prepare for your test using all online tools available to you at ■

www.kfeducation.com.

Our role/your goal:

Our role is to explain all content, providing context and confidence ■

to our students. While it’s impossible for us to know the exact ques-tions you’ll encounter as a test-taker, we will give you the knowledge, tools, and skills to be successful.

You must not take the test lightly. ■

You must be fully engaged as a classroom participant. ■

You must invest time, effort, and energy. ■

You must learn from your mistakes by reviewing any questions you have ■

answered incorrectly and by completing the Post-Test diagnostic.

You must successfully apply your test-taking skills and the knowledge ■

you have learned.

Thank you for choosing Kaplan Financial Education for your exam preparation needs. Your success is our goal.

MN_P&C_CN.indb 11 6/23/2011 8:56:16 AM

MN_P&C_CN.indb 12 6/23/2011 8:56:16 AM

introductionWelcome to Kaplan Financial Education

MN_P&C_CN.indb 13 6/23/2011 8:56:16 AM

xiv

Intr

oduc

tion

Wel

com

e to

Kap

lan

Fina

ncia

l Edu

catio

n

Wel

com

e to

Kap

lan

Fina

ncia

l Edu

catio

n

1

Why

We’

re H

ere

•Th

ose

purs

uing

a li

cens

e to

sel

l ins

uran

ce in

M

inne

sota

mus

t:M

inne

sota

mus

t:–

Atte

nd 2

0 ho

urs

of e

duca

tion

spec

ific

to th

eir a

rea

of

spec

ializ

atio

n (L

ife; A

ccid

ent a

nd H

ealth

; Pro

perty

; or

Cas

ualty

)

•Th

e 20

hou

rs in

clud

es g

ener

al tr

aini

ng o

n al

l pr

oduc

tsan

dse

rvic

esw

ithin

the

indu

stry

asw

ell

©20

11 K

apla

n, In

c.2

prod

ucts

and

serv

ices

with

inth

ein

dust

ry,a

sw

ell

as s

peci

fic tr

aini

ng in

the

area

of s

peci

aliz

atio

n

–P

ass

a te

st d

emon

stra

ting

com

pete

nce

in th

eir a

rea

or a

reas

of s

peci

aliz

atio

n

Why

We’

re H

ere

•Th

is tr

aini

ng p

rogr

am s

atis

fies

the

Com

mer

ce

Dep

artm

ent’s

clas

sroo

mre

quire

men

tsan

dhe

lps

Dep

artm

ents

clas

sroo

mre

quire

men

tsan

dhe

lps

prep

are

you

for t

he e

xam

©20

11 K

apla

n, In

c.3

Are

as o

f Spe

cial

izat

ion

•Li

fe, A

ccid

ent a

nd H

ealth

lice

nse

optio

ns–

Life

onl

y 20

hou

rs

–A

ccid

ent a

nd H

ealth

onl

y20

hou

rs

–Li

fe, A

ccid

ent a

nd H

ealth

40 h

ours

©20

11 K

apla

n, In

c.4

MN_P&C_CN.indb 14 6/23/2011 8:56:28 AM

xvIn

trod

uctio

n W

elco

me

to K

apla

n Fi

nanc

ial E

duca

tion

Are

as o

f Spe

cial

izat

ion

•Pr

oper

ty a

nd C

asua

lty li

cens

e op

tions

–P

rope

rty o

nly

20 h

ours

–C

asua

lty o

nly

20 h

ours

–P

rope

rty a

nd C

asua

lty40

hou

rs

©20

11 K

apla

n, In

c.5

The

Prod

ucer

’s E

xam

•Ad

min

iste

red

by P

SI w

ww

.psi

exam

s.co

m

•Sc

hool

cod

e: 5

90 (K

apla

n Fi

nanc

ial)

•W

e re

com

men

d yo

u ta

ke y

our e

xam

with

in fi

ve

days

of c

ompl

etin

g yo

ur c

lass

©20

11 K

apla

n, In

c.6

The

Prod

ucer

’s E

xam

•M

ultip

le c

hoic

e, c

ompu

ter-

base

d–

Life

, Acc

iden

t and

Hea

lth e

xam

con

tain

s 13

5 qu

estio

ns

–P

rope

rty a

nd C

asua

lty e

xam

con

tain

s 13

8 qu

estio

ns

–Li

fe o

nly

exam

con

tain

s 75

que

stio

ns

–A

ccid

enta

ndH

ealth

exam

cont

ains

80qu

estio

ns

©20

11 K

apla

n, In

c.7

Acc

iden

tand

Hea

lthex

amco

ntai

ns80

ques

tions

The

Lice

nsin

g Pr

oces

s

•C

ompl

ete

the

requ

ired

educ

atio

n

Pth

tt

lii

•P

ass

the

stat

elic

ensi

ng e

xam

–Fi

nger

prin

ting

is d

one

at th

e ex

am s

ite (c

ost i

s $5

3.25

in a

dditi

on

to e

xam

fee)

•A

pply

for a

resi

dent

pro

duce

r lic

ense

–O

nlin

e ap

plic

atio

n

Ci

ilh

it

dh

k

©20

11 K

apla

n, In

c.8

–C

rimin

alhi

stor

y re

cord

che

ck

•S

ee th

e G

ener

al In

form

atio

n se

ctio

n of

you

r Cla

ss N

otes

fo

r mor

e de

tails

MN_P&C_CN.indb 15 6/23/2011 8:56:28 AM

xvi

Intr

oduc

tion

Wel

com

e to

Kap

lan

Fina

ncia

l Edu

catio

n

Prep

arin

g fo

r the

Pro

duce

r’s E

xam

•C

ompl

ete

the

requ

ired

cour

se o

r cou

rses

•O

utsi

de s

tudy

–R

evie

w le

sson

mat

eria

l in

Cla

ss N

otes

•P

rope

rty a

nd C

asua

lty e

xam

: stu

dy L

esso

ns 1

, 6,

7, 8

–12,

13–

18

•P

rope

rtyex

am:s

tudy

Less

ons

16

78

12

©20

11 K

apla

n, In

c.9

•P

rope

rtyex

am:s

tudy

Less

ons

1,6,

7,8–

12

•C

asua

lty e

xam

: stu

dy L

esso

ns 1

, 6, 7

, 13–

18

Prep

arin

g fo

r the

Pro

duce

r’s E

xam

•O

utsi

de s

tudy

(con

tinue

d)–

Com

plet

e en

d-of

-less

on re

view

s an

d tru

e/fa

lse

ques

tions

–U

tiliz

e th

e on

line

asse

ts a

vaila

ble

thro

ugh

ww

w.k

fedu

catio

n.co

m

–R

ead

the

Min

neso

ta P

rope

rty a

nd C

asua

lty L

aw

Sl

t

©20

11 K

apla

n, In

c.10

Sup

plem

ent

–R

ead

the

Lice

nse

Exa

m M

anua

l

Prep

arin

g fo

r the

Pro

duce

r’s E

xam

•Fr

om P

SI’s

web

site

(ww

w.p

siex

ams.

com

), pr

int

and

read

two

impo

rtant

docu

men

ts:

and

read

two

impo

rtant

docu

men

ts:

–C

andi

date

Info

rmat

ion

Bul

letin

–C

onte

nt O

utlin

e fo

r you

r exa

m

•Yo

u m

ust b

ring

your

cou

rse

com

plet

ion

certi

ficat

esto

the

test

ing

site

!

©20

11 K

apla

n, In

c.11

certi

ficat

esto

the

test

ing

site

!

Our

Pro

mis

e

•C

onte

nt

•C

onfid

ence

•Fu

n

•Fa

st s

tart

©20

11 K

apla

n, In

c.12

MN_P&C_CN.indb 16 6/23/2011 8:56:29 AM

xvii

Intr

oduc

tion

Wel

com

e to

Kap

lan

Fina

ncia

l Edu

catio

n

Hou

seke

epin

g

•Fa

cilit

ies

•At

tend

ance

•Br

eaks

/lunc

h

•Po

licie

s –

lapt

ops,

cel

l pho

nes,

PD

As,

reco

rdin

g de

vice

s of

f; be

resp

ectfu

l to

fello

w s

tude

nts

©20

11 K

apla

n, In

c.13

•Sa

fe h

aven

pol

icy

MN_P&C_CN.indb 17 6/23/2011 8:56:29 AM

MN_P&C_CN.indb 18 6/23/2011 8:56:29 AM

Lesson oneFundamentals of insurance

MN_P&C_CN.indb 1 6/23/2011 8:56:29 AM

2Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Less

on O

neFu

ndam

enta

ls o

f Ins

uran

ce

1

Def

initi

ons

Ris

k

•Th

e un

certa

inty

of a

loss

–Sp

ecul

ativ

e ris

k in

volv

es th

e ch

ance

of l

oss

or g

ain,

an

d it

is n

ot in

sura

ble

–Pu

re ri

sk in

volv

es th

e ch

ance

of l

oss

only

, and

it is

in

sura

ble

3©

2011

Kap

lan,

Inc.

Loss

•An

uni

nten

ded,

unf

ores

een

even

t (pr

oper

ty

dam

age

orin

jury

)da

mag

eor

inju

ry)

–D

irect

loss

–ca

used

dire

ctly

by

a co

vere

d pe

ril (f

ire

loss

to a

stru

ctur

e)

–In

dire

ct lo

ss –

the

subs

eque

nt lo

ss o

f use

cla

im th

e in

sure

d fil

es fo

r the

loss

incu

rred

afte

r the

fire

(hot

el

acco

mm

odat

ions

busi

ness

inco

me

loss

)

4©

2011

Kap

lan,

Inc.

acco

mm

odat

ions

,bus

ines

sin

com

elo

ss)

MN_P&C_CN.indb 2 6/23/2011 8:56:31 AM

3Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Peril

•So

met

hing

that

dire

ctly

cau

ses

a lo

ss

5©

2011

Kap

lan,

Inc.

Haz

ard

•A

cond

ition

that

incr

ease

s th

e fre

quen

cy o

r se

verit

yof

alo

ssse

verit

yof

alo

ss–

Phys

ical

haz

ard

–vi

sibl

e (ic

e on

a s

idew

alk)

–M

oral

haz

ard

–di

shon

est t

ende

ncie

s (a

rson

)

–M

oral

e ha

zard

–ca

rele

ss, i

rres

pons

ible

atti

tude

(le

avin

g ke

ys in

an

unlo

cked

car

)

6©

2011

Kap

lan,

Inc.

Expo

sure

•Su

scep

tibilit

y to

loss

7©

2011

Kap

lan,

Inc.

Adv

erse

Sel

ectio

n

•Th

ose

with

hig

h-ris

k si

tuat

ions

atte

mpt

to

purc

hase

insu

ranc

ebe

fore

thos

ew

ithav

erag

epu

rcha

sein

sura

nce

befo

reth

ose

with

aver

age

or b

elow

-ave

rage

risk

s

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 3 6/23/2011 8:56:31 AM

4Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Insu

ranc

e

•A

trans

fer o

f ris

k fro

m o

ne to

man

y

9©

2011

Kap

lan,

Inc.

Pool

ing

of R

isk

•In

sure

ds e

xcha

nge

a sm

all,

certa

in lo

ss (t

he

prem

ium

)for

prot

ectio

nag

ains

tala

rger

prem

ium

)for

prot

ectio

nag

ains

tala

rger

unce

rtain

loss

•Th

e in

sure

r poo

ls th

e pr

emiu

ms

to c

ome

up w

ith

a la

rge

rese

rve

of m

oney

ava

ilabl

e to

pay

cla

ims

10©

2011

Kap

lan,

Inc.

Law

of L

arge

Num

bers

•As

the

num

ber o

f sim

ilar r

isk

expo

sure

s in

crea

ses

the

accu

racy

ofth

ein

sura

nce

incr

ease

s,th

eac

cura

cyof

the

insu

ranc

eco

mpa

ny’s

loss

pro

ject

ions

will

incr

ease

11©

2011

Kap

lan,

Inc.

Bin

der

•U

sed

prio

rto

a po

licy

bein

g is

sued

–B

inde

rs p

rovi

de th

e in

sure

d w

ith im

med

iate

pr

otec

tion,

val

id fo

r a s

peci

fied

time,

unt

il th

e ac

tual

po

licy

is is

sued

–M

ay b

e or

al o

r writ

ten.

If o

ral,

mus

t be

follo

wed

up

in

writ

ing

with

in fi

ve b

usin

ess

days

.

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 4 6/23/2011 8:56:31 AM

5Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Bin

der

–C

over

age

rem

ains

in e

ffect

unt

il th

e bi

nder

exp

ires

(60

days

)oru

ntil

afo

rmal

canc

ella

tion

ism

ade

(60

days

)oru

ntil

afo

rmal

canc

ella

tion

ism

ade

–C

over

age

gene

rally

beg

ins

at 1

2:01

am

Cen

tral

Sta

ndar

d Ti

me

(Min

neso

ta)

13©

2011

Kap

lan,

Inc.

Cer

tific

ate

of In

sura

nce

•U

sed

afte

ra p

olic

y ha

s be

en is

sued

–P

rovi

ded

by th

e in

sura

nce

com

pany

as

evid

ence

that

a

polic

y ha

s be

en w

ritte

n

–C

onta

ins

a su

mm

ary

of th

e po

licy’

s co

vera

ge a

nd

limits

–Fr

eque

ntly

requ

ired

in lo

an tr

ansa

ctio

ns a

nd o

ther

l

ltt

14©

2011

Kap

lan,

Inc.

lega

l mat

ters

Ded

uctib

les

•Th

e in

sure

d pa

ys a

spe

cific

am

ount

or

perc

enta

geof

the

loss

The

insu

rerp

ays

inpe

rcen

tage

ofth

elo

ss.T

hein

sure

rpay

sin

exce

ss o

f the

ded

uctib

le.

–Th

e re

ason

s fo

r ded

uctib

les

incl

ude

the

follo

win

g:

•In

sure

rs c

an c

harg

e lo

wer

pre

miu

ms

•In

sure

ds a

re m

ore

care

ful b

ecau

se th

e y m

ust

15©

2011

Kap

lan,

Inc.

yas

sum

e pa

rt of

the

loss

•D

educ

tible

hel

ps to

elim

inat

e sm

all c

laim

s

Ded

uctib

les

–Th

e ty

pes

of d

educ

tible

s in

clud

e th

e fo

llow

ing:

Sti

htth

id

ti

t•

Stra

ight

–th

ein

sure

d pa

ys a

cer

tain

am

ount

per

lo

ss b

efor

e th

e in

sure

r is

requ

ired

to m

ake

a pa

ymen

t

•A

ggre

gate

–th

e in

sure

d pa

ys fo

r all

loss

es u

ntil

they

exc

eed

a ce

rtain

am

ount

. Agg

rega

te

dedu

ctib

les

typi

cally

app

ly p

er p

olic

y pe

riod.

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 5 6/23/2011 8:56:32 AM

6Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Ded

uctib

les

•C

orrid

or–

is a

pplie

d in

the

trans

ition

al a

rea

betw

een

basi

cco

vera

gean

dm

ajor

med

ical

betw

een

basi

cco

vera

gean

dm

ajor

med

ical

expe

nse

cove

rage

. Ben

efits

are

pai

d by

the

basi

c he

alth

pol

icy

first

; whe

n th

ese

bene

fits

are

exha

uste

d, th

e co

rrid

or d

educ

tible

is a

pplie

d be

fore

ben

efits

und

er th

e m

ajor

med

ical

pla

n ar

e pa

id.

17©

2011

Kap

lan,

Inc.

Ded

uctib

les

–Fr

anch

ise

–re

quire

s th

e in

sure

r pay

for a

n en

tire

loss

ifth

elo

ssex

ceed

sa

certa

indo

llara

mou

nt.

loss

ifth

elo

ssex

ceed

sa

certa

indo

llara

mou

nt.

How

ever

, if t

he lo

ss d

oes

not e

xcee

d th

is a

mou

nt, t

he

insu

red

is re

quire

d to

pay

for t

he e

ntire

loss

.

–El

imin

atio

n pe

riod

–us

ed w

ith d

isab

ility

inco

me

polic

ies

and

long

-term

car

e in

sura

nce

18©

2011

Kap

lan,

Inc.

Prox

imat

e C

ause

•An

unb

roke

n ch

ain

of e

vent

s le

adin

g to

the

dire

ctlo

ssdi

rect

loss

–A

n in

sure

d pe

ril is

requ

ired

–“H

ad it

not

bee

n fo

r thi

soc

curr

ing,

that

wou

ld n

ot

have

occ

urre

d”

19©

2011

Kap

lan,

Inc.

Acc

iden

t Ver

sus

Occ

urre

nce

•Ac

cide

nt –

a su

dden

and

unf

ores

een

even

t at a

fix

edtim

ean

dpl

ace

fixed

time

and

plac

e

•O

ccur

renc

e –

loss

cau

sed

by c

ontin

ued

and

repe

ated

exp

osur

e to

the

sam

e pe

ril o

ver t

ime

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 6 6/23/2011 8:56:32 AM

7Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Elem

ents

of a

n In

sura

ble

Ris

k

•C

AN

HA

M –

Wha

t ins

urer

s re

quire

–Th

e ch

ance

of l

oss

mus

t be

calc

ulab

le

–Th

e pr

emiu

m m

ust b

e af

ford

able

to th

e av

erag

e co

nsum

er

–Th

e lo

ss s

houl

d be

non

-cat

astro

phic

–Th

ere

mus

t be

a la

rge

num

ber o

f hom

ogen

ous

(sim

ilar)

expo

sure

s

21©

2011

Kap

lan,

Inc.

–Th

e lo

ss s

houl

d be

acc

iden

tal

–Th

e lo

ss s

houl

d be

mea

sura

ble

in n

umbe

r and

dol

lar

amou

nt

Met

hods

of M

anag

ing

Ris

k

•A

void

ance

–av

oidi

ng a

par

ticul

ar a

ctiv

ity th

at

coul

dtu

rnin

toa

loss

coul

dtu

rnin

toa

loss

•R

educ

tion

–ta

king

act

ion

to re

duce

the

poss

ibilit

y of

a lo

ss

•R

eten

tion

–th

e in

sure

d ac

cept

s th

e po

ssib

ility

of a

loss

and

ass

umes

par

t of t

he ri

sk. A

22©

2011

Kap

lan,

Inc.

dedu

ctib

le is

a fo

rm o

f ret

entio

n si

nce

the

insu

red

reta

ins

that

am

ount

of t

he lo

ss.

Met

hods

of M

anag

ing

Ris

k

•Tr

ansf

er–

shift

ing

the

finan

cial

bur

den

of a

loss

fro

mth

ein

sure

dto

anot

herp

arty

This

isth

efro

mth

ein

sure

dto

anot

herp

arty

.Thi

sis

the

purp

ose

of in

sura

nce.

Usi

ng a

hol

d ha

rmle

ss

agre

emen

t is

an e

xam

ple

of tr

ansf

errin

g ris

k.

•Sh

arin

g–

the

chan

ce o

f los

s is

sha

red

amon

g m

any

indi

vidu

als

and

calle

d po

olin

g th

e ris

k (e

.g.,

rein

sura

nce)

23©

2011

Kap

lan,

Inc.

Fund

amen

tal P

rinci

ples

of

Insu

ranc

e C

ontr

acts

MN_P&C_CN.indb 7 6/23/2011 8:56:33 AM

8Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Inde

mni

ty

•R

esto

ring

the

insu

red

to a

ppro

xim

atel

y th

e sa

me

posi

tion

the

insu

red

was

inbe

fore

alo

ssTh

ispo

sitio

nth

ein

sure

dw

asin

befo

rea

loss

.Thi

spr

inci

ple

prev

ents

the

insu

red

from

mak

ing

a pr

ofit

from

a lo

ss.

25©

2011

Kap

lan,

Inc.

Inde

mni

ty

•W

ith p

rope

rty in

sura

nce,

the

conc

ept o

f act

ual

cash

valu

eun

derli

esth

epr

inci

ple

ofin

dem

nity

cash

valu

eun

derli

esth

epr

inci

ple

ofin

dem

nity

Act

ual c

ash

valu

e =

repl

acem

ent c

ost –

depr

ecia

tion

•W

ith h

ealth

insu

ranc

e, th

e in

sure

r util

izes

the

actu

al lo

ss s

usta

ined

by

the

insu

red

26©

2011

Kap

lan,

Inc.

Inde

mni

ty

•Th

ere

are

two

com

mon

exc

eptio

ns to

the

prin

cipl

eof

inde

mni

ty:

prin

cipl

eof

inde

mni

ty:

–R

epla

cem

ent c

ost r

eim

burs

es th

e in

sure

d fo

r da

mag

ed o

r des

troye

d pr

oper

ty w

ithou

t sub

tract

ing

depr

ecia

tion.

In o

ther

wor

ds, t

he in

sure

d re

ceiv

es

“new

for o

ld.”

–A

valu

edpo

licy

pays

the

face

amou

ntfo

rato

tall

oss

27©

2011

Kap

lan,

Inc.

Ava

lued

polic

ypa

ysth

efa

ceam

ount

fora

tota

llos

sre

gard

less

of t

he a

ctua

l cas

h va

lue

of th

e in

sure

d pr

oper

ty. L

ife in

sura

nce

is a

val

ued

polic

y th

at p

ays

a st

ated

sum

to th

e be

nefic

iary

upo

n th

e de

ath

of th

e in

sure

d.

Inde

mni

ty

•O

ther

insu

ranc

e pr

ovis

ions

app

ly w

hen

mor

e th

anon

epo

licy

cove

rsth

esa

me

loss

They

are

than

one

polic

yco

vers

the

sam

elo

ss.T

hey

are

desi

gned

to p

reve

nt th

e in

sure

d fro

m p

rofit

ing

from

a lo

ss.

–Pr

o-ra

ta li

abili

ty is

use

d w

ith li

fe/h

ealth

and

pr

oper

ty/c

asua

lty in

sura

nce.

If m

ore

than

one

pol

icy

cove

rsth

esa

me

loss

,eac

hin

sure

rwill

pay

a

28©

2011

Kap

lan,

Inc.

cove

rsth

esa

me

loss

,eac

hin

sure

rwill

pay

apr

opor

tiona

l sha

re o

f the

loss

.

–

MN_P&C_CN.indb 8 6/23/2011 8:56:33 AM

9Le

sson

One

Fu

ndam

enta

ls o

f In

sura

nce

Inde

mni

ty

•O

ther

insu

ranc

e pr

ovis

ions

(con

tinue

d)–

Prim

ary

and

exce

ss c

over

age

is u

sed

with

bot

h lif

e/he

alth

and

pro

perty

/cas

ualty

insu

ranc

e. T

he

prim

ary

insu

rer p

ays

first

; onc

e th

at c

over

age

has

been

exh

aust

ed, t

he e

xces

s in

sure

r pay

s.

–C

oord

inat

ion

of b

enef

its p

rovi

sion

s ap

ply

whe

n m

ore

than

one

grou

phe

alth

insu

ranc

epo

licy

cove

rs

29©

2011

Kap

lan,

Inc.

mor

eth

anon

egr

oup

heal

thin

sura

nce

polic

yco

vers

the

sam

e lo

ss

Insu

rabl

e In

tere

st

•Th

e po

licyh

olde

r mus

t inc

ur a

fina

ncia

l los

s or

so

me

othe

rtyp

eof

harm

shou

lda

loss

occu

rso

me

othe

rtyp

eof

harm

shou

lda

loss

occu

r–

In p

rope

rty a

nd c

asua

lty p

olic

ies,

the

insu

rabl

e in

tere

st m

ust e

xist

at t

he ti

me

of th

e lo

ss

–In

life

and

hea

lth in

sura

nce,

the

insu

rabl

e in

tere

st

mus

t exi

st a

t the

tim

e of

the

appl

icat

ion

30©

2011

Kap

lan,

Inc.

Insu

rabl

e In

tere

st

–E

xam

ple:

Dav

e so

ld h

is h

ome,

but

has

not

yet

ca

ncel

led

his

hom

eow

ners

polic

y.D

ave

wou

ldha

veca

ncel

led

his

hom

eow

ners

polic

y.D

ave

wou

ldha

veno

insu

rabl

e in

tere

st in

that

pro

perty

if a

fire

loss

oc

curr

ed d

ays

afte

r the

sal

e.

31©

2011

Kap

lan,

Inc.

Subr

ogat

ion

•G

ives

the

insu

rer t

he ri

ght t

o co

llect

from

a

negl

igen

tthi

rdpa

rtyaf

term

akin

ga

loss

paym

ent

negl

igen

tthi

rdpa

rtyaf

term

akin

ga

loss

paym

ent

to th

e in

sure

d–

It pr

even

ts th

e in

sure

d fro

m c

olle

ctin

g tw

ice

for t

he

sam

e lo

ss

–W

hen

an in

sure

r sub

roga

tes

agai

nst a

neg

ligen

t pa

rtyit

hold

sth

atpa

rtyre

spon

sibl

efo

rthe

loss

32©

2011

Kap

lan,

Inc.

party

,ith

olds

that

party

resp

onsi

ble

fort

helo

ss

MN_P&C_CN.indb 9 6/23/2011 8:56:34 AM

10

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Utm

ost G

ood

Faith

•A

requ

irem

ent t

hat t

here

be

no fr

aud,

co

ncea

lmen

tor

mis

repr

esen

tatio

nsbe

twee

nth

eco

ncea

lmen

t,or

mis

repr

esen

tatio

nsbe

twee

nth

eco

ntra

ctin

g pa

rties

•In

sura

nce

cont

ract

s as

sum

e th

at b

oth

parti

es w

ill

act i

n ut

mos

t goo

d fa

ith, e

spec

ially

at t

he ti

me

of

appl

icat

ion

33©

2011

Kap

lan,

Inc.

Utm

ost G

ood

Faith

•R

epre

sent

atio

ns–

stat

emen

ts in

the

appl

icat

ion

that

are

belie

ved

tobe

entir

ely

true

that

are

belie

ved

tobe

entir

ely

true

•M

isre

pres

enta

tions

–in

corr

ect s

tate

men

ts in

th

e ap

plic

atio

n th

at d

o no

t affe

ct th

e ap

plic

ant’s

in

sura

bilit

y

34©

2011

Kap

lan,

Inc.

Utm

ost G

ood

Faith

•M

ater

ial m

isre

pres

enta

tions

–in

corr

ect

stat

emen

tsin

the

appl

icat

ion

that

invo

lve

stat

emen

tsin

the

appl

icat

ion

that

invo

lve

info

rmat

ion

used

to m

ake

an u

nder

writ

ing

deci

sion

. The

insu

rer w

ill us

ually

voi

d co

vera

ge

if a

mat

eria

l mis

repr

esen

tatio

n is

dis

cove

red.

•C

once

alm

ent–

inte

ntio

nally

hid

ing

mat

eria

l d

itii

fti

fth

iTh

ii

35©

2011

Kap

lan,

Inc.

unde

rwrit

ing

info

rmat

ion

from

the

insu

rer.

This

isa

form

of i

nsur

ance

frau

d.

Utm

ost G

ood

Faith

•W

arra

nty

–a

stat

emen

t fou

nd in

the

polic

y th

at

mus

tbe

true

atth

etim

ea

loss

occu

rsTh

isis

am

ustb

etru

eat

the

time

alo

ssoc

curs

.Thi

sis

aco

nditi

on o

f cov

erag

e, a

nd th

e in

sure

r is

not

oblig

ated

to p

ay a

cla

im if

a w

arra

nty

has

been

br

each

ed.

36©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 10 6/23/2011 8:56:34 AM

11

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Con

trac

t Law

and

Insu

ranc

e

Elem

ents

of a

Leg

al C

ontr

act

•C

ompe

tent

par

ties

–In

sure

d m

ust b

e 18

, san

e, a

nd s

ober

–In

sure

r mus

t be

auth

oriz

ed to

sel

l ins

uran

ce in

M

inne

sota

•M

utua

l agr

eem

ent –

all p

artie

s m

ust f

reel

y en

ter

into

the

cont

ract

; the

re is

offe

r and

acc

epta

nce

38©

2011

Kap

lan,

Inc.

p

•La

wfu

l obj

ectiv

e –

mus

t not

hav

e en

tere

d in

to

the

cont

ract

for i

llega

l pur

pose

s

Elem

ents

of a

Leg

al C

ontr

act

•C

onsi

dera

tion

–an

exc

hang

e of

val

ue b

etw

een

the

parti

esto

the

cont

ract

the

parti

esto

the

cont

ract

–Th

e in

sure

r’s c

onsi

dera

tion

is a

pro

mis

e to

pro

vide

in

dem

nity

in th

e ev

ent o

f a lo

ss

–Th

e in

sure

d’s

cons

ider

atio

n is

the

insu

ranc

e pr

emiu

m

and

the

truth

ful r

epre

sent

atio

ns m

ade

on th

e ap

plic

atio

n

39©

2011

Kap

lan,

Inc.

appl

icat

ion

Elem

ents

of a

Leg

al C

ontr

act

•Si

gnat

ures

nee

ded

to v

alid

ate

an in

sura

nce

cont

ract

cont

ract

–Tw

o of

ficer

s of

the

insu

ranc

e co

mpa

ny m

ust s

ign

(e.g

., pr

esid

ent,

vice

pre

side

nt, s

ecre

tary

or a

ssis

tant

se

cret

ary)

•N

ote:

trea

sure

r is

not a

utho

rized

40©

2011

Kap

lan,

Inc.

–Fa

csim

iles

are

acce

ptab

le a

nd a

llow

ed (m

echa

nica

l re

prod

uctio

n)

MN_P&C_CN.indb 11 6/23/2011 8:56:35 AM

12

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Uni

que

Feat

ures

of I

nsur

ance

Con

trac

ts

•U

nila

tera

l con

tract

–on

ly o

ne p

arty

mak

es a

le

gally

enfo

rcea

ble

prom

ise

lega

llyen

forc

eabl

epr

omis

e

•C

ontra

ct o

f adh

esio

n –

the

insu

red

mus

t acc

ept

the

cont

ract

as-

is. A

ny a

mbi

guiti

es in

a c

ontra

ct

of a

dhes

ion

will

be in

terp

rete

d in

favo

r of t

he

insu

red.

41©

2011

Kap

lan,

Inc.

Uni

que

Feat

ures

of I

nsur

ance

Con

trac

ts

•Al

eato

ry c

ontra

ct –

an u

nequ

al v

alue

is

exch

ange

dbe

twee

nth

epa

rties

toth

eco

ntra

ctex

chan

ged

betw

een

the

parti

esto

the

cont

ract

(pre

miu

m v

ersu

s co

vera

ge)

•C

ondi

tiona

l con

tract

–th

e co

ntra

ct m

ay b

e vo

ided

if a

ll po

licy

cond

ition

s ar

e no

t met

42©

2011

Kap

lan,

Inc.

Bas

ic P

arts

of a

n In

sura

nce

Con

trac

t

Dec

lara

tions

•St

atem

ents

that

pro

vide

info

rmat

ion

abou

t the

pe

rson

orpr

oper

tyto

bein

sure

dpe

rson

orpr

oper

tyto

bein

sure

d–

Dec

lara

tions

pag

e fo

r pro

perty

/cas

ualty

insu

ranc

e in

clud

es th

e fo

llow

ing:

•P

rope

rty –

desc

ribes

the

prop

erty

bei

ng c

over

ed

by th

e po

licy

44©

2011

Kap

lan,

Inc.

•P

artie

s –

the

com

pany

, cus

tom

er, a

nd o

ther

s w

ith

an in

sura

ble

inte

rest

(e.g

., ba

nk);

the

nam

ed

insu

red

will

be

liste

d on

the

decl

arat

ions

pag

e

MN_P&C_CN.indb 12 6/23/2011 8:56:35 AM

13

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Dec

lara

tions

–D

ecla

ratio

ns p

age

for p

rope

rty/c

asua

lty in

sura

nce

incl

udes

the

follo

win

g(c

ontin

ued)

:in

clud

esth

efo

llow

ing

(con

tinue

d):

•P

erio

d of

cov

erag

e –

lists

the

date

and

tim

e co

vera

ge ta

kes

effe

ct a

nd te

rmin

ates

•P

olic

y lim

its –

the

max

imum

am

ount

the

insu

rer w

ill

pay

for l

osse

s

•Premium

the

amou

ntth

ein

sure

dm

ustp

ayto

45©

2011

Kap

lan,

Inc.

•Premium

–th

eam

ount

the

insu

red

mus

tpay

toke

ep th

e po

licy

in fo

rce

Dec

lara

tions

–D

ecla

ratio

ns p

age

for l

ife/h

ealth

insu

ranc

e in

clud

es

the

follo

win

g:th

efo

llow

ing:

•P

artie

s to

the

cont

ract

•Th

e po

licy

limit

•A

ge o

f the

insu

red

at is

sue

date

46©

2011

Kap

lan,

Inc.

Insu

ring

Agr

eem

ent

•Th

e in

sura

nce

com

pany

’s p

rom

ise

to p

ay fo

r co

vere

dpe

rils

cove

red

peril

s–

Nam

ed p

eril

polic

ies

only

cov

er lo

sses

from

per

ils

that

are

spe

cific

ally

list

ed in

the

polic

y

–O

pen

peril

/all-

risk

polic

ies

cove

r all

loss

es e

xcep

t th

ose

liste

d in

the

polic

y

47©

2011

Kap

lan,

Inc.

–Li

fe in

sura

nce

polic

ies

are

all-r

isk

polic

ies

that

cov

er

all c

ause

s of

dea

th, w

ith fe

w e

xcep

tions

Con

ditio

ns

•D

utie

s an

d re

spon

sibi

litie

s of

the

insu

red

and

the

insu

rer

insu

rer

48©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 13 6/23/2011 8:56:36 AM

14

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Excl

usio

ns

•Th

e pe

rils/

loss

es th

at a

re n

ot c

over

ed b

y th

e po

licy

polic

y

49©

2011

Kap

lan,

Inc.

Endo

rsem

ents

•M

odifi

catio

ns to

a p

rope

rty o

r cas

ualty

pol

icy;

m

ustb

ein

writ

ing

and

are

atta

ched

toth

em

ustb

ein

writ

ing,

and

are

atta

ched

toth

ein

sura

nce

polic

y

50©

2011

Kap

lan,

Inc.

Rid

ers

•M

odifi

catio

ns to

a li

fe o

r hea

lth p

olic

y; m

ust b

e in

w

ritin

gan

dar

eat

tach

edto

the

insu

ranc

epo

licy

writ

ing

and

are

atta

ched

toth

ein

sura

nce

polic

y

51©

2011

Kap

lan,

Inc.

Def

initi

ons

•D

efin

es c

erta

in w

ords

and

thei

r mea

ning

(e.g

., bo

dily

inju

rym

otor

vehi

cle

orre

side

nce

bodi

lyin

jury

,mot

orve

hicl

e,or

resi

denc

eem

ploy

ee);

foun

d in

pro

perty

/cas

ualty

pol

icie

s

52©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 14 6/23/2011 8:56:36 AM

15

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Type

s of

Insu

ranc

e C

ompa

nies

Priv

ate

Insu

rers

•Pr

ivat

e-se

ctor

org

aniz

atio

ns th

at s

ell a

var

iety

of

insu

ranc

ein

clud

ing

life

heal

thpr

oper

tyan

din

sura

nce

incl

udin

glif

e,he

alth

,pro

perty

,and

casu

alty

pol

icie

s. T

here

are

sev

eral

type

s of

pr

ivat

e in

sure

rs.

54©

2011

Kap

lan,

Inc.

Priv

ate

Insu

rers

•M

utua

l ins

urer

s –

not-f

or-p

rofit

cor

pora

tions

th

atse

llin

sura

nce

toth

ege

nera

lpub

licth

atse

llin

sura

nce

toth

ege

nera

lpub

lic–

Ow

ned

by th

eir p

olic

yhol

ders

–M

anag

ed b

y a

boar

d of

dire

ctor

s

55©

2011

Kap

lan,

Inc.

Priv

ate

Insu

rers

•M

utua

l ins

urer

s(c

ontin

ued)

Sll

PA

R(

tii

ti)

lii

–S

ellP

AR

(par

ticip

atin

g) p

olic

ies

•P

AR

pol

icie

s pa

y di

vide

nds

to p

olic

yhol

ders

if th

e in

sure

r’s re

venu

e ex

ceed

s op

erat

ing

expe

nses

an

d re

serv

e re

quire

men

ts

•Th

ese

divi

dend

s ar

e co

nsid

ered

a re

fund

of

over

paid

pre

miu

m a

nd a

re n

ot ta

xabl

e

56©

2011

Kap

lan,

Inc.

–N

on-a

sses

sabl

e –

they

are

requ

ired

to s

et m

oney

as

ide

in re

serv

e in

cas

e th

eir c

laim

s ex

perie

nce

is

high

er th

an a

ntic

ipat

ed. N

on-a

sses

sabl

e in

sure

rs a

re

som

etim

es re

ferr

ed to

as

lega

l res

erve

com

pani

es.

MN_P&C_CN.indb 15 6/23/2011 8:56:36 AM

16

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Priv

ate

Insu

rers

•St

ock

insu

rers

–fo

r-pr

ofit

corp

orat

ions

that

sel

l in

sura

nce

toth

ege

nera

lpub

licin

sura

nce

toth

ege

nera

lpub

lic–

Ow

ned

by th

eir s

hare

hold

ers

–M

anag

ed b

y a

boar

d of

dire

ctor

s

–Ty

pica

lly s

ell n

on-P

AR

(non

-par

ticip

atin

g) p

olic

ies

•P

olic

yhol

ders

are

not

elig

ible

to re

ceiv

e di

vide

nds

57©

2011

Kap

lan,

Inc.

•H

owev

er, i

f the

com

pany

is p

rofit

able

, sh

areh

olde

rs m

ay re

ceiv

e ta

xabl

e di

vide

nds

–N

on-a

sses

sabl

e (le

gal r

eser

ve c

ompa

nies

)

Priv

ate

Insu

rers

•Fr

ater

nal i

nsur

ers

–no

t-for

-pro

fit o

rgan

izat

ions

th

atse

llin

sura

nce

toin

divi

dual

sth

atm

eet

that

sell

insu

ranc

eto

indi

vidu

als

that

mee

tm

embe

rshi

p cr

iteria

–O

wne

d by

thei

r pol

icyh

olde

rs

–M

anag

ed b

y th

e lo

dge

syst

em, w

hich

is a

mor

e re

pres

enta

tive

form

of g

over

nmen

t

58©

2011

Kap

lan,

Inc.

–S

ell P

AR

(par

ticip

atin

g) p

olic

ies

–M

ay a

sses

s th

eir p

olic

yhol

ders

Priv

ate

Insu

rers

•To

wns

hip

mut

ual

–A

sses

sabl

e, b

ut m

ust m

aint

ain

a m

inim

um re

serv

e of

$3

00,0

00

–Tw

enty

-five

or m

ore

mem

bers

livi

ng in

adj

oini

ng

coun

ties

–M

ust h

ave

$50,

000

wor

th o

f col

lect

ivel

y ow

ned

t

59©

2011

Kap

lan,

Inc.

prop

erty

Priv

ate

Insu

rers

•R

ecip

roca

l exc

hang

e–

Indi

vidu

als

insu

ring

each

oth

er

–M

anag

ed b

y an

atto

rney

-in-fa

ct

60©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 16 6/23/2011 8:56:37 AM

17

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Priv

ate

Insu

rers

•Su

rplu

s lin

es in

sure

rs–

Writ

e po

licie

s th

at c

over

uni

que,

one

-of-a

-kin

d ris

ks

that

oth

er in

sure

rs w

ill n

ot c

over

–If

an in

sura

nce

prod

uct i

s un

avai

labl

e th

roug

h lic

ense

d ca

rrie

rs, c

onsu

mer

s m

ay w

ork

thro

ugh

surp

lus

lines

insu

rers

and

pur

chas

e th

e pr

oduc

t fro

m

ano

n-ad

mitt

edca

rrie

r(an

insu

rern

otlic

ense

dto

sell

61©

2011

Kap

lan,

Inc.

ano

nad

mitt

edca

rrie

r(an

insu

rern

otlic

ense

dto

sell

in th

eir s

tate

)

Cla

ssifi

catio

n of

Priv

ate

Insu

rers

•D

omes

tic c

ompa

ny –

inco

rpor

ated

, org

aniz

ed, o

r do

mic

iled

unde

rthe

law

sof

Min

neso

tado

mic

iled

unde

rthe

law

sof

Min

neso

ta

•Fo

reig

n co

mpa

ny –

inco

rpor

ated

, org

aniz

ed, o

r do

mic

iled

unde

r the

law

s of

ano

ther

sta

te

•Al

ien

com

pany

–in

corp

orat

ed, o

rgan

ized

, or

dom

icile

d un

der t

he la

ws

of a

noth

er c

ount

ry

62©

2011

Kap

lan,

Inc.

y

Gov

ernm

ent I

nsur

ers

•St

ate

or fe

dera

l gov

ernm

ent a

genc

ies

that

pr

ovid

ein

sura

nce

toth

ege

nera

lpub

lic(e

gpr

ovid

ein

sura

nce

toth

ege

nera

lpub

lic(e

.g.,

Med

icar

e, S

ocia

l Sec

urity

, Min

neso

ta

Com

preh

ensi

ve H

ealth

Ass

ocia

tion,

and

N

atio

nal F

lood

Insu

ranc

e P

rogr

am)

63©

2011

Kap

lan,

Inc.

Occ

upat

ions

and

Pro

fess

iona

l D

esig

natio

ns

MN_P&C_CN.indb 17 6/23/2011 8:56:37 AM

18

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Prod

ucer

•Le

gally

repr

esen

ts th

e in

sure

r and

has

the

auth

ority

toac

ton

the

insu

rer’s

beha

lfAl

lau

thor

ityto

acto

nth

ein

sure

rsbe

half.

All

prod

ucer

s (a

lso

calle

d ag

ents

) mus

t be

prop

erly

lic

ense

d be

fore

they

are

abl

e to

sel

l ins

uran

ce.

65©

2011

Kap

lan,

Inc.

Solic

itor

•An

indi

vidu

al w

ho h

as b

een

appo

inte

d an

d au

thor

ized

byan

agen

tto

serv

eas

the

agen

t’sau

thor

ized

byan

agen

tto

serv

eas

the

agen

tsre

pres

enta

tive.

Sol

icito

rs m

ay a

id th

e ag

ent w

ith

sale

s ac

tiviti

es o

r ser

ve a

s a

cust

omer

ser

vice

re

pres

enta

tive.

Sol

icito

rs a

re s

ubje

ct to

the

sam

e lic

ensi

ng re

quire

men

ts a

s ag

ents

.

66©

2011

Kap

lan,

Inc.

Bro

ker

•Le

gally

repr

esen

ts th

e in

sure

d an

d ne

gotia

tes

a co

ntra

ctof

insu

ranc

eon

the

insu

red’

sbe

half

cont

ract

ofin

sura

nce

onth

ein

sure

ds

beha

lf.B

roke

rs a

re s

ubje

ct to

the

sam

e lic

ensi

ng

requ

irem

ents

as

agen

ts. M

inne

sota

law

doe

s no

t re

cogn

ize

the

exis

tenc

e of

insu

ranc

e br

oker

s.

67©

2011

Kap

lan,

Inc.

Surp

lus

Line

s A

gent

•H

olds

a s

epar

ate

licen

se to

pla

ce b

usin

ess

with

no

nad

mitt

ed(s

urpl

uslin

es)i

nsur

ers

Sur

plus

non-

adm

itted

(sur

plus

lines

)ins

urer

s.S

urpl

uslin

es in

sure

rs u

nder

writ

e un

ique

, one

-of-a

-kin

d ris

ks.

68©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 18 6/23/2011 8:56:38 AM

19

Less

on O

ne

Fund

amen

tals

of

Insu

ranc

e

Oth

er O

ccup

atio

ns

•Th

ese

indi

vidu

als

do n

ot n

eed

a pr

oduc

er’s

lic

ense

licen

se–

Und

erw

riter

–ev

alua

tes

new

risk

s fo

r an

insu

rer t

o de

term

ine

whe

ther

or n

ot th

e ris

k m

eets

the

insu

rer’s

st

anda

rd g

uide

lines

–A

ctua

ry –

a hi

ghly

trai

ned

stat

istic

ian

who

is

resp

onsi

ble

ford

eter

min

ing

the

rate

san

dre

serv

e

69©

2011

Kap

lan,

Inc.

resp

onsi

ble

ford

eter

min

ing

the

rate

san

dre

serv

ere

quire

men

ts fo

r the

insu

rer

Oth

er O

ccup

atio

ns

–A

djus

ter –

inve

stig

ates

, eva

luat

es, a

nd s

ettle

s cl

aim

s on

beha

lfof

the

insu

red

orin

sure

ron

beha

lfof

the

insu

red

orin

sure

r

•In

depe

nden

t adj

uste

r –se

ttles

loss

es o

n be

half

of

mor

e th

an o

ne in

sure

r

•P

ublic

adj

uste

r –ac

ts s

olel

y to

repr

esen

t the

in

tere

sts

of th

e in

sure

d

•S

taff

adju

ster

anem

ploy

eeof

the

insu

ranc

e

70©

2011

Kap

lan,

Inc.

•S

taff

adju

ster

–an

empl

oyee

ofth

ein

sura

nce

com

pany

adj

ustin

g lo

sses

sol

ely

for t

hat c

ompa

ny

Prof

essi

onal

Des

igna

tions

•In

sura

nce

prof

essi

onal

s ca

n ob

tain

incr

ease

d sp

ecia

lizat

ion

and

enha

nced

cred

ibilit

yby

spec

ializ

atio

nan

den

hanc

edcr

edib

ility

byob

tain

ing

a pr

ofes

sion

al d

esig

natio

n th

at is

ea

rned

thro

ugh

curr

icul

um s

tudy

and

test

ing

71©

2011

Kap

lan,

Inc.

Prof

essi

onal

Des

igna

tions

•Ex

ampl

es in

clud

e, b

ut a

re n

ot li

mite

d to

, the

fo

llow

ing:

follo

win

g:–

Cha

rtere

d P

rope

rty C

asua

lty U

nder

writ

er (C

PC

U®)

–C

harte

red

Life

Und

erw

riter

(CLU

®)

–C

ertif

ied

Insu

ranc

e C

ouns

elor

(CIC

)

–A

ccre

dite

dA

dvis

orin

Insu

ranc

e(A

AI)

72©

2011

Kap

lan,

Inc.

Acc

redi

ted

Adv

isor

inIn

sura

nce

(AA

I)

–A

ssoc

iate

in R

isk

Man

agem

ent (

AR

M)

–A

ssoc

iate

in P

erso

nal I

nsur

ance

(AP

I)

MN_P&C_CN.indb 19 6/23/2011 8:56:38 AM

MN_P&C_CN.indb 20 6/23/2011 8:56:38 AM

Lesson twooverview of Property insurance

MN_P&C_CN.indb 21 6/23/2011 8:56:38 AM

22

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Less

onTw

oLe

sson

Two

Ove

rvie

w o

f Pro

pert

y In

sura

nce

Intr

oduc

tion

Prop

erty

Insu

ranc

e

•Pr

oper

ty in

sura

nce

cove

rs th

e in

sure

d’s

real

es

tate

and

pers

onal

prop

erty

agai

nstd

amag

eor

esta

tean

dpe

rson

alpr

oper

tyag

ains

tdam

age

orlo

ss d

ue to

cov

ered

per

ils

•Pe

rson

al in

sura

nce

is d

esig

ned

for i

ndiv

idua

ls–

Exa

mpl

es in

clud

e au

to, h

omeo

wne

rs, a

nd w

ater

craf

t

•C

omm

erci

al in

sura

nce

is in

sura

nce

for

bi

fi

3©

2011

Kap

lan,

Inc.

busi

ness

es o

f any

siz

e–

Exa

mpl

es in

clud

e co

mm

erci

al p

rope

rty in

sura

nce,

the

busi

ness

owne

rs p

olic

y, a

nd in

land

mar

ine

insu

ranc

e

Peril

For

ms

•U

sed

to d

etai

l the

spe

cific

per

ils (c

ause

s of

loss

) th

atar

eco

vere

dby

apr

oper

tyin

sura

nce

polic

yth

atar

eco

vere

dby

apr

oper

tyin

sura

nce

polic

y

•Al

l pro

perty

insu

ranc

e po

licie

s re

fere

nce

a pe

ril

form –N

amed

per

il fo

rm li

sts,

or n

ames

, the

per

ils c

over

ed

by th

e po

licy

4©

2011

Kap

lan,

Inc.

•C

omm

on c

over

ed p

erils

incl

ude

prop

erty

dam

age

due

to fi

re, l

ight

ning

, win

dsto

rm, h

ail,

and

expl

osio

n

MN_P&C_CN.indb 22 6/23/2011 8:56:39 AM

23

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Peril

For

ms

•Al

l pro

perty

insu

ranc

e po

licie

s re

fere

nce

a pe

ril

form

(con

tinue

d)fo

rm(c

ontin

ued)

–O

pen

peril

form

list

s th

e pe

rils

not c

over

ed b

y th

e po

licy

•C

over

s di

rect

loss

cau

sed

by a

nyth

ing

exce

pt th

e pe

rils

liste

d

5©

2011

Kap

lan,

Inc.

•C

omm

on e

xclu

sion

s in

clud

e m

echa

nica

l br

eakd

own,

ear

thqu

ake,

floo

d, a

nd w

ear a

nd te

ar

Hom

eow

ners

Insu

ranc

e

ISO

Hom

eow

ners

Pol

icy

•A

stan

dard

ized

insu

ranc

e po

licy

draf

ted

by th

e In

sura

nce

Ser

vice

sO

ffice

(ISO

)In

sura

nce

Ser

vice

sO

ffice

(ISO

)

•U

sed

by m

ost i

nsur

ers

as th

e ba

sis

for t

heir

own

hom

eow

ners

pol

icie

s

•A

pack

age

polic

y th

at c

over

s bo

th p

rope

rty a

nd

liabi

lity

expo

sure

s fo

r the

ave

rage

hom

eow

ner

7©

2011

Kap

lan,

Inc.y

pg

ISO

Hom

eow

ners

Pol

icy

•R

esid

entia

l stru

ctur

es w

ith o

ne to

four

uni

ts a

re

elig

ible

forc

over

age

aslo

ngas

atle

asto

neof

elig

ible

forc

over

age

aslo

ngas

atle

asto

neof

the

units

is o

wne

r occ

upie

d

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 23 6/23/2011 8:56:39 AM

24

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Sect

ion

I –Pr

oper

ty C

over

age

•D

wel

ling

–In

sure

s th

e dw

ellin

g pl

us a

ny a

ttach

ed s

truct

ures

•O

ther

stru

ctur

es–

Pol

icy

limit

is 1

0% o

f Cov

erag

e A

–C

over

s ot

her s

truct

ures

on

the

prem

ises

not

atta

ched

to

the

dwel

ling

9©

2011

Kap

lan,

Inc.

toth

edw

ellin

g

Sect

ion

I –Pr

oper

ty C

over

age

•Pe

rson

al p

rope

rty (c

onte

nts)

–P

olic

y lim

it is

50%

of C

over

age

A

–C

over

s pe

rson

al p

rope

rty d

amag

ed b

y a

cove

red

peril

•Lo

ss o

f use

(add

ition

al li

ving

exp

ense

s)–

The

polic

y lim

it de

pend

s on

the

type

of p

olic

y;

typi

cally

30%

ofC

over

age

A

10©

2011

Kap

lan,

Inc.

typi

cally

30%

ofC

over

age

A

Sect

ion

I –Pr

oper

ty C

over

age

•Lo

ss o

f use

(con

tinue

d)–

Cov

ers

addi

tiona

l liv

ing

expe

nses

incu

rred

by

the

insu

red

whe

n th

e pr

oper

ty is

dam

aged

by

a co

vere

d pe

ril

–C

over

s fa

ir re

ntal

val

ue fo

r any

par

t of t

he in

sure

d pr

emis

es th

at is

hel

d ou

t for

rent

al to

oth

ers

when

the

prop

erty

isda

mag

edby

aco

vere

dpe

ril

11©

2011

Kap

lan,

Inc.

prop

erty

isda

mag

edby

aco

vere

dpe

ril

Prop

erty

Exc

lusi

ons

•Pr

oper

ty in

sure

d on

ano

ther

pol

icy

•An

imal

s, b

irds,

and

fish

•Pr

oper

ty o

f ren

ters

•M

otor

ized

veh

icle

s –

unle

ss u

sed

to m

aint

ain

the

prem

ises

or a

ssis

t the

han

dica

pped

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 24 6/23/2011 8:56:39 AM

25

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Sect

ion

II –

Liab

ility

Cov

erag

e

•Pe

rson

al li

abilit

y–

Cov

erag

e ex

tend

s to

bod

ily in

jury

and

pro

perty

da

mag

e oc

curr

ing

on o

r aw

ay fr

om th

e in

sure

d pr

emis

es

•M

edic

al p

aym

ents

to o

ther

s–

Cov

ers

the

med

ical

exp

ense

s of

oth

ers

(gue

st

13©

2011

Kap

lan,

Inc.

med

ical

)

–Th

e in

sure

d do

es n

ot n

eed

to b

e le

gally

liab

le fo

r be

nefit

s to

be

prov

ided

Liab

ility

Exc

lusi

ons

•Bu

sine

ss o

pera

tions

•Au

to a

nd a

ircra

ft lia

bilit

y

•W

ater

craf

t lia

bilit

y –

ther

e is

lim

ited

cove

rage

w

hen

usin

g bo

ats

depe

ndin

g on

the

type

of

mot

or, h

orse

pow

er o

f the

mot

or, a

nd w

heth

er

the

boat

is o

wne

d or

not

14©

2011

Kap

lan,

Inc.

•In

tent

iona

l act

s

Dw

ellin

g Pr

oper

ty In

sura

nce

ISO

Dw

ellin

g Pr

oper

ty P

olic

y

•A

stan

dard

ized

pol

icy

used

to in

sure

dw

ellin

gs

note

ligib

lefo

raho

meo

wne

rspo

licy

note

ligib

lefo

raho

meo

wne

rspo

licy

•A

prop

erty

cou

ld b

e in

elig

ible

bec

ause

of t

he

insu

ranc

e co

mpa

ny’s

und

erw

ritin

g gu

idel

ines

, or

beca

use

it’s

not o

wne

r occ

upie

d

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 25 6/23/2011 8:56:40 AM

26

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

ISO

Dw

ellin

g Pr

oper

ty P

olic

y

•Pr

ovid

es p

rope

rty c

over

age

only

, sim

ilar t

o th

at

onth

eho

meo

wne

rspo

licy

onth

eho

meo

wne

rspo

licy

•Li

abilit

y co

vera

ge m

ust b

e ad

ded

with

an

endo

rsem

ent

17©

2011

Kap

lan,

Inc.

ISO

Dw

ellin

g Pr

oper

ty P

olic

y

•In

sure

s on

e to

four

-uni

t stru

ctur

es; t

he s

truct

ure

isno

treq

uire

dto

beow

ner

occu

pied

isno

treq

uire

dto

beow

ner-

occu

pied

•O

ften

this

pol

icy

is u

sed

to in

sure

rent

al

prop

erty

, cab

ins,

or s

econ

dary

hom

es

18©

2011

Kap

lan,

Inc.

ISO

Dw

ellin

g Pr

oper

ty P

olic

y

•Pr

oper

ty c

over

ed in

clud

es th

e dw

ellin

g an

d at

tach

edst

ruct

ures

othe

rstru

ctur

esan

dat

tach

edst

ruct

ures

,oth

erst

ruct

ures

,and

pers

onal

pro

perty

•Lo

ss o

f use

is c

over

ed fo

r add

ition

al li

ving

ex

pens

es in

curre

d by

the

insu

red,

as

wel

l as

rent

al re

venu

e th

e in

sure

d lo

ses

19©

2011

Kap

lan,

Inc.

•C

over

age

only

app

lies

whe

n th

e st

ruct

ure

is

dam

aged

by

a co

vere

d pe

ril

Com

mer

cial

Pro

pert

y In

sura

nce

MN_P&C_CN.indb 26 6/23/2011 8:56:40 AM

27

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Com

mer

cial

Pro

pert

y Po

licy

•Th

e In

sura

nce

Ser

vice

s O

ffice

(IS

O)

Com

mer

cial

Pro

perty

Pol

icy

insu

res

build

ings

Com

mer

cial

Pro

perty

Pol

icy

insu

res

build

ings

,ot

her s

truct

ures

, and

ow

ned

pers

onal

pro

perty

ag

ains

t dam

age

due

to c

over

ed p

erils

21©

2011

Kap

lan,

Inc.

Com

mer

cial

Pro

pert

y Po

licy

Cov

erag

e

•Bu

ildin

gs a

nd o

ther

stru

ctur

es o

n th

e pr

emis

es–

Incl

udes

fixt

ures

, flo

or c

over

ings

, and

equ

ipm

ent

atta

ched

to th

e bu

ildin

g

•Bu

sine

ss p

erso

nal p

rope

rty o

wne

d by

the

busi

ness

–In

clud

es s

tock

or i

nven

tory

22©

2011

Kap

lan,

Inc.

y

•Pe

rson

al p

rope

rty o

f oth

ers

in th

e ca

re, c

usto

dy,

or c

ontro

l of t

he b

usin

ess

Com

mer

cial

Pro

pert

y Po

licy

Excl

usio

ns

•Pr

oper

ty in

sure

d on

ano

ther

pol

icy

•Ai

rcra

ft an

d m

otor

ized

veh

icle

s

•Po

wer

boa

ts

•D

etac

hed

outd

oor s

igns

•An

imal

s an

d pe

ts

23©

2011

Kap

lan,

Inc.

p

•Ac

coun

ts, b

ills,

cur

renc

y, m

oney

, and

sec

uriti

es

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

Cov

erag

e•C

an b

e ad

ded

to th

e C

omm

erci

al P

rope

rty

Pol

icy

toin

sure

agai

nstl

oss

ofus

eex

posu

res

Pol

icy

toin

sure

agai

nstl

oss

ofus

eex

posu

res

aris

ing

whe

n th

e in

sure

d pr

emis

es is

dam

aged

or

des

troye

d by

a c

over

ed p

eril

24©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 27 6/23/2011 8:56:41 AM

28

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

Cov

erag

e•Pa

ys fo

r los

s of

the

insu

red’

s ne

t inc

ome

whe

nth

epr

oper

tyis

dam

aged

bya

cove

red

peril

and

the

prop

erty

isda

mag

edby

aco

vere

dpe

rilan

dth

e bu

sine

ss m

ust c

lose

•Pa

ys fo

r any

exp

ense

sin

curr

ed to

min

imiz

e th

e su

spen

sion

of b

usin

ess

and

cont

inue

ope

ratio

ns

at th

e in

sure

d pr

emis

es o

r a re

plac

emen

t i

25©

2011

Kap

lan,

Inc.

prem

ises

Bus

ines

sow

ners

Pol

icy

(BO

P)

Bus

ines

sow

ners

Pol

icy

•Pr

e-pa

ckag

ed p

olic

y av

aila

ble

for s

mal

l and

m

ediu

msi

zed

busi

ness

esm

ediu

msi

zed

busi

ness

es

•C

ombi

nes

prop

erty

, los

s of

inco

me,

liab

ility,

and

cr

ime

cove

rage

•D

epen

ding

on

the

busi

ness

type

, bus

ines

ses

mus

t not

exc

eed

a ce

rtain

squ

are

foot

age

size

27©

2011

Kap

lan,

Inc.

qg

or g

ross

ann

ual s

ales

to b

e el

igib

le fo

r cov

erag

e on

the

polic

y

Bus

ines

sow

ners

Pol

icy

•Ex

ampl

es o

f elig

ible

busi

ness

es in

clud

e ba

kerie

sco

nven

ienc

est

ores

dry

clea

ners

bake

ries,

conv

enie

nce

stor

es,d

rycl

eane

rs,

hard

war

e st

ores

, and

sm

all r

esta

uran

ts

•Ex

ampl

es o

f ine

ligib

lebu

sine

sses

incl

ude

auto

re

pair

shop

s, fa

rms,

bar

s, b

anks

, cre

dit u

nion

s,

and

man

ufac

turin

g op

erat

ions

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 28 6/23/2011 8:56:41 AM

29

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Inla

nd M

arin

e C

over

age

Inla

nd M

arin

e Fl

oate

rs

•In

land

mar

ine

float

ers

insu

re p

rope

rty th

at is

po

rtabl

ein

natu

reor

has

ahi

ghin

here

ntva

lue

porta

ble

inna

ture

orha

sa

high

inhe

rent

valu

e

•Th

ese

are

polic

ies

inde

pend

ent o

f a c

omm

erci

al

prop

erty

or b

usin

esso

wne

rs p

olic

y

30©

2011

Kap

lan,

Inc.

Bai

lee’

s C

usto

mer

Flo

ater

•D

esig

ned

to in

sure

the

prop

erty

of c

usto

mer

s th

atis

inth

eca

recu

stod

yor

cont

rolo

fath

atis

inth

eca

re,c

usto

dy,o

rcon

trolo

fabu

sine

ss–

Use

d fre

quen

tly b

y dr

y cl

eani

ng e

stab

lishm

ents

, te

levi

sion

repa

ir sh

ops,

and

oth

er b

usin

esse

s th

at

take

pos

sess

ion

of c

usto

mer

s’ p

rope

rty

31©

2011

Kap

lan,

Inc.

Inst

alla

tion

Floa

ter

•D

esig

ned

to in

sure

pro

perty

that

is b

eing

de

liver

edto

orin

stal

led

inth

epr

emis

esof

ade

liver

edto

,ori

nsta

lled

in,t

hepr

emis

esof

acu

stom

er

32©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 29 6/23/2011 8:56:42 AM

30

Less

on T

wo

Ove

rvie

w o

f Pr

oper

ty In

sura

nce

Out

door

Sig

ns F

loat

er

•D

esig

ned

to in

sure

out

door

sig

ns th

at c

anno

t be

insu

red

byth

eco

mm

erci

alpr

oper

typo

licy

insu

red

byth

eco

mm

erci

alpr

oper

typo

licy

33©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 30 6/23/2011 8:56:42 AM

Lesson threeoverview of Casualty insurance

MN_P&C_CN.indb 31 6/23/2011 8:56:42 AM

32

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Less

onTh

ree

Less

onTh

ree

Ove

rvie

w o

f Cas

ualty

In

sura

nce

Cas

ualty

Insu

ranc

e

•C

asua

lty (l

iabi

lity)

insu

ranc

e pr

otec

ts th

e in

sure

d fro

mfin

anci

allo

ssas

are

sult

ofbe

ing

from

finan

cial

loss

asa

resu

ltof

bein

gre

spon

sibl

e, o

r lia

ble,

for l

oss

to a

noth

er p

erso

n or

ano

ther

per

son’

s pr

oper

ty

2©

2011

Kap

lan,

Inc.

Pers

onal

Aut

o In

sura

nce

Pers

onal

Aut

o Po

licy

•A

stan

dard

pol

icy

writ

ten

by th

e In

sura

nce

Ser

vice

sO

ffice

(ISO

)whi

chis

used

bym

ost

Ser

vice

sO

ffice

(ISO

)whi

chis

used

bym

ost

insu

rers

as

the

basi

s fo

r the

ir ow

n au

to p

olic

ies

•C

onta

ins

four

sec

tions

that

are

des

igne

d to

co

ver m

ost o

f the

risk

s as

soci

ated

with

ow

ning

an

d op

erat

ing

a m

otor

veh

icle

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 32 6/23/2011 8:56:43 AM

33

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Pers

onal

Aut

o Po

licy

Cov

erag

es

•Li

abilit

y–

Cov

ers

liabi

lity

to a

noth

er fo

r bod

ily in

jury

or p

rope

rty

dam

age

caus

ed b

y an

insu

red

–Ty

pica

lly a

spl

it lim

it of

liab

ility

–30

/60/

10

•$3

0,00

0 pe

r per

son

for b

odily

inju

ry

•$6

0,00

0pe

racc

iden

tfor

bodi

lyin

jury

5©

2011

Kap

lan,

Inc.$6

0,00

0pe

racc

iden

tfor

bodi

lyin

jury

•$1

0,00

0 pe

r acc

iden

t for

pro

perty

dam

age

Pers

onal

Aut

o Po

licy

Cov

erag

es

•M

edic

al p

aym

ents

(per

sona

l inj

ury

prot

ectio

n)–

Cov

ers

med

ical

exp

ense

s of

an

insu

red

that

resu

lt fro

m a

n au

to a

ccid

ent

–B

enef

its a

re p

ayab

le w

heth

er th

e in

sure

d is

the

driv

er,

a pa

ssen

ger,

a pe

dest

rian,

or w

as g

ettin

g in

to o

r out

of

an

auto

Pt

ddl

fh

itf

lt

6©

2011

Kap

lan,

Inc.

–P

aym

ents

are

mad

e re

gard

less

of w

hois

atf

ault

Pers

onal

Aut

o Po

licy

Cov

erag

es

•U

nins

ured

and

und

erin

sure

d m

otor

ist c

over

age

(UM/UIM)

(UM/UIM)

–C

over

s bo

dily

inju

ry s

usta

ined

by

the

insu

red

in a

n ac

cide

nt fo

r whi

ch a

noth

er d

river

is re

spon

sibl

e

–P

ays

whe

n th

e at

-faul

t driv

er d

oes

not h

ave

any

liabi

lity

insu

ranc

e, o

r doe

s no

t hav

e en

ough

liab

ility

in

sura

nce

7©

2011

Kap

lan,

Inc.

insu

ranc

e

–If

the

insu

red

is a

t-fau

lt, th

ere

is n

o co

vera

ge u

nder

th

is s

ectio

n of

the

polic

y

Pers

onal

Aut

o Po

licy

Cov

erag

es

•Ph

ysic

al d

amag

e–

Col

lisio

n co

vera

ge –

cove

rs d

amag

e to

the

insu

red

vehi

cle

caus

ed b

y im

pact

with

ano

ther

obj

ect o

r ov

ertu

rnin

g of

the

vehi

cle;

invo

lves

a d

educ

tible

–C

ompr

ehen

sive

cov

erag

e –

cove

rs d

amag

e to

the

insu

red

vehi

cle

caus

ed b

y flo

od, v

anda

lism

, fire

, hai

l, w

ind,

glas

sbr

eaka

ge,t

heft,

expl

osio

n,ea

rthqu

ake,

8©

2011

Kap

lan,

Inc.

win

d,gl

ass

brea

kage

,the

ft,ex

plos

ion,

earth

quak

e,fa

lling

obj

ects

, and

con

tact

with

a b

ird o

r ani

mal

; in

volv

es a

ded

uctib

le

MN_P&C_CN.indb 33 6/23/2011 8:56:43 AM

34

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Stan

dard

Pol

icy

Excl

usio

ns

•W

hile

eng

aged

in th

e bu

sine

ss o

f sel

ling,

re

pairi

ngse

rvic

ing

stor

ing

orpa

rkin

gre

pairi

ng,s

ervi

cing

,sto

ring,

orpa

rkin

gau

tom

obile

s

•Li

very

veh

icle

s (ta

xi, l

imou

sine

, or d

eliv

ery

vehi

cle)

•Au

tos

used

as

a re

side

nce

9©

2011

Kap

lan,

Inc.

•Ph

ysic

al d

amag

e ca

used

by

freez

ing

or w

ear

and

tear

Min

neso

ta N

o-Fa

ult L

aw

•O

ne o

f sev

eral

law

s th

at g

over

n th

e sa

le a

nd

purc

hase

ofau

toin

sura

nce

inM

inne

sota

purc

hase

ofau

toin

sura

nce

inM

inne

sota

•R

equi

res

vehi

cle

owne

rs to

insu

re th

e ve

hicl

es

they

ow

n an

d op

erat

e w

ith c

erta

in m

anda

tory

co

vera

ges

–Li

abili

ty –

min

imum

lim

it of

30/

60/1

0

10©

2011

Kap

lan,

Inc.

–P

erso

nal i

njur

y pr

otec

tion

–m

inim

um b

enef

it of

$4

0,00

0

–U

nins

ured

/und

erin

sure

d m

otor

ist –

min

imum

lim

it of

25

/50

Pers

onal

Um

brel

la P

olic

y

Pers

onal

Um

brel

la P

olic

y

•P

rovi

des

indi

vidu

als

with

bro

ad-b

ased

liab

ility

prot

ectio

npr

otec

tion

•P

rovi

des

addi

tiona

l cov

erag

e if

the

insu

red

exha

usts

all

liabi

lity

prot

ectio

n av

aila

ble

unde

r a h

omeo

wne

rs o

r aut

o po

licy

•B

road

ens

the

cove

rage

ava

ilabl

e to

the

insu

red

by

cove

ring

addi

tiona

l lia

bilit

y ex

posu

res

that

are

not

12©

2011

Kap

lan,

Inc.

cove

red

unde

r the

aut

o an

d ho

meo

wne

rs p

olic

ies

•P

ays

for b

odily

inju

ry, p

rope

rty d

amag

e, o

r per

sona

l in

jury

for w

hich

the

insu

red

is li

able

MN_P&C_CN.indb 34 6/23/2011 8:56:44 AM

35

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Pers

onal

Um

brel

la P

olic

y

•Th

e un

derly

ing

limits

of l

iabi

lity

are

prim

ary

–If

a lo

ss is

cov

ered

by

the

unde

rlyin

g au

to,

hom

eow

ners

, or r

ente

rs p

olic

y, th

e un

derly

ing

polic

y pa

ys fi

rst

–O

nce

the

unde

rlyin

g po

licy

has

been

exh

aust

ed, t

he

umbr

ella

pol

icy

will

pay

13©

2011

Kap

lan,

Inc.

Com

mer

cial

Lia

bilit

y In

sura

nce

Com

mer

cial

Gen

eral

Lia

bilit

y Po

licy

•Th

e IS

O C

omm

erci

al G

ener

al L

iabi

lity

Pol

icy

(CG

L)is

desi

gned

toco

vera

broa

dar

ray

of(C

GL)

isde

sign

edto

cove

rabr

oad

arra

yof

liabi

lity

expo

sure

s th

e av

erag

e bu

sine

ss fa

ces

on a

dai

ly b

asis

•C

over

age

for b

odily

inju

ry a

nd p

rope

rty d

amag

e,

pers

onal

and

adv

ertis

ing

inju

ry, a

nd m

edic

al

tf

th

15©

2011

Kap

lan,

Inc.

paym

ents

of o

ther

s

•Li

abilit

y ex

posu

res

incl

ude

prem

ises

and

op

erat

ions

, pro

duct

s, a

nd c

ompl

eted

ope

ratio

ns

CG

L Ex

clus

ions

•W

ar/n

ucle

ar

•Li

quor

liab

ility

(soc

ial h

ost l

iquo

r lia

bilit

y is

co

vere

d)

•Au

to, a

ircra

ft, w

ater

craf

t lia

bilit

y

•Ba

ilee

expo

sure

s (d

amag

e to

pro

perty

of o

ther

s in

the

care

, cus

tody

, or c

ontro

l of t

he in

sure

d)

16©

2011

Kap

lan,

Inc.

y)

•Pr

ofes

sion

al li

abilit

y

•Em

ploy

er’s

liab

ility

MN_P&C_CN.indb 35 6/23/2011 8:56:44 AM

36

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Com

mer

cial

Aut

o In

sura

nce

Com

mer

cial

Aut

o In

sura

nce

•C

omm

erci

al a

uto

insu

ranc

e is

use

d by

aut

o de

aler

ship

san

dbu

sine

sses

that

own

and

deal

ersh

ips

and

busi

ness

esth

atow

nan

dop

erat

e th

eir o

wn

fleet

of v

ehic

les

18©

2011

Kap

lan,

Inc.

Com

mer

cial

Aut

o In

sura

nce

•Bu

sine

ss a

uto

cove

rage

–U

sed

by b

usin

esse

s th

at o

wn

and

oper

ate

thei

r ow

n fle

et o

f veh

icle

s

•G

arag

e co

vera

ge–

Use

d by

dea

lers

hips

to in

sure

the

vehi

cles

they

ow

n,

and

prov

ide

cove

rage

for c

usto

mer

s’ v

ehic

les

in th

eir

19©

2011

Kap

lan,

Inc.

poss

essi

on

Crim

e In

sura

nce

MN_P&C_CN.indb 36 6/23/2011 8:56:44 AM

37

Less

on T

hree

O

verv

iew

of

Cas

ualty

Insu

ranc

e

Crim

e In

sura

nce

•C

rime

insu

ranc

e is

use

d by

bus

ines

ses

to

prot

ecta

gain

stlo

sses

such

asro

bber

ybu

rgla

rypr

otec

taga

inst

loss

essu

chas

robb

ery,

burg

lary

,an

d em

bezz

lem

ent

•Th

e ty

pe o

f cov

erag

e ch

osen

will

depe

nd o

n w

hat t

he b

usin

ess

does

and

the

type

of c

rime

expo

sure

that

is fa

ced

by th

e bu

sine

ss

21©

2011

Kap

lan,

Inc.

•C

over

s ex

posu

res

such

as

empl

oyee

thef

t and

th

eft o

f mon

ey, s

ecur

ities

, and

pro

perty

from

in

side

or o

utsi

de th

e pr

emis

es

MN_P&C_CN.indb 37 6/23/2011 8:56:45 AM

MN_P&C_CN.indb 38 6/23/2011 8:56:45 AM

Lesson Fouroverview of Life insurance and Annuities

MN_P&C_CN.indb 39 6/23/2011 8:56:45 AM

40

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Less

onFo

urLe

sson

Four

Ove

rvie

w o

f Life

Insu

ranc

e an

d A

nnui

ties

Purp

ose

of L

ife In

sura

nce

•Li

fe in

sura

nce

is a

con

tract

that

pay

s an

inco

me

tax

free

deat

hbe

nefit

orfa

ceam

ount

toa

tax

free

deat

hbe

nefit

,orf

ace

amou

nt,t

oa

nam

ed b

enef

icia

ry u

pon

the

deat

h of

the

insu

red.

The

re a

re tw

o m

ajor

cat

egor

ies

of li

fe

insu

ranc

e: te

rm a

nd p

erm

anen

t.

2©

2011

Kap

lan,

Inc.

Fam

ily a

nd P

erso

nal U

ses

•Fu

nera

l and

oth

er fi

nal e

xpen

ses

•Fu

nds

to p

ay o

utst

andi

ng d

ebt

•Fu

nds

for e

duca

tion

expe

nses

for s

urvi

ving

ch

ildre

n

•R

etire

men

t fun

ds fo

r sur

vivi

ng s

pous

e

3©

2011

Kap

lan,

Inc.

•C

ash

to m

eet d

aily

livi

ng e

xpen

ses

of s

urvi

vors

•C

harit

able

giv

ing

Trad

ition

al L

ife

Insu

ranc

e Po

licie

s

MN_P&C_CN.indb 40 6/23/2011 8:56:45 AM

41

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Term

Life

Insu

ranc

e

•Pr

ovid

es te

mpo

rary

prot

ectio

n; th

e po

licy

rem

ains

info

rce

fora

spec

ified

perio

dof

time

rem

ains

info

rce

fora

spec

ified

perio

dof

time,

afte

r whi

ch c

over

age

term

inat

es

•Pr

ovid

es a

ben

efit

only

if th

e in

sure

d di

es d

urin

g th

e pe

riod

of c

over

age;

no

othe

r ben

efits

are

pa

yabl

e un

der t

he p

olic

y

5©

2011

Kap

lan,

Inc.

•Ty

pica

lly p

rovi

des

life

insu

ranc

e pr

otec

tion

at th

e lo

wes

t pre

miu

m b

ecau

se th

e in

sure

r lim

its it

s ris

k to

a s

peci

fic p

erio

d of

tim

e

Term

Life

Insu

ranc

e

•Ex

ampl

es o

f ter

m in

sura

nce:

–Le

vel t

erm

insu

ranc

e pr

ovid

es a

leve

l dea

th b

enef

it an

d a

leve

l pre

miu

m d

urin

g th

e te

rm o

f cov

erag

e.

Type

s of

leve

l ter

m in

sura

nce

incl

ude

the

follo

win

g:

•A

nnua

lly re

new

able

term

insu

ranc

e –

sets

the

term

of c

over

age

as o

ne y

ear

Ll

it

it

tht

f

6©

2011

Kap

lan,

Inc.

•Le

vel p

rem

ium

term

insu

ranc

e–

sets

the

term

of

cove

rage

as

long

er th

an o

ne y

ear (

e.g.

, 5, 1

0, o

r 20

yea

rs)

Term

Life

Insu

ranc

e

•Ex

ampl

es o

f ter

m in

sura

nce

(con

tinue

d):

–D

ecre

asin

g te

rm in

sura

nce

prov

ides

a d

eath

ben

efit

that

ste

adily

dec

reas

es d

urin

g th

e te

rm

•P

rem

ium

s re

mai

n le

vel f

or th

e te

rm o

f cov

erag

e

•M

ay a

lso

be c

alle

d m

ortg

age

prot

ectio

n in

sura

nce

or c

redi

t life

insu

ranc

e

7©

2011

Kap

lan,

Inc.

Perm

anen

t Life

Insu

ranc

e

•Pe

rman

ent l

ife in

sura

nce

prov

ides

pro

tect

ion

until

the

insu

red

dies

orre

ache

sag

e10

0un

tilth

ein

sure

ddi

esor

reac

hes

age

100

•W

hole

life

and

univ

ersa

l life

are

exa

mpl

es o

f pe

rman

ent i

nsur

ance

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 41 6/23/2011 8:56:46 AM

42

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Face

Am

ount

: $10

0,00

0

Perm

anen

t Life

Insu

ranc

e

Pur

eIn

sura

nce

Inte

rest

Cas

hVa

lue

9©

2011

Kap

lan,

Inc.

Con

tribu

tions

Age

Perm

anen

t Life

Insu

ranc

e

•Pe

rman

ent l

ife in

sura

nce

com

bine

s in

sura

nce

prot

ectio

nw

ithth

eac

cum

ulat

ion

ofca

shva

lue

prot

ectio

nw

ithth

eac

cum

ulat

ion

ofca

shva

lue

•Pe

rman

ent l

ife in

sura

nce

has

a hi

gher

initi

al

prem

ium

than

term

life

, bec

ause

par

t of t

he

polic

yow

ner’s

pre

miu

m is

cre

dite

d to

cas

h va

lue.

A

dditi

onal

ly, t

he in

sure

r exp

ects

the

polic

y to

i

if

tilth

id

di

10©

2011

Kap

lan,

Inc.

rem

ain

info

rce

until

the

insu

red

dies

.

Perm

anen

t Life

Insu

ranc

e

•If

the

insu

red

dies

, the

dea

th b

enef

it is

pai

d to

th

ebe

nefic

iary

the

bene

ficia

ry

•Th

e po

licy

endo

ws

whe

n th

e ca

sh v

alue

equ

als

the

face

am

ount

of t

he p

olic

y

•If

the

insu

red

is s

till a

live

whe

n th

e po

licy

endo

ws,

the

face

am

ount

is p

aid

to th

e

11©

2011

Kap

lan,

Inc.

,p

polic

yow

ner

Com

mon

Pol

icy

Rid

ers

MN_P&C_CN.indb 42 6/23/2011 8:56:46 AM

43

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Wai

ver o

f Pre

miu

m R

ider

•Ap

plie

s w

hen

the

polic

yow

ner a

nd in

sure

d ar

e th

esa

me

pers

onth

esa

me

pers

on

•W

aive

s pr

emiu

ms

in th

e ev

ent o

f a d

isab

ility

and

allo

ws

the

polic

y to

rem

ain

in fo

rce

•U

sual

ly re

quire

s th

e di

sabi

lity

to la

st m

ore

than

90

day

s

13©

2011

Kap

lan,

Inc.y

•U

sual

ly e

nds

whe

n th

e in

sure

d re

ache

s ag

e 65

Gua

rant

eed

Insu

rabi

lity

Rid

er

•Th

is a

llow

s th

e in

sure

d to

pur

chas

e ad

ditio

nal

insu

ranc

eat

spec

ified

times

with

outh

avin

gto

insu

ranc

eat

spec

ified

times

with

outh

avin

gto

prov

e in

sura

bilit

y

•Pr

emiu

ms

for t

he a

dditi

onal

cov

erag

e ar

e ba

sed

on th

e in

sure

d’s

atta

ined

age

at t

he ti

me

the

addi

tiona

l cov

erag

e is

add

ed

14©

2011

Kap

lan,

Inc.

•Th

is ri

der t

ypic

ally

exp

ires

whe

n th

e in

sure

d re

ache

s ag

e 40

Opt

ion

to C

onve

rt

•M

any

leve

l ter

m p

olic

ies

cont

ain

an o

ptio

n to

co

nver

tthe

polic

yto

perm

anen

tlife

insu

ranc

eco

nver

tthe

polic

yto

perm

anen

tlife

insu

ranc

ew

ithou

t hav

ing

to p

rove

insu

rabi

lity.

Pre

miu

ms

will

be h

ighe

r whe

n th

e po

licy

is c

onve

rted.

Thi

s op

tion

may

app

ear a

s a

rider

.

15©

2011

Kap

lan,

Inc.

Polic

y Pr

ovis

ions

and

Excl

usio

ns

MN_P&C_CN.indb 43 6/23/2011 8:56:47 AM

44

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Part

ies

to a

Life

Insu

ranc

e Po

licy

•Th

e po

licyo

wne

ris

the

pers

on re

spon

sibl

e fo

r pa

ying

the

prem

ium

sof

the

insu

ranc

epo

licy

payi

ngth

epr

emiu

ms

ofth

ein

sura

nce

polic

y

•Th

e in

sure

dis

the

pers

on w

hose

life

is in

sure

d by

the

polic

y. S

omet

imes

the

insu

red

is th

e sa

me

pers

on a

s th

e po

licyo

wne

r.

•Th

e be

nefic

iary

is th

e pe

rson

who

rece

ives

the

17©

2011

Kap

lan,

Inc.

yp

deat

h be

nefit

upo

n th

e de

ath

of th

e in

sure

d

Stan

dard

Pol

icy

Prov

isio

ns

•Th

e en

tire

cont

ract

cla

use

stat

es th

at th

e po

licy

itsel

fth

eat

tach

edap

plic

atio

nan

dan

yat

tach

edits

elf,

the

atta

ched

appl

icat

ion,

and

any

atta

ched

rider

s co

nstit

ute

the

entir

e co

ntra

ct b

etw

een

the

parti

es

•Th

e in

cont

esta

bilit

y cl

ause

sta

tes

that

the

insu

rer

cann

ot c

onte

st a

cla

im b

ased

on

mat

eria

l m

isre

pres

enta

tion

orco

ncea

lmen

tafte

rthe

18©

2011

Kap

lan,

Inc.

mis

repr

esen

tatio

nor

conc

ealm

enta

ftert

hepo

licy

has

been

in fo

rce

for t

wo

full

year

s. N

ote:

th

ere

are

thre

e ca

ses

of fr

aud

that

can

be

cont

este

d be

yond

two

year

s—im

pers

onat

ion,

no

insu

rabl

e in

tere

st, a

nd in

tent

to m

urde

r.

Stan

dard

Pol

icy

Prov

isio

ns

•Th

e fre

e-lo

ok p

rovi

sion

not

ifies

the

polic

yow

ner

ofth

erig

htto

exam

ine

and

surr

ende

rthe

polic

yof

the

right

toex

amin

ean

dsu

rren

dert

hepo

licy

if no

t sat

isfie

d fo

r any

reas

on. T

he fr

ee-lo

ok

perio

d la

sts

10da

ysfro

m th

e da

te th

e po

licy

is

rece

ived

by

the

polic

yow

ner,

who

may

als

o be

th

e in

sure

d.

19©

2011

Kap

lan,

Inc.

Stan

dard

Pol

icy

Prov

isio

ns

•Th

e m

isst

atem

ent o

f age

and

gen

der p

rovi

sion

is

impo

rtant

beca

use

the

age

and

gend

erof

the

impo

rtant

beca

use

the

age

and

gend

erof

the

appl

ican

t are

crit

ical

fact

ors

in e

stab

lishi

ng th

e pr

emiu

m ra

tes

for a

life

insu

ranc

e po

licy.

If a

m

isst

atem

ent o

f age

or g

ende

r res

ulte

d in

an

over

paym

ent o

f pre

miu

ms,

the

insu

rer w

ill re

fund

th

e ov

erpa

idpr

emiu

m. I

f it r

esul

ted

in a

n

20©

2011

Kap

lan,

Inc.

pp

unde

rpay

men

t of p

rem

ium

, the

insu

rer w

ill pa

y a

redu

ced

deat

h be

nefit

. Thi

s pr

ovis

ion

is n

ot

subj

ect t

o th

e in

cont

esta

bilit

y pr

ovis

ion.

MN_P&C_CN.indb 44 6/23/2011 8:56:47 AM

45

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Stan

dard

Pol

icy

Prov

isio

ns

•Th

e su

icid

e ex

clus

ion

stat

es th

at if

the

insu

red

com

mits

suic

ide

with

intw

oye

ars

ofth

epo

licy

com

mits

suic

ide

with

intw

oye

ars

ofth

epo

licy

issu

e da

te, t

he d

eath

ben

efit

will

not b

e pa

id.

Rat

her,

the

bene

ficia

ry w

ill re

ceiv

e a

refu

nd o

f an

y pr

emiu

ms

paid

.

21©

2011

Kap

lan,

Inc.

Com

mon

Exc

lusi

ons

•Ac

ts o

f war

•H

azar

dous

occ

upat

ions

or h

obbi

es, i

nclu

ding

av

iatio

n ac

cide

nts;

som

e oc

cupa

tiona

l ex

clus

ions

can

be

rem

oved

by

purc

hasi

ng a

rid

er

•W

hile

com

mitt

ing

a fe

lony

22©

2011

Kap

lan,

Inc.

gy

•Su

icid

e

Gro

up In

sura

nce

Cha

ract

eris

tics

•G

roup

insu

ranc

e pr

ovid

es c

over

age

to m

any

peop

leun

dero

nepo

licy

peop

leun

dero

nepo

licy

•In

divi

dual

s m

ust f

irst b

e m

embe

rs o

f a g

roup

be

fore

they

bec

ome

elig

ible

to p

urch

ase

the

insu

ranc

e

•Th

e gr

oup

spon

sor,

or m

aste

r pol

icyo

wne

r,

24©

2011

Kap

lan,

Inc.g

pp

,p

y,

hold

s th

e in

sura

nce

polic

y

MN_P&C_CN.indb 45 6/23/2011 8:56:48 AM

46

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Gro

up T

erm

Life

Insu

ranc

e

•Th

e em

ploy

er o

ffers

, and

pay

s fo

r, an

am

ount

of

annu

ally

rene

wab

lete

rmlif

ein

sura

nce

equa

lto

annu

ally

rene

wab

lete

rmlif

ein

sura

nce

equa

lto

the

empl

oyee

’s a

nnua

l sal

ary.

Thi

s in

sura

nce

usua

lly d

oes

not r

equi

re p

roof

of i

nsur

abilit

y.

•Th

e em

ploy

ee ty

pica

lly h

as th

e op

tion

to

purc

hase

add

ition

al (s

uppl

emen

tal)

life

iif

di

d(

23

4l

)

25©

2011

Kap

lan,

Inc.

insu

ranc

eif

desi

red

(e.g

.,2x

,3x,

or 4

x sa

lary

).Th

e em

ploy

ee m

ay b

e re

quire

d to

pro

ve

insu

rabi

lity

whe

n pu

rcha

sing

add

ition

al

cove

rage

.

Ann

uitie

s

Ann

uitie

s

•An

nuiti

es a

re d

esig

ned

to p

rote

ct a

gain

st th

e ris

k of

livin

glo

nger

than

expe

cted

and

outli

ving

one’

sof

livin

glo

nger

than

expe

cted

and

outli

ving

one

ssa

ving

s

•U

nlik

e lif

e in

sura

nce,

ann

uitie

s pr

ovid

e a

bene

fit

whi

le th

e an

nuita

nt is

stil

l aliv

e

•An

nuiti

es c

an b

e us

ed to

gua

rant

ee a

n in

com

e

27©

2011

Kap

lan,

Inc.

gfo

r the

rem

aind

er o

f a p

erso

n’s

life

or fo

r a

spec

ific

perio

d of

tim

e

Part

ies

to a

n A

nnui

ty

•Th

e ow

neri

s th

e pe

rson

who

pur

chas

es th

e an

nuity

annu

ity

•Th

e an

nuita

ntis

the

pers

on w

ho re

ceiv

es th

e in

com

e di

strib

utio

n fro

m a

n an

nuity

. The

an

nuita

nt is

ofte

n th

e ow

ner.

•Th

e be

nefic

iary

is th

e pe

rson

who

rece

ives

28©

2011

Kap

lan,

Inc.

yp

undi

strib

uted

mon

ey, i

f any

mon

ey is

ava

ilabl

e,

from

the

annu

ity w

hen

the

annu

itant

die

s

MN_P&C_CN.indb 46 6/23/2011 8:56:49 AM

47

Less

on F

our

Ove

rvie

w o

f Li

fe In

sura

nce

and

Ann

uitie

s

Type

s of

Ann

uitie

s

•Im

med

iate

annu

ity –

a si

ngle

pre

miu

m is

pai

d to

th

ein

sura

nce

com

pany

whi

chth

enbe

gins

the

insu

ranc

eco

mpa

ny,w

hich

then

begi

nsm

akin

g pa

ymen

ts to

the

annu

itant

for a

spe

cifie

d pe

riod

of ti

me

or fo

r the

rem

aind

er o

f the

an

nuita

nt’s

life

•D

efer

red

annu

ity –

prem

ium

s ar

e ac

cum

ulat

ed

dt

df

df

diti

bti

tl

t

29©

2011

Kap

lan,

Inc.

and

grow

tax-

defe

rred

ford

istri

butio

n at

a la

ter

date

MN_P&C_CN.indb 47 6/23/2011 8:56:49 AM

MN_P&C_CN.indb 48 6/23/2011 8:56:49 AM

Lesson Fiveoverview of Accident and Health insurance

MN_P&C_CN.indb 49 6/23/2011 8:56:49 AM

50

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Less

onFi

veLe

sson

Five

Ove

rvie

w o

f Acc

iden

t and

H

ealth

Insu

ranc

eM

edic

al P

lans

Maj

or M

edic

al P

olic

ies

•Pr

ovid

e br

oad

med

ical

cov

erag

e up

to a

ver

y hi

ghpo

licy

limit

high

polic

ylim

it

•Fe

atur

e de

duct

ible

s, c

oins

uran

ce, a

max

imum

ou

t-of-p

ocke

t lim

it, a

nd li

fetim

e m

axim

um

bene

fits

•U

sual

lypa

y fo

r all

reas

onab

le a

nd n

eces

sary

3©

2011

Kap

lan,

Inc.

yp

yy

med

ical

exp

ense

s, s

ubje

ct to

cer

tain

lim

itatio

ns

and

excl

usio

ns

Hea

lth M

aint

enan

ce O

rgan

izat

ion

(HM

O)

•C

ombi

ne th

e fin

anci

ng a

nd d

eliv

ery

of h

ealth

ca

reca

re

•C

olle

ct s

ubsc

riber

fees

(pre

miu

ms)

and

ass

ume

risk

in th

e sa

me

way

as

tradi

tiona

l ins

uran

ce

com

pani

es, b

ut o

nly

prov

ide

acce

ss to

a s

elec

t ne

twor

k of

hea

lth c

are

prov

ider

s

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 50 6/23/2011 8:56:50 AM

51

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Hea

lth M

aint

enan

ce O

rgan

izat

ion

(HM

O)

•Be

nefit

s m

ust b

e pr

ovid

ed b

y ne

twor

k ca

re

prov

ider

spr

ovid

ers

•Be

nefit

s us

ually

incl

ude

prev

entiv

e ca

re, v

isits

to a

pr

imar

y ca

re p

hysi

cian

, ref

erra

ls, n

on-e

mer

genc

y ho

spita

l car

e, e

mer

genc

y ro

om c

are,

and

out

-of-

netw

ork

care

5©

2011

Kap

lan,

Inc.

Pref

erre

d Pr

ovid

er O

rgan

izat

ion

(PPO

)

•D

o no

t com

bine

the

finan

cing

and

del

iver

y of

he

alth

care

;atra

ditio

nali

nsur

ance

com

pany

heal

thca

re;a

tradi

tiona

lins

uran

ceco

mpa

nyfin

ance

s th

e he

alth

car

e

•C

are

is d

eliv

ered

by

the

PP

O, w

hich

is a

gro

up

of d

octo

rs th

at h

ave

agre

ed to

redu

ce th

e fe

es

they

cha

rge

to th

e in

sura

nce

com

pany

6©

2011

Kap

lan,

Inc.

•C

ombi

nes

man

y of

the

in-n

etw

ork

bene

fits

of a

n H

MO

and

the

out-o

f-net

wor

k be

nefit

s of

a m

ajor

m

edic

al p

lan

Pref

erre

d Pr

ovid

er O

rgan

izat

ion

(PPO

)

•In

-net

wor

k be

nefit

s in

volv

ing

phys

icia

n se

rvic

es

and

emer

genc

yro

omca

rear

epr

ovid

edw

itha

and

emer

genc

yro

omca

rear

epr

ovid

edw

itha

co-p

aym

ent.

Non

-em

erge

ncy

hosp

ital a

nd

surg

ical

car

e in

volv

es a

ded

uctib

le a

nd

coin

sura

nce.

•O

ut-o

f-net

wor

k be

nefit

s ar

e al

so p

rovi

ded,

bj

ttd

dtib

ld

i

7©

2011

Kap

lan,

Inc.

subj

ectt

o a

dedu

ctib

le a

nd c

oins

uran

cere

quire

men

t

Dis

abili

ty In

com

e Po

licie

s

MN_P&C_CN.indb 51 6/23/2011 8:56:50 AM

52

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Dis

abili

ty In

com

e Po

licie

s

•D

isab

ility

inco

me

polic

ies

are

desi

gned

to

repl

ace

apo

rtion

ofth

ein

sure

d’s

lost

wag

esif

repl

ace

apo

rtion

ofth

ein

sure

ds

lost

wag

esif

the

insu

red

is u

nabl

e to

wor

k du

e to

illn

ess

or

inju

ry

•M

ost d

isab

ility

inco

me

polic

ies

pay

60–8

0% o

f th

e in

sure

d’s

wag

es

9©

2011

Kap

lan,

Inc.

Type

s of

Dis

abili

ty B

enef

its

•Pu

re lo

ss o

f inc

ome

polic

ies

pay

a pe

rcen

tage

(u

sual

ly60

80%

)ofl

osti

ncom

ew

hen

the

(usu

ally

60–8

0%)o

flos

tinc

ome

whe

nth

ein

sure

d ca

nnot

wor

k du

e to

a q

ualif

ying

dis

abilit

y–

Typi

cally

use

d w

ith g

roup

dis

abili

ty p

olic

ies

•In

dem

nity

pol

icie

s pa

y a

flat m

onth

ly b

enef

it w

hen

the

insu

red

cann

ot w

ork

due

to a

10©

2011

Kap

lan,

Inc.

qual

ifyin

g di

sabi

lity

–Ty

pica

lly u

sed

with

indi

vidu

al d

isab

ility

pol

icie

s

Long

-Ter

m C

are

Insu

ranc

e

Long

-Ter

m C

are

Insu

ranc

e

•Lo

ng-te

rm c

are

is c

are

need

ed fo

r an

exte

nded

pe

riod

oftim

eto

deal

with

the

prol

onge

def

fect

spe

riod

oftim

eto

deal

with

the

prol

onge

def

fect

sof

illn

ess,

inju

ry, o

r old

age

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 52 6/23/2011 8:56:51 AM

53

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Typi

cal P

olic

y Fe

atur

es

•Ty

pes

of c

are

incl

ude

nurs

ing

hom

e, a

ssis

ted

livin

gfa

cilit

yho

me

heal

thca

rean

dad

ult

livin

gfa

cilit

y,ho

me

heal

thca

re,a

ndad

ult

dayc

are;

long

-term

car

e po

licie

s do

not

pay

for

care

pro

vide

d in

a h

ospi

tal

•Th

e m

axim

um li

fetim

e be

nefit

is th

e m

ost t

he

insu

rer w

ill pa

y fo

r car

e du

ring

the

insu

red’

s lif

ti

13©

2011

Kap

lan,

Inc.

lifet

ime

Typi

cal P

olic

y Fe

atur

es

•Th

e el

imin

atio

n pe

riod

is th

e le

ngth

of t

ime

the

insu

red

mus

twai

tbef

ore

qual

ifyin

gfo

rben

efits

insu

red

mus

twai

tbef

ore

qual

ifyin

gfo

rben

efits

.It

typi

cally

rang

es fr

om 0

–100

day

s.

•R

ider

s ar

e av

aila

ble

to p

rovi

de a

dditi

onal

co

vera

ge (e

.g.,

infla

tion

prot

ectio

n, g

uara

ntee

d in

sura

bilit

y, u

nlim

ited

lifet

ime

bene

fit)

14©

2011

Kap

lan,

Inc.

Qua

lifyi

ng fo

r Ben

efits

•Th

e in

sure

d m

ust b

e ce

rtifie

d as

chr

onic

ally

ill

–Th

e in

sure

d re

quire

s su

bsta

ntia

l sup

ervi

sion

due

to a

se

vere

cog

nitiv

e im

pairm

ent

–Th

e in

sure

d is

una

ble

to p

erfo

rm, w

ithou

t sub

stan

tial

supe

rvis

ion

from

ano

ther

indi

vidu

al, a

t lea

st tw

o of

the

six

regu

lar a

ctiv

ities

of d

aily

livi

ng (A

DLs

): ba

thin

g,

dres

sing

,eat

ing,

toile

ting,

trans

ferr

ing,

and

15©

2011

Kap

lan,

Inc.

dres

sing

,eat

ing,

toile

ting,

trans

ferr

ing,

and

cont

inen

ce

Med

icar

e

MN_P&C_CN.indb 53 6/23/2011 8:56:51 AM

54

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Med

icar

e

•A

fede

ral g

over

nmen

t hea

lth in

sura

nce

prog

ram

fo

rind

ivid

uals

who

are

age

65or

olde

rha

vefo

rind

ivid

uals

who

are

age

65or

olde

r,ha

vepe

rman

ent k

idne

y fa

ilure

orh

ave

rece

ived

a

Soc

ial S

ecur

ity d

isab

ility

bene

fit fo

r 24

mon

ths

or

long

er

•Fi

nanc

ed p

rimar

ily th

roug

h pa

yrol

l tax

es, a

nd is

d

ii

td

bth

Ct

fM

di&

17©

2011

Kap

lan,

Inc.

adm

inis

tere

dby

the

Cen

ters

forM

edic

are

&M

edic

aid

Ser

vice

s

•Fu

nctio

ns w

ith d

educ

tible

s, c

o-pa

ymen

ts, a

nd

coin

sura

nce

Med

icar

e Pa

rt A

: Hos

pita

l Ins

uran

ce

(Man

dato

ry)

•In

-pat

ient

hos

pita

l car

e is

cov

ered

with

a 9

0-da

y be

nefit

perio

dE

xam

ples

ofco

vere

dho

spita

lbe

nefit

perio

d.E

xam

ples

ofco

vere

dho

spita

lca

re in

clud

e a

sem

ipriv

ate

hosp

ital r

oom

, op

erat

ing

room

cos

ts, a

nest

hesi

a, x

-ray

s, a

nd

drug

s pr

ovid

ed w

hile

in th

e ho

spita

l.

18©

2011

Kap

lan,

Inc.

Med

icar

e Pa

rt B

: Med

ical

Insu

ranc

e (O

ptio

nal)

•M

edic

are

Par

t B c

over

s a

wid

e va

riety

of

outp

atie

ntdo

ctor

and

med

ical

serv

ices

rece

ived

outp

atie

ntdo

ctor

and

med

ical

serv

ices

rece

ived

with

in th

e U

nite

d S

tate

s. E

xam

ples

of c

over

ed

serv

ices

incl

ude

doct

or v

isits

, am

bula

nce,

ph

ysic

al th

erap

y, x

-rays

, and

lab

test

s.

Exc

lusi

ons

incl

ude

pres

crip

tion

drug

s, ro

utin

e ph

ysic

als,

and

vis

ion,

and

hea

ring

exam

s.

19©

2011

Kap

lan,

Inc.

py

,,

g

Med

icar

e Su

pple

men

t Ins

uran

ce

•So

ld b

y pr

ivat

e in

sura

nce

com

pani

es to

fill

the

gaps

inM

edic

are

Par

tsA

and

Bga

psin

Med

icar

eP

arts

Aan

dB

•So

met

imes

refe

rred

to a

s M

edig

ap p

olic

ies

•M

edic

are

Par

ts A

and

B m

ust b

e ca

rried

to b

e el

igib

le fo

r Med

icar

e su

pple

men

t ins

uran

ce

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 54 6/23/2011 8:56:52 AM

55

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

NA

IC S

tand

ard

Prov

isio

ns

NA

IC S

tand

ard

Prov

isio

ns

•Th

e N

atio

nal A

ssoc

iatio

n of

Insu

ranc

e C

omm

issi

oner

s (N

AIC

)has

deve

lope

dst

anda

rdpo

licy

prov

isio

nsto

use

(NA

IC)h

asde

velo

ped

stan

dard

polic

ypr

ovis

ions

tous

ein

indi

vidu

al h

ealth

insu

ranc

e po

licie

s

•Tw

elve

are

man

dato

ry a

nd a

re d

esig

ned

to p

rote

ct th

e in

tere

sts

of th

e co

nsum

er

•E

leve

n ar

e op

tiona

l and

are

des

igne

d to

pro

tect

the

inte

rest

s of

the

insu

ranc

e co

mpa

ny

22©

2011

Kap

lan,

Inc.

•M

ost s

tate

s, in

clud

ing

Min

neso

ta, h

ave

adop

ted

thes

e st

anda

rd p

rovi

sion

s as

law

Man

dato

ry P

rovi

sion

Exa

mpl

es

•En

tire

cont

ract

pro

visi

on–Th

e en

tire

cont

ract

bet

wee

n th

e in

sure

r and

po

licyo

wne

r is

the

polic

y its

elf,

the

appl

icat

ion

(if a

ttach

ed) a

nd a

ny a

ttach

ed ri

ders

–Th

e in

sure

r may

not

refe

r to

docu

men

ts o

utsi

de o

f the

po

licy

as a

bas

is fo

r den

ying

a c

laim

, unl

ess

the

docu

men

twas

atta

ched

toth

eba

ckof

the

polic

y

23©

2011

Kap

lan,

Inc.

docu

men

twas

atta

ched

toth

eba

ckof

the

polic

y

Man

dato

ry P

rovi

sion

Exa

mpl

es

•In

cont

esta

bilit

y cl

ause

–Th

e in

sure

r may

not

con

test

mis

repr

esen

tatio

ns a

fter

the

polic

y ha

s be

en in

effe

ct fo

r tw

o ye

ars

–Fr

aud

can

be c

onte

sted

inde

finite

ly

•G

race

per

iod

prov

isio

nS

even

days

forw

eekl

ypr

emiu

m

24©

2011

Kap

lan,

Inc.

–S

even

days

forw

eekl

ypr

emiu

m

–Te

n da

ys fo

r mon

thly

pre

miu

m

–Th

irty-

one

days

for q

uarte

rly, s

emi-a

nnua

lly, a

nd

annu

al p

rem

ium

MN_P&C_CN.indb 55 6/23/2011 8:56:52 AM

56

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Opt

iona

l Pro

visi

on E

xam

ples

•C

hang

e of

occ

upat

ion

prov

isio

n–

If th

e in

sure

d ch

ange

s to

a m

ore

haza

rdou

s oc

cupa

tion,

ben

efits

will

be

redu

ced

–If

the

insu

red

chan

ges

to a

less

haz

ardo

us

occu

patio

n, p

rem

ium

s w

ill b

e re

duce

d

25©

2011

Kap

lan,

Inc.

Opt

iona

l Pro

visi

on E

xam

ples

•M

isst

atem

ent o

f age

pro

visi

on–

If th

e m

isst

atem

ent r

esul

ted

in a

n ov

erpa

ymen

t of

prem

ium

s, th

e ov

erpa

ymen

t will

be

refu

nded

–If

the

mis

stat

emen

t res

ulte

d in

an

unde

rpay

men

t of

prem

ium

s, th

e be

nefit

s w

ill b

e re

duce

d to

coi

ncid

e w

ith th

e pr

emiu

m c

olle

cted

Illl

ii

i

26©

2011

Kap

lan,

Inc.

•Ill

egal

occ

upat

ion

prov

isio

n–

If th

e in

sure

d is

inju

red

whi

le e

ngag

ed in

an

illeg

al

occu

patio

n or

whi

le c

omm

ittin

g a

felo

ny, t

here

is n

o co

vera

ge

Gro

up H

ealth

Insu

ranc

e

Gro

up H

ealth

Insu

ranc

e

•G

roup

hea

lth in

sura

nce

can

be is

sued

to a

ny

grou

pth

atex

ists

prim

arily

forr

easo

nsot

hert

han

grou

pth

atex

ists

prim

arily

forr

easo

nsot

hert

han

obta

inin

g in

sura

nce

(e.g

., em

ploy

ers,

labo

r un

ions

, and

ban

ks)

•G

roup

insu

ranc

e is

mos

t com

mon

ly u

sed

as a

fo

rm o

f em

ploy

ee b

enef

it

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 56 6/23/2011 8:56:53 AM

57

Less

on F

ive

Ove

rvie

w o

f A

ccid

ent

and

Hea

lth In

sura

nce

Gro

up H

ealth

Insu

ranc

e

•In

sura

nce

mus

t be

inci

dent

al to

the

grou

p–

The

grou

p ca

nnot

exi

st fo

r the

sol

e pu

rpos

e of

ob

tain

ing

insu

ranc

e

–Th

e un

derw

riter

will

look

at t

he ri

sk e

xpos

ure

of th

e en

tire

grou

p ra

ther

than

its

indi

vidu

al m

embe

rs.

This

pe

rmits

indi

vidu

als

who

mig

ht o

ther

wis

e be

un

insu

rabl

eto

obta

inin

sura

nce

cove

rage

.

29©

2011

Kap

lan,

Inc.

unin

sura

ble

toob

tain

insu

ranc

eco

vera

ge.

–A

mas

ter p

olic

y is

issu

ed to

the

grou

p sp

onso

r, an

d ev

ery

indi

vidu

al in

sure

d is

giv

en a

cer

tific

ate

Type

s of

Gro

up In

sura

nce

•G

roup

sho

rt-te

rm d

isab

ility

–P

rovi

des

a sh

ort-t

erm

ben

efit

(usu

ally

thre

e m

onth

s to

on

e ye

ar) f

or e

mpl

oyee

s w

ho c

anno

t wor

k du

e to

a

disa

bilit

y

–M

onth

ly b

enef

it is

usu

ally

60–

80%

of t

he e

mpl

oyee

’s

wag

e

30©

2011

Kap

lan,

Inc.

Type

s of

Gro

up In

sura

nce

•G

roup

long

-term

dis

abili

ty–

Pro

vide

s a

long

-term

ben

efit

(usu

ally

unt

il ag

e 65

) for

em

ploy

ees

who

can

not w

ork

due

to a

dis

abili

ty

–M

onth

ly b

enef

it is

usu

ally

60–

80%

of t

he e

mpl

oyee

’s

wag

e

–E

limin

atio

n pe

riod

is u

sual

ly m

uch

long

er (9

0 da

ys to

1

)

31©

2011

Kap

lan,

Inc.

1 ye

ar)

MN_P&C_CN.indb 57 6/23/2011 8:56:53 AM

MN_P&C_CN.indb 58 6/23/2011 8:56:53 AM

Lesson SixMinnesota insurance Regulation

MN_P&C_CN.indb 59 6/23/2011 8:56:53 AM

60

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

LSi

Less

onSi

xM

inne

sota

Insu

ranc

e R

egul

atio

n

Law

Sup

plem

ent

•Th

e C

lass

Not

es a

re d

esig

ned

to h

ighl

ight

som

e of

the

Min

neso

tain

sura

nce

regu

latio

nsof

the

Min

neso

tain

sura

nce

regu

latio

ns

•In

add

ition

to re

view

ing

the

mat

eria

l cov

ered

in

clas

s, y

ou m

ust r

ead

the

Min

neso

ta P

rope

rty

and

Cas

ualty

Insu

ranc

e La

w S

uppl

emen

t in

its

entir

ety

2©

2011

Kap

lan,

Inc.

Law

Sup

plem

ent

•Th

e re

view

que

stio

ns a

nd tr

ue/fa

lse

ques

tions

fo

rthi

sle

sson

shou

ldbe

com

plet

edaf

terr

eadi

ngfo

rthi

sle

sson

shou

ldbe

com

plet

edaf

terr

eadi

ngth

e la

w s

uppl

emen

t

3©

2011

Kap

lan,

Inc.

Insu

ranc

e R

egul

atio

nM

inne

sota

Sta

tute

60K

MN_P&C_CN.indb 60 6/23/2011 8:56:54 AM

61

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Dep

artm

ent o

f Com

mer

ce

•In

divi

dual

sta

tes,

not

the

fede

ral g

over

nmen

t, ar

ere

spon

sibl

efo

rreg

ulat

ing

the

insu

ranc

ear

ere

spon

sibl

efo

rreg

ulat

ing

the

insu

ranc

ein

dust

ry (M

cCar

ran-

Ferg

uson

Act

)

•Th

e D

epar

tmen

t of C

omm

erce

ove

rsee

s th

e M

inne

sota

insu

ranc

e in

dust

ry

•H

eade

d by

the

Com

mis

sion

er o

f Com

mer

ce

5©

2011

Kap

lan,

Inc.

y–

App

oint

ed b

y th

e go

vern

or

Com

mis

sion

er o

f Com

mer

ce

•Em

pow

ered

to e

nfor

ce a

ll M

inne

sota

insu

ranc

e la

ws

law

s

•Em

pow

ered

to e

stab

lish

rule

s an

d pr

oced

ures

to

ensu

re th

e co

nsis

tent

enf

orce

men

t of t

he la

ws

6©

2011

Kap

lan,

Inc.

Com

mis

sion

er o

f Com

mer

ce

•Th

e C

omm

issi

oner

may

:–

Con

duct

inve

stig

atio

ns a

nd h

old

hear

ings

–E

xam

ine

the

book

s, re

cord

s, a

nd d

ocum

ents

of a

ny

pers

on o

r ent

ity e

ngag

ed in

regu

late

d ac

tivity

. Thi

s m

ay b

e do

ne a

t any

tim

e an

d w

ithou

t a c

ourt

orde

r.

–P

ublis

h in

form

atio

n co

llect

ed fr

om in

vest

igat

ions

, h

id

iti

7©

2011

Kap

lan,

Inc.

hear

ings

, and

exa

min

atio

ns

–R

equi

re re

ports

of a

ll sa

les

or tr

ansa

ctio

ns th

at a

re

regu

late

d

Who

Mus

t Be

Lice

nsed

MN_P&C_CN.indb 61 6/23/2011 8:56:54 AM

62

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Insu

ranc

e C

ompa

nies

•If

an in

sura

nce

com

pany

fails

to o

btai

n a

licen

se

tose

llin

sura

nce

the

com

pany

’spo

lices

rem

ain

tose

llin

sura

nce,

the

com

pany

spo

lices

rem

ain

valid

(to

prot

ect t

he p

ublic

) but

the

com

pany

will

face

sev

ere

pena

lties

9©

2011

Kap

lan,

Inc.

Insu

ranc

e C

ompa

nies

•An

adm

itted

or a

utho

rized

car

rier i

s an

y in

sura

nce

com

pany

that

has

obta

ined

ain

sura

nce

com

pany

that

has

obta

ined

ace

rtifi

cate

of a

utho

rity

to tr

ansa

ct b

usin

ess

•Ad

mitt

ed c

arrie

rs m

ay g

rant

pro

duce

rs a

utho

rity

to s

olic

it in

sura

nce

busi

ness

by

issu

ing

a co

mpa

ny a

ppoi

ntm

ent

10©

2011

Kap

lan,

Inc.

Insu

ranc

e C

ompa

nies

•Su

rplu

s lin

es c

ompa

nies

may

sel

l ins

uran

ce in

M

inne

sota

with

outa

certi

ficat

eof

auth

ority

but

Min

neso

taw

ithou

tace

rtific

ate

ofau

thor

ity,b

utth

ey m

ay o

nly

trans

act b

usin

ess

thro

ugh

a lic

ense

d su

rplu

s lin

es a

gent

•C

ompa

nies

with

out a

cer

tific

ate

of a

utho

rity

are

cons

ider

edno

n-ad

mitt

ed c

arrie

rs

11©

2011

Kap

lan,

Inc.

Insu

ranc

e Pr

oduc

ers

•A

Life

, Acc

iden

t and

Hea

lth, P

rope

rty, C

asua

lty,

orP

erso

nalL

ines

licen

seis

requ

ired

ofan

yone

orP

erso

nalL

ines

licen

seis

requ

ired

ofan

yone

who

sol

icits

, or a

ppoi

nts

othe

rs to

sol

icit,

in

sura

nce

on b

ehal

f of a

n in

sura

nce

com

pany

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 62 6/23/2011 8:56:55 AM

63

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Insu

ranc

e Pr

oduc

ers

•R

esid

entp

rodu

cer –

a re

side

nt p

rodu

cer’s

lic

ense

shal

lbe

issu

edto

ape

rson

who

resi

des

licen

sesh

allb

eis

sued

toa

pers

onw

hore

side

sin

Min

neso

ta o

r mai

ntai

ns th

e pe

rson

’s p

rinci

pal

plac

e of

bus

ines

s in

Min

neso

ta

13©

2011

Kap

lan,

Inc.

Insu

ranc

e Pr

oduc

ers

•N

on-r

esid

entp

rodu

cer –

a no

n-re

side

nt

insu

ranc

epr

oduc

er’s

licen

sesh

allb

eis

sued

toa

insu

ranc

epr

oduc

ers

licen

sesh

allb

eis

sued

toa

pers

on if

that

per

son

is a

lread

y a

licen

sed

resi

dent

pro

duce

r in

good

sta

ndin

g in

the

pers

on’s

hom

e st

ate

14©

2011

Kap

lan,

Inc.

Insu

ranc

e Pr

oduc

ers

•M

anag

ing

gene

ral a

gent

–th

is p

erso

n hi

res

prod

ucer

ssu

perv

ises

ate

rrito

rym

anag

espr

oduc

ers,

supe

rvis

esa

terr

itory

,man

ages

prod

ucer

act

iviti

es, a

nd m

ust b

e lic

ense

d as

an

insu

ranc

e pr

oduc

er

15©

2011

Kap

lan,

Inc.

Insu

ranc

e Pr

oduc

ers

–Te

mpo

rary

Lic

ense

•Te

mpo

rary

lice

nse

–a

tem

pora

ry 1

80-d

ay

licen

sem

aybe

issu

edby

the

com

mis

sion

erin

licen

sem

aybe

issu

edby

the

com

mis

sion

erin

the

follo

win

g ci

rcum

stan

ces:

–To

the

surv

ivin

g sp

ouse

, nex

t of k

in,

adm

inis

trato

r/exe

cuto

r of t

he e

stat

e, e

mpl

oyee

, leg

al

guar

dian

, or c

ourt-

appo

inte

d pe

rson

al re

pres

enta

tive

of a

dec

ease

d or

dis

able

d lic

ense

d pr

oduc

er

16©

2011

Kap

lan,

Inc.

p

MN_P&C_CN.indb 63 6/23/2011 8:56:55 AM

64

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Insu

ranc

e Pr

oduc

ers

–Te

mpo

rary

Lic

ense

–To

the

desi

gnee

of a

lice

nsed

pro

duce

r ent

erin

g ac

tive

serv

ice

inth

ear

med

forc

esof

the

Uni

ted

activ

ese

rvic

ein

the

arm

edfo

rces

ofth

eU

nite

dS

tate

s

–To

an

empl

oyee

of a

bus

ines

s en

tity

licen

sed

as a

pr

oduc

er, u

pon

the

deat

h or

dis

abili

ty o

f the

indi

vidu

al

desi

gnat

ed o

n th

e lic

ense

–A

ny o

ther

circ

umst

ance

that

ser

ves

the

publ

ic in

tere

st

17©

2011

Kap

lan,

Inc.

Prod

ucer

Lic

ensi

ng

Req

uire

men

ts

Educ

atio

n an

d Ex

am

•In

divi

dual

mus

t be

at le

ast 1

8 ye

ars

of a

ge

•C

ompl

ete

educ

atio

n re

quire

men

ts –

all

cand

idat

es m

ust c

ompl

ete

20 h

ours

of e

duca

tion

per m

ajor

line

of a

utho

rity:

Life

, Acc

iden

t and

H

ealth

, Pro

perty

, Cas

ualty

, or P

erso

nal L

ines

•Pa

ss li

cens

ing

exam

19©

2011

Kap

lan,

Inc.

g

Educ

atio

n an

d Ex

am

•C

ompl

ete

licen

se a

pplic

atio

n on

line

with

Sirc

on

•Pa

y ap

plic

able

lice

nse

fee

–Li

fe, A

ccid

ent a

nd H

ealth

, Pro

perty

, Cas

ualty

, P

erso

nal L

ines

—$5

0 pe

r lin

e

–A

dded

to th

e lic

ense

fee

is a

tech

nolo

gy fe

e up

to $

40

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 64 6/23/2011 8:56:56 AM

65

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Educ

atio

n an

d Ex

am

•Ap

ply

for a

per

man

ent i

nsur

ance

lice

nse

with

in

thre

eye

ars

ofpa

ssin

gth

eap

plic

able

licen

sing

thre

eye

ars

ofpa

ssin

gth

eap

plic

able

licen

sing

exam

•To

sel

l var

iabl

e pr

oduc

ts a

pro

duce

r mus

t hol

d a

secu

ritie

s re

gist

ratio

n, a

dmin

iste

red

by th

e Fi

nanc

ial I

ndus

try R

egul

ator

y A

utho

rity

(FIN

RA

), i

dditi

tlif

ili

21©

2011

Kap

lan,

Inc.

in a

dditi

onto

a li

fein

sura

nce

licen

se

Lice

nse

Expi

ratio

n

•D

urat

ion

of li

cens

e –

two

year

s•

A fir

st y

ear l

icen

see

has

a lic

ense

per

iod

of a

t le

ast 1

2 m

onth

s bu

t not

mor

e th

an 2

4 m

onth

s

•Li

cens

e fe

e of

$50

per

line

of a

utho

rity

plus

a

tech

nolo

gy fe

e (u

p to

$40

) mus

t be

rem

itted

with

th

e on

line

rene

wal

app

licat

ion

22©

2011

Kap

lan,

Inc.

Lice

nse

Expi

ratio

n

•In

divi

dual

pro

duce

r lic

ense

s is

sued

bef

ore

Aug

ust1

2010

expi

reon

Oct

ober

31of

the

Aug

ust1

,201

0ex

pire

onO

ctob

er31

ofth

ere

new

al y

ear

•In

divi

dual

pro

duce

r lic

ense

s is

sued

or r

enew

ed

on o

r afte

r Aug

ust 1

, 201

0 ex

pire

on

the

last

day

of

the

prod

ucer

’s b

irth

mon

th

23©

2011

Kap

lan,

Inc.

•Li

cens

es is

sued

to a

bus

ines

s en

tity

expi

re o

n O

ctob

er 3

1 of

the

rene

wal

yea

r

Con

tinui

ng E

duca

tion

Req

uire

men

ts

•Tw

enty

-four

hou

rsof

app

rove

d co

ntin

uing

ed

ucat

ion

isre

quire

ddu

ring

each

licen

sing

educ

atio

nis

requ

ired

durin

gea

chlic

ensi

ngpe

riod

•N

o m

ore

than

hal

f of t

he re

quire

d cr

edits

may

co

me

from

cou

rses

that

are

offe

red

by,

spon

sore

d by

, or a

ffilia

ted

with

an

insu

ranc

e it

d

24©

2011

Kap

lan,

Inc.

com

pany

or i

ts p

rodu

cers

MN_P&C_CN.indb 65 6/23/2011 8:56:56 AM

66

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Con

tinui

ng E

duca

tion

Req

uire

men

ts

•Pr

oduc

ers

mus

t obt

ain

thre

eho

urs

per

licen

sing

perio

dfro

ma

clas

sor

clas

ses

inth

elic

ensi

ngpe

riod

from

acl

ass

orcl

asse

sin

the

area

of e

thic

s

•An

age

nt m

ay n

ot c

arry

ove

r cre

dits

from

one

lic

ense

per

iod

to a

noth

er

•Li

cens

ing

cour

ses

do n

ot c

ount

tow

ards

25©

2011

Kap

lan,

Inc.

gco

ntin

uing

edu

catio

n cr

edit

•C

lass

es m

ay b

e of

fere

d vi

a cl

assr

oom

or o

nlin

e

Con

tinui

ng E

duca

tion

Req

uire

men

ts

•C

erta

in ty

pes

of c

ours

es c

anno

t be

appr

oved

for

cont

inui

nged

ucat

ion

cred

itco

ntin

uing

educ

atio

ncr

edit

–S

ales

and

mar

ketin

g

–M

otiv

atio

n

–S

peci

fic c

ompa

ny p

rodu

ct k

now

ledg

e

–O

ffice

man

agem

ent

26©

2011

Kap

lan,

Inc.

Offi

cem

anag

emen

t

–U

se o

f cal

cula

tors

or m

achi

nes

Not

ifica

tion

Req

uire

men

ts

•M

ust n

otify

the

Com

mis

sion

er in

writ

ing

–C

hang

e of

nam

e or

add

ress

•N

otifi

catio

n w

ithin

10

days

of a

cha

nge

of n

ame,

ad

dres

s, o

r any

oth

er in

form

atio

n th

at w

as

prov

ided

by

the

prod

ucer

on

the

licen

se a

pplic

atio

n

–A

dmin

istra

tive

actio

n ta

ken

agai

nst t

he p

rodu

cer b

y th

Mi

tt

l

27©

2011

Kap

lan,

Inc.

anot

herM

inne

sota

gov

ernm

enta

l age

ncy

•N

otifi

catio

n w

ithin

30

days

of th

e fin

al d

ispo

sitio

n of

the

mat

ter,

and

shal

l inc

lude

a c

opy

of th

e or

der

and

any

othe

r rel

evan

t leg

al d

ocum

ents

Not

ifica

tion

Req

uire

men

ts

•M

ust n

otify

the

Com

mis

sion

er in

writ

ing

–C

rimin

al p

rose

cutio

n ag

ains

t the

pro

duce

r in

any

juris

dict

ion

•N

otifi

catio

n w

ithin

30

days

of th

e in

itial

pre

-tria

l he

arin

g da

te, a

nd s

hall

incl

ude

a co

py o

f the

initi

al

com

plai

nt a

nd a

ny o

ther

rele

vant

lega

l doc

umen

ts

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 66 6/23/2011 8:56:57 AM

67

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Not

ifica

tion

Req

uire

men

ts

•M

ust n

otify

the

Com

mis

sion

er in

writ

ing

–C

rimin

al c

onvi

ctio

ns a

nd g

uilty

ple

as

•Th

e pr

oduc

er is

con

vict

ed o

f, pl

eads

gui

lty to

, or

plea

ds n

o co

ntes

t to,

a fe

lony

, gro

ss

mis

dem

eano

r, or

mis

dem

eano

r inv

olvi

ng m

oral

tu

rpitu

de

Ntif

iti

ithi

10d

fth

iti

29©

2011

Kap

lan,

Inc.

•N

otifi

catio

n w

ithin

10da

ysof

the

conv

ictio

n

Not

ifica

tion

Req

uire

men

ts

•M

ust n

otify

the

Com

mis

sion

er in

writ

ing

–A

ssum

ed n

ames

–a

prod

ucer

may

not

con

duct

bu

sine

ss u

nder

an

assu

med

nam

e (e

.g.,

Sum

mit

Insu

ranc

e S

ervi

ces)

, unt

il re

ceiv

ing

prio

r app

rova

l fro

m th

e C

omm

issi

oner

. The

nam

e m

ust b

e pr

oper

ly

filed

with

the

Sec

reta

ry o

f Sta

te.

30©

2011

Kap

lan,

Inc.

Law

of A

genc

y

Def

initi

ons

•Ag

ent –

som

eone

who

act

s on

beh

alf o

f ano

ther

(a

gent

sar

eal

soca

lled

prod

ucer

s)(a

gent

sar

eal

soca

lled

prod

ucer

s)

•Pr

inci

pal –

the

party

for w

hom

the

actio

n is

take

n (in

sura

nce

com

pany

)

32©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 67 6/23/2011 8:56:57 AM

68

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Age

ncy

Agr

eem

ent

•Th

e le

gal a

gree

men

t tha

t est

ablis

hes

the

rela

tions

hip

betw

een

the

prin

cipa

land

agen

t;it

rela

tions

hip

betw

een

the

prin

cipa

land

agen

t;it

also

out

lines

the

pow

ers

and

resp

onsi

bilit

ies

of

the

agen

t–

Expr

ess

auth

ority

–po

wer

s gi

ven

to th

e ag

ent a

s pa

rt of

the

agen

cy a

gree

men

t

33©

2011

Kap

lan,

Inc.

Age

ncy

Agr

eem

ent

–Im

plie

dau

thor

ity –

pow

ers

not g

iven

by

the

agen

cy

agre

emen

t,bu

tnec

essa

ryto

com

plet

eth

efu

nctio

nsag

reem

ent,

butn

eces

sary

toco

mpl

ete

the

func

tions

allo

wed

in th

e ag

ency

agr

eem

ent

–A

ppar

enta

utho

rity

–po

wer

s no

t giv

en b

y th

e ag

ency

ag

reem

ent,

but t

hat a

reas

onab

le p

erso

n w

ould

pr

esum

e th

e ag

ent h

as

34©

2011

Kap

lan,

Inc.

Prod

ucer

Res

pons

ibili

ties

•Th

e pr

oduc

er h

as a

fidu

ciar

y re

spon

sibi

lity

to th

e in

sure

rTh

ism

eans

the

prod

ucer

mus

talw

ays

insu

rer.

This

mea

nsth

epr

oduc

erm

usta

lway

spr

otec

t the

insu

rer’s

inte

rest

s an

d fo

llow

any

la

wfu

l ins

truct

ions

from

the

insu

rer.

35©

2011

Kap

lan,

Inc.

Prod

ucer

Res

pons

ibili

ties

•Th

e pr

oduc

er m

ust a

lso

upho

ld h

igh

stan

dard

s of

com

mer

cial

hono

rwhe

nde

alin

gw

ithth

eof

com

mer

cial

hono

rwhe

nde

alin

gw

ithth

eap

plic

ant.

This

mea

ns th

e pr

oduc

er m

ust a

lway

s ac

t fai

rly a

nd h

ones

tly, a

nd d

iscl

ose

all

info

rmat

ion

need

ed b

y th

e ap

plic

ant t

o m

ake

a w

ell-i

nfor

med

buy

ing

deci

sion

.

36©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 68 6/23/2011 8:56:58 AM

69

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Com

pany

App

oint

men

ts

Com

pany

App

oint

men

ts

•A

licen

sed

insu

ranc

e pr

oduc

er s

hall

not t

rans

act

insu

ranc

ebu

sine

sson

beha

lfof

anin

sure

rin

sura

nce

busi

ness

onbe

half

ofan

insu

rer

unle

ss th

e pr

oduc

er e

ither

:–

Has

bee

n ap

poin

ted

by th

e in

sure

r

–H

as th

e in

sure

r’s p

erm

issi

on to

tran

sact

bus

ines

s on

its

beh

alf a

nd o

btai

ns a

n ap

poin

tmen

t with

in 1

5da

ysaf

ters

ubm

ittin

gth

efir

stap

plic

atio

nto

that

insu

rer

38©

2011

Kap

lan,

Inc.

afte

rsub

mitt

ing

the

first

appl

icat

ion

toth

atin

sure

r

Com

pany

App

oint

men

ts

•O

nce

a co

mpa

ny a

ppoi

ntm

ent h

as b

een

filed

w

ithth

eco

mm

issi

oner

itw

illre

mai

nin

forc

eun

tilw

ithth

eco

mm

issi

oner

,itw

illre

mai

nin

forc

eun

tilvo

lunt

arily

term

inat

ed b

y th

e pr

oduc

er o

r ins

urer

39©

2011

Kap

lan,

Inc.

Com

pany

App

oint

men

ts

•If

the

insu

rer t

erm

inat

es a

com

pany

app

oint

men

t fo

rany

reas

onit

mus

tnot

ifyth

eco

mm

issi

oner

fora

nyre

ason

,itm

ustn

otify

the

com

mis

sion

erw

ithin

30da

ysfo

llow

ing

the

effe

ctiv

e da

te o

f the

te

rmin

atio

n

40©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 69 6/23/2011 8:56:58 AM

70

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Com

pany

App

oint

men

ts

•W

ithin

15

days

of n

otify

ing

the

com

mis

sion

er,

the

insu

rerm

usts

end

writ

ten

notic

eof

the

the

insu

rerm

usts

end

writ

ten

notic

eof

the

term

inat

ion

to th

e pr

oduc

er

41©

2011

Kap

lan,

Inc.

Com

pany

App

oint

men

ts

•W

ithin

30

days

afte

r rec

eivi

ng n

otic

e of

the

term

inat

ion

the

prod

ucer

may

file

writ

ten

term

inat

ion,

the

prod

ucer

may

file

writ

ten

com

men

ts c

once

rnin

g th

e te

rmin

atio

n w

ith th

e co

mm

issi

oner

. The

com

men

ts b

ecom

e pa

rt of

th

e co

mm

issi

oner

’s fi

le a

nd m

ust a

ccom

pany

ev

ery

repo

rt di

strib

uted

or d

iscl

osed

abo

ut th

e pr

oduc

er.

42©

2011

Kap

lan,

Inc.

p

Com

pany

App

oint

men

ts

•An

y in

sure

r tha

t fai

ls to

file

a c

ompa

ny

appo

intm

enti

spe

naliz

ed$2

5pe

roffe

nse

Eac

hap

poin

tmen

tis

pena

lized

$25

pero

ffens

e.E

ach

sale

of a

pol

icy

by a

n un

appo

inte

d pr

oduc

er is

a

sepa

rate

offe

nse.

The

max

imum

pen

alty

per

un

appo

inte

d pr

oduc

er is

$30

0.

43©

2011

Kap

lan,

Inc.

Dis

clos

ure

Req

uire

men

ts

MN_P&C_CN.indb 70 6/23/2011 8:56:59 AM

71

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Dis

clos

ure

Req

uire

men

ts

•Ag

ents

and

insu

ranc

e co

mpa

nies

are

lega

lly

oblig

ated

todi

sclo

sece

rtain

info

rmat

ion

toob

ligat

edto

disc

lose

certa

inin

form

atio

nto

pros

pect

s an

d cl

ient

s

45©

2011

Kap

lan,

Inc.

1995

Age

nt D

iscl

osur

e La

w

•Pr

ior t

o a

pers

onal

sol

icita

tion,

the

prod

ucer

, or

pers

onac

ting

onbe

half

ofth

epr

oduc

erm

ust

pers

onac

ting

onbe

half

ofth

epr

oduc

er,m

ust

disc

lose

the

follo

win

g in

writ

ing:

–Th

e pr

oduc

er’s

nam

e

–Th

e in

sura

nce

com

pany

or a

gent

the

prod

ucer

re

pres

ents

46©

2011

Kap

lan,

Inc.

–Th

e fa

ct th

at th

e pr

oduc

er is

in th

e bu

sine

ss o

f sel

ling

insu

ranc

e

1995

Age

nt D

iscl

osur

e La

w

•A

pers

onal

sol

icita

tion

is d

efin

ed a

s a

sale

, or

atte

mpt

edsa

leby

apr

oduc

eror

ape

rson

actin

gat

tem

pted

sale

,by

apr

oduc

eror

ape

rson

actin

gon

beh

alf o

f a p

rodu

cer.

This

app

lies

whe

ther

th

e co

ntac

t is

mad

e in

per

son,

by

tele

phon

e, o

r by

ele

ctro

nic

mea

ns.

•If

the

initi

al p

erso

nal c

onta

ct is

mad

e by

t

lh

thd

dil

th

47©

2011

Kap

lan,

Inc.

tele

phon

e,th

e pr

oduc

er c

an d

iscl

ose

the

info

rmat

ion

verb

ally

1995

Age

nt D

iscl

osur

e La

w

•Th

e be

st w

ay to

com

ply

with

the

requ

irem

ent i

s to

have

the

nece

ssar

yin

form

atio

npr

inte

don

the

toha

veth

ene

cess

ary

info

rmat

ion

prin

ted

onth

epr

oduc

er’s

bus

ines

s ca

rds

–If

the

prod

ucer

doe

s no

t use

bus

ines

s ca

rds,

the

requ

ired

info

rmat

ion

can

be a

dded

to a

pplic

atio

ns o

r fin

anci

al p

lann

er d

iscl

osur

e fo

rms

Ifth

epr

oduc

erre

pres

ents

seve

ralc

ompa

nies

the

48©

2011

Kap

lan,

Inc.

–If

the

prod

ucer

repr

esen

tsse

vera

lcom

pani

es,t

hepr

oduc

er c

an p

rovi

de a

bus

ines

s ca

rd th

at in

clud

es

the

prod

ucer

’s n

ame

and

suffi

cien

t inf

orm

atio

n fo

r a

reas

onab

le p

erso

n to

det

erm

ine

that

the

prod

ucer

is

in th

e bu

sine

ss o

f sel

ling

insu

ranc

e

MN_P&C_CN.indb 71 6/23/2011 8:56:59 AM

72

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

1995

Age

nt D

iscl

osur

e La

w

•An

y m

ater

ial t

hat r

elat

es to

spe

cific

insu

ranc

e pr

oduc

tsm

usti

nclu

deth

eid

entit

yof

the

insu

rer

prod

ucts

mus

tinc

lude

the

iden

tity

ofth

ein

sure

r.Th

is m

ater

ial i

nclu

des

appl

icat

ions

, bro

chur

es,

polic

y illu

stra

tions

, and

bin

ders

.

49©

2011

Kap

lan,

Inc.

Fair

Cre

dit R

epor

ting

Act

•In

sura

nce

com

pani

es n

eed

accu

rate

info

rmat

ion

abou

tan

appl

ican

tto

mak

ea

prop

erab

outa

nap

plic

antt

om

ake

apr

oper

unde

rwrit

ing

deci

sion

. Thi

s in

form

atio

n m

ay

incl

ude

the

follo

win

g:–

Info

rmat

ion

from

the

appl

icat

ion

that

is p

rovi

ded

by

the

appl

ican

t

Di

id

idd

bth

Dt

tfM

t

50©

2011

Kap

lan,

Inc.

–D

rivin

g re

cord

s pr

ovid

edby

the

Dep

artm

ent o

fMot

orV

ehic

les

Fair

Cre

dit R

epor

ting

Act

–M

edic

al re

cord

s pr

ovid

ed b

y th

e ap

plic

ant’s

phy

sici

an

Cdi

tt

idd

bti

–C

redi

t rep

orts

pro

vide

dby

a c

onsu

mer

repo

rting

agen

cy; t

hey

may

incl

ude

the

appl

ican

t’s c

redi

t st

andi

ng, o

ccup

atio

n, fi

nanc

es a

nd m

arita

l sta

tus

51©

2011

Kap

lan,

Inc.

Fair

Cre

dit R

epor

ting

Act

•Pr

otec

ts c

onsu

mer

s by

requ

iring

the

insu

rer t

o no

tify

the

cons

umer

whe

nth

ein

sure

racc

esse

sno

tify

the

cons

umer

whe

nth

ein

sure

racc

esse

sth

e co

nsum

er’s

cre

dit r

epor

t

•Ad

vise

s ho

w th

e co

nsum

er c

an c

orre

ct

info

rmat

ion

on a

cre

dit r

epor

t

•En

sure

s th

at c

redi

t rep

ortin

g ag

enci

es e

xerc

ise

52©

2011

Kap

lan,

Inc.

pg

gth

eir r

espo

nsib

ilitie

s in

a fa

ir an

d im

parti

al w

ay

MN_P&C_CN.indb 72 6/23/2011 8:56:59 AM

73

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Fair

Cre

dit R

epor

ting

Act

•W

hen

a cr

edit

repo

rt is

ord

ered

, the

app

lican

t m

ustb

eno

tifie

dbo

thve

rbal

lyan

din

writ

ing

ofm

ustb

eno

tifie

dbo

thve

rbal

lyan

din

writ

ing

ofth

e fo

llow

ing:

–Th

e ap

plic

ant h

as th

e rig

ht to

requ

est a

cop

y of

the

repo

rt fro

m th

e cr

edit

agen

cy

–Th

e ap

plic

ant m

ay re

ques

t to

be in

terv

iew

ed

53©

2011

Kap

lan,

Inc.

Fair

Cre

dit R

epor

ting

Act

–Th

e ap

plic

ant h

as th

e rig

ht to

cha

lleng

e an

y er

rone

ous

info

rmat

ion

cont

aine

din

the

repo

rt.A

nyer

rone

ous

info

rmat

ion

cont

aine

din

the

repo

rt.A

nych

alle

nge

mus

t be

mad

e di

rect

ly to

the

cred

it ag

ency

, w

ho m

ust r

espo

nd to

the

chal

leng

e w

ithin

30

days

.

–Th

e ap

plic

ant m

ay m

ake

a w

ritte

n st

atem

ent

rega

rdin

g an

y ne

gativ

e in

form

atio

n in

the

cred

it re

port.

The

cre

dit a

genc

y m

ust i

nclu

de th

is s

tate

men

t in

the

cred

itre

port

54©

2011

Kap

lan,

Inc.

inth

ecr

edit

repo

rt.

Fair

Cre

dit R

epor

ting

Act

•M

ost a

dver

se in

form

atio

n re

mai

ns in

a c

redi

t re

port

fors

even

year

sB

ankr

uptc

yin

form

atio

nre

port

fors

even

year

s.B

ankr

uptc

yin

form

atio

nre

mai

ns in

the

repo

rt fo

r 10

year

s.

55©

2011

Kap

lan,

Inc.

Gra

mm

-Lea

ch-B

liley

Act

•Th

e G

ram

m-L

each

-Blile

y A

ct re

quire

s in

sura

nce

com

pani

esto

disc

lose

thei

rpriv

acy

polic

yan

dco

mpa

nies

todi

sclo

seth

eirp

rivac

ypo

licy

and

how

a c

usto

mer

’s p

erso

nal (

non-

publ

ic)

info

rmat

ion

may

be

used

and

sha

red

with

af

filia

tes

and

third

par

ties

•Th

e A

ct re

quire

s co

mpa

nies

to p

rovi

de th

eir

ili

hli

ii

dd

t

56©

2011

Kap

lan,

Inc.

priv

acy

polic

y w

hen

a po

licy

isis

sued

and

at

leas

t onc

e a

year

ther

eafte

r

MN_P&C_CN.indb 73 6/23/2011 8:57:00 AM

74

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Con

sum

er P

rote

ctio

n

Gua

rant

y A

ssoc

iatio

n

•Th

e pu

rpos

e of

the

Min

neso

ta In

sura

nce

Gua

rant

yA

ssoc

iatio

nis

topr

otec

tpol

icyh

olde

rsG

uara

nty

Ass

ocia

tion

isto

prot

ectp

olic

yhol

ders

from

an

insu

rer’s

inab

ility

to p

ay c

laim

s du

e to

in

solv

ency

or b

ankr

uptc

y

•Th

e A

ssoc

iatio

n w

ill pa

y un

paid

cla

ims

up to

ce

rtain

max

imum

s lim

ited

by M

inne

sota

sta

tute

. Th

tti

idd

ib

dM

it

58©

2011

Kap

lan,

Inc.

The

prot

ectio

n pr

ovid

edis

base

d on

Min

neso

tala

w a

nd th

e la

ngua

ge o

f the

inso

lven

t com

pany

’s

polic

ies

at th

e tim

e of

inso

lven

cy.

Gua

rant

y A

ssoc

iatio

n

•Th

e no

tice

of p

olic

yhol

der r

ight

s m

ust b

e gi

ven

atth

etim

eof

appl

icat

ion;

ifth

eap

plic

atio

nis

not

atth

etim

eof

appl

icat

ion;

ifth

eap

plic

atio

nis

not

take

n in

per

son,

not

ice

mus

t be

sent

with

in 7

2ho

urs

of ta

king

the

appl

icat

ion

•Fu

ndin

g of

the

Gua

rant

y A

ssoc

iatio

n co

mes

fro

m c

ontri

butio

ns m

ade

by a

dmitt

ed c

arrie

rs

59©

2011

Kap

lan,

Inc.

•It

is a

n un

fair

trade

pra

ctic

e fo

r any

insu

rer o

r ag

ent t

o us

e th

e pr

otec

tion

affo

rded

by

the

Gua

rant

y A

ssoc

iatio

n as

a re

ason

for b

uyin

g in

sura

nce

Law

s R

egul

atin

g A

gent

C

ondu

ct

MN_P&C_CN.indb 74 6/23/2011 8:57:01 AM

75

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Adm

inis

trat

ive

Pena

lties

•D

enia

l of l

icen

sure

–th

e C

omm

issi

oner

refu

ses

tois

sue

ane

win

sura

nce

licen

seto

ape

rson

tois

sue

ane

win

sura

nce

licen

seto

ape

rson

who

has

pre

viou

sly

com

mitt

ed a

n ac

t tha

t wou

ld

have

resu

lted

in d

isci

plin

ary

actio

n if

the

pers

on

had

been

lice

nsed

at t

hat t

ime

61©

2011

Kap

lan,

Inc.

Adm

inis

trat

ive

Pena

lties

•C

ensu

re–

a fo

rmal

repr

iman

d of

a p

rodu

cer.

Th

isbe

com

esa

perm

anen

tpar

toft

heTh

isbe

com

esa

perm

anen

tpar

toft

hepr

oduc

er’s

reco

rd, b

ut d

oes

not o

ther

wis

e af

fect

th

e pr

oduc

er’s

abi

lity

to re

mai

n lic

ense

d.

•Su

spen

sion

–th

e C

omm

issi

oner

sus

pend

s a

prod

ucer

’s li

cens

e fo

r any

per

iod

of n

ot le

ss

thth

thTh

dt

ll

62©

2011

Kap

lan,

Inc.

than

thre

e m

onth

s.Th

e pr

oduc

er m

ay n

ot s

ell

or s

ervi

ce in

sura

nce

polic

ies

durin

g th

e su

spen

sion

.

Adm

inis

trat

ive

Pena

lties

•R

evoc

atio

n–

the

Com

mis

sion

er re

voke

s a

prod

ucer

’slic

ense

fors

erio

usm

isco

nduc

tTh

epr

oduc

ers

licen

sefo

rser

ious

mis

cond

uct.

The

prod

ucer

may

not

sel

l or s

ervi

ce in

sura

nce

polic

ies

durin

g th

e re

voca

tion.

–Th

e pr

oduc

er is

pro

hibi

ted

from

lice

nse

reap

plic

atio

n fo

r at l

east

two

year

sfro

m th

e ef

fect

ive

date

of t

he

revo

catio

n

63©

2011

Kap

lan,

Inc.

revo

catio

n

–A

s a

cond

ition

of r

eapp

licat

ion

the

prod

ucer

mus

t ob

tain

a p

erfo

rman

ce b

ond

of a

t lea

st $

20,0

00 w

ith

the

stat

e of

Min

neso

ta a

s ob

ligee

. The

bon

d m

ust b

e fil

ed w

ith th

e co

mm

issi

oner

.

Adm

inis

trat

ive

Pena

lties

•Fi

nes

–in

add

ition

to ta

king

act

ion

agai

nst a

pr

oduc

er’s

licen

seth

eC

omm

issi

oner

may

fine

apr

oduc

ers

licen

se,t

heC

omm

issi

oner

may

fine

apr

oduc

er u

p to

$10

,000

per

vio

latio

n

64©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 75 6/23/2011 8:57:01 AM

76

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Crim

inal

Pen

altie

s

•In

add

ition

to a

dmin

istra

tive

pena

lties

levi

ed b

y th

eco

mm

issi

oner

crim

inal

pena

lties

appl

yw

hen

the

com

mis

sion

er,c

rimin

alpe

nalti

esap

ply

whe

nvi

olat

ing

insu

ranc

e la

ws

•Th

e fir

st o

ffens

e is

a m

isde

mea

nor;

each

su

bseq

uent

offe

nse

is a

gro

ss m

isde

mea

nor

65©

2011

Kap

lan,

Inc.

Crim

inal

Pen

altie

s

•Th

e fo

llow

ing

offe

nses

are

a g

ross

mis

dem

eano

r on

the

first

offe

nse:

onth

efir

stof

fens

e:–

Act

ing

as a

n in

sura

nce

prod

ucer

with

out a

val

id

licen

se

–M

akin

g fa

lse

stat

emen

ts o

n an

app

licat

ion

for

insu

ranc

e

66©

2011

Kap

lan,

Inc.

–Fo

rgin

g th

e si

gnat

ure

of a

noth

er p

erso

n

Gro

unds

for D

isci

plin

ary

Act

ion

•Pr

ovid

ing

inco

rrec

t, m

isle

adin

g, in

com

plet

e, o

r m

ater

ially

untru

ein

form

atio

non

anap

plic

atio

nm

ater

ially

untru

ein

form

atio

non

anap

plic

atio

nfo

r an

insu

ranc

e lic

ense

•Vi

olat

ing

the

insu

ranc

e la

ws

or re

gula

tions

of t

he

Sta

te o

f Min

neso

ta o

r any

oth

er s

tate

•At

tem

ptin

g to

obt

ain

an in

sura

nce

licen

se

67©

2011

Kap

lan,

Inc.

pg

thro

ugh

fraud

or m

isre

pres

enta

tion

Gro

unds

for D

isci

plin

ary

Act

ion

•Im

prop

erly

with

hold

ing,

mis

appr

opria

ting,

or

conv

ertin

gm

oney

orpr

oper

tyre

ceiv

edin

the

conv

ertin

gm

oney

orpr

oper

tyre

ceiv

edin

the

cour

se o

f doi

ng in

sura

nce

busi

ness

•M

isre

pres

entin

g th

e te

rms

of a

n ac

tual

or

prop

osed

insu

ranc

e po

licy

•Be

ing

conv

icte

d of

, or p

lead

ing

guilt

y or

no

68©

2011

Kap

lan,

Inc.g

,p

gg

yco

ntes

t to,

a fe

lony

, gro

ss m

isde

mea

nor,

or

mis

dem

eano

r inv

olvi

ng m

oral

turp

itude

•C

omm

ittin

g an

y un

fair

trade

pra

ctic

e or

frau

d

MN_P&C_CN.indb 76 6/23/2011 8:57:01 AM

77

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Gro

unds

for D

isci

plin

ary

Act

ion

•U

sing

frau

dule

nt, c

oerc

ive,

or d

isho

nest

pra

ctic

es

•D

emon

stra

ting

inco

mpe

tenc

e, u

ntru

stw

orth

ines

s,

or fi

nanc

ial i

rresp

onsi

bilit

y

•H

avin

g an

insu

ranc

e lic

ense

in a

ny ju

risdi

ctio

n di

scip

lined

for a

ny re

ason

Citt

if

hth

tth

fi

69©

2011

Kap

lan,

Inc.

•C

omm

ittin

gfo

rger

y, w

heth

er o

r not

the

forg

ery

isre

late

d to

an

insu

ranc

e tra

nsac

tion

Gro

unds

for D

isci

plin

ary

Act

ion

•C

heat

ing

on a

n in

sura

nce

licen

se e

xam

•Kn

owin

gly

acce

ptin

g in

sura

nce

busi

ness

from

an

indi

vidu

al w

ho is

not

lice

nsed

•Fa

iling

to m

ake

cour

t-ord

ered

chi

ld s

uppo

rt pa

ymen

ts

Fili

tt

ti

t

70©

2011

Kap

lan,

Inc.

•Fa

iling

to p

ay s

tate

inco

me

taxe

s

•Be

ing

enjo

ined

by

any

cour

t of c

ompe

tent

ju

risdi

ctio

n fro

m e

ngag

ing

in a

ny a

spec

t of t

he

insu

ranc

e bu

sine

ss

Gro

unds

for D

isci

plin

ary

Act

ion

•M

akin

g an

y co

mm

unic

atio

n to

a p

oten

tial b

uyer

th

atth

epr

oduc

eris

actin

gon

beha

lfof

ath

atth

epr

oduc

eris

actin

gon

beha

lfof

ago

vern

men

t age

ncy

•Vi

olat

ing

any

notif

icat

ion,

dis

clos

ure,

or r

ecor

d-ke

epin

g re

quire

men

t, or

any

sta

ndar

d of

con

duct

im

pose

d by

Min

neso

ta s

tatu

te w

hile

per

form

ing

idti

lt

tiit

71©

2011

Kap

lan,

Inc.

resi

dent

ial m

ortg

age

activ

ity

Proh

ibite

d Pr

actic

es –

Age

nts

•M

etho

ds, a

cts

and

prac

tices

that

are

def

ined

as

unfa

iror

dece

ptiv

eas

unfa

iror

dece

ptiv

e–

Mis

repr

esen

tatio

n –

mak

ing

stat

emen

ts th

at

mis

repr

esen

t the

pol

icie

s, d

ivid

ends

, or f

inan

cial

co

nditi

on o

f any

insu

rer f

or th

e pu

rpos

e of

indu

cing

a

polic

yhol

der t

o la

pse,

forfe

it, o

r sur

rend

er a

n in

sura

nce

polic

y

72©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 77 6/23/2011 8:57:02 AM

78

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Proh

ibite

d Pr

actic

es –

Age

nts

•M

etho

ds, a

cts

and

prac

tices

that

are

def

ined

as

unfa

iror

dece

ptiv

eas

unfa

iror

dece

ptiv

e–

Def

amat

ion

–m

akin

g an

y st

atem

ent t

hat i

s m

alic

ious

ly c

ritic

al o

f the

fina

ncia

l con

ditio

n of

an

insu

rer t

hat i

s in

tend

ed to

inju

re a

ny p

erso

n en

gage

d in

the

busi

ness

of i

nsur

ance

–B

oyco

ttco

erci

onan

din

timid

atio

n–

any

acto

f

73©

2011

Kap

lan,

Inc.

Boy

cott,

coer

cion

,and

intim

idat

ion

any

acto

fbo

ycot

t, co

erci

on, o

r int

imid

atio

n re

sulti

ng in

an

unre

ason

able

rest

rain

t of t

rade

Proh

ibite

d Pr

actic

es –

Age

nts

•M

etho

ds, a

cts

and

prac

tices

that

are

def

ined

as

unfa

iror

dece

ptiv

eas

unfa

iror

dece

ptiv

e–

Dis

crim

inat

ion

–m

akin

g or

per

mitt

ing

any

unfa

ir di

scrim

inat

ion

betw

een

indi

vidu

als

in th

e sa

me

clas

s of

insu

reds

whe

n se

tting

rate

s, o

r ref

usin

g to

offe

r, se

ll, o

r ren

ew c

over

age

or li

miti

ng c

over

age

on th

e ba

sis

of m

arita

l sta

tus,

gen

der,

a di

sabi

lity,

or

74©

2011

Kap

lan,

Inc.

beca

use

the

prop

osed

insu

red

is a

vic

tim o

f dom

estic

ab

use

Proh

ibite

d Pr

actic

es –

Age

nts

•M

etho

ds, a

cts

and

prac

tices

that

are

def

ined

as

unfa

iror

dece

ptiv

eas

unfa

iror

dece

ptiv

e–

Reb

atin

g –

offe

ring

or g

ivin

g an

y re

bate

of p

rem

ium

s or

any

thin

g el

se o

f val

ue a

s an

indu

cem

ent t

o bu

y in

sura

nce;

the

pena

lty is

$60

–$20

0 pe

r vio

latio

n

–Tw

istin

g –

repl

acin

g in

sura

nce

to th

e de

trim

ent o

f the

in

sure

d

75©

2011

Kap

lan,

Inc.

insu

red

Req

uire

d C

ondu

ct o

f Age

nts

•Li

cens

e di

spla

y –

mus

t be

disp

laye

d in

the

prod

ucer

’sof

fice

whe

reit

can

bere

adily

view

edpr

oduc

ers

offic

ew

here

itca

nbe

read

ilyvi

ewed

or in

spec

ted

•D

eliv

ery

of p

olic

ies

–m

ust b

e de

liver

ed o

r m

aile

d w

ithin

30

wor

king

day

sof

the

prod

ucer

’s

rece

ipt f

rom

the

insu

rer

76©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 78 6/23/2011 8:57:02 AM

79

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Req

uire

d C

ondu

ct o

f Age

nts

•D

eliv

ery

of re

fund

s –

mus

t be

deliv

ered

or

mai

led

with

infiv

eda

ysof

rece

iptb

yth

em

aile

dw

ithin

five

days

ofre

ceip

tby

the

prod

ucer

•R

ecei

pts

–m

ust b

e is

sued

any

tim

e th

e pr

oduc

er ta

kes

poss

essi

on o

f mon

ey, i

nsur

ance

po

licie

s, o

r doc

umen

ts b

elon

ging

to a

n in

sure

d ti

id

77©

2011

Kap

lan,

Inc.

or p

rosp

ectiv

ein

sure

d

•Fi

nanc

ial a

nd c

ompl

aint

reco

rds

–m

ust b

e re

tain

ed fo

r six

yea

rs

Req

uire

d C

ondu

ct o

f Age

nts

•Su

itabi

lity

–m

ust d

eter

min

e w

heth

er o

r not

an

insu

ranc

epo

licy

issu

itabl

efo

rthe

cust

omer

’sin

sura

nce

polic

yis

suita

ble

fort

hecu

stom

ers

indi

vidu

al n

eeds

bef

ore

sellin

g a

polic

y

•O

ral b

inde

rs m

ust b

e fo

llow

ed u

p in

writ

ing

to th

e in

sure

d w

ithin

five

bus

ines

s da

ys

•Pr

oduc

ers

may

acc

ept l

oans

from

clie

nts

78©

2011

Kap

lan,

Inc.

yp

prov

ided

the

loan

agr

eem

ent i

s in

writ

ing.

All

reco

rds

rela

ting

to th

e lo

an m

ust b

e ke

pt o

n fil

e fo

r at l

east

six

yea

rs a

fter r

epay

men

t.

Com

pens

atio

n of

Lic

ense

es

•An

insu

rer o

r pro

duce

r may

not

pay

a

com

mis

sion

toa

pers

onfo

rsel

ling

orne

gotia

ting

com

mis

sion

toa

pers

onfo

rsel

ling

orne

gotia

ting

insu

ranc

e in

Min

neso

ta if

that

per

son

is re

quire

d to

be

licen

sed

and

is n

ot

•A

pers

on m

ay n

ot a

ccep

t a c

omm

issi

on fo

r se

lling

or n

egot

iatin

g in

sura

nce

in M

inne

sota

if

tht

ii

dt

bli

dd

it

79©

2011

Kap

lan,

Inc.

that

per

son

is re

quire

dto

belic

ense

d an

dis

not

Com

pens

atio

n of

Lic

ense

es

•R

enew

al o

r oth

er d

efer

red

com

mis

sion

may

be

paid

toa

retir

edpr

oduc

erfo

rpol

icie

sth

atw

ere

paid

toa

retir

edpr

oduc

erfo

rpol

icie

sth

atw

ere

sold

whi

le th

e pe

rson

was

lice

nsed

•Li

cens

ed p

rodu

cers

may

cha

rge

serv

ice

fees

but

on

ly if

the

fee

is re

ason

able

and

fully

dis

clos

ed

in w

ritin

g

80©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 79 6/23/2011 8:57:03 AM

80

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Law

s R

egul

atin

g In

sure

r C

ondu

ct

Insu

ranc

e C

ompa

ny R

egul

atio

n

•C

ompl

aint

reco

rds

–m

ust b

e re

tain

ed fo

r fou

rye

ars

afte

rthe

com

plai

ntis

mad

eye

ars

afte

rthe

com

plai

ntis

mad

e

•Po

licy

form

s an

d ap

plic

atio

ns –

mus

t be

reta

ined

fo

rthr

eeye

ars

afte

r the

effe

ctiv

e da

te

•C

laim

reco

rds

–m

ust b

e re

tain

ed fo

r thr

eeye

ars

afte

r the

cla

im is

pai

d or

den

ied

82©

2011

Kap

lan,

Inc.

yp

Insu

ranc

e C

ompa

ny R

egul

atio

n

•Al

l ins

uran

ce p

olic

ies

sold

in M

inne

sota

mus

t be

read

able

and

unde

rsta

ndab

leto

ape

rson

ofre

adab

lean

dun

ders

tand

able

toa

pers

onof

aver

age

inte

lligen

ce, e

xper

ienc

e, a

nd e

duca

tion

•Al

l pol

icie

s m

ust p

ass

the

“Fle

sch

scal

e an

alys

is”

(whi

ch m

easu

res

the

ease

of r

eada

bilit

y) a

t an

eigh

th g

rade

read

ing

leve

l. P

olic

ies

are

anal

yzed

f

thb

fll

bld

dth

83©

2011

Kap

lan,

Inc.

fort

he n

umbe

r of s

ylla

bles

per

wor

d, a

ndth

enu

mbe

r of w

ords

per

sen

tenc

e.

Insu

ranc

e C

ompa

ny R

egul

atio

n

•Al

l new

insu

ranc

e po

licie

s so

ld in

Min

neso

ta

mus

tcon

tain

a“fr

eelo

ok”p

erio

dof

atle

ast1

0m

ustc

onta

ina

free-

look

perio

dof

atle

ast1

0da

ys. I

f the

insu

red

is d

issa

tisfie

d w

ith th

e po

licy

for a

ny re

ason

, the

pol

icy

can

be re

turn

ed fo

r a

full

refu

nd d

urin

g th

e fre

e-lo

ok p

erio

d.

84©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 80 6/23/2011 8:57:04 AM

81

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Insu

ranc

e C

ompa

ny R

egul

atio

n

•An

insu

rer m

ay n

ot re

fuse

to in

sure

or c

ontin

ue

toin

sure

the

life

ofa

Nat

iona

lGua

rdor

arm

edto

insu

reth

elif

eof

aN

atio

nalG

uard

orar

med

forc

es re

serv

e m

embe

r due

to th

at p

erso

n’s

stat

us a

s a

mem

ber,

unle

ss th

e in

divi

dual

has

re

ceiv

ed a

n or

der f

or a

ctiv

e du

ty–

If co

vera

ge fo

r a re

serv

e m

embe

r was

term

inat

ed,

canc

elle

d, o

r non

rene

wed

whi

le o

n ac

tive

duty

, an

it

ft

it

tf

th

85©

2011

Kap

lan,

Inc.

insu

rer m

ay n

ot re

fuse

to re

inst

ate

cove

rage

fort

hein

sure

d or

any

cov

ered

dep

ende

nts

unde

r an

indi

vidu

al o

r gro

up li

fe o

r hea

lth p

olic

y

–Th

e pe

rson

sha

ll ap

ply

for r

eins

tate

men

t with

in 9

0 da

ys a

fter r

emov

al fr

om a

ctiv

e du

ty

Unf

air C

laim

s Se

ttlem

ent P

ract

ices

•M

inne

sota

law

requ

ires

that

insu

ranc

e co

mpa

nies

hand

lecl

aim

sin

apr

ompt

fair

and

com

pani

esha

ndle

clai

ms

ina

prom

pt,f

air,

and

hone

st m

anne

r

•Th

e la

w a

lso

stat

es th

at c

erta

in c

laim

set

tlem

ent

prac

tices

are

pro

hibi

ted

86©

2011

Kap

lan,

Inc.

Unf

air C

laim

s Se

ttlem

ent P

ract

ices

•D

elay

ing

or re

fusi

ng a

set

tlem

ent b

ecau

se th

e cl

aim

antr

etai

nsan

atto

rney

orpu

blic

adju

ster

clai

man

tret

ains

anat

torn

eyor

publ

icad

just

er

•D

eman

ding

irre

leva

nt in

form

atio

n th

at h

as

noth

ing

to d

o w

ith th

e lo

ss

•Fa

iling

to a

dopt

reas

onab

le s

tand

ards

for p

rom

pt

inve

stig

atio

n of

a c

laim

87©

2011

Kap

lan,

Inc.

g

•R

efus

ing

to p

ay a

cla

im w

ithou

t con

duct

ing

a re

ason

able

inve

stig

atio

n

Unf

air C

laim

s Se

ttlem

ent P

ract

ices

•C

ompe

lling

an in

sure

d to

com

men

ce li

tigat

ion

by

offe

ring

anin

adeq

uate

settl

emen

tof

ferin

gan

inad

equa

tese

ttlem

ent

•M

akin

g se

ttlem

ent o

n on

e pa

rt of

a c

laim

co

ntin

gent

on

agre

emen

t to

settl

e on

ano

ther

pa

rt of

the

clai

m

•D

enyi

ng a

cla

im w

ithou

t dis

clos

ure;

the

insu

rer

88©

2011

Kap

lan,

Inc.y

g;

mus

t cite

the

spec

ific

polic

y pr

ovis

ion

that

ap

plie

s

MN_P&C_CN.indb 81 6/23/2011 8:57:05 AM

82

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Unf

air C

laim

s Se

ttlem

ent P

ract

ices

•M

akin

g an

arb

itrar

y as

sign

men

t of c

ompa

rativ

e ne

glig

ence

;the

insu

rerm

usth

ave

reas

onab

lene

glig

ence

;the

insu

rerm

usth

ave

reas

onab

leev

iden

ce a

nd d

ocum

enta

tion

•D

enyi

ng a

cla

im b

ecau

se th

e in

sure

d di

d no

t “o

ffici

ally

” rep

ort i

t or u

se th

e pr

oper

form

s

•R

efus

ing

to p

ay a

cla

im b

ecau

se th

e in

sure

d

89©

2011

Kap

lan,

Inc.

gp

ym

ight

col

lect

som

ewhe

re e

lse

Unf

air C

laim

s Se

ttlem

ent P

ract

ices

•R

equi

ring

insp

ectio

ns a

t spe

cific

pla

ces

or

unre

ason

able

dist

ance

sun

reas

onab

ledi

stan

ces

•Fa

iling

to re

ply

to c

usto

mer

cla

ims/

inqu

iries

w

ithin

10

days

•M

akin

g cl

aim

pay

men

ts w

ithou

t set

ting

forth

the

cove

rage

und

er w

hich

the

paym

ent i

s m

ade

90©

2011

Kap

lan,

Inc.

gp

y

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•M

inne

sota

sta

tute

s re

gula

te in

sura

nce

adve

rtisi

ngan

dm

arke

ting

toen

sure

that

adve

rtisi

ngan

dm

arke

ting

toen

sure

that

com

mun

icat

ion

of in

sura

nce

prod

ucts

is c

lear

an

d co

mpl

ete

91©

2011

Kap

lan,

Inc.

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•In

sura

nce

adve

rtisi

ng is

def

ined

by

stat

ute

to

incl

ude

the

follo

win

g:in

clud

eth

efo

llow

ing:

–P

rinte

d m

ater

ial,

audi

ovis

ual m

ater

ial,

and

desc

riptiv

e lit

erat

ure

used

in ra

dio,

tele

visi

on, a

nd b

illbo

ards

–D

escr

iptiv

e lit

erat

ure

and

sale

s ad

s us

ed in

circ

ular

s,

leaf

lets

, and

form

lette

rs

92©

2011

Kap

lan,

Inc.

–P

repa

red

sale

s ta

lks

and

pres

enta

tions

use

d by

a

prod

ucer

MN_P&C_CN.indb 82 6/23/2011 8:57:05 AM

83

Less

on S

ix

Min

neso

ta In

sura

nce

Reg

ulat

ion

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•Ad

verti

sem

ents

or r

epre

sent

atio

ns m

ay n

ot

cont

ain

dece

ptiv

ew

ords

phra

ses

orillu

stra

tions

cont

ain

dece

ptiv

ew

ords

,phr

ases

,ori

llust

ratio

ns

•Pr

oduc

ers

mus

t abi

de b

y ce

rtain

sal

es p

ract

ices

w

hen

trans

actin

g bu

sine

ss to

avo

id m

isle

adin

g or

dec

eivi

ng th

e pu

blic

93©

2011

Kap

lan,

Inc.

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•Ex

ampl

es o

f pro

hibi

ted

term

inol

ogy

incl

ude:

–In

vest

men

t, ex

pans

ion

plan

, or p

rofit

-sha

ring

plan

–Th

e in

sure

r gua

rant

ees

your

pay

chec

k or

inco

me

–Fu

ll, c

ompl

ete,

com

preh

ensi

ve, u

nlim

ited

(to

exag

gera

te b

enef

its)

–Policy

will

help

pay

med

ical

bills

,rep

lace

your

94©

2011

Kap

lan,

Inc.

Policy

will

help

pay

med

ical

bills

,rep

lace

your

inco

me,

or f

ill th

e ga

ps o

f you

r cur

rent

insu

ranc

e

–Th

e in

sure

r saf

egua

rds

your

sta

ndar

d of

livi

ng o

r pay

s fo

r fin

anci

al n

eeds

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•O

ther

adv

ertis

ing

and

mar

ketin

g re

gula

tions

–A

ll po

licy

limita

tions

mus

t be

disc

lose

d

–A

n ad

verti

sem

ent m

ust n

ot m

ake

unfa

ir or

inco

mpl

ete

com

paris

ons

of o

ther

pol

icie

s or

insu

ranc

e co

mpa

nies

–If

the

polic

y st

ates

ben

efits

and

pre

miu

ms,

it m

ust

also

sta

te p

olic

y de

duct

ible

s

95©

2011

Kap

lan,

Inc.

–A

dver

tisem

ents

mus

t cle

arly

def

ine

how

oth

er

insu

ranc

e m

ay a

pply

and

dis

clos

e an

y ov

erla

ppin

g be

nefit

s

Adv

ertis

ing

and

Mar

ketin

g St

anda

rds

•C

onsu

lt th

e M

inne

sota

law

sup

plem

ent f

or a

co

mpl

ete

listo

fadv

ertis

ing

and

mar

ketin

gco

mpl

ete

listo

fadv

ertis

ing

and

mar

ketin

gst

anda

rds

96©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 83 6/23/2011 8:57:05 AM

MN_P&C_CN.indb 84 6/23/2011 8:57:05 AM

Lesson SevenProperty and Casualty Provisions, terms, and Concepts

MN_P&C_CN.indb 85 6/23/2011 8:57:05 AM

86

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Less

on S

even

Prop

erty

and

Cas

ualty

Pr

ovis

ions

, Ter

ms,

and

C

once

pts

1

Prop

erty

and

Cas

ualty

Pr

ovis

ions

2

Def

initi

on o

f Ins

ured

•N

amed

insu

red

–pe

rson

or b

usin

ess

who

se

nam

eap

pear

son

the

decl

arat

ions

page

nam

eap

pear

son

the

decl

arat

ions

page

•Ad

ditio

nal i

nsur

ed –

who

the

insu

rer p

rom

ises

to

prot

ect i

n ad

ditio

n to

the

nam

ed in

sure

d–A

resi

dent

rela

tive

on a

hom

eow

ners

pol

icy

–A

per

mis

sive

use

r on

an a

uto

polic

y

Fit

di

di

lli

iill

3©

2011

Kap

lan,

Inc.

•Fi

rst n

amed

insu

red

–co

mm

erci

al p

olic

ies

will

list t

he fi

rst n

amed

insu

red

who

is re

spon

sibl

e fo

r co

ntra

ctua

l dut

ies

and

rece

ives

not

ifica

tions

from

in

sure

r

Can

cella

tion

Prov

isio

n

•W

hen

the

polic

y is

can

celle

d be

fore

the

end

of th

e po

licy

perio

d, u

near

ned

prem

ium

s w

ill b

e re

fund

ed to

the

pp

polic

yhol

der

–P

ro-ra

ta c

ance

llatio

n

•Th

e pr

orat

ed u

near

ned

prem

ium

is re

turn

ed to

the

insu

red

–S

hort-

rate

can

cella

tion

•A

fina

ncia

l pen

alty

is in

curre

d w

hen

the

insu

red

canc

els

the

polic

ypr

ior t

o th

e ex

pira

tion

date

4©

2011

Kap

lan,

Inc.p

yp

p

•Th

e in

sure

r kee

ps a

per

cent

age

of u

near

ned

prem

ium

to

cove

r cos

ts

•Ty

pica

lly u

sed

with

com

mer

cial

pol

icie

s

MN_P&C_CN.indb 86 6/23/2011 8:57:06 AM

87

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Oth

er In

sura

nce

•C

laim

ants

(peo

ple

filin

g a

clai

m) s

houl

d be

in

dem

nifie

dbu

tsho

uld

notp

rofit

from

alo

ssin

dem

nifie

d,bu

tsho

uld

notp

rofit

from

alo

ss

•If

mul

tiple

pol

icie

s ap

ply

to th

e sa

me

loss

, oth

er

insu

ranc

e pr

ovis

ions

will

appl

y

•An

y on

e of

thes

e pr

ovis

ions

may

app

ly:

Prim

ary

and

exce

ssco

ntrib

utio

nby

equa

lsha

res

5©

2011

Kap

lan,

Inc.

–P

rimar

yan

dex

cess

,con

tribu

tion

byeq

uals

hare

s,pr

o-ra

ta, o

r non

-con

curr

ency

Oth

er In

sura

nce

•Pr

imar

y an

d ex

cess

–W

hen

mul

tiple

pol

icie

s co

ver t

he lo

ss (p

eril)

, one

is

deem

ed p

rimar

y, a

nd th

e ot

her i

s ex

cess

–P

rimar

y po

licy

pays

firs

t, an

d th

e ex

cess

pol

icy

pays

la

st

–E

xam

ple:

aut

o lia

bilit

y co

vera

ge a

nd u

mbr

ella

pol

icie

s

6©

2011

Kap

lan,

Inc.

Oth

er In

sura

nce

•C

ontri

butio

n by

equ

al s

hare

s–

Use

d w

hen

mul

tiple

liab

ility

pol

icie

s co

ver t

he lo

ss

–A

ll in

sure

rs s

hare

equ

ally

up

to th

e lim

it of

the

lowe

st

polic

y

–R

emai

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

7©

2011

Kap

lan,

Inc.

–C

ompa

nies

spl

it th

e bi

ll, e

ven

if th

e co

vera

ge

prov

ided

is u

nequ

al

Oth

er In

sura

nce

•Pr

o-ra

ta (u

sed

mos

t ofte

n)–

Use

d w

hen

mul

tiple

pol

icie

s co

ver t

he lo

ss

–Th

e in

sure

rs w

ill s

hare

the

cost

of t

he c

laim

–ea

ch

insu

rer w

ill p

ay a

pro

port

iona

l sha

re o

f the

loss

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 87 6/23/2011 8:57:07 AM

88

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Oth

er In

sura

nce

•P

ro-r

ata

exam

ple:

Hld

$100

000

ti

db

CA

d–

Har

old

owns

a $

100,

000

prop

erty

insu

red

byC

ompa

ny A

and

Com

pany

B. T

he p

rope

rty s

uffe

rs a

$40

,000

fire

loss

, whi

ch is

co

vere

d by

bot

h po

licie

s. H

ow m

uch

wou

ld e

ach

shar

e in

the

cost

of t

he fi

re lo

ss?

Tota

l pol

icy

limit:

$10

0,00

0

•C

ompa

ny A

insu

res

75%

of t

he p

rope

rty: $

75,0

00

CB

i25

%ft

ht

$25

000

9©

2011

Kap

lan,

Inc.

•C

ompa

ny B

insu

res

25%

oft

he p

rope

rty: $

25,0

00

Tota

l cos

t of f

ire lo

ss: $

40,0

00

•C

ompa

ny A

pay

s $3

0,00

0

•C

ompa

ny B

pay

s $1

0,00

0

Oth

er In

sura

nce

•N

on-c

oncu

rren

cy–

Use

d w

hen

mul

tiple

pol

icie

s ex

ist b

ut th

e pe

ril is

co

vere

d by

onl

y on

e po

licy

–Th

e po

licy

prov

idin

g co

vera

ge w

ill d

o so

pr

opor

tiona

lly

10©

2011

Kap

lan,

Inc.

Oth

er In

sura

nce

•N

on-c

oncu

rren

cy e

xam

ple:

A$1

0000

0t

ii

db

ti

Tht

–A

$100

,000

pro

perty

isin

sure

dby

two

com

pani

es.T

he p

rope

rtysu

ffers

an

earth

quak

e lo

ss (c

over

ed b

y on

e po

licy)

.

•C

ompa

ny A

insu

res

75%

of t

he p

rope

rty/e

arth

quak

es a

re

cove

red

•C

ompa

ny B

insu

res

25%

of t

he p

rope

rty/e

arth

quak

es a

re

excl

uded

Tt

lt

fth

kl

$80

000

11©

2011

Kap

lan,

Inc.

Tota

l cos

t of e

arth

quak

elo

ss: $

80,0

00

•C

ompa

ny A

pay

s $6

0,00

0

•C

ompa

ny B

pay

s no

thin

g

App

rais

al

•U

sed

to re

solv

e a

disp

ute

over

the

amou

nt o

f a

loss

loss –E

ach

party

sel

ects

an

appr

aise

r to

repr

esen

t the

m

–Th

e tw

o ap

prai

sers

sel

ect a

n um

pire

, who

will

mak

e th

e de

cisi

on; m

ajor

ity d

ecis

ion

is b

indi

ng

–Th

e tw

o pa

rties

ass

ume

the

cost

s fo

r the

app

rais

ers

12©

2011

Kap

lan,

Inc.

they

hire

and

sha

re th

e co

st o

f the

um

pire

’s la

bor

MN_P&C_CN.indb 88 6/23/2011 8:57:07 AM

89

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Arb

itrat

ion

•U

sed

to re

solv

e ot

her p

olic

y di

sput

es b

etw

een

the

insu

rera

ndin

sure

dth

ein

sure

rand

insu

red

–E

ach

party

sel

ects

an

arbi

trato

r to

repr

esen

t the

m

–Th

e tw

o ar

bitra

tors

will

sel

ect a

third

arb

itrat

or, w

ho

will

mak

e th

e de

cisi

on

–Th

e tw

o pa

rties

ass

ume

the

cost

s fo

r the

arb

itrat

ors

13©

2011

Kap

lan,

Inc.

they

hire

and

sha

re th

e co

st o

f the

third

arb

itrat

or’s

la

bor

Insu

rer P

rovi

sion

s

•R

ight

of s

ubro

gatio

n–

The

insu

rer m

ay, a

t the

ir op

tion,

col

lect

from

a

negl

igen

t thi

rd p

arty

any

loss

pay

men

ts m

ade

to a

n in

sure

d

–W

hen

the

insu

red

rece

ives

pay

men

t of a

cla

im, t

he

right

to c

olle

ct fr

om th

e ne

glig

ent p

arty

is tr

ansf

erre

d to

the

insu

rer

14©

2011

Kap

lan,

Inc.

toth

ein

sure

r

Insu

rer P

rovi

sion

s

•R

ight

of s

alva

ge (r

ight

of r

ecov

ery)

–In

sure

rs m

ay, a

t the

ir op

tion,

sal

vage

pro

perty

that

ha

s be

en d

ecla

red

a to

tal l

oss

–A

fter p

ayin

g th

e in

sure

d, th

e in

sure

r bec

omes

the

new

ow

ner o

f the

pro

perty

and

can

sel

l it t

o of

fset

the

clai

m e

xpen

ses

15©

2011

Kap

lan,

Inc.

Insu

rer P

rovi

sion

s

•D

uty

to d

efen

d–

The

insu

rer m

ust d

efen

d th

e in

sure

d ag

ains

t all

clai

ms

and

law

suits

that

wou

ld b

e co

vere

d by

the

polic

y

–Th

is d

uty

to d

efen

d en

ds w

hen

the

limits

of l

iabi

lity

have

bee

n ex

haus

ted

Lib

lii

l

16©

2011

Kap

lan,

Inc.

•Li

bera

lizat

ion

clau

se–

If th

e in

sure

r cha

nges

the

polic

y fo

rm in

a m

anne

r tha

t w

ould

bro

aden

cov

erag

e at

no

addi

tiona

l cos

t, th

e in

sure

d is

aut

omat

ical

ly g

iven

the

addi

tiona

l cov

erag

e

MN_P&C_CN.indb 89 6/23/2011 8:57:08 AM

90

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Nam

ed In

sure

d Pr

ovis

ions

•D

utie

s af

ter a

loss

incl

ude

the

follo

win

g:–

Giv

e pr

ompt

not

ice

of lo

ss to

the

insu

rer

–C

oope

rate

with

the

insu

rer

–P

rote

ct th

e pr

oper

ty fr

om fu

rther

dam

age/

loss

–M

ake

reas

onab

le a

nd n

eces

sary

repa

irs

Pi

tfd

dl

t

17©

2011

Kap

lan,

Inc.

–P

repa

re a

n in

vent

ory

ofda

mag

ed p

erso

nal p

rope

rty

–S

ubm

it to

que

stio

ns u

nder

oat

h

–S

end

the

insu

rer a

sig

ned

and

swor

n pr

oof o

f los

s st

atem

ent (

with

in 6

0 da

ys)

Nam

ed In

sure

d Pr

ovis

ions

•A

ssig

nmen

t cla

use

(tran

sfer

of r

ight

s an

d du

ties)

T

fi

thhi

fli

tth

t–

Tran

sfer

ring

the

owne

rshi

p of

a p

olic

y to

ano

ther

par

ty

–Th

e as

sign

men

t cla

use

stat

es th

at a

pol

icy

may

not

be

assi

gned

w

ithou

t the

prio

r writ

ten

cons

ent o

f the

insu

rer (

usua

lly fr

om

unde

rwrit

ing)

–In

sura

nce

is a

per

sona

l con

tract

, mea

ning

it is

issu

ed to

a

pers

on, n

ot a

n ite

m o

f pro

perty

. Whe

n a

polic

y is

ass

igne

d to

a

new

per

son,

the

polic

y m

ust b

e un

derw

ritte

n ag

ain.

18©

2011

Kap

lan,

Inc.

p,

py

g

–Fl

ood

insu

ranc

e is

the

only

type

of p

rope

rty/c

asua

lty c

over

age

that

can

be

assi

gned

with

out t

he w

ritte

n pe

rmis

sion

of t

he

insu

rer

Nam

ed In

sure

d Pr

ovis

ions

•Ab

ando

nmen

t pro

visi

on–

Pro

hibi

ts th

e in

sure

d fro

m a

band

onin

g da

mag

ed

prop

erty

to th

e in

sura

nce

com

pany

and

insi

stin

g re

imbu

rsem

ent f

or it

s fu

ll va

lue

–Th

e in

sure

r ret

ains

the

right

of s

alva

ge b

ut d

oes

not

allo

w th

e in

sure

d to

relin

quis

h pr

oper

ty to

the

com

pany

atth

eop

tion

ofth

ein

sure

d

19©

2011

Kap

lan,

Inc.

com

pany

atth

eop

tion

ofth

ein

sure

d

Third

Par

ty P

rovi

sion

s

•S

tand

ard

mor

tgag

e cl

ause

Di

dt

ttt

hi

bli

tt

fth

t–

Des

igne

dto

pro

tect

the

insu

rabl

ein

tere

st o

fthe

mor

tgag

ee(le

nder

). Th

e m

ortg

agee

:

•M

ay a

ct a

s th

e in

sure

d by

pay

ing

prem

ium

s an

d su

bmitt

ing

clai

ms

•H

as th

e fu

ll rig

ht o

f rec

over

y to

any

am

ount

ow

ed u

nder

the

mor

tgag

e

Hth

iht

ti

tlt1

0d

’d

itt

20©

2011

Kap

lan,

Inc.

•H

asth

e rig

htto

rece

ive

atle

ast1

0da

ys’ a

dvan

ce w

ritte

nno

tice

if th

e po

licy

is c

ance

lled

for a

ny re

ason

; the

insu

rer w

ill se

nd th

is n

otic

e di

rect

ly to

the

mor

tgag

ee

–N

othi

ng th

e in

sure

d do

es, e

ven

dish

ones

t act

s, c

an p

reve

nt th

e m

ortg

agee

from

col

lect

ing

unde

r the

pol

icy

MN_P&C_CN.indb 90 6/23/2011 8:57:08 AM

91

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Third

Par

ty P

rovi

sion

s

•N

o be

nefit

to b

aile

e–

A b

aile

eis

som

eone

who

has

take

n cu

stod

y of

an

othe

r per

son’

s pr

oper

ty fo

r a s

peci

al p

urpo

se (a

nd

usua

lly fo

r a fe

e)

–Th

e in

sure

r will

not

pro

vide

cov

erag

e th

at b

enef

its a

ba

ilee.

The

bai

lee’

spo

licy

wou

ld b

e pr

imar

y ov

er th

e pr

oper

tyow

ner’s

polic

y.

21©

2011

Kap

lan,

Inc.

prop

erty

owne

rspo

licy.

–E

xam

ple:

Bob

’s te

levi

sion

is d

estro

yed

by fi

re w

hile

in

for r

epai

rs. T

he re

pair

shop

’s p

olic

y w

ould

han

dle

the

clai

m b

efor

e B

ob’s

hom

eow

ners

pol

icy.

Prop

erty

Pro

visi

ons

Vaca

ncy/

Uno

ccup

ancy

•If

the

insu

red

prem

ises

has

bee

n va

cant

or u

nocc

upie

d fo

rove

r60

cons

ecut

ive

days

,the

rem

aybe

nofo

rove

r60

cons

ecut

ive

days

,the

rem

aybe

noco

vera

ge fo

r cer

tain

loss

es s

uch

as v

anda

lism

, pip

es

freez

ing

or b

urst

ing,

thef

t, an

d gl

ass

brea

kage

–U

nocc

upie

d

•N

o pe

ople

or a

ctiv

ity

•N

o re

side

nts

but f

ully

furn

ishe

d

23©

2011

Kap

lan,

Inc.

–V

acan

t

•N

o pe

ople

or a

ctiv

ity a

nd n

o co

nten

ts

•Th

e pr

oper

ty is

not

in u

se

Coi

nsur

ance

Pro

visi

on

•B

ecau

se s

mal

l cla

ims

are

mor

e co

mm

on th

an to

tal l

oss

clai

ms,

cust

omer

sm

aych

oose

toun

der-

insu

reth

eir

clai

ms,

cust

omer

sm

aych

oose

toun

der

insu

reth

eir

prop

erty

, pur

chas

ing

only

the

cove

rage

requ

ired

to c

over

sm

all c

laim

s

•In

sura

nce

to v

alue

is th

e am

ount

of i

nsur

ance

co

mpa

red

to th

e re

plac

emen

t cos

t of t

he p

rope

rty.

Insu

rers

enc

oura

ge th

e in

sure

d to

car

ry in

sura

nce

as

clos

eto

the

full

repl

acem

entc

osta

spo

ssib

le

24©

2011

Kap

lan,

Inc.

clos

eto

the

full

repl

acem

entc

osta

spo

ssib

le.

•C

oins

uran

ce re

quire

men

ts a

re c

omm

on in

com

mer

cial

pr

oper

ty p

olic

ies

–th

e st

anda

rd c

oins

uran

ce re

quire

men

t is

80%

of th

e re

plac

emen

t cos

t

MN_P&C_CN.indb 91 6/23/2011 8:57:09 AM

92

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Coi

nsur

ance

Pro

visi

on

•If

a co

insu

ranc

e re

quire

men

t is

met

, cla

ims

are

paid

infu

llup

toth

epo

licy

limits

paid

infu

ll,up

toth

epo

licy

limits

•If

the

prop

erty

is u

nder

insu

red,

par

tial c

laim

s ar

e su

bjec

t to

a pe

nalty

, cal

led

the

coin

sura

nce

pena

lty–

In s

uch

case

s, th

e in

sure

d (c

usto

mer

) may

be

calle

d

25©

2011

Kap

lan,

Inc.

the

coin

sure

rbec

ause

the

insu

red

is s

harin

g th

e co

sts

of th

e cl

aim

Coi

nsur

ance

Pro

visi

on

•Th

e re

duce

d se

ttlem

ent i

s de

term

ined

thro

ugh

a fo

rmul

a:(IC

)Ins

uran

ceca

rried

•E

xam

ple:

A c

omm

erci

al p

rope

rty o

wne

r with

a $

100,

000

prop

erty

in

sure

d it

for $

20,0

00. T

he p

rope

rty o

wne

r suf

fere

d a

$10,

000

cove

red

loss

. Wha

t is

the

clai

m s

ettle

men

t am

ount

? W

hat i

s th

e co

insu

ranc

e pe

nalty

?

(IC)I

nsur

ance

carri

ed×

loss

= c

laim

set

tlem

ent

(IR) I

nsur

ance

requ

ired

(IC)$

2000

0

26©

2011

Kap

lan,

Inc.

•D

educ

tible

s ar

e ap

plie

d af

ter t

he c

laim

set

tlem

ent i

s de

term

ined

(IC)$

20,0

00×

10,0

00 =

$2,

500

clai

m s

ettle

men

t and

a

(IR) $

80,0

00$7

,500

coi

nsur

ance

pen

alty

Loss

Val

uatio

n

•D

iffer

ent w

ays

insu

ranc

e co

mpa

nies

can

han

dle

clai

ms

clai

ms

•Ac

tual

cas

h va

lue

–R

epla

cem

ent c

ost m

inus

dep

reci

atio

n

–U

sed

as th

e de

faul

t und

er m

ost p

rope

rty in

sura

nce

polic

ies

27©

2011

Kap

lan,

Inc.

p

–D

epre

ciat

ion—

decr

ease

in th

e va

lue

of p

rope

rty o

ver

a pe

riod

of ti

me

•R

esul

ts fr

om a

ge, w

ear a

nd te

ar fr

om u

se, a

nd

econ

omic

obs

oles

cenc

e

Loss

Val

uatio

n

•R

epla

cem

ent c

ost

–Th

e in

sure

r pay

s th

e fu

ll co

st to

repa

ir or

repl

ace

the

prop

erty

with

like

kin

d an

d qu

ality

with

out

subt

ract

ing

depr

ecia

tion

–Th

is c

an b

e ad

ded

to m

ost p

rope

rty p

olic

ies

by

endo

rsem

ent

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 92 6/23/2011 8:57:09 AM

93

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Loss

Val

uatio

n

•Va

lued

pol

icy/

agre

ed v

alue

–Th

e in

sure

r pay

s a

stat

ed, f

ace

amou

nt in

the

even

t of

a to

tal l

oss

–Th

is c

an b

e us

ed w

hen

the

insu

rer a

nd in

sure

d ag

ree

to th

e va

lue

in a

dvan

ce

–Th

is is

com

mon

ly u

sed

with

ant

ique

s, c

olle

ctor

s’

itth

itith

hih

lth

thb

29©

2011

Kap

lan,

Inc.

item

s, o

r oth

erite

ms

with

a h

igh

valu

eth

atha

vebe

enap

prai

sed

in a

dvan

ce

Pair

and

Set C

laus

e

•Pr

ovis

ion

foun

d on

pro

perty

form

s de

alin

g w

ith

loss

esin

volv

ing

one

ofa

pair

orpa

rtof

ase

tlo

sses

invo

lvin

gon

eof

apa

iror

part

ofa

set

•Th

e in

sure

r can

eith

er–

Rep

air o

r rep

lace

any

par

t to

rest

ore

the

pair

or s

et to

its

val

ue p

rior t

o th

e lo

ss

–Pay

the

diffe

renc

e be

twee

n th

e va

lue

of th

e pr

oper

ty

30©

2011

Kap

lan,

Inc.y

pp

ybe

fore

the

loss

and

the

valu

e af

ter t

he lo

ss

•Th

e in

sure

r is

not o

blig

ated

to p

ay fo

r los

s of

the

who

le s

et w

hen

only

one

par

t has

bee

n da

mag

ed

Settl

emen

t

•C

laim

s ar

e co

nclu

ded

thro

ugh

–C

laim

pay

men

t

–C

laim

den

ial

–A

ltern

ativ

e di

sput

e re

solu

tion

(e.g

., ar

bitra

tion

or

med

iatio

n)

31©

2011

Kap

lan,

Inc.

Settl

emen

t•

Cla

im p

aym

ent

Mos

tcla

ims

are

settl

edw

itha

gene

ralr

elea

seby

–M

ostc

laim

sar

ese

ttled

with

age

nera

lrel

ease

byw

hich

the

insu

rer a

gree

s to

pay

the

clai

man

t the

ag

reed

am

ount

and

the

clai

man

t rel

ease

s th

e in

sure

d of

all

liabi

lity

•C

laim

den

ial

Cla

ims

will

bede

nied

ifno

cove

rage

exis

tsor

if

32©

2011

Kap

lan,

Inc.

–C

laim

sw

illbe

deni

edif

noco

vera

geex

ists

orif

insu

red

was

not

liab

le (i

n th

e ca

se o

f thi

rd-p

arty

cl

aim

s)

–D

enia

l may

be

acce

pted

by

insu

red

or c

laim

ant o

r ch

alle

nged

in la

wsu

it

MN_P&C_CN.indb 93 6/23/2011 8:57:10 AM

94

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Settl

emen

t

•Al

tern

ativ

e di

sput

e re

solu

tion

(AD

R)

–Le

ss c

ostly

and

tim

e co

nsum

ing

tech

niqu

es u

sed

to

reso

lve

clai

ms

outs

ide

the

tradi

tiona

l cou

rt sy

stem

–E

xam

ples

incl

ude

arbi

tratio

n an

d m

edia

tion

33©

2011

Kap

lan,

Inc.

Prop

erty

Cau

se o

f Los

s Fo

rms

(Per

il Fo

rms)

Peril

For

ms

•Pr

oper

ty in

sura

nce

polic

ies

use

caus

e of

loss

(p

eril)

form

sto

defin

ew

hatl

osse

sar

eco

vere

d(p

eril)

form

sto

defin

ew

hatl

osse

sar

eco

vere

dan

d w

hat l

osse

s ar

e ex

clud

ed–

Nam

ed p

eril

form

s sp

ecifi

cally

list

wha

t is

cove

red

–O

pen

peril

form

s sp

ecifi

cally

list

wha

t is

not c

over

ed

•A

llho

meo

wne

rs,d

wel

ling,

and

com

mer

cial

35©

2011

Kap

lan,

Inc.

All

hom

eow

ners

,dw

ellin

g,an

dco

mm

erci

alpr

oper

ty p

olic

ies

use

one

of th

e fo

llow

ing

Insu

ranc

e S

ervi

ces

Offi

ce (I

SO

) cau

se o

f los

s fo

rms

Bas

ic P

eril

Form

•N

amed

per

il co

vera

ge

•Fi

re a

nd li

ghtn

ing

plus

WC

SH

AV

VV

ER

•C

over

s lo

ss d

ue to

the

follo

win

g na

med

per

ils:

–Fi

re

–Li

ghtn

ing

36©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 94 6/23/2011 8:57:10 AM

95

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Bas

ic P

eril

Form

WC

SHA

VVVE

RW

id

tt

dh

id

hih

lit

–W

inds

torm

–to

rnad

o,hu

rric

ane,

and

high

vel

ocity

win

ds. C

onte

nts

are

only

cov

ered

if th

e bu

ildin

g w

as

dam

aged

firs

t.

–C

ivil

com

mot

ion

–S

mok

e da

mag

e –

caus

ed b

y th

e re

leas

e of

soo

t or

smok

e fro

m a

furn

ace,

boi

ler,

or s

imila

r equ

ipm

ent

37©

2011

Kap

lan,

Inc.

,,

qp

–H

ail –

cont

ents

are

onl

y co

vere

d if

the

build

ing

was

da

mag

ed fi

rst

–A

ircra

ft –

incl

udes

sel

f-pro

pelle

d m

issi

les

and

spac

ecra

ft

Bas

ic P

eril

Form

WC

SHA

VVVE

R

Vhi

l–

Veh

icle

s

–V

anda

lism

and

mal

icio

us m

isch

ief –

will

ful a

nd

mal

icio

us d

amag

e to

the

prop

erty

–V

olca

nic

erup

tion

–E

xplo

sion

–st

eam

boi

ler e

xplo

sion

is s

peci

fical

ly

38©

2011

Kap

lan,

Inc.

excl

uded

from

com

mer

cial

pro

perty

pol

icie

s

–R

iot

Bro

ad P

eril

Form

•N

amed

per

il co

vera

ge

•Ba

sic

form

plu

s an

add

ition

al s

ix p

erils

–W

eigh

t of i

ce, s

now

, or s

leet

–S

udde

n an

d ac

cide

ntal

cra

ckin

g of

a s

team

or h

ot

wat

er h

eatin

g sy

stem

Falli

ngob

ject

sth

ero

ofor

outs

ide

wal

lmus

tfirs

tbe

39©

2011

Kap

lan,

Inc.

–Fa

lling

obje

cts

–th

ero

ofor

outs

ide

wal

lmus

tfirs

tbe

dam

aged

bef

ore

cont

ents

are

cov

ered

Bro

ad P

eril

Form

–P

ower

sur

ge –

does

not

pro

vide

cov

erag

e fo

r el

ectro

nic

com

pone

nts

that

are

part

ofap

plia

nces

,el

ectro

nic

com

pone

nts

that

are

part

ofap

plia

nces

,co

mpu

ters

, or o

ther

ele

ctro

nic

equi

pmen

t

–P

ipes

free

zing

or b

urst

ing

–m

ust a

ttem

pt to

mai

ntai

n he

at in

the

build

ing

or d

rain

the

wat

er s

yste

m

–O

verfl

ow o

f a w

ater

sys

tem

–m

ust b

e in

tern

al

plum

bing

con

tain

ed w

ithin

the

hom

e

40©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 95 6/23/2011 8:57:11 AM

96

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Bro

ad P

eril

Form

•U

se th

e fo

llow

ing

mne

mon

ic p

hras

e–

Whe

n

–S

tudy

ing

–Fo

llow

–P

erfe

ctly

P

41©

2011

Kap

lan,

Inc.

–P

rove

n

–O

utlin

e

Spec

ial P

eril

Form

•O

pen

peril

cov

erag

e

•C

over

s al

l dire

ct p

hysi

cal d

amag

e ex

cept

dam

age

caus

ed b

y 13

exc

lusi

ons

(nam

ed

excl

usio

n co

vera

ge)

–P

ower

out

age

off p

rem

ises

–In

tent

iona

lact

s/in

here

ntde

fect

s

42©

2011

Kap

lan,

Inc.

Inte

ntio

nala

cts/

inhe

rent

defe

cts

–M

echa

nica

l/ele

ctric

al b

reak

dow

n

Spec

ial P

eril

Form

–B

uild

ing

code

/ord

inan

ce –

acts

regu

latin

g co

nstru

ctio

n,re

pair,

orde

mol

ition

cons

truct

ion,

repa

ir,or

dem

oliti

on

–W

ar/n

ucle

ar

–F l

ood/

grou

nd w

ater

bac

kup

–W

ear a

nd te

ar, r

ust,

and

mol

d

–E

arth

mov

emen

t –ea

rthqu

ake,

land

slid

e, a

nd

43©

2011

Kap

lan,

Inc.mud

flow

–S

mog

Spec

ial P

eril

Form

–B

irds

It

–In

sect

s

–R

oden

ts

–D

omes

tic a

nim

als

44©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 96 6/23/2011 8:57:11 AM

97

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Spec

ial P

eril

Form

•U

se th

e fo

llow

ing

mne

mon

ic p

hras

e–

Pro

fess

iona

lP

rofe

ssio

nal

–In

stru

ctor

s–

May

–B

ecom

e–

Wild

–Fa

natic

sW

hile

45©

2011

Kap

lan,

Inc.

–W

hile

–E

duca

ting

–S

tude

nts

–B

, I, R

, D

Cov

erag

e fo

r The

ft

•Th

eft i

s co

vere

d un

der a

ll ho

meo

wne

r pol

icie

s

•M

yste

rious

dis

appe

aran

ce is

not

cov

ered

•Th

eft c

over

age

mus

t be

purc

hase

d se

para

tely

un

der m

any

com

mer

cial

pro

perty

pol

icie

s

46©

2011

Kap

lan,

Inc.

Cas

ualty

Ter

ms

and

Con

cept

s

Neg

ligen

ce

•So

meo

ne’s

act

ion,

or i

nact

ion,

resu

lts in

a lo

ss

–P

rope

rty d

amag

e, b

odily

inju

ry, o

r per

sona

l inj

ury

•El

emen

ts o

f neg

ligen

ce–

Lega

l dut

y to

pro

tect

oth

ers

from

har

m

–Fa

ilure

to c

ompl

y w

ith th

at d

uty

48©

2011

Kap

lan,

Inc.

–A

ctua

l los

s (b

odily

inju

ry, p

rope

rty d

amag

e, o

r pe

rson

al in

jury

)

–P

roxi

mat

e ca

use

mus

t exi

st

MN_P&C_CN.indb 97 6/23/2011 8:57:12 AM

98

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Neg

ligen

ce

•C

ompa

rativ

e ne

glig

ence

–M

ore

than

one

par

ty c

ontri

bute

s to

the

loss

–Th

e pl

aint

iff’s

dam

ages

are

redu

ced

by th

eir a

mou

nt

of n

eglig

ence

49©

2011

Kap

lan,

Inc.

Liab

ility

•In

divi

dual

s an

d or

gani

zatio

ns m

ay b

e he

ld

lega

llyre

spon

sibl

efo

ract

ions

that

resu

ltin

lega

llyre

spon

sibl

efo

ract

ions

that

resu

ltin

bodi

ly in

jury

or p

rope

rty d

amag

e of

oth

ers

50©

2011

Kap

lan,

Inc.

Liab

ility

•Ty

pes

of w

rong

ful a

cts

–su

bjec

t to

cour

t act

ion

and

mon

etar

yju

dgm

ent

and

mon

etar

yju

dgm

ent

–C

rimin

al a

ct

•V

iola

tion

of th

e la

w

•P

unis

habl

e w

ith fi

nes

and

jail

time

–C

ivil

wro

ng

51©

2011

Kap

lan,

Inc.

Civ

ilw

rong

•To

rts th

at re

sult

in in

jury

or p

rope

rty d

amag

e

•R

esol

ved

thro

ugh

clai

ms

or la

wsu

its fi

led

by a

n in

jure

d pa

rty

Liab

ility

•Ty

pes

of w

rong

ful a

cts

(con

tinue

d)–

Bot

h cr

imin

al a

cts

and

civi

l wro

ngs

may

app

ly in

a

give

n si

tuat

ion

•Fo

r exa

mpl

e, a

driv

er li

able

for a

n ac

cide

nt d

rove

th

roug

h a

red

light

(crim

inal

act

) and

dam

aged

so

meo

ne’s

car

(civ

il w

rong

)

Libi

liti

iil

ti

il

52©

2011

Kap

lan,

Inc.

–Li

abili

tyin

sura

nce

cove

rs c

ivil

wro

ngs,

not

crim

inal

acts

MN_P&C_CN.indb 98 6/23/2011 8:57:13 AM

99

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Liab

ility

•Li

abilit

y ex

posu

res

–G

ener

allia

bilit

y –

expo

sure

from

use

of p

rem

ises

and

bu

sine

ss o

pera

tions

–Pe

rson

allia

bilit

y –

rela

ted

to n

on-b

usin

ess

activ

ities

–Pr

ofes

sion

allia

bilit

y –

expo

sure

due

to a

pr

ofes

sion

—do

ctor

, atto

rney

, or i

nsur

ance

age

nt

53©

2011

Kap

lan,

Inc.

Liab

ility

•Li

abilit

y ex

posu

res

(con

tinue

d)–

Bus

ines

slia

bilit

y –

expo

sure

from

con

duct

ing

busi

ness

–A

dver

tisin

glia

bilit

y –

slan

der a

nd li

bel

–Vi

cario

uslia

bilit

y –

bein

g le

gally

resp

onsi

ble

for t

he

negl

igen

t beh

avio

r of a

noth

er p

erso

n

54©

2011

Kap

lan,

Inc.

•E

mpl

oyer

/em

ploy

ee, p

aren

t/min

or c

hild

Type

s of

Inju

ries

Res

ultin

g fr

om L

iabi

lity

•B

odily

inju

ry–

inju

ry to

the

body

of a

per

son

incl

udin

g pa

in a

nd s

uffe

ring

or d

eath

pg

•Pr

oper

ty d

amag

e–

loss

of t

angi

ble

prop

erty

or l

oss

of

use

•Pe

rson

al in

jury

–ha

rm o

ther

than

bod

ily in

jury

; w

rong

ful e

vict

ion,

sla

nder

(spo

ken)

, lib

el (w

ritte

n), a

nd

inva

sion

of p

rivac

y

Ad

tii

ij

di

tiith

th

55©

2011

Kap

lan,

Inc.

•A

dver

tisin

gin

jury

–da

mag

esin

con

nect

ion

with

the

insu

red'

s ad

verti

sing

of i

ts g

oods

or s

ervi

ces:

libe

l, sl

ande

r, in

vasi

on o

f priv

acy,

cop

yrig

ht in

fring

emen

t, an

d m

isap

prop

riatio

n of

adv

ertis

ing

idea

s

Dam

ages

for T

ort L

iabi

lity

•C

ompe

nsat

ory

dam

ages

–m

oney

pai

d to

the

inju

red

party

inju

red

party

–Sp

ecia

l dam

ages

are

aw

arde

d to

reim

burs

e sp

ecifi

c,

out-o

f-poc

ket e

xpen

ses

•M

edic

al b

ills

•Lo

st w

ages

56©

2011

Kap

lan,

Inc.

•C

ost o

f rep

airin

g/re

plac

ing

dam

aged

pro

perty

MN_P&C_CN.indb 99 6/23/2011 8:57:13 AM

100

Less

on S

even

Pr

oper

ty a

nd C

asua

lty P

rovi

sion

s, T

erm

s, a

nd C

once

pts

Dam

ages

for T

ort L

iabi

lity

•C

ompe

nsat

ory

dam

ages

(con

tinue

d)–

Gen

eral

dam

ages

are

aw

arde

d to

reim

burs

e no

n-ec

onom

ic lo

sses

•M

enta

l ang

uish

•P

ain

and

suffe

ring

•Pu

nitiv

eda

mag

es–

cour

taw

ards

mon

eyto

57©

2011

Kap

lan,

Inc.

Puni

tive

dam

ages

cour

taw

ards

mon

eyto

puni

sh th

e w

rong

doer

for a

ctio

ns g

reat

er th

an

sim

ple

negl

igen

ce

Liab

ility

Pol

icy

Feat

ures

•In

sura

nce

polic

ies

stat

e th

e lim

its o

r max

imum

am

ount

ofco

vera

geth

ein

sure

rwill

pay

inth

eam

ount

ofco

vera

geth

ein

sure

rwill

pay

inth

eev

ent o

f a lo

ss

•Li

abilit

y in

sura

nce

is a

third

-par

ty c

over

age

that

ha

s no

ded

uctib

le

•Th

e pa

rty in

jure

d by

the

insu

red

can

be a

war

ded

mon

etar

yda

mag

es

58©

2011

Kap

lan,

Inc.

mon

etar

yda

mag

es

•Li

abilit

y co

vera

ge p

ays

for m

edic

al b

ills, l

ost

wag

es, a

nd p

ain

and

suffe

ring

due

to th

e in

jury

Liab

ility

Pol

icy

Feat

ures

•Su

pple

men

tal p

aym

ents

–pa

id in

add

ition

toth

elia

bilit

ylim

itspr

ovid

ed(i

epo

licy

limits

are

the

liabi

lity

limits

prov

ided

(i.e.

,pol

icy

limits

are

not r

educ

ed b

y th

ese

expe

nses

) –

Bon

ds –

prem

ium

s fo

r bon

ds re

quire

d in

a s

uit t

he

insu

rer d

efen

ds (a

mou

nts

vary

by

polic

y)

–A

id –

expe

nses

the

insu

red

incu

rs fo

r firs

t aid

to

othe

rsat

the

time

ofan

acci

dent

paid

with

nolim

it

59©

2011

Kap

lan,

Inc.

othe

rsat

the

time

ofan

acci

dent

—pa

idw

ithno

limit

–In

tere

st –

inte

rest

on

judg

men

ts a

gain

st th

e in

sure

d w

hile

in a

ppea

l—pa

id w

ith n

o lim

it

Liab

ility

Pol

icy

Feat

ures

•Su

pple

men

tal p

aym

ents

(con

tinue

d)–Lo

ss o

f ear

ning

s –

wag

e lo

ss w

hile

ass

istin

g th

e in

sure

r in

the

defe

nse

or in

vest

igat

ion

of a

cla

im

(am

ount

will

var

y by

pol

icy)

–E

xpen

ses

incu

rred

at t

he re

ques

t of t

he in

sure

r –pa

id

with

no

limit

Df

tf

thi

did

ithli

it

60©

2011

Kap

lan,

Inc.

–D

efen

se c

osts

fort

hein

sure

d–

paid

with

no

limit

MN_P&C_CN.indb 100 6/23/2011 8:57:14 AM

Lesson EightHomeowners insurance

MN_P&C_CN.indb 101 6/23/2011 8:57:14 AM

102

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Less

on E

ight

Hom

eow

ners

Insu

ranc

eIS

O H

omeo

wne

rs P

olic

y

The

Hom

eow

ners

Pol

icy

•D

rafte

d by

the

Insu

ranc

e S

ervi

ces

Offi

ce (I

SO

)

•Th

e IS

O w

rites

sta

ndar

dize

d pr

oper

ty a

nd

casu

alty

pol

icie

s, w

hich

are

use

d by

the

vast

m

ajor

ity o

f ins

uran

ce c

ompa

nies

that

sel

l pr

oper

ty/c

asua

lty in

sura

nce

in th

e U

nite

d S

tate

s

3©

2011

Kap

lan,

Inc.

The

Hom

eow

ners

Pol

icy

•A

pack

age

polic

y th

at p

rovi

des

cove

rage

for b

oth

prop

erty

and

liabi

lity

expo

sure

spr

oper

tyan

dlia

bilit

yex

posu

res

•U

ses

the

basi

c, b

road

, or s

peci

al p

eril

form

to

deta

il th

e lo

sses

cov

ered

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 102 6/23/2011 8:57:14 AM

103

Less

on E

ight

H

omeo

wne

rs In

sura

nce

The

Hom

eow

ners

Pol

icy

•Se

ctio

n I –

prop

erty

cov

erag

es

–C

over

age

A –

dwel

ling

–C

over

age

B –

othe

r stru

ctur

es

–C

over

age

C –

pers

onal

pro

perty

–C

over

age

D –

loss

of u

se

Si

IIli

bili

5©

2011

Kap

lan,

Inc.

•Se

ctio

nII

–lia

bilit

y co

vera

ges

–C

over

age

E –

pers

onal

liab

ility

–C

over

age

F –

med

ical

pay

men

ts to

oth

ers

Elig

ibili

ty R

equi

rem

ents

•R

esid

entia

l stru

ctur

es w

ith o

ne to

four

uni

ts

•At

leas

t one

of t

he u

nits

mus

t be

owne

r-oc

cupi

ed(e

xcep

t ren

ter’s

pol

icy)

•H

omes

und

er c

onst

ruct

ion

are

elig

ible

if th

e in

tent

is to

occ

upy

the

hom

e up

on c

ompl

etio

n

6©

2011

Kap

lan,

Inc.

Inel

igib

le R

isks

•Fa

rms

–us

e fa

rmow

ners

pol

icy

•M

anuf

actu

red

hous

ing

–us

e m

obile

hom

e en

dors

emen

t or s

epar

ate

polic

y

•N

on-o

wne

r occ

upie

d –

use

dwel

ling

polic

y

7©

2011

Kap

lan,

Inc.

Insu

reds

•N

amed

insu

red

•R

esid

ent r

elat

ives

•O

ther

per

sons

that

are

und

er a

ge 2

1 an

d in

the

care

of t

he in

sure

d

•Fu

ll-tim

e st

uden

ts u

nder

age

24

who

are

a

rela

tive

of th

e in

sure

d an

d w

ere

a re

side

nt o

f the

8©

2011

Kap

lan,

Inc.

hous

ehol

d be

fore

leav

ing

for s

choo

l

•If

the

insu

red

dies

, the

insu

red’

s le

gal

repr

esen

tativ

e be

com

es th

e in

sure

d

MN_P&C_CN.indb 103 6/23/2011 8:57:15 AM

104

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Insu

red

Loca

tions

•R

esid

ence

pre

mis

es

•O

ther

pre

mis

es u

sed

as a

resi

denc

e sh

own

in

the

decl

arat

ions

pag

e

•Pr

emis

es re

nted

for n

on-b

usin

ess

purp

oses

(s

tora

ge lo

cker

)

Nid

tlti

9©

2011

Kap

lan,

Inc.

•N

on-r

esid

entl

ocat

ions

–V

acan

t lan

d ow

ned

by o

r ren

ted

to in

sure

ds

–La

nd o

wne

d by

insu

red

on w

hich

dw

ellin

g is

bei

ng b

uilt

–B

uria

l plo

ts

Hom

eow

ners

Pol

icy

Form

s

Hom

eow

ners

Pol

icy

Form

s

•H

O-2

(Bro

ad fo

rm)

–N

amed

per

il co

vera

ge o

n C

over

age

A, B

, C, a

nd D

•H

O-3

(Spe

cial

form

)–

Ope

n pe

ril c

over

age

on C

over

age

A, B

, and

D

–N

amed

per

il co

vera

ge o

n C

over

age

C

11©

2011

Kap

lan,

Inc.

Hom

eow

ners

Pol

icy

Form

s

•H

O-4

(Ten

ant’s

/rent

er’s

form

)–R

ente

r of a

sin

gle-

fam

ily h

ome,

con

do, a

partm

ent,

or

mob

ile h

ome

–N

amed

per

il co

vera

ge o

n C

over

age

C a

nd D

–Li

ke H

O-2

, but

no

Cov

erag

e A

or B

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 104 6/23/2011 8:57:15 AM

105

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Hom

eow

ners

Pol

icy

Form

s

•H

O-5

(Com

preh

ensi

ve fo

rm)

–O

pen

peril

cov

erag

e on

Cov

erag

e A

, B, C

, and

D

•H

O-6

(Uni

t ow

ners

form

–co

ndo/

tow

nhom

e)–

Nam

ed p

eril

cove

rage

on

Cov

erag

e C

and

D

–A

$1,

000

limit

on C

over

age

A w

hich

can

be

incr

ease

d by

endo

rsem

ent

13©

2011

Kap

lan,

Inc.

byen

dors

emen

t

–N

amed

per

il co

vera

ge o

n C

over

age

A

Hom

eow

ners

Pol

icy

Form

s

•H

O-8

(Mod

ified

form

)–

Nam

ed p

eril

cove

rage

on

Cov

erag

e A

, B, C

, and

D

–Lo

sses

are

set

tled

usin

g ac

tual

cas

h va

lue

(AC

V)

–U

sed

for h

omes

whe

re re

plac

emen

t cos

t far

exc

eeds

th

e m

arke

t val

ue a

nd h

omes

of u

nusu

al c

onst

ruct

ion

14©

2011

Kap

lan,

Inc.

Polic

y Fo

rm C

ompa

rison

Dw

ellin

gC

onte

nts

HO

-2: (

Hom

e)B

road

For

mB

road

For

m

HO

-3: (

Hom

e)Sp

ecia

l For

mB

road

For

m

HO

-4: (

Tena

nt)

N/A

Bro

ad F

orm

HO

5:(H

ome)

Spec

ialF

orm

Spec

ialF

orm

15©

2011

Kap

lan,

Inc.

HO

-5:(

Hom

e)Sp

ecia

lFor

mSp

ecia

lFor

m

HO

-6: (

Con

do)

Bro

ad F

orm

Bro

ad F

orm

HO

-8: (

Hom

e)B

asic

For

mB

asic

For

m

Polic

y Fo

rm C

ompa

rison

•Ex

ampl

es u

sing

an

HO

-3po

licy:

–G

rape

juic

e sp

illed

on

wal

l-to-

wal

l car

pet i

s co

vere

d (p

art o

f the

dw

ellin

g)

–G

rape

juic

e sp

illed

on

a ru

g is

not

cov

ered

(per

sona

l pr

oper

ty)

–C

ount

erto

p sc

orch

ed b

y ho

t pan

is c

over

ed (p

art o

f d

lli)

16©

2011

Kap

lan,

Inc.

dwel

ling)

–S

tove

top

surfa

ce s

corc

hed

by h

ot p

an is

not

cov

ered

(p

erso

nal p

rope

rty)

MN_P&C_CN.indb 105 6/23/2011 8:57:16 AM

106

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Prop

erty

Cov

erag

e –

Sect

ion

I

Cov

erag

e A

: Dw

ellin

g

•In

clud

es th

e dw

ellin

g its

elf a

nd a

ny s

truct

ures

th

atar

eph

ysic

ally

atta

ched

toit

that

are

phys

ical

lyat

tach

edto

it

•In

clud

es c

over

age

for b

uild

ing

mat

eria

ls o

n pr

emis

es fo

r rep

air o

r con

stru

ctio

n of

the

dwel

ling

but d

oes

not c

over

thef

t of b

uild

ing

mat

eria

ls

18©

2011

Kap

lan,

Inc.

•D

oes

not i

nclu

de la

nd

•To

tal l

osse

s to

the

dwel

ling

are

settl

ed u

sing

va

lued

pol

icy

law

, whi

le p

artia

l los

ses

are

typi

cally

set

tled

usin

g re

plac

emen

t cos

t

Cov

erag

e B

: Oth

er S

truc

ture

s

•C

over

s st

ruct

ures

on

the

prem

ises

oth

er th

an

the

dwel

ling

the

dwel

ling

•Po

licy

limit

is 1

0% o

f Cov

erag

e A

•Ex

ampl

es in

clud

e de

tach

ed g

arag

e, s

hed,

in-

grou

nd p

ool,

or fr

ee s

tand

ing

gues

t hou

se

•B

usin

ess

use

isno

tallo

wed

19©

2011

Kap

lan,

Inc.

Bus

ines

sus

eis

nota

llow

ed–

Can

not c

ondu

ct b

usin

ess

or s

tore

bus

ines

s pr

oper

ty

in th

e st

ruct

ure

–M

ay re

nt o

ut a

gar

age

to s

omeo

ne e

lse

for u

se a

s a

priv

ate

gara

ge

Cov

erag

e C

: Per

sona

l Pro

pert

y

•Po

licy

limit

is 5

0% o

f Cov

erag

e A

•W

orld

wid

e co

vera

ge fo

r ins

ured

per

ils

•Pr

oper

ty lo

cate

d at

ano

ther

resi

denc

e is

lim

ited

to 1

0% o

f the

Cov

erag

e C

lim

it or

$1,

000,

w

hich

ever

is g

reat

er

–P

erso

nal p

rope

rty a

t a c

olle

ge d

orm

room

or l

ake

bi

20©

2011

Kap

lan,

Inc.

cabi

n

•Pe

rson

al p

rope

rty is

cov

ered

for 3

0 da

ys w

hile

m

ovin

g to

a n

ew re

side

nce

MN_P&C_CN.indb 106 6/23/2011 8:57:16 AM

107

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Cov

erag

e C

: Per

sona

l Pro

pert

y

•Sp

ecia

l lim

itatio

ns o

n pe

rson

al p

rope

rty–

Mon

ey, b

ank

note

s, g

old,

and

silv

er b

ullio

n$2

00

–S

ecur

ities

, sta

mps

, and

dee

ds$1

,500

–W

ater

craf

t and

rela

ted

equi

pmen

t in

stor

age

(boa

t tra

iler a

nd o

utbo

ard

mot

or)

$1,5

00

Oth

til

$150

0

21©

2011

Kap

lan,

Inc.

–O

ther

traile

rs$1

,500

Cov

erag

e C

: Per

sona

l Pro

pert

y

•Sp

ecia

l lim

itatio

ns o

n pe

rson

al p

rope

rty–

Thef

tof j

ewel

ry, w

atch

es, f

ur, p

reci

ous

ston

es$1

,500

–Th

efto

f fire

arm

s an

d re

late

d eq

uipm

ent

$2,5

00

–Th

efto

f silv

erw

are

or g

oldw

are

$2,5

00

–B

usin

ess

prop

erty

on

prem

ises

$2,5

00

Bi

tff

i$5

00

22©

2011

Kap

lan,

Inc.

–B

usin

ess

prop

erty

off

prem

ises

$500

–P

erso

nal e

lect

roni

cs in

a v

ehic

le$1

,500

Cov

erag

e C

: Per

sona

l Pro

pert

y

•Ex

clud

edpe

rson

al p

rope

rty–

Pro

perty

insu

red

else

whe

re

–P

rope

rty re

nted

to o

ther

s

–A

nim

als,

bird

s, a

nd fi

sh

–P

rope

rty o

f ren

ters

(exc

ept r

elat

ives

)

Ai

ft

23©

2011

Kap

lan,

Inc.

–A

ircra

ft

–M

otor

ized

veh

icle

s, u

nles

s us

ed to

mai

ntai

n th

e pr

emis

es o

r ass

ist t

he h

andi

capp

ed

Cov

erag

e D

: Los

s of

Use

•C

over

s ad

ditio

nal l

ivin

g ex

pens

es in

curre

d by

th

eho

useh

old

tom

aint

ain

itsno

rmal

stan

dard

ofth

eho

useh

old

tom

aint

ain

itsno

rmal

stan

dard

ofliv

ing

whe

n th

e in

sure

d pr

emis

es is

dam

aged

or

dest

roye

d by

a c

over

ed p

eril

•C

over

s fa

ir re

ntal

val

ue o

f any

par

t of t

he

insu

red

prem

ises

that

is h

eld

out f

or re

ntal

to

thh

thi

di

id

d

24©

2011

Kap

lan,

Inc.

othe

rs w

hen

the

insu

red

prem

ises

isda

mag

edor

des

troye

d by

a c

over

ed p

eril

MN_P&C_CN.indb 107 6/23/2011 8:57:17 AM

108

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Cov

erag

e D

: Los

s of

Use

•Po

licy

limit:

HO

2/H

O3/

HO

530

%fC

A–

HO

-2/H

O-3

/HO

-5:3

0% o

fCov

erag

eA

–H

O-4

: 30%

of C

over

age

C

–H

O-6

: 50%

of C

over

age

C

–H

O-8

: 10%

of C

over

age

A

•If

aci

vila

utho

rity

proh

ibits

use

ofth

ein

sure

d

25©

2011

Kap

lan,

Inc.

Ifa

civi

laut

horit

ypr

ohib

itsus

eof

the

insu

red

prop

erty

bec

ause

a c

over

ed p

eril

dam

aged

a

neig

hbor

ing

loca

tion,

pay

men

ts a

re li

mite

d to

a

max

imum

of t

wo

wee

ks

Add

ition

al P

rope

rty

Cov

erag

es

•D

ebris

rem

oval

—de

bris

of c

over

ed p

rope

rty d

ue

toda

mag

efro

ma

cove

red

peril

toda

mag

efro

ma

cove

red

peril

–If

the

appl

icab

le p

olic

y lim

it ha

s no

t bee

n ex

haus

ted,

de

bris

rem

oval

is p

aid

out o

f tha

t lim

it

–If

the

appl

icab

le p

olic

y lim

it ha

s be

en e

xhau

sted

, an

addi

tiona

l 5%

of t

hat l

imit

is a

vaila

ble

26©

2011

Kap

lan,

Inc.

•R

easo

nabl

e re

pairs

to p

rote

ct th

e pr

oper

ty fr

om

furth

er lo

ss

Add

ition

al P

rope

rty

Cov

erag

es

•Pr

oper

ty re

mov

ed (p

rese

rvat

ion

of p

rope

rty) i

s co

vere

dag

ains

tdire

ctlo

ssfo

r30

days

cove

red

agai

nstd

irect

loss

for3

0da

ys•R

emov

al o

f tre

es, s

hrub

s, a

nd o

ther

pla

nts

from

th

e pr

emis

es:

–U

p to

$50

0/tre

e, m

axim

um o

f $1,

000

per l

oss

–C

over

s tre

es d

owne

d by

win

d, h

ail,

or w

eigh

t of i

ce

27©

2011

Kap

lan,

Inc.

–Tr

ee m

ust h

ave

dam

aged

the

cove

red

stru

ctur

e or

bl

ocke

d th

e dr

ivew

ay o

r han

dica

pped

acc

ess

Add

ition

al P

rope

rty

Cov

erag

es

•R

epla

cem

ent o

f tre

es, s

hrub

s, a

nd o

ther

pla

nts

–U

p to

$50

0 ea

ch, m

axim

um o

f 5%

of C

over

age

A

–D

amag

e du

e to

fire

, lig

htni

ng, e

xplo

sion

, rio

t, ci

vil

com

mot

ion,

airc

raft,

veh

icle

s, v

anda

lism

, or t

heft

•Lo

ss a

sses

smen

ts—

up to

$1,

000

for a

n as

sess

men

t due

to lo

ss to

pro

perty

ow

ned

by a

ll

28©

2011

Kap

lan,

Inc.

pp

yy

asso

ciat

ion

mem

bers

•Fi

re d

epar

tmen

t ser

vice

cha

rge—

up to

$50

0 fo

r a

char

ge b

illed

to th

e in

sure

d w

ith n

o de

duct

ible

MN_P&C_CN.indb 108 6/23/2011 8:57:17 AM

109

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Add

ition

al P

rope

rty

Cov

erag

es

•C

redi

t car

ds, f

orge

ry, o

r cou

nter

feit

mon

ey–

Up

to $

500,

with

no

dedu

ctib

le

–C

over

age

for l

osse

s du

e to

acc

epta

nce

of c

ount

erfe

it m

oney

, che

ck fo

rger

y, th

eft,

or u

naut

horiz

ed c

redi

t or

debi

t car

d us

e

•La

ndlo

rd fu

rnis

hing

s

29©

2011

Kap

lan,

Inc.

–U

p to

$2,

500

for f

urni

shin

gs a

vaila

ble

to re

nter

s us

ing

a po

rtion

of t

he in

sure

d pr

emis

es (e

.g.,

appl

ianc

es

and

furn

iture

)

Add

ition

al P

rope

rty

Cov

erag

es

•O

rdin

ance

or l

aw–

10%

of C

over

age

A li

mits

for c

hang

es re

quire

d by

bu

ildin

g co

de, o

rdin

ance

or l

aw, f

ollo

win

g a

cove

red

peril

•G

rave

mar

kers

—up

to $

5,00

0 fo

r dam

age

caus

ed b

y a

peril

cov

ered

by

Cov

erag

e C

30©

2011

Kap

lan,

Inc.

•G

lass

or s

afet

y gl

azin

g m

ater

ial—

cove

rs th

e br

eaka

ge o

f gla

ss w

hich

is p

art o

f a c

over

ed

build

ing,

sto

rm d

oor,

or s

torm

win

dow

Add

ition

al P

rope

rty

Cov

erag

es

•C

olla

pse

of a

cov

ered

stru

ctur

e if

loss

cau

sed

by:

by:

–N

amed

per

ils

–H

idde

n de

cay

–H

idde

n in

sect

s or

ver

min

–W

eigh

tofc

onte

nts

orpe

ople

31©

2011

Kap

lan,

Inc.

Wei

ghto

fcon

tent

sor

peop

le

–W

eigh

t of r

ain

or s

now

on

a ro

of

–U

se o

f def

ectiv

e co

nstru

ctio

n m

etho

ds o

r mat

eria

ls

Prop

erty

Cla

ims

Settl

emen

t

•C

laim

s se

ttled

for a

ctua

l cas

h va

lue

(AC

V)–

Cov

erag

es A

and

B if

the

dwel

ling

is in

sure

d fo

r les

s th

an 8

0% o

f its

full

repl

acem

ent c

ost

–P

erso

nal p

rope

rty u

nder

Cov

erag

e C

–A

pplia

nces

, aw

ning

s, a

nten

nas,

and

car

petin

g

32©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 109 6/23/2011 8:57:18 AM

110

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Prop

erty

Cla

ims

Settl

emen

t

•C

laim

s se

ttled

for r

epla

cem

ent c

ost

–C

over

ages

A a

nd B

if th

e dw

ellin

g is

insu

red

to 8

0%

or m

ore

of th

e fu

ll re

plac

emen

t cos

t

–P

erso

nal p

rope

rty u

nder

Cov

erag

e C

with

an

endo

rsem

ent

33©

2011

Kap

lan,

Inc.

Pers

onal

Art

icle

s Fl

oate

r

•U

sed

to c

over

sch

edul

ed p

erso

nal p

rope

rty o

n an

allr

isk

basi

sIte

ms

are

liste

dse

para

tely

with

anal

l-ris

kba

sis.

Item

sar

elis

ted

sepa

rate

lyw

ithth

e ex

act v

alue

sta

ted

for e

ach.

•U

sed

for p

erso

nal p

rope

rty th

at re

ceiv

es li

mite

d co

vera

ge u

nder

the

hom

eow

ners

pol

icy

–Fu

rs, j

ewel

ry, f

ine

arts

, ant

ique

s, s

ilver

war

e, a

nd

34©

2011

Kap

lan,

Inc.

stam

p an

d co

in c

olle

ctio

ns

•C

over

age

is a

lso

som

etim

es a

fford

ed o

n a

hom

eow

ners

pol

icy

by e

ndor

sem

ent

Liab

ility

Cov

erag

e –

Sect

ion

II

Cov

erag

e E:

Per

sona

l Lia

bilit

y

•Pr

otec

tion

agai

nst b

odily

inju

ry to

oth

ers

and

prop

erty

dam

age

ofot

hers

forw

hich

the

insu

red

prop

erty

dam

age

ofot

hers

forw

hich

the

insu

red

is li

able

–In

jury

on

the

prem

ises

due

to in

sure

d ne

glig

ence

–Li

abili

ty re

sulti

ng fr

om th

e in

sure

d’s

pers

onal

ac

tiviti

es, b

oth

on a

nd o

ff th

e pr

emis

es

36©

2011

Kap

lan,

Inc.

–D

og b

ites

•Li

mit

appl

ies

per l

oss

MN_P&C_CN.indb 110 6/23/2011 8:57:19 AM

111

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Cov

erag

e F:

Med

ical

Pay

men

ts to

Oth

ers

•Pa

ys re

ason

able

med

ical

and

fune

ral e

xpen

ses

incu

rred

with

inth

ree

year

sof

anac

cide

ntth

atin

curre

dw

ithin

thre

eye

ars

ofan

acci

dent

that

caus

es in

jury

•N

o le

gal l

iabi

lity

requ

ired

for c

over

age

to a

pply

•D

oes

not c

over

inju

ries

sust

aine

d by

the

insu

red

or re

side

nt re

lativ

es, b

ut d

oes

cove

r inj

urie

s su

stai

ned

bya

resi

denc

eem

ploy

ee

37©

2011

Kap

lan,

Inc.

sust

aine

dby

are

side

nce

empl

oyee

•St

anda

rd p

olic

y lim

it is

$1,

000

per p

erso

n, w

hich

ca

n be

incr

ease

d

Add

ition

al L

iabi

lity

Cov

erag

es

•Su

pple

men

tal p

aym

ents

(BA

ILE

D)

•Lo

ss a

sses

smen

t–

Up

to $

1,00

0 of

the

insu

red’

s sh

are

of a

liab

ility

loss

as

sess

men

t

38©

2011

Kap

lan,

Inc.

Add

ition

al L

iabi

lity

Cov

erag

es

•D

amag

e to

pro

perty

of o

ther

s–

Up

to $

1,00

0 pe

r occ

urre

nce,

at r

epla

cem

ent c

ost,

for

prop

erty

of o

ther

s da

mag

ed w

hile

in th

e ca

re o

f the

in

sure

d

•M

ust b

e in

the

care

, cus

tody

, or c

ontro

l of t

he

insu

red

Nl

lli

bilit

ii

d

39©

2011

Kap

lan,

Inc.

•N

ole

gall

iabi

lity

is re

quire

d

•N

o de

duct

ible

app

lies

•N

o co

vera

ge fo

r int

entio

nal l

oss

by a

n in

sure

d 13

or

old

er o

r for

bus

ines

s pr

oper

ty o

f oth

ers

Pers

onal

Lia

bilit

y Ex

clus

ions

•Bu

sine

ss li

abilit

y–

Ther

e is

cov

erag

e fo

r ins

ured

s un

der a

ge 2

1 en

gage

d in

par

t-tim

e, s

elf-e

mpl

oyed

act

iviti

es

•Pr

ofes

sion

al li

abilit

y

•In

tent

iona

l act

s

Aif

dh

fli

bili

40©

2011

Kap

lan,

Inc.

•Ai

rcra

ft an

dho

verc

raft

liabi

lity

MN_P&C_CN.indb 111 6/23/2011 8:57:19 AM

112

Less

on E

ight

H

omeo

wne

rs In

sura

nce

Pers

onal

Lia

bilit

y Ex

clus

ions

•M

otor

ized

veh

icle

liab

ility

–C

over

age

for t

he u

se o

f gol

f car

ts o

n th

e go

lf co

urse

–C

over

age

for v

ehic

les

used

to:

•M

aint

ain

the

insu

red

prem

ises

•A

ssis

t the

han

dica

pped

41©

2011

Kap

lan,

Inc.

Pers

onal

Lia

bilit

y Ex

clus

ions

•W

ater

craf

t lia

bilit

y–

Cov

erag

e is

pro

vide

d on

cer

tain

type

s of

wat

ercr

aft

•O

utbo

ard

mot

or–

25 h

orse

pow

er o

r les

s is

cov

ered

–O

ver 2

5 ho

rsep

ower

is o

nly

cove

red

if re

nted

or

borro

wed

42©

2011

Kap

lan,

Inc.

•In

boar

d m

otor

–50

hor

sepo

wer

or l

ess

is o

nly

cove

red

if re

nted

or

borro

wed

–O

ver 5

0 ho

rsep

ower

is o

nly

cove

red

if bo

rrow

ed

Pers

onal

Lia

bilit

y Ex

clus

ions

•W

ater

craf

t lia

bilit

y–

Cov

erag

e is

pro

vide

d on

cer

tain

type

s of

wat

ercr

aft

•S

ailb

oat

–Le

ss th

an 2

6 fe

et is

cov

ered

–26

feet

or m

ore

is o

nly

cove

red

if bo

rrow

ed

43©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 112 6/23/2011 8:57:19 AM

Lesson ninedwelling insurance

MN_P&C_CN.indb 113 6/23/2011 8:57:19 AM

114

Less

on N

ine

Dw

ellin

g In

sura

nce

Less

on N

ine

Dw

ellin

g In

sura

nce

ISO

Dw

ellin

g Pr

oper

ty P

olic

y

Dw

ellin

g Pr

oper

ty P

olic

y

•Pr

ovid

es m

ore

limite

d pr

oper

ty c

over

age

than

th

eho

meo

wne

rspo

licy

the

hom

eow

ners

polic

y

•Th

eft a

nd li

abilit

y co

vera

ge m

ust b

e ad

ded

by

endo

rsem

ent

•Av

aila

ble

for d

wel

lings

that

do

not q

ualif

y fo

r a

hom

eow

ners

polic

y

3©

2011

Kap

lan,

Inc.

py

–N

ot o

wne

r-oc

cupi

ed, s

easo

nal d

wel

ling,

hig

her r

isk

Dw

ellin

g Pr

oper

ty P

olic

y

•In

sure

s re

side

ntia

l stru

ctur

es w

ith o

ne to

four

un

itsun

its

•Th

e pr

oper

ty d

oes

not n

eed

to b

e ow

ner-

occu

pied

, but

can

be

•Th

ree

dwel

ling

polic

ies:

DP

-1, D

P-2

, DP

-3

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 114 6/23/2011 8:57:20 AM

115

Less

on N

ine

Dw

ellin

g In

sura

nce

Cov

erag

e A

: Dw

ellin

g

•C

over

age

for:

–D

wel

ling

–S

truct

ures

atta

ched

to th

e dw

ellin

g

–B

uild

ing

mat

eria

ls fo

r con

stru

ctio

n or

repa

ir of

the

dwel

ling

•To

tall

osse

sha

ndle

don

ava

lued

polic

yba

sis

5©

2011

Kap

lan,

Inc.

Tota

llos

ses

hand

led

ona

valu

edpo

licy

basi

s

•Pa

rtial

loss

es h

andl

ed o

n a

repl

acem

ent c

ost

basi

s

Cov

erag

e B

: Oth

er S

truc

ture

s

•In

sure

s ot

her s

truct

ures

on

the

prem

ises

not

atta

ched

toth

edw

ellin

gat

tach

edto

the

dwel

ling

•Po

licy

limit

is 1

0% o

f Cov

erag

e A

•N

o bu

sine

ss u

se is

allo

wed

6©

2011

Kap

lan,

Inc.

Cov

erag

e C

: Per

sona

l Pro

pert

y

•D

oes

not c

over

pro

perty

of r

ente

rs

•C

over

age

for p

erso

nal p

rope

rty o

ff pr

emis

es is

lim

ited

to 1

0% o

f Cov

erag

e C

lim

its

•Po

licy

limit

is s

elec

ted

by th

e in

sure

d

7©

2011

Kap

lan,

Inc.

Cov

erag

e D

: Fai

r Ren

tal V

alue

•R

eim

burs

es lo

st re

ntal

reve

nue

whe

n th

e pr

oper

tyis

dam

aged

bya

cove

red

peril

prop

erty

isda

mag

edby

aco

vere

dpe

ril

•If

a ci

vil a

utho

rity

proh

ibits

use

of t

he in

sure

d pr

oper

ty b

ecau

se a

cov

ered

per

il da

mag

ed a

ne

ighb

orin

g lo

catio

n, p

aym

ents

are

lim

ited

to a

m

axim

um o

f tw

o w

eeks

8©

2011

Kap

lan,

Inc.

•Po

licy

limit

is 2

0% o

f Cov

erag

e A

MN_P&C_CN.indb 115 6/23/2011 8:57:21 AM

116

Less

on N

ine

Dw

ellin

g In

sura

nce

Cov

erag

e E:

Add

ition

al L

ivin

g Ex

pens

e

•C

over

s ad

ditio

nal l

ivin

g ex

pens

es re

quire

d to

al

low

the

hous

ehol

dto

mai

ntai

nits

norm

alal

low

the

hous

ehol

dto

mai

ntai

nits

norm

alst

anda

rd o

f liv

ing

•D

wel

ling

mus

t be

owne

r-oc

cupi

ed fo

r thi

s co

vera

ge to

app

ly

•If

a ci

vil a

utho

rity

proh

ibits

use

of t

he in

sure

d

9©

2011

Kap

lan,

Inc.

yp

prop

erty

bec

ause

a c

over

ed p

eril

dam

aged

a

neig

hbor

ing

loca

tion,

pay

men

ts a

re li

mite

d to

a

max

imum

of t

wo

wee

ks

Cov

erag

e E:

Add

ition

al L

ivin

g Ex

pens

e

•Po

licy

limit

is 2

0% o

f Cov

erag

e A

•M

ust b

e ad

ded

by e

ndor

sem

ent t

o th

e D

P-1

po

licy

•Au

tom

atic

ally

incl

uded

in th

e D

P-2

and

DP

-3

polic

ies

10©

2011

Kap

lan,

Inc.

Add

ition

al C

over

ages

•D

ebris

rem

oval

is c

over

ed o

ut o

f the

app

licab

le

polic

ylim

itTh

ere

isno

addi

tiona

lcov

erag

epo

licy

limit.

Ther

eis

noad

ditio

nalc

over

age

for d

ebris

rem

oval

und

er th

e dw

ellin

g po

licy.

•R

easo

nabl

e re

pairs

to p

rote

ct th

e pr

oper

ty fr

om

furth

er lo

ss

•Pr

oper

ty re

mov

ed (p

rese

rvat

ion

of p

rope

rty) i

s

11©

2011

Kap

lan,

Inc.p

y(p

pp

y)co

vere

d ag

ains

t dire

ct lo

ss fo

r 30

days

Add

ition

al C

over

ages

•R

epla

cem

ent o

f tre

es, s

hrub

s an

d ot

her p

lant

s –

Up

to $

500

each

, max

imum

of 5

% o

f Cov

erag

e A

–D

amag

e du

e to

fire

, lig

htni

ng, e

xplo

sion

, rio

t/civ

il co

mm

otio

n, a

ircra

ft, v

ehic

les,

van

dalis

m, o

r the

ft

•Fi

re d

epar

tmen

t ser

vice

cha

rge—

up to

$50

0 fo

r a

char

ge b

illed

to th

e in

sure

d w

ith n

o de

duct

ible

12©

2011

Kap

lan,

Inc.

g

MN_P&C_CN.indb 116 6/23/2011 8:57:21 AM

117

Less

on N

ine

Dw

ellin

g In

sura

nce

Add

ition

al C

over

ages

•O

rdin

ance

or l

aw–

10%

of C

over

age

A li

mits

ava

ilabl

e fo

r upg

rade

s re

quire

d by

bui

ldin

g co

de, o

rdin

ance

, or l

aw, f

ollo

win

g a

cove

red

peril

•C

olla

pse

of a

cov

ered

stru

ctur

e

•G

lass

or s

afet

ygl

azin

g m

ater

ial—

cove

rs th

e

13©

2011

Kap

lan,

Inc.

yg

gbr

eaka

ge o

f gla

ss o

r saf

ety

glaz

ing

mat

eria

l w

hich

is p

art o

f a c

over

ed b

uild

ing,

sto

rm d

oor,

or s

torm

win

dow

Excl

usio

ns

•Pr

oper

ty in

sure

d el

sew

here

•Pr

oper

ty re

nted

to o

ther

s

•An

imal

s, b

irds,

or f

ish

•Pr

oper

ty o

f ren

ters

(exc

ept r

elat

ives

)

•Ai

rcra

ft de

sign

ed to

car

rype

ople

or c

argo

14©

2011

Kap

lan,

Inc.

gy

pp

g

Excl

usio

ns

•M

otor

ized

veh

icle

s, u

nles

s us

ed to

mai

ntai

n th

e pr

emis

esor

assi

stth

eha

ndic

appe

dpr

emis

esor

assi

stth

eha

ndic

appe

d

•W

ater

craf

t of a

ll ty

pes,

oth

er th

an c

anoe

s an

d ro

wbo

ats

•G

rave

mar

kers

15©

2011

Kap

lan,

Inc.

Prop

erty

Cla

ims

Settl

emen

t

•D

P-1

–A

ctua

l cas

h va

lue

on C

over

age

A, B

, and

C

•D

P-2

and

DP

-3–

Rep

lace

men

t cos

t on

Cov

erag

e A

and

B

–A

ctua

l cas

h va

lue

on C

over

age

C

16©

2011

Kap

lan,

Inc.

–R

epla

cem

ent c

ost c

over

age

prov

ided

as

long

as

the

dwel

ling

is in

sure

d to

80%

or m

ore

of th

e fu

ll re

plac

emen

t cos

t

MN_P&C_CN.indb 117 6/23/2011 8:57:22 AM

118

Less

on N

ine

Dw

ellin

g In

sura

nce

Dw

ellin

g Po

licy

Endo

rsem

ents

•Br

oad

thef

t cov

erag

e en

dors

emen

tC

tff

thi

–C

over

s pr

oper

ty o

n or

off

the

prem

ises

•Pe

rson

al li

abilit

y su

pple

men

t–

Cov

erag

e L:

Per

sona

l lia

bilit

y

•C

over

s bo

dily

inju

ry to

oth

ers

and

prop

erty

da

mag

e of

oth

ers

for w

hich

the

insu

red

is le

gally

li

bl

17©

2011

Kap

lan,

Inc.lia

ble

•Li

mit

of li

abili

ty a

pplie

s pe

r los

s

•C

ompa

rabl

e to

HO

Cov

erag

e E

Dw

ellin

g Po

licy

Endo

rsem

ents

•Pe

rson

al li

abilit

y su

pple

men

t (co

ntin

ued)

–C

over

age

M: M

edic

al p

aym

ents

to o

ther

s

•P

ays

reas

onab

le m

edic

al a

nd fu

nera

l exp

ense

s in

curr

ed w

ithin

thre

e ye

ars

of a

n ac

cide

nt th

at

caus

es in

jury

•N

o le

gal l

iabi

lity

requ

ired

for c

over

age

to a

pply

18©

2011

Kap

lan,

Inc.

Dw

ellin

g Po

licy

Endo

rsem

ents

•Pe

rson

al li

abilit

y su

pple

men

t (co

ntin

ued)

–C

over

age

M: M

edic

al p

aym

ents

to o

ther

s

•D

oes

not c

over

inju

ries

sust

aine

d by

the

insu

red

or

the

insu

red’

s fa

mily

mem

bers

, but

doe

s co

ver

inju

ries

sust

aine

d by

a re

side

nce

empl

oyee

•S

tand

ard

polic

y lim

it is

$1,

000

per p

erso

n

19©

2011

Kap

lan,

Inc.

•C

ompa

rabl

e to

HO

Cov

erag

e F

–S

uppl

emen

tal p

aym

ents

Dw

ellin

g Pr

oper

ty F

orm

s

MN_P&C_CN.indb 118 6/23/2011 8:57:22 AM

119

Less

on N

ine

Dw

ellin

g In

sura

nce

DP-

1: B

asic

For

m

•N

amed

per

il co

vera

ge

•Au

tom

atic

ally

cov

ered

und

er th

e D

P-1

:–

Fire

–Li

ghtn

ing

–In

tern

al e

xplo

sion

(exp

losi

on o

f a fu

rnac

e, s

tove

, or

hotw

ater

heat

er)

21©

2011

Kap

lan,

Inc.

hotw

ater

heat

er)

DP-

1: B

asic

For

m

Exte

nded

cov

erag

e pe

rils

–av

aila

ble

for a

n ad

ditio

nal p

rem

ium

Wi

dt

td

hi

dhi

hl

it–

Win

dsto

rm–

torn

ado,

hurr

ican

e, a

ndhi

gh v

eloc

ityw

inds

. Con

tent

s ar

e on

ly c

over

ed if

the

build

ing

was

da

mag

ed fi

rst.

–C

ivil

com

mot

ion

–S

mok

e da

mag

e –

caus

ed b

y th

e re

leas

e of

soo

t or

smok

efro

ma

furn

ace

boile

ror

sim

ilare

quip

men

t

22©

2011

Kap

lan,

Inc.

smok

efro

ma

furn

ace,

boile

r,or

sim

ilare

quip

men

t

–H

ail –

cont

ents

are

onl

y co

vere

d if

the

build

ing

was

da

mag

ed fi

rst

DP-

1: B

asic

For

m

Exte

nded

cov

erag

e pe

rils

–av

aila

ble

for a

n ad

ditio

nal p

rem

ium

Ai

fti

ld

lfll

di

ild

ft–

Airc

raft

–in

clud

es s

elf-p

rope

lled

mis

sile

s an

d sp

acec

raft

–V

ehic

les

–V

olca

nic

erup

tion

–E

xplo

sion

–st

eam

boi

ler e

xplo

sion

is s

peci

fical

ly e

xclu

ded

from

co

mm

erci

al p

rope

rty p

olic

ies

–R

iot

23©

2011

Kap

lan,

Inc.

Vand

alis

m a

nd m

alic

ious

mis

chie

f–

Ava

ilabl

e fo

r an

addi

tiona

l pre

miu

m

DP-

2: B

road

For

m

•N

amed

per

il co

vera

ge

•Ba

sic

form

plu

s an

add

ition

al s

even

per

ils–

Wei

ght o

f ice

, sno

w, o

r sle

et

–S

udde

n an

d ac

cide

ntal

cra

ckin

g of

a s

team

or h

ot

wat

er h

eatin

g sy

stem

Falli

ngob

ject

sth

ero

ofor

outs

ide

wal

lmus

tfirs

tbe

24©

2011

Kap

lan,

Inc.

–Fa

lling

obje

cts

–th

ero

ofor

outs

ide

wal

lmus

tfirs

tbe

dam

aged

bef

ore

cont

ents

are

cov

ered

MN_P&C_CN.indb 119 6/23/2011 8:57:23 AM

120

Less

on N

ine

Dw

ellin

g In

sura

nce

DP-

2: B

road

For

m

–P

ower

sur

ge –

does

not

pro

vide

cov

erag

e fo

r el

ectro

nic

com

pone

nts

that

are

part

ofap

plia

nces

,el

ectro

nic

com

pone

nts

that

are

part

ofap

plia

nces

,co

mpu

ters

, or o

ther

ele

ctro

nic

equi

pmen

t

–P

ipes

free

zing

or b

urst

ing

–m

ust a

ttem

pt to

mai

ntai

n he

at in

the

build

ing

or d

rain

the

wat

er s

yste

m

–O

verfl

ow o

f a w

ater

sys

tem

–m

ust b

e in

tern

al

plum

bing

con

tain

ed w

ithin

the

hom

e

25©

2011

Kap

lan,

Inc.

–D

amag

e to

cov

ered

pro

perty

cau

sed

by b

urgl

ars

(doe

s no

t app

ly to

thef

t of p

rope

rty)

DP-

2: B

road

For

m

•U

se th

e fo

llow

ing

mne

mon

ic p

hras

e–

Whe

n

–S

tudy

ing

–Fo

llow

–P

erfe

ctly

P

26©

2011

Kap

lan,

Inc.

–P

rove

n

–O

utlin

e

–D

aily

DP-

3: S

peci

al F

orm

•O

pen

peril

cov

erag

e

•C

over

s al

l dire

ct p

hysi

cal d

amag

e ex

cept

dam

age

caus

ed b

y 13

exc

lusi

ons

(nam

ed

excl

usio

n co

vera

ge)

–P

ower

out

age

off p

rem

ises

–In

tent

iona

lact

s/in

here

ntde

fect

s

27©

2011

Kap

lan,

Inc.

Inte

ntio

nala

cts/

inhe

rent

defe

cts

–M

echa

nica

l/ele

ctric

al b

reak

dow

n

DP-

3: S

peci

al F

orm

–B

uild

ing

code

/ord

inan

ce –

acts

regu

latin

g co

nstru

ctio

n,re

pair,

orde

mol

ition

cons

truct

ion,

repa

ir,or

dem

oliti

on

–W

ar/n

ucle

ar

–F l

ood/

grou

nd w

ater

bac

kup

–W

ear a

nd te

ar, r

ust,

and

mol

d

–E

arth

mov

emen

t –ea

rthqu

ake,

land

slid

e, a

nd

28©

2011

Kap

lan,

Inc.

mud

flow

–S

mog

MN_P&C_CN.indb 120 6/23/2011 8:57:23 AM

121

Less

on N

ine

Dw

ellin

g In

sura

nce

DP-

3: S

peci

al F

orm

–B

irds

It

–In

sect

s

–R

oden

ts

–D

omes

tic a

nim

als

29©

2011

Kap

lan,

Inc.

DP-

3: S

peci

al F

orm

•U

se th

e fo

llow

ing

mne

mon

ic p

hras

e–

Pro

fess

iona

lP

rofe

ssio

nal

–In

stru

ctor

s–

May

–B

ecom

e–

Wild

–Fa

natic

sW

hile

30©

2011

Kap

lan,

Inc.

–W

hile

–E

duca

ting

–S

tude

nts

–B

, I, R

, D

Polic

y Fo

rm C

ompa

rison

Dw

ellin

gC

onte

nts

DP-

1B

asic

For

mB

asic

For

m

DP-

2B

road

For

mB

road

For

m

DP-

3Sp

ecia

l For

mB

road

For

m

31©

2010

Kap

lan,

Inc.

MN_P&C_CN.indb 121 6/23/2011 8:57:24 AM

MN_P&C_CN.indb 122 6/23/2011 8:57:24 AM

Lesson tenother Property insurance

MN_P&C_CN.indb 123 6/23/2011 8:57:24 AM

124

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Less

on T

enO

ther

Pro

pert

y In

sura

nce

Ear

thqu

ake,

Mob

ile H

ome,

Per

sona

l W

ater

craf

tan

dFl

ood

Insu

ranc

eW

ater

craf

t,an

dFl

ood

Insu

ranc

e

Eart

hqua

ke In

sura

nce

Eart

hqua

ke In

sura

nce

•Ea

rthqu

ake

is s

peci

fical

ly e

xclu

ded

on p

eril

form

sfo

rms

•C

over

age

can

be a

dded

to th

e dw

ellin

g or

ho

meo

wne

rs p

olic

y by

end

orse

men

t, or

sol

d as

a

sepa

rate

pol

icy

•Th

e de

duct

ible

is w

ritte

n as

a p

erce

ntag

e of

the

3©

2011

Kap

lan,

Inc.

pg

polic

y lim

it–Th

e ba

se d

educ

tible

is 5

% a

nd c

an b

e in

crea

sed

Eart

hqua

ke In

sura

nce

•C

over

s ea

rthqu

ake,

ear

th m

ovem

ent,

and

land

slid

ela

ndsl

ide

•Th

e in

sure

d w

ill in

cur o

ne d

educ

tible

eve

ry 7

2 ho

urs

to p

rovi

de c

over

age

for a

fters

hock

s

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 124 6/23/2011 8:57:24 AM

125

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Mob

ile H

ome

Insu

ranc

e

Mob

ile H

ome

Insu

ranc

e

•M

obile

hom

es a

re n

ot e

ligib

le fo

r cov

erag

e on

th

eho

meo

wne

rspo

licy

the

hom

eow

ners

polic

y

•C

over

age

can

be a

dded

to th

e H

O-2

or H

O-3

by

endo

rsem

ent o

r sol

d as

a s

epar

ate

polic

y

6©

2011

Kap

lan,

Inc.

Mob

ile H

ome

Insu

ranc

e

•Po

licy

insu

res:

–M

obile

hom

e, in

clud

ing

atta

ched

stru

ctur

es a

nd

perm

anen

tly in

stal

led

equi

pmen

t

–O

ther

stru

ctur

es

–P

erso

nal p

rope

rty

–Lo

ssof

use

7©

2011

Kap

lan,

Inc.

Loss

ofus

e

Mob

ile H

ome

Insu

ranc

e

•R

emov

al c

over

age—

up to

$50

0 fo

r rea

sona

ble

expe

nses

form

ovin

gth

em

obile

hom

ew

hen

thre

aten

edex

pens

esfo

rmov

ing

the

mob

ileho

me

whe

nth

reat

ened

by a

cov

ered

per

il (n

o de

duct

ible

app

lies)

•O

rdin

ance

or l

aw a

dditi

onal

cov

erag

e do

es n

ot a

pply

•Li

abili

ty c

over

age

is s

imila

r to

Sec

tion

II of

the

hom

eow

ners

pol

icy

•W

hen

adde

das

anen

dors

emen

tth

ein

sura

nce

is

8©

2011

Kap

lan,

Inc.

•W

hen

adde

das

anen

dors

emen

t,th

ein

sura

nce

issu

bjec

t to

all p

rovi

sion

s of

the

hom

eow

ners

form

MN_P&C_CN.indb 125 6/23/2011 8:57:25 AM

126

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Pers

onal

Wat

ercr

aft C

over

age

Boa

tow

ners

/Wat

ercr

aft P

acka

ge P

olic

y

•C

ombi

nes

prop

erty

, lia

bilit

y, a

nd m

edic

al

paym

ents

insu

ranc

eon

anop

enpe

rilba

sis

paym

ents

insu

ranc

eon

anop

enpe

rilba

sis

•Lo

sses

are

usu

ally

pai

d on

an

actu

al c

ash

valu

e ba

sis

10©

2011

Kap

lan,

Inc.

Pers

onal

Yac

ht P

olic

y

•C

over

age

desi

gned

for l

arge

boa

ts s

uch

as

cabi

ncr

uise

rsin

boar

dm

otor

boat

san

dca

bin

crui

sers

,inb

oard

mot

orbo

ats,

and

sailb

oats

•C

over

age

is u

sual

ly p

rovi

ded

on a

n op

en p

eril

basi

s

11©

2011

Kap

lan,

Inc.

Pers

onal

Yac

ht P

olic

y

•Pa

ckag

e po

licie

s in

clud

e:P

tti

di

dit

(f

fbdi

li

jd

–P

rote

ctio

n an

din

dem

nity

(afo

rm o

fbod

ilyin

jury

and

prop

erty

dam

age

liabi

lity

insu

ranc

e)

–M

edic

al p

aym

ents

cov

erag

e

–H

ull i

nsur

ance

•R

epla

cem

ent c

ost f

or p

artia

l los

ses

12©

2011

Kap

lan,

Inc.

•V

alue

d ba

sis

for t

otal

loss

es

–B

oat t

raile

r ins

uran

ce

•P

ays

on a

ctua

l cas

h va

lue

basi

s

MN_P&C_CN.indb 126 6/23/2011 8:57:25 AM

127

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Nat

iona

l Flo

od In

sura

nce

Prog

ram

(NFI

P)

Nat

iona

l Flo

od In

sura

nce

Prog

ram

•C

reat

ed in

196

8 by

Con

gres

s to

pro

vide

floo

d in

sura

nce

forh

omeo

wne

rsre

nter

san

din

sura

nce

forh

omeo

wne

rs,r

ente

rs,a

ndbu

sine

ss o

wne

rs if

thei

r com

mun

ity p

artic

ipat

es

in th

e N

FIP

•Th

e N

FIP

is a

dmin

iste

red

by th

e Fe

dera

l E

mer

genc

y M

anag

emen

t Age

ncy

(FE

MA

), w

hich

k

ll

ithi

ti

i

14©

2011

Kap

lan,

Inc.

wor

ks c

lose

ly w

ith p

rivat

ein

sura

nce

com

pani

esto

offe

r flo

od in

sura

nce

to p

rope

rty o

wne

rs a

nd

rent

ers

Nat

iona

l Flo

od In

sura

nce

Prog

ram

•Fl

ood

insu

ranc

e is

sol

d by

priv

ate

insu

rers

th

roug

hth

e“W

rite

You

rOw

n”pr

ogra

mth

roug

hth

eW

rite

You

rOw

npr

ogra

m–

FEM

A s

ets

rate

s, e

ligib

ility

requ

irem

ents

, and

co

vera

ge li

mita

tions

. The

insu

rer c

olle

cts

prem

ium

s an

d pa

ys fo

r los

ses

out o

f tho

se p

rem

ium

s.

–If

the

amou

nt o

f los

ses

exce

eds

the

amou

nt o

f pr

emiu

m c

olle

cted

, FE

MA

pay

s th

e di

ffere

nce

15©

2011

Kap

lan,

Inc.

–If

the

insu

rer c

olle

cts

mor

e in

pre

miu

ms

than

it p

ays

out i

n lo

sses

, the

exc

ess

mus

t be

retu

rned

to th

e go

vern

men

t. Th

e in

sure

r kee

ps a

ny in

vest

men

t in

com

e.

Nat

iona

l Flo

od In

sura

nce

Prog

ram

•W

hen

cove

red

prop

erty

is s

old,

the

flood

in

sura

nce

polic

yca

nbe

trans

ferr

edim

med

iate

lyin

sura

nce

polic

yca

nbe

trans

ferr

edim

med

iate

ly

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 127 6/23/2011 8:57:26 AM

128

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Floo

d: E

ligib

ility

•Al

l res

iden

tial d

wel

lings

, far

ms,

and

com

mer

cial

pr

oper

ties

loca

ted

ina

parti

cipa

ting

com

mun

itypr

oper

ties

loca

ted

ina

parti

cipa

ting

com

mun

ityar

e el

igib

le

•A

parti

cipa

ting

com

mun

ity is

one

that

has

fo

rmal

ly a

pplie

d to

the

NFI

P a

nd a

gree

d to

ado

pt

flood

con

trol m

easu

res

17©

2011

Kap

lan,

Inc.

–Fl

ood

cont

rol m

easu

res

are

corr

ectiv

e an

d pr

even

tativ

e m

easu

res

take

n to

redu

ce fu

ture

floo

d da

mag

e. T

hey

gene

rally

invo

lve

zoni

ng, s

ubdi

visi

on,

or b

uild

ing

requ

irem

ents

.

Floo

d: E

ligib

ility

–D

urin

g th

e ap

plic

atio

n ph

ase,

the

com

mun

ity is

el

igib

lefo

rem

erge

ncy

cove

rage

with

redu

ced

limits

elig

ible

fore

mer

genc

yco

vera

gew

ithre

duce

dlim

its(d

wel

ling

cove

rage

up

to $

35,0

00 a

nd c

onte

nts

cove

rage

up

to $

10,0

00)

–O

nce

the

com

mun

ity h

as b

een

form

ally

acc

epte

d to

th

e pr

ogra

m, f

ull c

over

age

can

be p

urch

ased

•51

% o

r mor

e of

the

build

ing’

s va

lue

mus

t be

18©

2011

Kap

lan,

Inc.

%g

abov

e gr

ound

Floo

d: P

erils

Cov

ered

•An

y un

usua

l and

rapi

d ac

cum

ulat

ion

or ru

noff

of

surfa

cew

ater

sfro

ma

natu

rals

ourc

esu

rface

wat

ers

from

ana

tura

lsou

rce

•An

ove

rflow

of i

nlan

d or

tida

l wat

ers

•M

udsl

ides

cau

sed

by fl

oodi

ng

•C

olla

pse

of la

nd a

s a

resu

lt of

exc

essi

ve e

rosi

on

dt

fld

19©

2011

Kap

lan,

Inc.

due

toflo

od

Floo

d: D

wel

ling

Form

Cov

erag

e

•Bu

ildin

g pr

oper

ty c

over

age

up to

$25

0,00

0

•C

onte

nts

(per

sona

l pro

perty

) cov

erag

e up

to

$100

,000

•C

onte

nts

cove

rage

mus

t be

purc

hase

d se

para

tely

Dd

tibl

lt

lt

bild

it

20©

2011

Kap

lan,

Inc.

•D

educ

tible

s ap

ply

sepa

rate

lyto

build

ing

prop

erty

and

pers

onal

pro

perty

cla

ims

MN_P&C_CN.indb 128 6/23/2011 8:57:26 AM

129

Less

on T

en

Oth

er P

rope

rty

Insu

ranc

e

Floo

d: D

wel

ling

Form

Cov

erag

e

•Pr

emiu

m is

due

in fu

ll an

d m

ust a

ccom

pany

the

appl

icat

ion

appl

icat

ion

•C

over

age

take

s ef

fect

afte

r a w

aitin

g pe

riod

of

30 c

alen

dar d

ays

follo

win

g th

e da

te o

f ap

plic

atio

n; it

will

not c

over

a fl

ood

in p

rogr

ess

•Bi

ndin

g of

cov

erag

e is

not

per

mitt

ed

21©

2011

Kap

lan,

Inc.

gg

p

Floo

d: E

xclu

sion

s

•M

oney

, sec

uriti

es, a

ccou

nts,

bills

, and

dee

ds

•La

wns

, tre

es, s

hrub

s, p

lant

s, c

rops

, and

liv

esto

ck

•Ai

rcra

ft, s

elf-p

rope

lled

vehi

cles

, and

mot

or

vehi

cles

Ft

ii

lltd

ii

22©

2011

Kap

lan,

Inc.

•Fe

nces

, ret

aini

ng w

alls

, out

door

sw

imm

ing

pool

s, d

ocks

, and

oth

er o

pen

stru

ctur

es o

n or

ov

er w

ater

Floo

d: E

xclu

sion

s

•U

nder

grou

nd s

truct

ures

, suc

h as

wel

ls a

nd

sept

icta

nks

sept

icta

nks

•C

onta

iner

s fo

r gas

or o

ther

liqu

id s

tora

ge ta

nks

•Pe

rson

al p

rope

rty lo

cate

d be

neat

h th

e gr

ound

flo

or

Idi

tfi

ill

lf

23©

2011

Kap

lan,

Inc.

•In

dire

ctfin

anci

allo

ss o

r los

s of

use

•Se

wer

bac

kup

into

the

dwel

ling

MN_P&C_CN.indb 129 6/23/2011 8:57:27 AM

MN_P&C_CN.indb 130 6/23/2011 8:57:27 AM

Lesson ElevenMinnesota Property Law

MN_P&C_CN.indb 131 6/23/2011 8:57:27 AM

132

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

Less

on E

leve

nM

inne

sota

Pro

pert

y La

wM

inne

sota

Sta

ndar

d Fi

re P

olic

y

Min

neso

ta S

tand

ard

Fire

Pol

icy

•A

fore

runn

er to

toda

y’s

hom

eow

ners

pol

icy

•Pr

ovid

ed le

ss p

eril

and

loss

set

tlem

ent c

over

age

•Th

e sa

me

law

s an

d pr

ovis

ions

foun

d on

the

stan

dard

fire

pol

icy

appl

y to

day

•A

polic

y of

fire

insu

ranc

e m

ust b

e la

bele

d “M

it

td

dfi

li”

idth

3©

2011

Kap

lan,

Inc.

“Min

neso

ta s

tand

ard

fire

polic

y,” p

rovi

deth

esp

ecifi

ed c

over

age,

and

con

form

to a

ll pr

ovis

ions

requ

ired

by la

w

Min

neso

ta S

tand

ard

Fire

Pol

icy

•M

ust l

ist t

he fo

llow

ing:

–In

sure

r’s n

ame

–Lo

catio

n of

the

hom

e of

fice

–Ty

pe o

f ins

urer

•S

tock

, mut

ual,

reci

proc

al, o

r Llo

yd’s

Und

erw

riter

s

Thli

bi

dd

1201

4©

2011

Kap

lan,

Inc.

•Th

e po

licy

begi

ns a

nd e

nds

at 1

2:01

am

S

tand

ard

Tim

e

MN_P&C_CN.indb 132 6/23/2011 8:57:27 AM

133

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

Min

neso

ta S

tand

ard

Fire

Pol

icy

•Pe

rils

cove

red

incl

ude:

–Fi

re

–Li

ghtn

ing

–D

amag

e to

pro

perty

rem

oved

from

the

prem

ises

for

pres

erva

tion

•If

alo

ssoc

curs

the

insu

red

mus

tmak

e

5©

2011

Kap

lan,

Inc.

Ifa

loss

occu

rs,t

hein

sure

dm

ustm

ake

reas

onab

le a

nd n

eces

sary

repa

irs to

pro

tect

the

prop

erty

from

furth

er lo

ss

Min

neso

ta S

tand

ard

Fire

Pol

icy

•Pa

rtial

loss

es a

re s

ettle

d ba

sed

on th

e ac

tual

ca

shva

lue

ofth

epr

oper

tyat

the

time

ofth

elo

ssca

shva

lue

ofth

epr

oper

tyat

the

time

ofth

elo

ss

•To

tal l

osse

s ar

e se

ttled

usi

ng v

alue

d po

licy

law

—th

e fu

ll fa

ce a

mou

nt o

f the

dw

ellin

g co

vera

ge is

pai

d

6©

2011

Kap

lan,

Inc.

Min

neso

ta S

tand

ard

Fire

Pol

icy

•In

the

even

t of a

loss

, the

insu

red

shal

l:–

Giv

e im

med

iate

writ

ten

notic

e to

the

insu

rer

–P

rote

ct th

e pr

oper

ty fr

om fu

rther

loss

–P

rovi

de a

sig

ned

and

swor

n pr

oof o

f los

s st

atem

ent

with

in 6

0 da

ys

•If

the

insu

red

initi

ates

ala

wsu

itag

ains

tthe

7©

2011

Kap

lan,

Inc.

Ifth

ein

sure

din

itiat

esa

law

suit

agai

nstt

hein

sure

r, it

mus

t be

com

men

ced

with

in tw

o ye

ars

afte

r the

loss

Min

neso

ta S

tand

ard

Fire

Pol

icy

•Th

e in

sure

r has

the

optio

n to

repa

ir or

repl

ace

dam

aged

prop

erty

and

will

doso

with

like

kind

dam

aged

prop

erty

and

will

doso

with

like

kind

and

qual

ity

•Th

e in

sure

r mus

t giv

e th

e in

sure

d no

tice

of h

ow

it w

ill ha

ndle

the

loss

with

in 3

0 da

ys a

fter r

ecei

pt

of p

roof

of l

oss

8©

2011

Kap

lan,

Inc.

•Th

e in

sure

r mus

t pro

vide

adv

ance

writ

ten

notic

e of

at l

east

20

days

if c

ance

lling

the

insu

red’

s po

licy

MN_P&C_CN.indb 133 6/23/2011 8:57:28 AM

134

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

Can

cella

tion

and

Non

rene

wal

of

HO

and

DP

Polic

ies

Can

cella

tion

and

Non

rene

wal

•Th

e st

anda

rd e

xper

ienc

e pe

riod

in M

inne

sota

is

thre

eye

ars

thre

eye

ars

–A

ny c

laim

s or

loss

es th

at o

ccur

red

befo

re th

e ex

perie

nce

perio

d ca

nnot

be

used

by

the

insu

rer

whe

n m

akin

g an

und

erw

ritin

g de

cisi

on

10©

2011

Kap

lan,

Inc.

Can

cella

tion

and

Non

rene

wal

•Ev

ery

insu

rer m

ust e

stab

lish

the

min

imum

nu

mbe

rand

amou

ntof

clai

ms

durin

gth

enu

mbe

rand

amou

ntof

clai

ms

durin

gth

eex

perie

nce

perio

d th

at m

ay re

sult

in n

onre

new

al

•Th

e in

sure

r may

not

con

side

r as

a cl

aim

:–Th

e in

sure

d’s

inqu

iry a

bout

a h

ypot

hetic

al c

laim

–The

insu

red’

sin

quiry

toth

ein

sure

d’s

agen

treg

ardi

ng

11©

2011

Kap

lan,

Inc.

The

insu

red

sin

quiry

toth

ein

sure

ds

agen

treg

ardi

nga

pote

ntia

l cla

im

Can

cella

tion

and

Non

rene

wal

•N

o ho

meo

wne

r’s p

olic

y m

ay b

e no

nren

ewed

bas

ed o

n th

ein

sure

d’s

loss

expe

rienc

eun

less

the

insu

rerh

asse

ntth

ein

sure

ds

loss

expe

rienc

eun

less

the

insu

rerh

asse

nta

writ

ten

notic

e th

at a

ny fu

ture

loss

es m

ay re

sult

in

nonr

enew

al

•A

ll no

tices

mus

t inc

lude

the

follo

win

g:–Th

e re

ason

for t

erm

inat

ion

–P

ossi

ble

cove

rage

thro

ugh

the

FAIR

pla

n

12©

2011

Kap

lan,

Inc.

gg

p

–Th

e in

sure

d’s

right

to c

ompl

ain

to th

e co

mm

issi

oner

•C

over

age

rem

ains

in fo

rce

until

the

effe

ctiv

e da

te a

nd

time

of p

olic

y te

rmin

atio

n

MN_P&C_CN.indb 134 6/23/2011 8:57:28 AM

135

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

Can

cella

tion

•C

ance

llatio

n du

e to

non

-pay

men

t of p

rem

ium

re

quire

s20

day

adva

nce

writ

ten

notic

eto

the

requ

ires

20-d

ayad

vanc

ew

ritte

nno

tice

toth

ein

sure

d

•If

the

polic

y ha

s be

en in

forc

e fo

r les

s th

an 6

0 da

ys:

–Th

e in

sure

r can

can

cel f

or a

ny re

ason

13©

2011

Kap

lan,

Inc.

–20

-day

adv

ance

writ

ten

notic

e is

requ

ired

Can

cella

tion

•If

the

polic

y ha

s be

en in

forc

e fo

r 60

days

or

long

erth

ein

sure

rcan

only

canc

elfo

rthe

long

er,t

hein

sure

rcan

only

canc

elfo

rthe

follo

win

g re

ason

s:

–M

ater

ial m

isre

pres

enta

tion

on th

e ap

plic

atio

n

–Th

e in

sure

d fil

ed a

frau

dule

nt c

laim

–Th

ere

is a

phy

sica

l cha

nge

in th

e pr

oper

ty

14©

2011

Kap

lan,

Inc.

py

gp

py

•30

-day

adv

ance

writ

ten

notic

e is

requ

ired

Non

rene

wal

•Th

e in

sure

r can

non

-ren

ew fo

r the

sam

e re

ason

sas

canc

ella

tion

reas

ons

asca

ncel

latio

n

•Th

e in

sure

r can

als

o no

n-re

new

for t

he fo

llow

ing

reas

ons:

–U

se o

f the

pre

mis

es fo

r an

illeg

al a

ctiv

ity

–Tw

oor

mor

eye

ars

ofde

linqu

entp

rope

rtyta

xes

15©

2011

Kap

lan,

Inc.

Two

orm

ore

year

sof

delin

quen

tpro

perty

taxe

s

Non

rene

wal

–C

hang

e in

the

qual

ity o

f fire

pro

tect

ion

serv

ices

Tl

di

thth

i–

Two

or m

ore

loss

esdu

ring

the

thre

e-ye

ar e

xper

ienc

epe

riod

(nat

ural

loss

es d

o no

t cou

nt)

•60

-day

adv

ance

writ

ten

notic

e is

requ

ired

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 135 6/23/2011 8:57:29 AM

136

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

FAIR

Pla

n (F

air A

cces

s to

In

sura

nce

Req

uire

men

ts)

FAIR

Pla

n

•Pr

ovid

es li

mite

d pr

oper

ty in

sura

nce

for

prop

ertie

sth

atca

nnot

obta

inin

sura

nce

thro

ugh

prop

ertie

sth

atca

nnot

obta

inin

sura

nce

thro

ugh

the

priv

ate

insu

ranc

e m

arke

t–

Pro

perti

es h

ave

been

den

ied

insu

ranc

e du

e to

poo

r cr

edit

hist

ory,

a h

igh

num

ber o

f cla

ims,

or t

he

cond

ition

of t

he p

rope

rty

Ad

ii

td

thh

thM

it

Pt

18©

2011

Kap

lan,

Inc.

•Ad

min

iste

red

thro

ugh

the

Min

neso

taPr

oper

tyIn

sura

nce

Pla

cem

ent F

acilit

y

FAIR

Pla

n

•El

igib

le p

rope

rties

incl

ude:

–H

omes

, apa

rtmen

ts, c

ondo

min

ium

s

–B

usin

esse

s

–Fa

ctor

ies

–Fa

rms

19©

2011

Kap

lan,

Inc.

FAIR

Pla

n: A

pplic

atio

n Pr

oces

s

•Th

e FA

IR p

lan

will

issu

e a

polic

yU

ii

thli

ti–

Upo

n re

ceiv

ing

the

appl

icat

ion

–A

fter d

eter

min

ing

if th

e ris

k m

eets

pre

limin

ary

unde

rwrit

ing

requ

irem

ents

•To

obt

ain

furth

er u

nder

writ

ing

info

rmat

ion,

the

plan

may

requ

est a

n in

spec

tion

repo

rt th

at is

do

neat

noco

stto

the

owne

r

20©

2011

Kap

lan,

Inc.

done

atno

cost

toth

eow

ner

–S

umm

ariz

es th

e ge

nera

l con

ditio

n of

the

prop

erty

–Is

sued

with

in 1

0 da

ys a

fter t

he in

spec

tion

MN_P&C_CN.indb 136 6/23/2011 8:57:30 AM

137

Less

on E

leve

n M

inne

sota

Pro

pert

y La

w

FAIR

Pla

n: A

pplic

atio

n Pr

oces

s

•W

ithin

five

bus

ines

s da

ys o

f rec

eivi

ng a

co

mpl

eted

appl

icat

ion

the

plan

mus

teith

er:

com

plet

edap

plic

atio

n,th

epl

anm

uste

ither

:–

Acc

ept t

he p

rope

rty

•If

a su

rcha

rge

appl

ies,

the

plan

mus

t lis

t the

im

prov

emen

ts n

eces

sary

to re

mov

e th

e ch

arge

–R

ejec

t the

pro

perty

unt

il af

ter t

he im

prov

emen

ts a

re

mad

e

21©

2011

Kap

lan,

Inc.

–R

ejec

t the

risk

•Th

e ris

k ca

nnot

be

reje

cted

sol

ely

base

d on

its

loca

tion

FAIR

Pla

n: C

ance

llatio

n of

Cov

ered

Ris

ks

•15

-day

adv

ance

writ

ten

notic

e is

requ

ired

•Te

rmin

atio

n no

tice

mus

t inc

lude

the

reas

on a

nd

the

insu

red’

s rig

ht to

app

eal

•Po

licy

can

be c

ance

lled:

–Fo

r non

paym

ent o

f pre

miu

m

22©

2011

Kap

lan,

Inc.

–W

ith th

e ap

prov

al o

f the

FA

IR p

lan

–Fo

r a re

ason

that

wou

ld h

ave

caus

ed th

e ris

k to

be

decl

ined

had

it b

een

know

n at

the

time

of a

pplic

atio

n

FAIR

Pla

n: P

rodu

cer D

utie

s

•A

licen

sed

prod

ucer

sha

ll no

t ref

use

to s

ubm

it an

ap

plic

atio

nto

the

Min

neso

taFA

IRpl

anap

plic

atio

nto

the

Min

neso

taFA

IRpl

an

•Pr

oduc

ers

will

rece

ive

a co

mm

issi

on fr

om th

e pl

an fo

r pre

miu

ms

paid

•Th

e pr

oduc

er is

not

an

agen

t of t

he M

inne

sota

FA

IRpl

an a

nd m

ay n

ot b

ind

cove

rage

. All

form

s

23©

2011

Kap

lan,

Inc.

py

gof

pre

miu

m p

aym

ents

mus

t be

mad

e pa

yabl

e to

th

e M

inne

sota

FA

IR p

lan

and

not t

he p

rodu

cer.

MN_P&C_CN.indb 137 6/23/2011 8:57:30 AM

MN_P&C_CN.indb 138 6/23/2011 8:57:30 AM

Lesson twelveCommercial Property and inland Marine insurance

MN_P&C_CN.indb 139 6/23/2011 8:57:30 AM

140

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

LT

lLe

sson

Twel

veC

omm

erci

al P

rope

rty

and

Inla

nd M

arin

e In

sura

nce

Com

mer

cial

Ris

k Ex

posu

res

Prop

erty

Exp

osur

es

•Bu

ildin

gs, o

ther

stru

ctur

es, a

nd p

erso

nal

prop

erty

owne

dby

the

busi

ness

prop

erty

owne

dby

the

busi

ness

•Al

l fac

e th

e ris

k of

bei

ng d

amag

ed o

r des

troye

d by

a v

arie

ty o

f per

ils

3©

2011

Kap

lan,

Inc.

Gen

eral

Lia

bilit

y Ex

posu

res

•Bu

sine

sses

run

the

risk

of b

eing

sue

d–A

bus

ines

s co

uld

face

ban

krup

tcy

if th

e co

urt a

war

ds

a la

rge

judg

men

t

•G

ener

al li

abilit

y ex

posu

res

can

aris

e ou

t of t

he

com

pany

’s p

rem

ises

and

bus

ines

s op

erat

ions

4©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 140 6/23/2011 8:57:31 AM

141

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Loss

of U

se E

xpos

ures

•Lo

ss o

f rev

enue

–B

uild

ing

owne

d by

or u

sed

by a

bus

ines

s is

dam

aged

or

des

troye

d

–B

usin

ess

may

clo

seif

it su

ffers

a m

ajor

loss

•R

esta

uran

ts a

nd re

tail

stor

es

5©

2011

Kap

lan,

Inc.

Loss

of U

se E

xpos

ures

•Ex

pens

es a

bove

regu

lar o

pera

ting

cost

s–

Bui

ldin

g ow

ned

by o

r use

d by

a b

usin

ess

is d

amag

ed

or d

estro

yed

–B

usin

ess

may

rem

ain

open

afte

r a lo

ss b

ecau

se o

f th

e na

ture

of t

he b

usin

ess

•B

anks

, new

spap

er p

ublis

hers

, hos

pita

ls

6©

2011

Kap

lan,

Inc.

Crim

e Ex

posu

res

•R

obbe

ry, s

hopl

iftin

g, b

urgl

ary,

and

em

ploy

ee

dish

ones

tydi

shon

esty

•C

rime

expo

sure

var

ies

base

d on

the

natu

re o

f th

e bu

sine

ss–C

ompa

nies

that

han

dle

cash

or h

ave

larg

e in

vent

orie

s of

exp

ensi

ve g

oods

tend

to b

e es

peci

ally

pro

ne to

i

7©

2011

Kap

lan,

Inc.

crim

e

Oth

er R

isk

Expo

sure

s

•Po

rtabl

e pr

oper

ty

•Au

tom

obile

s

•Eq

uipm

ent b

reak

dow

n

•W

orke

rs’ c

ompe

nsat

ion

and

empl

oyer

’s li

abilit

y

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 141 6/23/2011 8:57:31 AM

142

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

The

ISO

Com

mer

cial

Pac

kage

Po

licy

(CPP

)

Com

mer

cial

Pac

kage

Pol

icy

•Al

low

s bu

sine

sses

to c

over

thei

r maj

or ri

sk

expo

sure

sun

dero

nepo

licy

expo

sure

sun

dero

nepo

licy

•Th

e bu

sine

ss s

elec

ts th

e co

vera

ge it

nee

ds, a

nd

thos

e co

vera

ges

are

com

bine

d in

to a

sin

gle

polic

y ca

lled

the

CPP

10©

2011

Kap

lan,

Inc.

Com

mer

cial

Pac

kage

Pol

icy

•C

an in

clud

e th

e fo

llow

ing

cove

rage

s:–

Pro

perty

–In

land

mar

ine

–E

quip

men

t bre

akdo

wn

–G

ener

al li

abili

ty

At

11©

2011

Kap

lan,

Inc.

–A

uto

–C

rime

Com

mer

cial

Pac

kage

Pol

icy

•C

omm

on p

olic

y de

clar

atio

ns–

Nam

ed in

sure

d an

d pr

oper

ty a

ddre

ss

–P

olic

y pe

riod

–P

olic

y lim

it fo

r eac

h in

divi

dual

cov

erag

e pu

rcha

sed

by

the

insu

red

–P

rem

ium

fore

ach

indi

vidu

alco

vera

ge

12©

2011

Kap

lan,

Inc.

Pre

miu

mfo

reac

hin

divi

dual

cove

rage

–In

sure

d’s

busi

ness

des

crip

tion

MN_P&C_CN.indb 142 6/23/2011 8:57:32 AM

143

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Com

mer

cial

Pac

kage

Pol

icy

•C

omm

on p

olic

y co

nditi

ons

–G

ener

al d

utie

s an

d re

spon

sibi

litie

s of

the

insu

rer a

nd

insu

red

–C

ance

llatio

n pr

ovis

ion

•Th

e in

sure

r will

not

ify th

e fir

st n

amed

insu

red

–P

aym

ento

fpre

miu

ms

13©

2011

Kap

lan,

Inc.

Pay

men

tofp

rem

ium

s

•Th

e fir

st n

amed

insu

red

is re

spon

sibl

e fo

r mak

ing

timel

y pa

ymen

t of p

rem

ium

Com

mer

cial

Pac

kage

Pol

icy

•If

the

first

nam

ed in

sure

d di

es th

e in

sure

d’s

lega

l re

pres

enta

tive

beco

mes

anin

sure

dre

pres

enta

tive

beco

mes

anin

sure

d

•Th

e po

licy

cons

ists

of t

wo

or m

ore

cove

rage

pa

rts–

If on

ly o

ne c

over

age

is n

eede

d, a

mon

olin

e po

licy

is

used

Eac

hin

divi

dual

cove

rage

inth

epo

licy

(ie

14©

2011

Kap

lan,

Inc.

•E

ach

indi

vidu

alco

vera

gein

the

polic

y(i.

e.,

com

mer

cial

pro

perty

, com

mer

cial

gen

eral

lia

bilit

y, e

tc.)

will

also

hav

e its

ow

n de

clar

atio

ns

and

cond

ition

s th

at a

pply

to th

at c

over

age

only

Com

mer

cial

Pro

pert

y In

sura

nce

Com

mer

cial

Pro

pert

y In

sura

nce

Com

mer

cial

Pac

kage

Pol

icy:

•C

omm

on d

ecla

ratio

ns a

nd

cond

ition

s•

Prop

erty

•In

land

mar

ine

•Eq

uipm

ent b

reak

dow

nco

vera

ge

Con

sist

s of

:•

Dec

lara

tions

•B

uild

ing

and

pers

onal

pr

oper

ty c

over

age

•B

usin

ess

inco

me

and

extra

exp

ense

cov

erag

e

16©

2011

Kap

lan,

Inc.co

vera

ge•

Liab

ility

•Au

to•

Crim

e

pg

MN_P&C_CN.indb 143 6/23/2011 8:57:32 AM

144

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Com

mer

cial

Pro

pert

y In

sura

nce

•Pe

ril fo

rms

incl

ude

basi

c, b

road

, and

spe

cial

•Sp

rinkl

er le

akag

e an

d si

nkho

le c

olla

pse

are

cove

red

unde

r eac

h pe

ril fo

rm

•Th

eft a

nd s

team

boi

ler e

xplo

sion

is n

ot c

over

ed

unde

r any

per

il fo

rm

17©

2011

Kap

lan,

Inc.

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

•Th

e m

ost c

omm

only

pur

chas

ed c

over

age

form

, an

dth

efo

rmth

atis

the

core

ofth

eco

mm

erci

alan

dth

efo

rmth

atis

the

core

ofth

eco

mm

erci

alpr

oper

ty c

over

age

part

•C

over

s bu

ildin

gs, t

he in

sure

d’s

busi

ness

pe

rson

al p

rope

rty, a

nd th

e pe

rson

al p

rope

rty o

f ot

hers

loca

ted

at th

e bu

sine

ss p

rem

ises

18©

2011

Kap

lan,

Inc.

•80

% c

oins

uran

ce re

quire

men

t

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

•Po

licy

stru

ctur

e–

Bui

ldin

g co

vera

ge

–B

usin

ess

pers

onal

pro

perty

–P

erso

nal p

rope

rty o

f oth

ers

–A

dditi

onal

cov

erag

es

19©

2011

Kap

lan,

Inc.

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: B

uild

ing

Cov

erag

e•C

over

s th

e bu

ildin

g an

d ot

her s

truct

ures

list

ed

onth

ede

clar

atio

nspa

geon

the

decl

arat

ions

page

•In

clud

es a

ll of

the

follo

win

g:–C

ompl

eted

add

ition

s

–Fi

xtur

es a

nd fl

oor c

over

ings

Permanently

inst

alle

dm

achi

nery

and

equi

pmen

t

20©

2011

Kap

lan,

Inc.

–Permanently

inst

alle

dm

achi

nery

and

equi

pmen

t

–P

erso

nal p

rope

rty u

sed

to s

ervi

ce o

r mai

ntai

n th

e pr

emis

es (f

ire e

xtin

guis

hers

)

MN_P&C_CN.indb 144 6/23/2011 8:57:33 AM

145

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: B

uild

ing

Cov

erag

e•N

ew b

uild

ings

und

er c

onst

ruct

ion

and

new

ly

acqu

ired

build

ings

are

cove

red

for3

0da

ysac

quire

dbu

ildin

gsar

eco

vere

dfo

r30

days

,ca

pped

at $

250,

000

21©

2011

Kap

lan,

Inc.

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: B

usin

ess

Pers

onal

Pro

pert

y•C

over

s an

y ow

ned

busi

ness

per

sona

l pro

perty

th

atis

inon

orw

ithin

100

feet

ofth

ebu

sine

ssth

atis

in,o

n,or

with

in10

0fe

etof

the

busi

ness

prem

ises

Furn

iture

, mac

hine

ry, e

quip

men

t, st

ock,

or

inve

ntor

y an

d an

y ot

her p

erso

nal p

rope

rty o

wne

d by

and

use

d in

the

busi

ness

Ifb

il

ti

ll

kt

22©

2011

Kap

lan,

Inc.

•If

busi

ness

per

sona

l pro

perty

is re

gula

rlyke

ptso

mew

here

oth

er th

an th

e pr

emis

es (s

tora

ge

lock

er),

the

addi

tiona

l loc

atio

n ca

n be

add

ed b

y en

dors

emen

t

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: B

usin

ess

Pers

onal

Pro

pert

y•N

ewly

acq

uire

d pe

rson

al p

rope

rty is

cov

ered

for

30da

ysca

pped

at$1

0000

030

days

,cap

ped

at$1

00,0

00

23©

2011

Kap

lan,

Inc.

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: Pe

rson

al P

rope

rty

of O

ther

s•C

over

s pe

rson

al p

rope

rty o

f oth

ers

in th

e ca

re,

cust

ody

orco

ntro

loft

hebu

sine

sscu

stod

y,or

cont

rolo

fthe

busi

ness

•Pr

oper

ty m

ust b

e in

, on,

or w

ithin

100

feet

of t

he

busi

ness

pre

mis

es

24©

2011

Kap

lan,

Inc.

–

MN_P&C_CN.indb 145 6/23/2011 8:57:33 AM

146

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: A

dditi

onal

Cov

erag

es•D

ebris

rem

oval

25%

fth

tll

ibl

fth

lili

it–

25%

oft

he a

ctua

llos

sis

pay

able

from

the

polic

y lim

it

–If

the

expe

nse

exce

eds

25%

of t

he a

ctua

l los

s, o

r the

po

licy

limit

has

been

exh

aust

ed, a

n ad

ditio

nal

$10,

000

is a

vaila

ble

•Pr

eser

vatio

n of

pro

perty

(rem

oval

) is

cove

red

for

30da

ys

25©

2011

Kap

lan,

Inc.

30da

ys

•Po

llutio

n cl

eanu

p th

at re

sults

from

a c

over

ed

peril

–up

to $

10,0

00

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: A

dditi

onal

Cov

erag

es•Fi

re d

epar

tmen

t ser

vice

cha

rge

Ut

$100

0f

hbi

lld

tth

id

ith–

Up

to$1

,000

for a

cha

rge

bille

dto

the

insu

red,

with

no d

educ

tible

•O

utdo

or s

igns

–U

p to

$2,

500

for d

amag

e to

atta

ched

or d

etac

hed

sign

s

Eli

d

26©

2011

Kap

lan,

Inc.

•El

ectro

nic

data

–U

p to

$2,

500

to p

ay fo

r the

cos

t to

repl

ace

or re

stor

e el

ectro

nic

data

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: A

dditi

onal

Cov

erag

es•Pr

oper

ty o

ff-pr

emis

es–

Up

to $

10,0

00 fo

r pro

perty

tem

pora

rily

away

from

the

prem

ises

, in

stor

age,

or a

t a fa

ir, tr

ade

show

, or

exhi

bitio

n

•R

epla

cem

ent o

f tre

es, s

hrub

s, a

nd o

ther

pla

nts

–U

p to

$25

0 ea

ch, m

axim

um $

1,00

0 pe

r los

s

27©

2011

Kap

lan,

Inc.

–D

amag

e du

e to

fire

, lig

htni

ng, e

xplo

sion

, rio

t, ci

vil

com

mot

ion,

or a

ircra

ft

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: Ex

clus

ions

•An

imal

s, u

nles

s th

ey a

re b

oard

ed o

r hel

d fo

r sa

lesa

le

•M

otor

veh

icle

s, a

ircra

ft, a

nd w

ater

craf

t

•D

etac

hed

outd

oor s

igns

•Pr

oper

ty in

sure

d el

sew

here

28©

2011

Kap

lan,

Inc.

•La

nd, f

ound

atio

ns, p

ipes

, and

dra

ins

MN_P&C_CN.indb 146 6/23/2011 8:57:34 AM

147

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Bui

ldin

g an

d Pe

rson

al P

rope

rty

Form

: Ex

clus

ions

•Ac

coun

ts, b

ills,

cur

renc

y, m

oney

, and

sec

uriti

es

•R

etai

ning

wal

ls, p

iers

, wha

rves

, and

doc

ks

•Ba

ilees

29©

2011

Kap

lan,

Inc.

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

•Pa

ys fo

r the

loss

of u

se th

e bu

sine

ss s

usta

ins

due

toa

dire

ctph

ysic

allo

ssfro

ma

cove

red

peril

due

toa

dire

ctph

ysic

allo

ssfro

ma

cove

red

peril

•Th

e di

rect

loss

may

forc

e th

e in

sure

d to

sus

pend

op

erat

ions

or c

lose

the

busi

ness

dur

ing

the

perio

d of

rest

orat

ion

30©

2011

Kap

lan,

Inc.

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

•If

a ci

vil a

utho

rity

proh

ibits

use

of t

he in

sure

d pr

oper

tybe

caus

ea

cove

red

peril

dam

aged

apr

oper

tybe

caus

ea

cove

red

peril

dam

aged

ane

ighb

orin

g lo

catio

n, c

over

age

is p

aid

for u

p to

th

ree

wee

ks

•C

over

age

begi

ns 7

2 ho

urs

afte

r the

civ

il au

thor

ity a

ctio

n

31©

2011

Kap

lan,

Inc.

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

•D

efin

ition

s–B

usin

ess

inco

me

–ne

t inc

ome

that

wou

ld h

ave

been

ea

rned

, plu

s th

e co

sts

of c

ontin

uing

nor

mal

op

erat

ions

, inc

ludi

ng p

ayro

ll

–E

xtra

exp

ense

–an

y ex

pens

e in

curr

ed to

kee

p th

e bu

sine

ss g

oing

afte

r a lo

ss c

ause

d by

a c

over

ed p

eril

32©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 147 6/23/2011 8:57:34 AM

148

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

•D

efin

ition

s (c

ontin

ued)

–R

esto

ratio

n pe

riod

–be

gins

at t

he ti

me

of lo

ss a

nd

ends

whe

n th

e pr

oper

ty s

houl

d be

repa

ired

or w

hen

the

busi

ness

resu

mes

at a

new

per

man

ent l

ocat

ion

–E

xten

ded

busi

ness

inco

me

–pa

ys fo

r los

s of

bu

sine

ss in

com

e af

ter o

pera

tions

hav

e re

sum

ed, a

nd

until

the

busi

ness

rega

ins

itsno

rmal

volu

me.

The

33©

2011

Kap

lan,

Inc.

until

the

busi

ness

rega

ins

itsno

rmal

volu

me.

The

basi

c pe

riod

is 3

0 da

ys a

nd c

an b

e in

crea

sed

by

endo

rsem

ent.

Bus

ines

s In

com

e C

over

age

•Pa

ys fo

r los

s of

inco

me

if th

e bu

sine

ss c

lose

s du

ring

the

perio

dof

rest

orat

ion

durin

gth

epe

riod

ofre

stor

atio

n

•Th

e co

vera

ge c

an b

e w

ritte

n w

ith o

r with

out

coin

sura

nce

34©

2011

Kap

lan,

Inc.

Bus

ines

s In

com

e C

over

age:

with

Coi

nsur

ance

•M

inim

um c

oins

uran

ce re

quire

men

t is

50%

of th

e an

nual

busi

ness

inco

me

buth

ighe

rlim

itsm

ayan

nual

busi

ness

inco

me,

buth

ighe

rlim

itsm

aybe

pur

chas

ed. T

his

acts

as

the

polic

y lim

it.

•In

the

even

t of a

cov

ered

loss

, the

insu

rer w

ill pa

y th

e ac

tual

loss

sus

tain

ed, u

p to

the

polic

y lim

it

35©

2011

Kap

lan,

Inc.

•N

o m

onth

ly li

mits

on

how

muc

h th

e in

sure

d ca

n re

ceiv

e

Bus

ines

s In

com

e C

over

age:

with

Coi

nsur

ance

•Th

is o

ptio

n is

goo

d fo

r bus

ines

ses

with

se

ason

alflu

ctua

tions

inth

eirv

olum

eof

seas

onal

fluct

uatio

nsin

thei

rvol

ume

ofbu

sine

ss a

nd th

ose

who

wou

ld e

xpec

t to

clos

e fo

r six

mon

ths

or lo

nger

36©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 148 6/23/2011 8:57:35 AM

149

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Bus

ines

s In

com

e C

over

age:

with

out C

oins

uran

ce•Th

e in

sure

d se

lect

s a

max

imum

pol

icy

limit

and

am

onth

lylim

itof

inde

mni

tya

mon

thly

limit

ofin

dem

nity

•In

the

even

t of a

cov

ered

loss

, the

insu

rer w

ill ca

p th

e am

ount

pay

able

at t

he m

onth

ly li

mit

of

inde

mni

ty

•Fo

r exa

mpl

e, if

the

max

imum

pol

icy

limit

is

37©

2011

Kap

lan,

Inc.

p,

py

$100

,000

and

the

mon

thly

lim

it of

inde

mni

ty is

25

%, t

he m

ost t

he in

sure

d w

ill re

ceiv

e in

any

gi

ven

mon

th is

$25

,000

Bus

ines

s In

com

e C

over

age:

with

out C

oins

uran

ce•Th

is o

ptio

n is

goo

d fo

r bus

ines

ses

with

ste

ady

cash

flow

and

thos

ew

how

ould

beab

leto

cash

flow

and

thos

ew

how

ould

beab

leto

reop

en a

fter a

sho

rter p

erio

d of

tim

e

38©

2011

Kap

lan,

Inc.

Extr

a Ex

pens

e C

over

age

•U

sed

by b

usin

esse

s th

at w

ill re

mai

n op

en d

urin

g th

epe

riod

ofre

stor

atio

nth

epe

riod

ofre

stor

atio

n

•Pa

ys n

eces

sary

ope

ratin

g ex

pens

es to

con

tinue

bu

sine

ss o

pera

tions

39©

2011

Kap

lan,

Inc.

Equi

pmen

t Bre

akdo

wn

Cov

erag

e

MN_P&C_CN.indb 149 6/23/2011 8:57:36 AM

150

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Equi

pmen

t Bre

akdo

wn

Cov

erag

e

•In

sure

s bo

ilers

and

mac

hine

ry o

wne

d by

the

insu

red

insu

red

•Pr

otec

ts a

gain

st p

rope

rty d

amag

e re

sulti

ng fr

om

sudd

en a

nd a

ccid

enta

l bre

akdo

wn

of th

e eq

uipm

ent

41©

2011

Kap

lan,

Inc.

Equi

pmen

t Bre

akdo

wn

Cov

erag

e

•C

over

ed e

quip

men

t inc

lude

s th

e fo

llow

ing:

–E

quip

men

t bui

lt to

ope

rate

und

er in

tern

al p

ress

ure

such

as

boile

rs

–E

lect

rical

or m

echa

nica

l equ

ipm

ent u

sed

to g

ener

ate

or tr

ansm

it en

ergy

–C

omm

unic

atio

ns a

nd c

ompu

ter e

quip

men

t

42©

2011

Kap

lan,

Inc.

–E

quip

men

t ow

ned

by a

util

ity a

nd u

sed

sole

ly to

su

pply

util

ity s

ervi

ces

to th

e in

sure

d’s

prem

ises

Equi

pmen

t Bre

akdo

wn

Cov

erag

e

•Th

e de

clar

atio

ns p

age

will

incl

ude

the

follo

win

g:fo

llow

ing:

–Th

e na

med

insu

red,

bus

ines

s ad

dres

s, p

olic

y pe

riod,

pr

emiu

m, a

nd c

over

ed p

rem

ises

–A

des

crip

tion

and

the

loca

tion

of th

e ob

ject

(s) i

nsur

ed

by th

e po

licy.

An

obje

ct is

the

boile

r, m

achi

nery

, or

equi

pmen

tins

ured

byth

epo

licy

43©

2011

Kap

lan,

Inc.

equi

pmen

tins

ured

byth

epo

licy.

Equi

pmen

t Bre

akdo

wn

Cov

erag

e

•C

over

s fin

anci

al lo

sses

that

ste

m fr

om th

e br

eakd

own

ofco

vere

deq

uipm

ent

brea

kdow

nof

cove

red

equi

pmen

t

•Br

eakd

own

is th

e on

ly c

ause

of l

oss

cove

red

–D

efin

ed a

s fa

ilure

of p

ress

ure

or v

acuu

m e

quip

men

t, m

echa

nica

l fai

lure

, or e

lect

rical

failu

re

44©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 150 6/23/2011 8:57:36 AM

151

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Equi

pmen

t Bre

akdo

wn:

Cov

erag

es A

vaila

ble

•D

irect

pro

pert

y lo

ss–

The

cost

to re

pair

or re

plac

e da

mag

ed e

quip

men

t

•Ex

pedi

ting

expe

nses

–P

ays

the

cost

s fo

r tem

pora

ry re

pairs

and

to e

xped

ite

perm

anen

t rep

airs

or r

epla

ce d

amag

ed p

rope

rty

45©

2011

Kap

lan,

Inc.

Equi

pmen

t Bre

akdo

wn:

Cov

erag

es A

vaila

ble

•B

usin

ess

inco

me

and

extr

a ex

pens

e –

Sim

ilar t

o th

e co

vera

ge u

nder

com

mer

cial

pro

perty

bu

t the

dam

age

mus

t be

caus

ed b

y br

eakd

own

(rat

her t

han

fire,

ligh

tnin

g, w

inds

torm

, etc

.)

•Sp

oila

ge d

amag

e–

Cov

ers

dam

age

to ra

w m

ater

ials

or p

rodu

cts

bein

g

46©

2011

Kap

lan,

Inc.

man

ufac

ture

d or

hel

d in

sto

rage

bec

ause

of l

ack

or

exce

ss o

f pow

er, l

ight

, hea

t, st

eam

, or r

efrig

erat

ion

Equi

pmen

t Bre

akdo

wn:

Con

ditio

ns•G

ener

al d

utie

s an

d re

spon

sibi

litie

s of

the

insu

rer

and

insu

red

and

insu

red

•Th

e in

sure

r may

imm

edia

tely

sus

pend

cove

rage

if eq

uipm

ent i

s fo

und

to b

e in

or

expo

sed

to a

dan

gero

us c

ondi

tion

–A

dvan

ce n

otic

e of

sus

pens

ion

is n

ot re

quire

d

47©

2011

Kap

lan,

Inc.

–Th

e in

sure

r will

pro

vide

writ

ten

notic

e to

the

insu

red

Inla

nd M

arin

e In

sura

nce

MN_P&C_CN.indb 151 6/23/2011 8:57:37 AM

152

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Inla

nd M

arin

e In

sura

nce

•C

over

s pr

oper

ty fr

eque

ntly

mov

ed fr

om p

lace

to

plac

ein

conn

ectio

nw

itha

busi

ness

orpl

ace

inco

nnec

tion

with

abu

sine

ssor

prof

essi

on

•C

over

s pr

oper

ty w

ith a

hig

h in

here

nt v

alue

•C

an b

e in

clud

ed a

s pa

rt of

the

com

mer

cial

pa

ckag

epo

licy

49©

2011

Kap

lan,

Inc.

pg

py

Inla

nd M

arin

e In

sura

nce:

Cat

egor

ies

of C

over

age

•Im

ports

Et

•E

xpor

ts

•D

omes

tic s

hipm

ents

•M

eans

of t

rans

porta

tion

(brid

ges,

tunn

els,

etc

.)

•M

eans

of c

omm

unic

atio

n (c

able

s, te

leph

one

lines

, sa

telli

tes,

etc

.)

50©

2011

Kap

lan,

Inc.

•C

omm

erci

al p

rope

rty fl

oate

r ris

ks

•P

erso

nal a

rticl

e flo

ater

risk

s (je

wel

ry, f

urs,

trav

el

bagg

age,

etc

.)

Inla

nd M

arin

e In

sura

nce

•B

aile

e’s

cust

omer

floa

ter

Ith

tf

tt

ili

th–

Insu

res

the

prop

erty

of c

usto

mer

ste

mpo

raril

yin

the

care

, cus

tody

, or c

ontro

l of t

he in

sure

d

•D

ry c

lean

ers,

tailo

rs, r

epai

r sho

ps

–C

over

age

is e

xten

ded

to p

rope

rty o

f cus

tom

ers

that

is

on th

e ba

ilee’

s pr

emis

es o

r off

prem

ises

but

in th

e ba

ilee’

s cu

stod

y

51©

2011

Kap

lan,

Inc.

–P

olic

ies

are

writ

ten

as b

road

form

or s

peci

al fo

rm,

with

loss

es ty

pica

lly h

andl

ed o

n an

act

ual c

ash

valu

e ba

sis

Inla

nd M

arin

e In

sura

nce

•B

aile

e’s

cust

omer

floa

ter(

cont

inue

d)–

Incl

udes

the

peril

“con

fusi

on o

f goo

ds” –

the

resu

lting

da

mag

e fro

m a

noth

er lo

ss h

as m

ade

it im

poss

ible

to

iden

tify

whi

ch g

arm

ents

bel

ong

to a

par

ticul

ar

cust

omer

–C

omm

on e

xclu

sion

s in

clud

e th

e fo

llow

ing:

Dd

bi

52©

2011

Kap

lan,

Inc.

•D

amag

e ca

used

by p

roce

ssin

g

•E

mpl

oyee

dis

hone

sty

•W

ear a

nd te

ar

•In

here

nt v

ice

or d

efec

t

MN_P&C_CN.indb 152 6/23/2011 8:57:37 AM

153

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Inla

nd M

arin

e In

sura

nce

•C

omm

erci

al a

rtic

les

float

erC

il

ili

tt

–C

over

s co

mm

erci

al c

amer

as, m

usic

alin

stru

men

ts,

and

thei

r rel

ated

equ

ipm

ent a

nd a

cces

sorie

s

–P

olic

y te

rrito

ry is

wor

ldw

ide

–A

dditi

onal

acq

uire

d pr

oper

ty is

cov

ered

for u

p to

30

days

. The

insu

red

mus

t rep

ort t

he p

rope

rty w

ithin

30

days

of a

cqui

sitio

n.

53©

2011

Kap

lan,

Inc.

•Th

e lim

it fo

r the

add

ition

al c

over

age

is th

e le

sser

of

25%

of t

he li

mit

show

n on

the

decl

arat

ions

for t

hat

prop

erty

or$

10,0

00

Inla

nd M

arin

e In

sura

nce

•In

stal

latio

n flo

ater

–U

sed

to in

sure

pro

perty

/mat

eria

ls th

at a

re b

eing

de

liver

ed to

or i

nsta

lled

in th

e pr

emis

es o

f a c

usto

mer

–C

over

s ite

ms

whi

le in

tran

sit a

nd u

ntil

perm

anen

tly

inst

alle

d

54©

2011

Kap

lan,

Inc.

Inla

nd M

arin

e In

sura

nce

•Je

wel

er’s

blo

ck c

over

age

–U

sed

to in

sure

jew

elry

, pre

ciou

s m

etal

s, a

nd p

reci

ous

ston

es

–P

rovi

des

cove

rage

for:

•Ite

ms

sold

, but

not

yet

del

iver

ed

•P

rope

rtyof

othe

rsin

the

care

,cus

tody

,orc

ontro

l

55©

2011

Kap

lan,

Inc.P

rope

rtyof

othe

rsin

the

care

,cus

tody

,orc

ontro

lof

the

busi

ness

Inla

nd M

arin

e In

sura

nce

•Je

wel

er’s

blo

ck c

over

age

(con

tinue

d)–

Exc

lusi

ons:

•P

rope

rty b

eing

wor

n by

an

empl

oyee

•M

yste

rious

dis

appe

aran

ce

•E

mpl

oyee

dis

hone

sty

Pt

thi

biti

it

it

56©

2011

Kap

lan,

Inc.

•P

rope

rty a

t exh

ibiti

ons

or in

trans

it

MN_P&C_CN.indb 153 6/23/2011 8:57:38 AM

154

Less

on T

wel

ve

Com

mer

cial

Pro

pert

y an

d In

land

Mar

ine

Insu

ranc

e

Inla

nd M

arin

e In

sura

nce

•O

utdo

or s

igns

floa

ter

–U

sed

to in

sure

out

door

sig

ns th

at c

anno

t be

cove

red

by th

e co

mm

erci

al p

rope

rty p

olic

y

–E

xclu

sion

s:

•W

ear a

nd te

ar

•S

hort

circ

uitw

ithin

the

sign

itsel

f

57©

2011

Kap

lan,

Inc.S

hort

circ

uitw

ithin

the

sign

itsel

f

•In

here

nt d

efec

t

Inla

nd M

arin

e In

sura

nce

•A

ccou

nts

rece

ivab

le fl

oate

r–

Rei

mbu

rses

the

insu

red

for a

mou

nts

that

can

’t be

co

llect

ed fr

om c

usto

mer

s be

caus

e of

dam

age

to th

e co

mpa

ny’s

acc

ount

s re

ceiv

able

reco

rds

–C

over

s ex

tra c

olle

ctio

n ex

pens

es a

nd in

tere

st o

n an

y lo

ans

the

insu

red

mus

t obt

ain

to s

tay

in b

usin

ess

until

co

llect

ions

are

rest

ored

58©

2011

Kap

lan,

Inc.

colle

ctio

nsar

ere

stor

ed

Inla

nd M

arin

e In

sura

nce

•Va

luab

le p

aper

s an

d re

cord

s flo

ater

–R

eim

burs

es th

e in

sure

d fo

r the

cos

t of r

epla

cing

da

mag

ed it

ems,

suc

h as

man

uscr

ipts

, film

s, m

aps,

dr

awin

gs, d

eeds

, and

boo

ks th

at b

elon

g to

the

insu

red

–M

oney

and

sec

uriti

es a

re n

ot c

over

ed

59©

2011

Kap

lan,

Inc.

Inla

nd M

arin

e In

sura

nce

•Va

luab

le p

aper

s an

d re

cord

s flo

ater

(c

ontin

ued)

(con

tinue

d)–W

hen

the

reco

rds

are

not i

n us

e an

d wh

en th

e bu

sine

ss is

clo

sed,

the

insu

red

mus

t kee

p al

l do

cum

ents

in th

e st

orag

e co

ntai

ners

des

crib

ed in

the

decl

arat

ions

–E

xclu

sion

sin

clud

eth

efo

llow

ing:

60©

2011

Kap

lan,

Inc.

Exc

lusi

ons

incl

ude

the

follo

win

g:

•E

rror

s or

om

issi

ons

in p

roce

ssin

g or

cop

ying

•E

lect

rical

or m

agne

tic d

istu

rban

ce, o

r era

sure

of

elec

troni

c re

cord

ings

MN_P&C_CN.indb 154 6/23/2011 8:57:38 AM

Lesson thirteenPersonal Auto insurance

MN_P&C_CN.indb 155 6/23/2011 8:57:38 AM

156

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Gen

eral

Cha

ract

eris

tics

The

Pers

onal

Aut

o Po

licy

•C

over

s pr

oper

ty a

nd li

abilit

y ex

posu

res

that

re

sult

from

the

owne

rshi

pm

aint

enan

cean

dre

sult

from

the

owne

rshi

p,m

aint

enan

ce,a

ndus

e of

a m

otor

veh

icle

3©

2011

Kap

lan,

Inc.

The

Pers

onal

Aut

o Po

licy

•Th

e IS

O p

olic

y ha

s fo

ur m

ain

cove

rage

s:–

Cov

erag

e A

–lia

bilit

y

–C

over

age

B –

med

ical

pay

men

ts

–C

over

age

C –

unin

sure

d an

d un

derin

sure

d m

otor

ists

co

vera

ge

–C

over

age

D–

phys

ical

dam

age

(dam

age

toyo

ur

4©

2011

Kap

lan,

Inc.

Cov

erag

eD

phys

ical

dam

age

(dam

age

toyo

urau

to)

MN_P&C_CN.indb 156 6/23/2011 8:57:39 AM

157

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Cov

ered

Aut

os

•O

wne

d–

Aut

o, tr

uck,

or v

an li

sted

on

the

decl

arat

ions

pag

e

•N

on-o

wne

d

–A

n au

to d

riven

by

the

insu

red

but n

ot o

wne

d by

the

insu

red

(ren

ted

vehi

cle,

frie

nd’s

car

)

•Te

mpo

rary

subs

titut

e

5©

2011

Kap

lan,

Inc.

•Te

mpo

rary

subs

titut

e–

Aut

o us

ed w

hile

the

owne

d au

to is

inop

erab

le

(doe

sn’t

run,

bei

ng re

paire

d)

Cov

ered

Aut

os

•N

ewly

acq

uire

d–

A re

plac

emen

t veh

icle

will

hav

e th

e sa

me

cove

rage

as

the

vehi

cle

it re

plac

es

–A

dditi

onal

veh

icle

s w

ill h

ave

the

broa

dest

cov

erag

e av

aila

ble

from

any

pol

icy

in th

e ho

useh

old

•Fo

r all

cove

rage

s to

app

ly, t

he in

sure

d m

ust a

sk to

h

thhi

li

dith

i14

df

6©

2011

Kap

lan,

Inc.ha

veth

e ve

hicl

ein

sure

d w

ithin

14da

ys o

fbe

com

ing

the

owne

r

Cov

ered

Aut

os

•N

ewly

acq

uire

d (c

ontin

ued)

–If

a cu

rren

t pol

icy

does

not

pro

vide

phy

sica

l dam

age

cove

rage

for a

ny v

ehic

les

in th

e ho

useh

old,

the

new

ly

acqu

ired

vehi

cle

is e

xten

ded

phys

ical

dam

age

cove

rage

for f

our d

ays

with

a $

500

dedu

ctib

le

•Fo

r cov

erag

e to

app

ly, t

he in

sure

d m

ust a

sk to

ha

veth

eve

hicl

ein

sure

dw

ithin

four

days

of

7©

2011

Kap

lan,

Inc.ha

veth

eve

hicl

ein

sure

dw

ithin

four

days

ofbe

com

ing

the

owne

r

Cov

ered

Aut

os

•Tr

aile

rsth

at a

re h

itche

d to

an

insu

red

vehi

cle

are

cove

red

forl

iabi

lity

are

cove

red

forl

iabi

lity

–P

hysi

cal d

amag

e is

pro

vide

d by

end

orse

men

t

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 157 6/23/2011 8:57:40 AM

158

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Pers

ons

Insu

red

•N

amed

insu

red

•R

esid

ent r

elat

ives

–R

elat

ed b

y bl

ood,

mar

riage

, or a

dopt

ion

•An

y pe

rson

driv

ing

the

insu

red

vehi

cle

with

pe

rmis

sion

9©

2011

Kap

lan,

Inc.

–P

erm

issi

ve u

ser

Exte

nt o

f Cov

erag

e

•Po

licy

insu

res

agai

nst a

ccid

ents

, whi

ch a

re

loss

esth

atoc

curi

na

fixed

time

and

afix

edlo

sses

that

occu

rin

afix

edtim

ean

da

fixed

spac

e

•Po

licy

does

not

insu

re a

gain

st o

ccur

renc

es,

whi

ch a

re lo

sses

that

occ

ur s

low

ly o

ver a

per

iod

of ti

me

(rus

t, w

ear a

nd te

ar)

10©

2011

Kap

lan,

Inc.

•Po

licy

terr

itory

is th

e U

nite

d S

tate

s, it

s te

rrito

ries

and

poss

essi

ons,

and

Can

ada

Cov

erag

es

Cov

erag

e A

: Lia

bilit

y

•Pr

ovid

es c

over

age

for b

odily

inju

ry to

oth

ers

and

prop

erty

dam

age

ofot

hers

aris

ing

outo

fan

and

prop

erty

dam

age

ofot

hers

aris

ing

outo

fan

auto

acc

iden

t for

whi

ch th

e in

sure

d is

lega

lly

liabl

e

•In

clud

es s

uppl

emen

tal p

aym

ents

(BA

ILE

D)

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 158 6/23/2011 8:57:40 AM

159

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Cov

erag

e B

: Med

ical

Pay

men

ts

•In

Min

neso

ta, c

alle

d no

-faul

t or p

erso

nal i

njur

y pr

otec

tion

(PIP

)pr

otec

tion

(PIP

)

•C

over

s m

edic

al e

xpen

ses,

fune

ral e

xpen

ses,

an

d w

age

loss

incu

rred

by th

e in

sure

d re

gard

less

of f

ault

•Pr

ovid

ed if

the

insu

red

is in

jure

d w

hile

occ

upyi

ng

13©

2011

Kap

lan,

Inc.

jpy

gan

aut

omob

ile–

Occ

upyi

ng is

def

ined

as

in, u

pon,

ent

erin

g, o

r al

ight

ing

from

a m

otor

veh

icle

Cov

erag

e B

: Med

ical

Pay

men

ts

•Pr

ovid

ed if

the

insu

red

is in

jure

d as

a p

edes

trian

•St

acki

ng e

ndor

sem

ent

–A

llow

s th

e in

sure

d to

acc

ess

the

med

ical

pay

men

ts

bene

fit o

f oth

er in

sure

d ve

hicl

es

–In

ord

er to

sta

ck th

e po

licie

s, th

e ve

hicl

es m

ust b

e in

sure

d w

ith th

e sa

me

insu

ranc

e co

mpa

ny

14©

2011

Kap

lan,

Inc.

Cov

erag

e B

: Med

ical

Pay

men

ts

•If

the

insu

red

is in

jure

d in

an

auto

acc

iden

t whi

le

onth

ejo

bw

orke

rs’c

ompe

nsat

ion

ispr

imar

yon

the

job,

wor

kers

com

pens

atio

nis

prim

ary

•Th

e cl

aim

ant h

as 6

0 da

ys to

info

rm th

e in

sure

r ab

out r

ehab

ilita

tion

for i

njur

ies

sust

aine

d in

the

acci

dent

–Fa

ilure

to n

otify

the

insu

rer w

ithin

60

days

will

lim

it th

e

15©

2011

Kap

lan,

Inc.

clai

man

t’s b

enef

it to

$1,

000

Cov

erag

e C

: Uni

nsur

ed a

nd U

nder

insu

red

Mot

oris

ts C

over

age

(UM

/UIM

)•

Cov

ers

bodi

ly in

jury

to th

e in

sure

d ca

used

by

a ne

glig

entd

river

who

does

noth

ave

any

liabi

lity

negl

igen

tdriv

erw

hodo

esno

thav

ean

ylia

bilit

yin

sura

nce

or e

noug

hlia

bilit

y in

sura

nce

•U

nins

ured

veh

icle

cov

erag

e in

clud

es h

it-an

d-ru

n ve

hicl

es w

hose

ope

rato

r or o

wne

r can

not b

e id

entif

ied

16©

2011

Kap

lan,

Inc.

–P

hant

om d

river

hits

or f

orce

s th

e in

sure

d of

f the

road

MN_P&C_CN.indb 159 6/23/2011 8:57:41 AM

160

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

•H

ow C

over

age

C w

orks

Cov

erag

e C

: Uni

nsur

ed a

nd U

nder

insu

red

Mot

oris

ts C

over

age

(UM

/UIM

)

–A

fter t

he in

sure

d m

akes

a c

laim

und

er P

IP b

enef

its,

the

insu

red

may

pur

sue

a lia

bilit

y cl

aim

aga

inst

an

at-

faul

t driv

er

–If

the

at-fa

ult d

river

has

inad

equa

te li

abili

ty li

mits

(u

nder

insu

red)

, the

insu

red

mak

es a

cla

im u

nder

UIM

co

vera

gefo

radd

ition

albe

nefit

s

17©

2011

Kap

lan,

Inc.

cove

rage

fora

dditi

onal

bene

fits

•H

ow C

over

age

C w

orks

(con

tinue

d)

Cov

erag

e C

: Uni

nsur

ed a

nd U

nder

insu

red

Mot

oris

ts C

over

age

(UM

/UIM

)

–If

the

at-fa

ult d

river

has

no

liabi

lity

insu

ranc

e (u

nins

ured

), th

e in

sure

d w

ill c

olle

ct fr

om th

e in

sure

d’s

PIP

cov

erag

e th

en m

ake

a cl

aim

und

er U

M c

over

age

for b

odily

inju

ry

–In

eith

er s

ituat

ion,

the

othe

r driv

er m

ust b

e at

faul

t fo

rUM

/UIM

cove

rage

toap

ply

18©

2011

Kap

lan,

Inc.

forU

M/U

IMco

vera

geto

appl

y

•U

M/U

IM re

ject

ion

Cov

erag

e C

: Uni

nsur

ed a

nd U

nder

insu

red

Mot

oris

ts C

over

age

(UM

/UIM

)

–In

cer

tain

sta

tes,

the

insu

red

mus

t sig

n a

reje

ctio

n fo

rm w

hen

cove

rage

is re

duce

d be

low

bod

ily in

jury

lim

its o

r is

com

plet

ely

reje

cted

19©

2011

Kap

lan,

Inc.

Cov

erag

e D

: Phy

sica

l Dam

age

•C

ollis

ion

–C

over

s th

e in

sure

d ve

hicl

e

–Ty

pica

lly w

ritte

n w

ith a

ded

uctib

le

–C

over

s da

mag

e ca

used

by

colli

sion

with

ano

ther

ve

hicl

e or

obj

ect,

and

upse

t of t

he v

ehic

le

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 160 6/23/2011 8:57:41 AM

161

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Cov

erag

e D

: Phy

sica

l Dam

age

•O

ther

than

col

lisio

n–

Ref

erre

d to

as

OTC

or c

ompr

ehen

sive

–C

over

s th

e in

sure

d ve

hicl

e

–Ty

pica

lly w

ritte

n w

ith a

ded

uctib

le

–C

over

s ph

ysic

al d

amag

e no

t cau

sed

by a

col

lisio

n

Fld

dli

fih

ili

dl

bk

21©

2011

Kap

lan,

Inc.

•Fl

ood,

van

dalis

m,f

ire,h

ail,

win

d, g

lass

brea

kage

,th

eft,

expl

osio

n, e

arth

quak

e, fa

lling

obj

ects

, co

ntac

t with

a b

ird o

r ani

mal

Cov

erag

e D

: Phy

sica

l Dam

age

•Tr

ansp

orta

tion

cove

rage

–C

over

s tra

nspo

rtatio

n ex

pens

es w

hen

ther

e is

a

cove

red

loss

to th

e in

sure

d ve

hicl

e

•U

p to

$20

per

day

, with

a $

600

max

imum

per

loss

•B

egin

s 48

hou

rs a

fter a

cov

ered

thef

t, or

24

hour

s af

ter a

ny o

ther

cov

ered

loss

22©

2011

Kap

lan,

Inc.

•To

win

g an

d la

bor

–O

ptio

nal c

over

age

adde

d by

end

orse

men

t tha

t cov

ers

tow

ing

and

road

side

ass

ista

nce

How

Cov

erag

e A

pplie

s

•Li

abili

ty –

follo

ws

the

vehi

cle

–Li

abili

ty is

prim

ary

on th

e ve

hicl

e be

ing

driv

en,

rega

rdle

ss o

f who

is d

rivin

g

–If

the

driv

er is

not

the

owne

r, th

e dr

iver

’s in

sura

nce

prov

ides

exc

ess

cove

rage

23©

2011

Kap

lan,

Inc.

How

Cov

erag

e A

pplie

s

•Pe

rson

al in

jury

pro

tect

ion

(PIP

/no-

faul

t) –

follo

ws

the

occu

pant

ofth

eve

hicl

efo

llow

sth

eoc

cupa

ntof

the

vehi

cle

–If

the

indi

vidu

al h

as a

uto

insu

ranc

e, th

e in

divi

dual

’s

polic

y pa

ys th

e be

nefit

(reg

ardl

ess

of th

e ve

hicl

e th

e in

divi

dual

was

in a

t the

tim

e of

loss

)

–If

the

indi

vidu

al d

oes

not h

ave

auto

insu

ranc

e, th

e po

licy

onth

eve

hicl

eth

ein

divi

dual

was

occu

pyin

g

24©

2011

Kap

lan,

Inc.

polic

yon

the

vehi

cle

the

indi

vidu

alw

asoc

cupy

ing

pays

the

bene

fit

–If

the

indi

vidu

al w

as o

n-th

e-jo

b at

the

time

of th

e ac

cide

nt, w

orke

rs’ c

ompe

nsat

ion

cove

rs th

e lo

ss

MN_P&C_CN.indb 161 6/23/2011 8:57:42 AM

162

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

How

Cov

erag

e A

pplie

s

•U

M/U

IM–

follo

ws

the

vehi

cle

–If

the

insu

red

is in

jure

d by

a n

eglig

ent d

river

who

ca

rrie

s no

insu

ranc

e or

inad

equa

te in

sura

nce,

the

insu

red

draw

s a

UM

/UIM

ben

efit

from

the

vehi

cle

the

insu

red

was

occ

upyi

ng a

t the

tim

e of

the

loss

•Ph

ysic

al d

amag

e–

follo

ws

the

vehi

cle

25©

2011

Kap

lan,

Inc.

–In

the

even

t of a

loss

, the

phy

sica

l dam

age

cove

rage

on

the

vehi

cle

invo

lved

han

dles

repa

ir co

sts,

eve

n if

the

vehi

cle

is d

riven

by

som

eone

oth

er th

an th

e in

sure

d

Sect

ions

of c

over

age:

For w

hom

:Fo

llow

s th

e:

How

Cov

erag

e A

pplie

s

g

Liab

ility

Oth

ers

Vehi

cle

Per

sona

l inj

ury

prot

ectio

n (P

IP)

Insu

red

Per

son

UM

/UIM

Insu

red

Vehi

cle

26©

2011

Kap

lan,

Inc.

Phy

sica

l dam

age

Insu

red

Vehi

cle

How

Cov

erag

e A

pplie

s

•Si

ngle

car

loss

with

inju

ries

–D

iane

driv

es o

ff th

e ro

ad a

nd c

ollid

es w

ith a

tree

–D

amag

e to

her

veh

icle

wou

ld b

e ha

ndle

d by

her

po

licy’

s ph

ysic

al d

amag

e co

vera

ge (C

over

age

D)

–Th

e fir

st $

20,0

00 o

f Dia

ne’s

med

ical

bill

s w

ould

be

hand

led

by h

er p

olic

y’s

pers

onal

inju

ry p

rote

ctio

n (C

B/

flt)

27©

2011

Kap

lan,

Inc.

cove

rage

(Cov

erag

eB

/no-

faul

t)

How

Cov

erag

e A

pplie

s

•Tw

o ca

r los

s w

ith in

jurie

s–

Bill

is h

it fro

m b

ehin

d w

hile

sto

pped

at a

ligh

t. Th

e ot

her d

river

is li

able

.

–D

amag

e to

his

veh

icle

wou

ld b

e ha

ndle

d by

the

othe

r dr

iver

’s li

abili

ty c

over

age

(Cov

erag

e A

)

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 162 6/23/2011 8:57:42 AM

163

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

How

Cov

erag

e A

pplie

s

•Tw

o ca

r los

s w

ith in

jurie

s (c

ontin

ued)

–Th

e fir

st $

20,0

00 o

f Bill

’s m

edic

al b

ills

wou

ld b

e ha

ndle

d by

his

pol

icy'

s pe

rson

al in

jury

pro

tect

ion

cove

rage

(cov

erag

e B

/no-

faul

t)

–M

edic

al e

xpen

ses

exce

edin

g th

at $

20,0

00 b

enef

it w

ould

be

hand

led

by th

e ot

her d

river

’s lia

bilit

y co

vera

ge(C

over

age

A)

29©

2011

Kap

lan,

Inc.

cove

rage

(Cov

erag

eA

)

–If

the

negl

igen

t driv

er is

und

erin

sure

d, B

ill m

ay tu

rn to

hi

s ow

n po

licy

for a

Cov

erag

e C

und

erin

sure

d m

otor

ist c

laim

Excl

usio

ns

Excl

usio

ns

•Bu

sine

ss u

se o

f the

veh

icle

–Li

mite

d us

e of

the

insu

red

vehi

cle

for b

usin

ess

is

acce

ptab

le; p

olic

y w

ill h

ave

a hi

gher

pre

miu

m

•U

se o

f a li

very

veh

icle

–Ta

xi, l

imou

sine

, del

iver

y ve

hicl

e

Exc

lusi

ondo

esno

tapp

lyto

ash

ared

expe

nse

31©

2011

Kap

lan,

Inc.

–E

xclu

sion

does

nota

pply

toa

shar

edex

pens

eca

rpoo

l

•Ve

hicl

es w

ith le

ss th

an fo

ur w

heel

s–

Mot

orcy

cles

Excl

usio

ns

•Ve

hicl

es d

esig

ned

prim

arily

for u

se o

ff of

pub

lic

road

sro

ads

–G

olf c

arts

, dun

e bu

ggie

s

•Ve

hicl

es th

at a

re fu

rnis

hed

or a

vaila

ble

for t

he

regu

lar u

se o

f the

insu

red

–C

ompa

nyca

r

32©

2011

Kap

lan,

Inc.

Com

pany

car

•Au

tom

obile

s us

ed a

s a

resi

denc

e

•Fa

rm m

achi

nery

MN_P&C_CN.indb 163 6/23/2011 8:57:43 AM

164

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Excl

usio

ns

•W

ar a

nd n

ucle

ar m

isha

ps

•Ph

ysic

al d

amag

e ca

used

by

rust

, wea

r and

tear

, fre

ezin

g, ti

re d

amag

e, a

nd ro

ad d

amag

e

•So

und

repr

oduc

tion

equi

pmen

t not

per

man

ently

in

stal

led

in th

e au

toU

nm

ount

edsp

eake

rsci

tizen

band

radi

os

33©

2011

Kap

lan,

Inc.

–U

n-m

ount

edsp

eake

rs,c

itize

nba

ndra

dios

Excl

usio

ns

•D

amag

e to

pro

perty

ow

ned

by o

r bei

ng

trans

porte

dby

the

insu

red

trans

porte

dby

the

insu

red

•In

jury

or p

rope

rty d

amag

e ca

used

inte

ntio

nally

by

the

insu

red

•N

o co

vera

ge fo

r bai

lees

Ifth

ein

sure

dve

hicl

eis

dam

aged

whi

lein

the

34©

2011

Kap

lan,

Inc.

–If

the

insu

red

vehi

cle

isda

mag

edw

hile

inth

epo

sses

sion

of a

val

et p

arki

ng a

ttend

ant,

the

atte

ndan

t’s b

aile

e po

licy

is p

rimar

y

Insu

red’

s D

utie

s A

fter a

Los

s

Insu

red’

s D

utie

s A

fter a

Los

s

•Pr

ompt

ly n

otify

the

insu

rer o

f how

, whe

n, a

nd

whe

reth

elo

ssoc

curr

edw

here

the

loss

occu

rred

•C

oope

rate

with

the

insu

rer

•Im

med

iate

ly fo

rwar

d no

tice

of le

gal a

ctio

n to

the

insu

rer

Law

suit

agai

nstt

hein

sure

d

36©

2011

Kap

lan,

Inc.

–La

wsu

itag

ains

tthe

insu

red

•Su

bmit

to a

phy

sica

l exa

m–

Aut

o in

jury

cla

ims

MN_P&C_CN.indb 164 6/23/2011 8:57:43 AM

165

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Insu

red’

s D

utie

s A

fter a

Los

s

•Al

low

the

insu

rer t

o ob

tain

med

ical

reco

rds

At

ij

li

–A

uto

inju

ry c

laim

s

•An

swer

que

stio

ns u

nder

oat

h

•Su

bmit

a si

gned

and

sw

orn

proo

f of l

oss

stat

emen

t

Idi

tl

tifth

liif

thhi

li

37©

2011

Kap

lan,

Inc.

•Im

med

iate

ly n

otify

the

polic

eif

the

vehi

cle

isst

olen

•Pe

rmit

insp

ectio

n an

d ap

prai

sal o

f the

aut

o be

fore

repa

ir

Cla

im S

ettle

men

t Opt

ions

Cla

im S

ettle

men

t Opt

ions

•Au

to c

laim

s ar

e se

ttled

usi

ng a

ctua

l cas

h va

lue

(ACV)

(ACV)

•R

epai

rthe

veh

icle

–Th

e re

pair

cost

is le

ss th

an th

e va

lue

of th

e ve

hicl

e

–Th

e in

sure

r pay

s al

l cos

ts n

eces

sary

to re

pair

the

dam

a ge

to th

e ve

hicl

e

39©

2011

Kap

lan,

Inc.

g

Cla

im S

ettle

men

t Opt

ions

•To

talt

he v

ehic

le–

The

repa

ir co

st e

xcee

ds th

e va

lue

of th

e ve

hicl

e

–Th

e in

sure

d is

pai

d th

e ac

tual

cas

h va

lue

of th

e ve

hicl

e, a

nd th

e in

sure

r bec

omes

the

new

ow

ner o

f th

e ca

r thr

ough

the

right

of s

alva

ge

•An

y di

sagr

eem

ent o

ver t

he v

alue

of t

he v

ehic

le

40©

2011

Kap

lan,

Inc.

will

be re

solv

ed u

sing

the

appr

aisa

l pro

visi

on

MN_P&C_CN.indb 165 6/23/2011 8:57:44 AM

166

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Min

neso

ta N

o-Fa

ult L

aw

No-

Faul

t Law

•Th

e N

o-Fa

ult A

ct w

as e

nact

ed in

197

5

•R

emov

es fa

ult a

s th

e ba

sis

for c

ompe

nsat

ion

for m

edic

al a

nd w

age

loss

ben

efits

•Pr

ovid

es im

med

iate

ent

itlem

ent o

f ben

efits

w

ithou

t the

nee

d fo

r liti

gatio

n

•Li

mits

the

para

met

ers

whe

reby

a n

on-n

eglig

ent

42©

2011

Kap

lan,

Inc.

py

gg

pers

on c

ould

brin

g a

clai

m o

r law

suit

agai

nst t

he

at-fa

ult d

river

(tor

t thr

esho

lds)

No-

Faul

t Law

•R

equi

res

vehi

cle

owne

rs to

insu

re th

e ve

hicl

es

they

own

and

oper

ate

with

certa

inm

anda

tory

they

own

and

oper

ate

with

certa

inm

anda

tory

cove

rage

s

43©

2011

Kap

lan,

Inc.

No-

Faul

t Law

: M

inim

um In

sura

nce

Req

uire

men

ts•

Cov

erag

e A

–Li

abili

tyS

litli

itf

tlt3

0/60

/10

–S

plit

limit

of a

tlea

st30

/60/

10;o

r–

Com

bine

d si

ngle

lim

it of

at l

east

$70

,000

–M

ust a

lso

prov

ide

cove

rage

of a

t lea

st $

35,0

00 fo

r da

mag

e to

a re

ntal

car

•C

over

age

B –

pers

onal

inju

ry p

rote

ctio

n (P

IP)

44©

2011

Kap

lan,

Inc.

–C

over

age

for b

asic

eco

nom

ic lo

ss b

enef

its d

ue to

in

jurie

s su

stai

ned

in a

n au

to a

ccid

ent

–P

aym

ent o

f cla

ims

mus

t be

mad

e w

ithin

30

days

MN_P&C_CN.indb 166 6/23/2011 8:57:44 AM

167

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

No-

Faul

t Law

: M

inim

um In

sura

nce

Req

uire

men

ts•

Cov

erag

e B

–pe

rson

al in

jury

pro

tect

ion

(con

tinue

d)(c

ontin

ued)

–M

ust h

ave

a to

tal b

enef

it of

at l

east

$40

,000

•$2

0,00

0 fo

r med

ical

exp

ense

s an

d re

habi

litat

ion

•$2

0,00

0 fo

r oth

er e

xpen

ses

–Fu

nera

l exp

ense

s: $

2,00

0 pe

r per

son

45©

2011

Kap

lan,

Inc.

–W

age

loss

: 85%

of g

ross

wag

es u

p to

$25

0/w

eek

–S

urvi

vors

loss

: $20

0/w

eek

–E

ssen

tial o

r rep

lace

men

t ser

vice

s: $

200/

wee

k w

ith a

se

ven-

day

elim

inat

ion

perio

d

No-

Faul

t Law

: M

inim

um In

sura

nce

Req

uire

men

ts•

Cov

erag

e C

–un

insu

red

and

unde

rinsu

red

mot

oris

ts(U

M/U

IM)

mot

oris

ts(U

M/U

IM)

–M

ust h

ave

a be

nefit

of a

t lea

st 2

5/50

•C

over

age

D –

phys

ical

dam

age

–Th

e ve

hicl

e ow

ner i

s no

t leg

ally

obl

igat

ed to

car

ry

phys

ical

dam

age

cove

rage

on

the

vehi

cle

46©

2011

Kap

lan,

Inc.

py

gg

No-

Faul

t Law

:A

ssig

ned

Cla

ims

Bur

eau

•Pr

ovid

es P

IP b

enef

its fo

r tho

se w

ho d

o no

t hav

e au

toin

sura

nce

auto

insu

ranc

e

•Th

e as

sign

ed c

laim

s bu

reau

han

dles

cas

es

whe

re:

–Th

e or

igin

al in

sure

r is

unab

le to

pay

–A

nin

sura

nce

com

pany

cann

otbe

iden

tifie

d(e

ghi

t-

47©

2011

Kap

lan,

Inc.

An

insu

ranc

eco

mpa

nyca

nnot

beid

entif

ied

(e.g

.,hi

tan

d-ru

n dr

iver

)

No-

Faul

t Law

:A

ssig

ned

Cla

ims

Bur

eau

•Al

l ins

urer

s lic

ense

d to

sel

l aut

o in

sura

nce

in

Min

neso

taar

ere

quire

dto

parti

cipa

teM

inne

sota

are

requ

ired

topa

rtici

pate

•C

ases

are

ass

igne

d ba

sed

on m

arke

t sha

re–

For e

xam

ple,

if th

e in

sure

r sel

ls 3

% o

f all

auto

pol

icie

s is

sued

in M

inne

sota

, the

insu

rer i

s as

sign

ed 3

% o

f th

ese

case

s

48©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 167 6/23/2011 8:57:45 AM

168

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

No-

Faul

t Law

:A

ssig

ned

Cla

ims

Bur

eau

•O

nce

a ca

se h

as b

een

assi

gned

to a

n in

sure

r, th

ein

sure

ris

lega

llyob

ligat

edto

prov

ide

the

the

insu

reri

sle

gally

oblig

ated

topr

ovid

eth

ecl

aim

ant t

he s

tate

-man

date

d P

IP b

enef

it

•Be

nefit

s ar

e ex

clud

ed fo

r tho

se w

ho a

re il

lega

lly

unin

sure

d. H

owev

er, m

inor

chi

ldre

n in

the

hous

ehol

d of

an

illega

lly u

nins

ured

mot

oris

t are

tit

ld

tb

fit

49©

2011

Kap

lan,

Inc.

entit

led

to a

ben

efit

•C

laim

ant m

ust n

otify

the

assi

gned

cla

ims

bure

au

with

insi

x m

onth

s of

the

acci

dent

No-

Faul

t Law

:To

rt T

hres

hold

s•

Inju

red

pers

ons

may

sue

an

at-fa

ult d

river

onl

y if

one

ofth

efo

llow

ing

thre

shol

dsis

met

:on

eof

the

follo

win

gth

resh

olds

ism

et:

–C

laim

ant’s

med

ical

exp

ense

s ex

ceed

$4,

000

(not

in

clud

ing

diag

nost

ic te

stin

g)

–A

ccid

ent r

esul

ts in

a p

erm

anen

t dis

figur

emen

t or

perm

anen

t inj

ury

50©

2011

Kap

lan,

Inc.

–C

laim

ant i

s di

sabl

ed fo

r ove

r 60

days

–A

ccid

ent r

esul

ts in

a d

eath

No-

Faul

t Law

:O

ther

Req

uire

men

ts•

Com

puls

ory

–A

uto

insu

ranc

e is

requ

ired

by la

w in

Min

neso

ta

–Th

e ve

hicl

e ow

ner c

an o

btai

n an

aut

o in

sura

nce

polic

y or

sel

f-ins

ure

–O

ff-ro

ad v

ehic

les

are

not r

equi

red

to c

arry

insu

ranc

e

–M

otor

cycl

esm

usto

nly

carr

ylia

bilit

yin

sura

nce

51©

2011

Kap

lan,

Inc.

Mot

orcy

cles

mus

tonl

yca

rry

liabi

lity

insu

ranc

e

No-

Faul

t Law

:O

ther

Req

uire

men

ts•

Proo

f of i

nsur

ance

is re

quire

d

•W

hen

driv

ing

in o

ther

sta

tes,

eith

er th

e in

sure

d’s

own

polic

y lim

its a

pply

or t

he o

ther

sta

te’s

m

inim

um p

olic

y lim

its a

pply

, whi

chev

er is

hig

her

52©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 168 6/23/2011 8:57:46 AM

169

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

No-

Faul

t Law

:O

ther

Req

uire

men

ts•

Polic

yhol

der m

ay n

ot a

dd m

ultip

le p

olic

ies

toge

ther

unle

sspo

licyh

olde

rele

cted

that

optio

nto

geth

erun

less

polic

yhol

dere

lect

edth

atop

tion

–In

sure

r mus

t not

ify p

olic

yhol

der o

f tha

t rig

ht

•Pr

iorit

y of

pol

icie

s fo

r pay

men

t of n

o-fa

ult

bene

fits:

–U

sing

vehi

cle

forb

usin

ess

53©

2011

Kap

lan,

Inc.

Usi

ngve

hicl

efo

rbus

ines

s

•D

river

or o

ccup

ant c

olle

cts

from

veh

icle

pol

icy.

If

vehi

cle

is u

nins

ured

, inj

ured

par

ty c

olle

cts

from

ow

n po

licy.

No-

Faul

t Law

:O

ther

Req

uire

men

ts•

Prio

rity

of p

olic

ies

for p

aym

ent o

f no-

faul

t be

nefit

s(c

ontin

ued)

:be

nefit

s(c

ontin

ued)

:–

Em

ploy

er p

rovi

ded

vehi

cle

•E

mpl

oyee

(as

driv

er o

r occ

upan

t) co

llect

s fro

m

vehi

cle

polic

y. If

veh

icle

is u

nins

ured

, inj

ured

par

ty

colle

cts

from

ow

n po

licy.

54©

2011

Kap

lan,

Inc.

–N

on-d

river

or n

on-o

ccup

ant

•In

jure

d pa

rty c

olle

cts

from

veh

icle

pol

icy.

If v

ehic

le

is u

nins

ured

, inj

ured

par

ty c

olle

cts

from

ow

n po

licy.

Can

cella

tion

and

Non

rene

wal

Can

cella

tion

and

Non

rene

wal

•Th

e st

anda

rd e

xper

ienc

e pe

riod

in M

inne

sota

is

thre

eye

ars

Any

clai

ms

orlo

sses

that

occu

rred

thre

eye

ars.

Any

clai

ms

orlo

sses

that

occu

rred

befo

re th

e ex

perie

nce

perio

d ca

nnot

be

used

by

the

insu

rer w

hen

mak

ing

an u

nder

writ

ing

deci

sion

.

•Al

l ter

min

atio

n no

tices

mus

t inc

lude

the

reas

on

ft

iti

thil

bilit

f

56©

2011

Kap

lan,

Inc.

fort

erm

inat

ion,

the

avai

labi

lity

of c

over

age

thro

ugh

the

Min

neso

ta A

uto

Insu

ranc

e P

lan,

and

th

e in

sure

d’s

right

to c

ompl

ain

to th

e co

mm

issi

oner

MN_P&C_CN.indb 169 6/23/2011 8:57:46 AM

170

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Can

cella

tion

and

Non

rene

wal

•C

over

age

rem

ains

in fo

rce

until

the

effe

ctiv

e da

tean

dtim

eof

polic

yte

rmin

atio

nda

tean

dtim

eof

polic

yte

rmin

atio

n

•If

the

insu

rer i

mpr

oper

ly c

ance

ls c

over

age,

the

Com

mer

ce D

epar

tmen

t can

issu

e fin

es

•Pr

oof o

f mai

ling

the

notic

e to

the

insu

red’

s ad

dres

s on

the

polic

y is

suf

ficie

nt p

roof

that

57©

2011

Kap

lan,

Inc.

py

pno

tice

was

pro

vide

d

Can

cella

tion

•C

ance

llatio

n du

e to

non

-pay

men

t of p

rem

ium

re

quire

s10

day

adva

nce

writ

ten

notic

eto

the

requ

ires

10-d

ayad

vanc

ew

ritte

nno

tice

toth

ein

sure

d

•If

the

polic

y ha

s be

en in

forc

e fo

r les

s th

an 6

0da

ys:

–10

-day

adv

ance

writ

ten

notic

e is

requ

ired

58©

2011

Kap

lan,

Inc.

–Th

e in

sure

r can

can

cel f

or a

ny re

ason

Can

cella

tion

•If

the

polic

y ha

s be

en in

forc

e fo

r 60

days

or

long

er:

long

er:

–30

-day

adv

ance

writ

ten

notic

e is

requ

ired

–Th

e in

sure

r can

onl

y ca

ncel

for s

peci

fic re

ason

s

•Th

e in

sure

d ha

s su

bmitt

ed a

frau

dule

nt c

laim

•M

ater

ialm

isre

pres

enta

tion

was

mad

eon

the

59©

2011

Kap

lan,

Inc.M

ater

ialm

isre

pres

enta

tion

was

mad

eon

the

appl

icat

ion

Can

cella

tion

–Th

e in

sure

r can

onl

y ca

ncel

for s

peci

fic re

ason

s (c

ontin

ued)

(con

tinue

d)

•Th

e in

sure

d’s

driv

er’s

lice

nse

has

been

sus

pend

ed

or re

voke

d in

the

past

36

mon

ths

•Th

e ve

hicl

e ha

s be

com

e m

echa

nica

lly d

efec

tive

•Th

e ve

hicl

e is

use

d in

the

busi

ness

of t

rans

porti

ng

flam

mab

leor

expl

osiv

em

ater

ials

60©

2011

Kap

lan,

Inc.fla

mm

able

orex

plos

ive

mat

eria

ls

•Th

e in

sure

d ha

s be

com

e su

bjec

t to

hear

t atta

cks

or e

pile

ptic

sei

zure

s (u

nles

s de

term

ined

by

a do

ctor

to b

e un

der c

ontro

l)

MN_P&C_CN.indb 170 6/23/2011 8:57:47 AM

171

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Can

cella

tion

–Th

e in

sure

r can

onl

y ca

ncel

for s

peci

fic re

ason

s (c

ontin

ued)

(con

tinue

d)

•Th

e in

sure

d fa

iled

to d

iscl

ose

any

acci

dent

s or

vi

olat

ions

with

in th

e pr

eced

ing

36 m

onth

s

•Th

e ve

hicl

e ha

s be

en s

ubst

antia

lly c

hang

ed in

type

or

con

ditio

n, th

eref

ore

incr

easi

ng th

e ris

k (e

.g.,

drag

ster

, spo

rts c

ar)

61©

2011

Kap

lan,

Inc.

•Th

e in

sure

d fa

ils to

coo

pera

te w

ith th

e in

sure

r, no

tify

the

insu

rer o

f a lo

ss, o

r not

ify th

e in

sure

r of a

la

wsu

it ag

ains

t the

insu

red

Non

rene

wal

•60

-day

adv

ance

writ

ten

notic

e is

requ

ired

•Th

e in

sure

r may

non

rene

w th

e po

licy

for t

he

sam

e re

ason

s as

can

cella

tion

•Th

e in

sure

r may

als

o no

nren

ew if

the

insu

red

equa

ls o

r exc

eeds

the

num

ber o

f poi

nts

allo

wed

fo

r tra

ffic

viol

atio

ns a

nd c

harg

eabl

e ac

cide

nts

62©

2011

Kap

lan,

Inc.

g(th

e in

sure

d is

at f

ault)

dur

ing

the

expe

rienc

e pe

riod

Non

rene

wal

–P

oint

s th

at m

ust b

e ac

cum

ulat

ed b

efor

e no

nren

ewal

Ohi

li

hh

ld2

it

•O

ne v

ehic

lein

hous

ehol

d–

2 po

ints

•Tw

o ve

hicl

es in

hou

seho

ld –

3 po

ints

•Th

ree

vehi

cles

in h

ouse

hold

–3½

poi

nts

•Fo

ur o

r mor

e ve

hicl

es in

hou

seho

ld –

4 po

ints

Hou

seho

ldve

hicl

esm

ustb

ein

sure

dby

the

sam

e

63©

2011

Kap

lan,

Inc.

–H

ouse

hold

vehi

cles

mus

tbe

insu

red

byth

esa

me

insu

rer

Non

rene

wal

–P

oint

sch

edul

e fo

r cha

rgea

ble

acci

dent

s an

d vi

olat

ions

viol

atio

ns

4 po

ints

•H

it-an

d-ru

n

•Fe

lony

with

an

auto

•A

uto

thef

t

64©

2011

Kap

lan,

Inc.

•S

uspe

nsio

n or

revo

catio

n of

a d

river

’s li

cens

e

•D

WI/i

mpl

ied

cons

ent

•D

rivin

g af

ter s

uspe

nsio

n or

revo

catio

n

MN_P&C_CN.indb 171 6/23/2011 8:57:47 AM

172

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Non

rene

wal

–P

oint

sch

edul

e fo

r cha

rgea

ble

acci

dent

s an

d vi

olat

ions

viol

atio

ns

2½ p

oint

s

•R

eckl

ess

driv

ing

cita

tion

1½ p

oint

s

•C

arel

ess

driv

ing

cita

tion

65©

2011

Kap

lan,

Inc.

Non

rene

wal

–P

oint

sch

edul

e fo

r cha

rgea

ble

acci

dent

s an

d vi

olat

ions

viol

atio

ns

1 po

int

•A

ccid

ent o

ver $

500

–In

sure

d is

at f

ault

and

insu

rer p

ays

over

$50

0 fro

m

liabi

lity

and/

or c

ollis

ion

cove

rage

•O

pen

bottl

evi

olat

ion

66©

2011

Kap

lan,

Inc.

•O

pen

bottl

evi

olat

ion

¾ p

oint

•S

econ

d an

d su

bseq

uent

spe

edin

g tic

kets

Non

rene

wal

–P

oint

sch

edul

e fo

r cha

rgea

ble

acci

dent

s an

d vi

olat

ions

viol

atio

ns

½ p

oint

•Fi

rst s

peed

ing

ticke

t

•A

ccid

ent u

nder

$50

0–

Insu

red

is a

t fau

lt an

d in

sure

r pay

s le

ss th

an $

500

from

li

bilit

d/lli

i

67©

2011

Kap

lan,

Inc.

liabi

lity

and/

or c

ollis

ion

cove

rage

•O

ther

mov

ing

viol

atio

ns

Non

rene

wal

•N

onre

new

al o

f phy

sica

l dam

age

cove

rage

Thi

dh

th

il

i–

The

insu

red

has

two

or m

ore

com

preh

ensi

ve c

laim

sdu

ring

the

mos

t rec

ent 1

2 m

onth

s

–Th

e in

sure

d ha

s th

ree

or m

ore

com

preh

ensi

ve c

laim

s du

ring

the

expe

rienc

e pe

riod

–Th

e in

sure

d ha

s a

tota

l of t

hree

cla

im p

aym

ents

for a

si

ngle

veh

icle

insu

red

68©

2011

Kap

lan,

Inc.

–If

mul

tiple

veh

icle

s ar

e in

sure

d, fo

ur c

laim

pay

men

ts

for a

ny c

ombi

natio

n of

com

preh

ensi

ve o

r col

lisio

n lo

sses

dur

ing

the

expe

rienc

e pe

riod

MN_P&C_CN.indb 172 6/23/2011 8:57:48 AM

173

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Surc

harg

e D

iscl

osur

e

•In

sure

rs m

ay a

dd a

sur

char

ge to

the

prem

ium

if

the

insu

red

mak

esa

clai

mor

rece

ives

atra

ffic

the

insu

red

mak

esa

clai

mor

rece

ives

atra

ffic

viol

atio

n

•In

sure

rs a

re re

quire

d to

pro

vide

the

polic

yhol

der

with

a s

urch

arge

dis

clos

ure

stat

emen

t prio

r to

acce

ptin

g th

e in

itial

pre

miu

m p

aym

ent

69©

2011

Kap

lan,

Inc.

Surc

harg

e D

iscl

osur

e

•O

nce

a po

licy

is in

effe

ct, a

n in

sura

nce

com

pany

ca

nnot

chan

gea

surc

harg

epl

anw

ithou

tfirs

tca

nnot

chan

gea

surc

harg

epl

anw

ithou

tfirs

tm

ailin

g or

del

iver

ing

a co

py o

f the

new

di

sclo

sure

sta

tem

ent t

o th

e po

licyh

olde

r

•Th

e di

sclo

sure

sta

tem

ent m

ust d

ispl

ay tw

o ex

ampl

es o

f how

the

surc

harg

e pl

an w

orks

and

l

ih

thi

ll

th

70©

2011

Kap

lan,

Inc.

expl

ain

how

the

insu

rer c

alcu

late

s su

rcha

rges

Min

neso

ta A

uto

Insu

ranc

e Pl

an

(MA

IP)

Min

neso

ta A

uto

Insu

ranc

e Pl

an

•Th

e pu

rpos

e is

to m

ake

stat

e-m

anda

ted

auto

in

sura

nce

cove

rage

sav

aila

ble

toin

divi

dual

sin

sura

nce

cove

rage

sav

aila

ble

toin

divi

dual

sw

ho a

re u

nabl

e to

obt

ain

them

thro

ugh

ordi

nary

m

eans

•Al

l ins

uran

ce c

ompa

nies

offe

ring

auto

cov

erag

e in

Min

neso

ta a

re le

gally

obl

igat

ed to

par

ticip

ate

ith

i

72©

2011

Kap

lan,

Inc.

inth

is p

rogr

am

MN_P&C_CN.indb 173 6/23/2011 8:57:48 AM

174

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Min

neso

ta A

uto

Insu

ranc

e Pl

an

•Pr

oduc

ers

mus

t:–

Offe

r to

plac

e co

vera

ge th

roug

h th

e pl

an fo

r any

qu

alifi

ed a

pplic

ant w

ho is

inel

igib

le o

r una

ccep

tabl

e fo

r cov

erag

e th

roug

h th

e pr

oduc

er’s

com

pany

(s)

–Fo

rwar

d al

l app

licat

ions

and

any

dep

osit

prem

ium

s to

th

e pl

an

73©

2011

Kap

lan,

Inc.

Min

neso

ta A

uto

Insu

ranc

e Pl

an

•In

sure

rs m

ay n

ot in

clud

e lo

sses

incu

rred

by ri

sks

insu

red

thro

ugh

the

plan

inde

term

inin

gth

elo

ssin

sure

dth

roug

hth

epl

anin

dete

rmin

ing

the

loss

ratio

of a

ny o

f its

pro

duce

rs

•Pr

oduc

ers

are

entit

led

to a

com

mis

sion

for r

isks

pl

aced

with

the

prod

ucer

74©

2011

Kap

lan,

Inc.

MA

IP C

over

ages

•Bo

dily

inju

ry a

nd p

rope

rty d

amag

e lia

bilit

y w

ith

min

imum

limits

of30

/60/

10m

inim

umlim

itsof

30/6

0/10

–Li

mits

up

to 5

0/10

0/25

are

ava

ilabl

e, w

ith h

ighe

r lim

its

if re

com

men

ded

by th

e pl

an

•Ba

sic

econ

omic

loss

ben

efits

as

requ

ired

by th

e M

inne

sota

no-

faul

t law

(per

sona

l inj

ury

i)

75©

2011

Kap

lan,

Inc.

prot

ectio

n)

MA

IP C

over

ages

•U

nins

ured

and

und

erin

sure

d m

otor

ist c

over

age

with

min

imum

limits

of25

/50

with

min

imum

limits

of25

/50

•Ph

ysic

al d

amag

e co

vera

ge s

ubje

ct to

ded

uctib

le

optio

ns

76©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 174 6/23/2011 8:57:49 AM

175

Less

on T

hirt

een

Pers

onal

Aut

o In

sura

nce

Elig

ibili

ty fo

r Cov

erag

e

•A

qual

ified

app

lican

t mus

t hav

e be

en re

ject

ed,

canc

elle

dor

nonr

enew

edby

anin

sure

rin

the

canc

elle

d,or

nonr

enew

edby

anin

sure

rin

the

volu

ntar

y m

arke

t

•C

over

age

thro

ugh

the

plan

will

term

inat

e on

ce

an in

sure

d is

offe

red

equi

vale

nt c

over

age

at a

lo

wer

rate

in th

e vo

lunt

ary

mar

ket

77©

2011

Kap

lan,

Inc.

Elig

ibili

ty fo

r Cov

erag

e

•At

leas

t ann

ually

, ins

urer

s w

ho h

ave

plac

ed

appl

ican

tsw

ithth

epl

ansh

allr

evie

wth

ose

appl

ican

tsw

ithth

epl

ansh

allr

evie

wth

ose

appl

ican

ts a

nd d

eter

min

e if

they

are

acc

epta

ble

for v

olun

tary

insu

ranc

e at

a lo

wer

rate

. If

acce

ptab

le, t

he in

sure

r sha

ll m

ake

an o

ffer t

o in

sure

the

appl

ican

t und

er v

olun

tary

cov

erag

e.

78©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 175 6/23/2011 8:57:50 AM

MN_P&C_CN.indb 176 6/23/2011 8:57:50 AM

Lesson FourteenUmbrella insurance and Errors and omissions insurance

MN_P&C_CN.indb 177 6/23/2011 8:57:50 AM

178

Less

on F

ourt

een

Um

brel

la In

sura

nce

and

Erro

rs a

nd O

mis

sion

s In

sura

nce

Less

onFo

urte

enLe

sson

Four

teen

Um

brel

la In

sura

nce

and

Erro

rs

and

Om

issi

ons

Insu

ranc

eU

mbr

ella

Lia

bilit

y Po

licy

Um

brel

la L

iabi

lity

Polic

y

•Pr

ovid

es h

igh

limits

of l

iabi

lity

prot

ectio

n to

pr

otec

taga

inst

cata

stro

phic

loss

esC

over

age

prot

ecta

gain

stca

tast

roph

iclo

sses

.Cov

erag

elim

its ty

pica

lly ra

nge

from

$1

milli

on to

$10

m

illion

•Av

aila

ble

for p

erso

nal a

nd c

omm

erci

al li

abilit

y ex

posu

res

3©

2011

Kap

lan,

Inc.

Um

brel

la L

iabi

lity

Polic

y

•Pa

ys fo

r bod

ily in

jury

, pro

perty

dam

age,

or

pers

onal

inju

ryfo

rwhi

chth

ein

sure

dis

liabl

epe

rson

alin

jury

forw

hich

the

insu

red

islia

ble

•Su

pple

men

tal p

aym

ents

are

pro

vide

d in

add

ition

to

the

polic

y lim

its

•Pr

ovid

es a

dditi

onal

liab

ility

insu

ranc

e ov

er a

nd

abov

e th

e co

vera

gepr

ovid

ed b

y un

derly

ing

4©

2011

Kap

lan,

Inc.

gp

yy

glia

bilit

y in

sura

nce

and

cove

rs s

ome

loss

es

excl

uded

by

the

unde

rlyin

g lia

bilit

y in

sura

nce

MN_P&C_CN.indb 178 6/23/2011 8:57:50 AM

179

Less

on F

ourt

een

Um

brel

la In

sura

nce

and

Erro

rs a

nd O

mis

sion

s In

sura

nce

Um

brel

la L

iabi

lity

Polic

y

•Ba

sis

of c

over

age

–Ex

cess

–w

hen

the

loss

is c

over

ed b

y th

e un

derly

ing

polic

y, it

pay

s fir

st a

nd th

e um

brel

la p

olic

y pr

ovid

es

exce

ss c

over

age

–Pr

imar

y–

whe

n th

e lo

ss is

not

cov

ered

by

the

unde

rlyin

g po

licy,

but

is c

over

ed b

y th

e um

brel

la

polic

y,th

eum

brel

lapr

ovid

espr

imar

yco

vera

ge

5©

2011

Kap

lan,

Inc.

polic

y,th

eum

brel

lapr

ovid

espr

imar

yco

vera

ge

•W

hen

the

umbr

ella

pol

icy

pays

for a

loss

not

co

vere

d by

und

erly

ing

insu

ranc

e, th

e in

sure

d m

ust

pay

a se

lf-in

sure

d re

tent

ion

(SIR

)

Um

brel

la L

iabi

lity

Polic

y

•C

ondi

tions

–Th

e in

sure

d m

ust d

iscl

ose

any

unde

rlyin

g lia

bilit

y in

sura

nce

befo

re a

pol

icy

will

be

issu

ed

–Th

is p

olic

y is

des

igne

d pr

imar

ily to

pro

vide

exc

ess

cove

rage

, so

the

insu

rer w

ill re

quire

a s

ubst

antia

l am

ount

of u

nder

lyin

g co

vera

ge b

efor

e is

suin

g an

um

brel

lapo

licy

6©

2011

Kap

lan,

Inc.

umbr

ella

polic

y

Um

brel

la L

iabi

lity

Polic

y

•C

ondi

tions

–M

aint

aini

ng th

e un

derly

ing

polic

ies

is a

con

ditio

n of

co

vera

ge

–If

an u

nder

lyin

g po

licy

laps

es, i

nsur

ers

will

onl

y pa

y th

e am

ount

they

wou

ld h

ave

paid

had

the

unde

rlyin

g po

licy

been

in fo

rce

7©

2011

Kap

lan,

Inc.

Erro

rs a

nd O

mis

sion

s (E

&O

) In

sura

nce

MN_P&C_CN.indb 179 6/23/2011 8:57:51 AM

180

Less

on F

ourt

een

Um

brel

la In

sura

nce

and

Erro

rs a

nd O

mis

sion

s In

sura

nce

Erro

rs a

nd O

mis

sion

s In

sura

nce

•C

over

s pr

oduc

ers

for l

iabi

lity

aris

ing

from

thei

r pr

ofes

sion

alac

tspr

ofes

sion

alac

ts–

Pro

fess

iona

l lia

bilit

y ar

ises

out

of p

rovi

ding

or f

ailin

g to

pro

vide

ser

vice

s of

a p

rofe

ssio

nal n

atur

e. It

is

excl

uded

und

er C

omm

erci

al G

ener

al L

iabi

lity

(CG

L)

polic

ies.

–P

rodu

cers

have

ale

gald

uty

tope

rform

the

serv

ices

9©

2011

Kap

lan,

Inc.

Pro

duce

rsha

vea

lega

ldut

yto

perfo

rmth

ese

rvic

esfo

r whi

ch th

ey w

ere

hire

d an

d to

per

form

them

in

acco

rdan

ce w

ith h

igh

stan

dard

s of

con

duct

Erro

rs a

nd O

mis

sion

s In

sura

nce

•C

over

s w

rong

ful a

cts,

err

ors,

or o

mis

sion

s w

hile

pe

rform

ing

dutie

sas

anag

ent

perfo

rmin

gdu

ties

asan

agen

t–

Exc

lude

s co

vera

ge fo

r crim

inal

, dis

hone

st, a

nd

fraud

ulen

t act

s

•D

efen

se c

osts

redu

ce th

e lim

its o

f lia

bilit

y

10©

2011

Kap

lan,

Inc.

Erro

rs a

nd O

mis

sion

s In

sura

nce

•C

onse

nt to

set

tle lo

sses

–S

ettli

ng c

laim

s ou

t of c

ourt

may

be

view

ed a

s an

ad

mis

sion

of a

n er

ror,

whi

ch m

ay h

arm

the

prod

ucer

’s

prof

essi

onal

repu

tatio

n

–P

revi

ousl

y, E

&O

pol

icie

s co

ntai

ned

a pr

ovis

ion

that

an

insu

rer c

ould

not

set

tle a

cla

im w

ithou

t the

in

sure

d’s

cons

ent

11©

2011

Kap

lan,

Inc.

insu

red

sco

nsen

t

–M

ost p

olic

ies

now

pro

vide

that

the

prod

ucer

’s c

onse

nt

is n

ot re

quire

d

MN_P&C_CN.indb 180 6/23/2011 8:57:51 AM

Lesson FifteenCommercial General Liability insurance (CGL)

MN_P&C_CN.indb 181 6/23/2011 8:57:51 AM

182

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Less

onFi

fteen

Less

onFi

fteen

Com

mer

cial

Gen

eral

Lia

bilit

y In

sura

nce

(CG

L)

Com

mer

cial

Gen

eral

Lia

bilit

y In

sura

nce

•C

over

s th

e in

sure

d’s

lega

l lia

bilit

y ar

isin

g ou

t of

dam

ages

suffe

red

bycu

stom

ers

tena

nts

dam

ages

suffe

red

bycu

stom

ers,

tena

nts,

clie

nts,

and

the

gene

ral p

ublic

•Tw

o pr

imar

y co

vera

ge fo

rms

–O

ccur

renc

e fo

rm

–C

laim

sm

ade

form

2©

2011

Kap

lan,

Inc.

Cla

ims

mad

efo

rm

•Th

e di

ffere

nce

betw

een

the

two

is w

hen

the

cove

rage

is tr

igge

red

or a

ctiv

ated

Occ

urre

nce

Form

•C

over

age

is tr

igge

red

by d

amag

e or

inju

ry (l

oss)

th

atoc

curs

durin

gth

epo

licy

perio

dth

atoc

curs

durin

gth

epo

licy

perio

d

•Th

e po

licy

in e

ffect

at t

he ti

me

the

loss

occ

urre

d w

ill ap

ply

–R

egar

dles

s of

whe

n th

e cl

aim

is m

ade

–E

ven

ifth

ecl

aim

ism

ade

afte

rthe

polic

yex

pire

s

3©

2011

Kap

lan,

Inc.

Eve

nif

the

clai

mis

mad

eaf

tert

hepo

licy

expi

res

Occ

urre

nce

Form

Exa

mpl

e

The

ABC

Mut

ual p

olic

y w

ould

app

ly b

ecau

se

itid

dh

thi

jit

prov

ided

cov

erag

e w

hen

the

inju

ryoc

curr

ed.

AB

C M

utua

lX

YZ

Mut

ual

4©

2011

Kap

lan,

Inc.

2000

2005

2010

Inju

ry O

ccur

red

Cla

im M

ade

MN_P&C_CN.indb 182 6/23/2011 8:57:52 AM

183

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Cla

ims-

Mad

e Fo

rm

•C

over

age

is tr

igge

red

whe

n a

clai

m is

mad

edu

ring

the

polic

ype

riod

even

ifth

ein

jury

ordu

ring

the

polic

ype

riod,

even

ifth

ein

jury

orda

mag

e oc

curr

ed a

t ano

ther

tim

e

•Th

e po

licy

in e

ffect

whe

n th

e cl

aim

is fi

led

will

appl

y, ra

ther

than

the

polic

y in

effe

ct w

hen

the

inju

ry o

r dam

age

occu

rred

5©

2011

Kap

lan,

Inc.

Cla

ims-

Mad

e Fo

rm

•Th

is fo

rm re

duce

s th

e ca

rrie

r’s e

xpos

ure

and

was

deve

lope

din

resp

onse

toth

elo

ngte

rmw

asde

velo

ped

inre

spon

seto

the

long

-term

natu

re o

f lia

bilit

y cl

aim

s

•Po

licie

s us

ing

this

form

incl

ude

prod

uct l

iabi

lity

and

prof

essi

onal

liab

ility

6©

2011

Kap

lan,

Inc.

Cla

ims-

Mad

e Ex

ampl

e

The

WeC

are

polic

y w

ould

app

ly b

ecau

se it

id

dh

thl

id

prov

ided

cov

erag

e w

hen

the

clai

m w

as m

ade.

Sur

eBet

Inc

WeC

are

Inc

7©

2011

Kap

lan,

Inc.

2000

2005

2010

Inju

ry O

ccur

red

Cla

im M

ade

Cla

ims-

Mad

e Fo

rm

•R

etro

activ

e da

tes

are

used

with

the

clai

ms-

mad

efo

rmm

ade

form

•Th

ree

retro

activ

e da

te o

ptio

ns:

–Th

e po

licy

effe

ctiv

e da

te

–A

dat

e ea

rlier

than

the

polic

y ef

fect

ive

date

No

retro

activ

eda

te

8©

2011

Kap

lan,

Inc.

–N

ore

troac

tive

date

MN_P&C_CN.indb 183 6/23/2011 8:57:52 AM

184

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Cla

ims-

Mad

e Fo

rm

•R

etro

activ

e da

tes

(con

tinue

d)–

The

clai

ms-

mad

e po

licy

will

han

dle

clai

ms

mad

e du

ring

the

polic

y pe

riod

prov

ided

the

inju

ry o

r dam

age

(loss

) tha

t lea

d to

that

cla

im o

ccur

red

on o

r afte

r the

re

troac

tive

date

–If

a co

mpa

ny p

urch

ased

a c

laim

s-m

ade

polic

y w

ith a

re

troac

tive

date

ofJa

nuar

y1,

2000

,and

acl

aim

was

9©

2011

Kap

lan,

Inc.

retro

activ

eda

teof

Janu

ary

1,20

00,a

nda

clai

mw

asm

ade

durin

g th

e po

licy

perio

d, th

e po

licy

woul

d on

ly

hand

le th

at c

laim

if th

e co

rres

pond

ing

loss

occ

urre

d on

or a

fter J

anua

ry 1

, 200

0

Cla

ims-

Mad

e Fo

rm

•Ex

tend

ed re

port

ing

perio

ds a

re a

lso

used

with

th

ecl

aim

sm

ade

form

An

exte

nded

repo

rting

the

clai

ms-

mad

efo

rm.A

nex

tend

edre

porti

ngpe

riod

may

be

refe

rred

to a

s a

tail.

–P

rovi

des

cove

rage

for c

laim

s th

at a

re m

ade

afte

r the

po

licy

expi

ratio

n da

te

–C

laim

s m

ade

durin

g th

e ex

tend

ed re

porti

ng p

erio

d ar

etre

ated

asif

they

wer

em

ade

durin

gth

epo

licy

10©

2011

Kap

lan,

Inc.

are

treat

edas

ifth

eyw

ere

mad

edu

ring

the

polic

ype

riod

Cla

ims-

Mad

e Fo

rm

•Ex

tend

ed re

port

ing

perio

ds(c

ontin

ued)

–B

asic

ext

ende

d re

porti

ng p

erio

d –

auto

mat

ical

ly

prov

ided

with

out a

dditi

onal

cha

rge

whe

n th

e po

licy

ends

(a 6

0-da

y an

d 5-

year

per

iod

will

app

ly)

–60

-day

bas

ic e

xten

ded

repo

rting

per

iod

•C

over

age

for a

cla

im m

ade

durin

g th

e fir

st 6

0 da

ys

ftth

lii

lth

ij

11©

2011

Kap

lan,

Inc.af

tert

he p

olic

y ex

pire

s, a

s lo

ng a

s th

ein

jury

or

dam

age

(loss

) occ

urre

d be

twee

n th

e re

troac

tive

date

and

pol

icy

expi

ratio

n da

te

Cla

ims-

Mad

e Fo

rm

•Ex

tend

ed re

port

ing

perio

ds(c

ontin

ued)

–Fi

ve-y

ear b

asic

ext

ende

d re

porti

ng p

erio

d

•C

over

age

for c

laim

s m

ade

up to

five

yea

rs a

fter

the

end

of th

e po

licy

perio

d–

As

long

as

the

inju

ry o

r dam

age

(loss

) occ

urre

d be

twee

n th

e re

troac

tive

date

and

pol

icy

expi

ratio

n da

te

Pid

dth

id

tth

ij

dt

th

12©

2011

Kap

lan,

Inc.

–P

rovi

ded

the

insu

red

repo

rtsth

ein

jury

or d

amag

eto

the

insu

rer w

ithin

60

days

afte

r the

pol

icy

expi

res

•P

rote

cts

the

insu

red

whe

n a

loss

occ

urs

but a

cl

aim

for t

he lo

ss h

as n

ot y

et b

een

mad

e

MN_P&C_CN.indb 184 6/23/2011 8:57:53 AM

185

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Cla

ims-

Mad

e Fo

rm

•Ex

tend

ed re

port

ing

perio

ds(c

ontin

ued)

–S

uppl

emen

tal e

xten

ded

repo

rting

per

iod

endo

rsem

ent

•P

rovi

des

an u

nlim

ited

exte

nsio

n of

the

clai

m

repo

rting

per

iod

•Th

e lo

ss le

adin

g to

the

clai

m m

ust o

ccur

bet

ween

th

e re

troac

tive

date

and

pol

icy

expi

ratio

n da

te

13©

2011

Kap

lan,

Inc.

•Th

e in

sure

d m

ust r

eque

st th

is e

ndor

sem

ent a

nd

pay

an a

dditi

onal

pre

miu

m

Cla

ims-

Mad

e Fo

rm

•Ex

ampl

e:–

A b

usin

ess

was

insu

red

by C

ompa

ny A

, on

a cl

aim

s-m

ade

polic

y, fr

om 2

000

to 2

005.

Whe

n ap

plyi

ng fo

r th

e po

licy,

the

busi

ness

cho

se a

retro

activ

e da

te o

f Ja

nuar

y 1,

199

7. F

rom

200

5 to

201

0, th

e bu

sine

ss

was

insu

red

by C

ompa

ny B

on

an o

ccur

renc

e po

licy.

Th

e bu

sine

ss a

lso

purc

hase

d an

ext

ende

d re

porti

ng

id

(til)

fC

At

tti

tlf

it

14©

2011

Kap

lan,

Inc.

perio

d(ta

il)fro

mC

ompa

ny A

to p

rote

ctits

elf a

gain

stfu

ture

cla

ims.

Ret

roac

tive

Dat

e

1997

Ext

ende

d R

epor

ting

Per

iod

(Tai

l)

1997

Com

pany

A(C

laim

s-M

ade)

Com

pany

B(O

ccur

renc

e)

2000

2005

2010

15©

2011

Kap

lan,

Inc.

Loss

Occ

urre

dC

laim

Mad

e

Polic

y St

ruct

ure

•C

over

age

A –

bodi

ly in

jury

and

pro

perty

dam

age

liabi

lity

liabi

lity

–P

rem

ises

and

ope

ratio

ns li

abili

ty

–In

depe

nden

t con

tract

ors’

liab

ility

–C

ontra

ctua

l lia

bilit

y

–P

rodu

cts

and

com

plet

ed o

pera

tions

liab

ility

16©

2011

Kap

lan,

Inc.

pp

y

–Fi

re le

gal l

iabi

lity

•C

over

age

B –

pers

onal

and

adv

ertis

ing

liabi

lity

•C

over

age

C –

med

ical

pay

men

ts

MN_P&C_CN.indb 185 6/23/2011 8:57:53 AM

186

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Cov

erag

e A

: Bod

ily In

jury

and

Pro

pert

y D

amag

e•

Prem

ises

and

ope

ratio

ns li

abili

ty–

Loss

es th

at o

ccur

on

the

busi

ness

pre

mis

es o

r as

a re

sult

of b

usin

ess

oper

atio

ns

–C

usto

mer

slip

s on

a w

et fl

oor

–P

lum

ber d

amag

es th

e co

unte

rtop

whi

le in

stal

ling

a di

shw

ashe

r

17©

2011

Kap

lan,

Inc.

Cov

erag

e A

: Bod

ily In

jury

and

Pro

pert

y D

amag

e•

Inde

pend

ent c

ontr

acto

rs’ l

iabi

lity

–Lo

sses

that

occ

ur d

ue to

the

actio

ns o

f an

inde

pend

ent c

ontra

ctor

that

was

hire

d to

per

form

w

ork

on b

ehal

f of t

he in

sure

d

18©

2011

Kap

lan,

Inc.

Cov

erag

e A

: Bod

ily In

jury

and

Pro

pert

y D

amag

e•

Con

trac

tual

liab

ility

–Fi

ve in

sure

d co

ntra

cts

are

cove

red

(LE

AS

E a

cron

ym)

•Le

ase

of p

rem

ises

•E

asem

ent a

gree

men

t

•A

gree

men

t to

inde

mni

fy a

mun

icip

ality

Sid

tk

t(il

did

tk

19©

2011

Kap

lan,

Inc.

•S

ide

track

agr

eem

ent(

railr

oad

side

track

agre

emen

t)

•E

leva

tor m

aint

enan

ce a

gree

men

t

Cov

erag

e A

: Bod

ily In

jury

and

Pro

pert

y D

amag

e•

Prod

ucts

and

com

plet

ed o

pera

tions

liab

ility

–Lo

sses

that

aris

e fro

m m

anuf

actu

ring,

sel

ling,

or

dist

ribut

ing

prod

ucts

, and

loss

es th

at o

ccur

afte

r the

in

sure

d ha

s co

mpl

eted

wor

k

–C

usto

mer

get

s ill

afte

r eat

ing

spoi

led

bake

ry g

oods

–Im

prop

erly

inst

alle

d di

shw

ashe

r cau

ses

wat

er

d

20©

2011

Kap

lan,

Inc.

dam

age

MN_P&C_CN.indb 186 6/23/2011 8:57:54 AM

187

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Cov

erag

e A

: Bod

ily In

jury

and

Pro

pert

y D

amag

e•

Fire

lega

l lia

bilit

y–

Als

o ca

lled

Dam

age

to P

rem

ises

Ren

ted

to Y

ou

–C

over

age

for a

n in

sure

d w

ho re

nts

or le

ases

the

build

ing

–C

over

s pr

oper

ty d

amag

e ca

used

by

fire

due

to th

e ne

glig

ence

of t

he in

sure

d

21©

2011

Kap

lan,

Inc.

Cov

erag

e B

: Per

sona

l and

Adv

ertis

ing

Inju

ry•Pr

otec

ts th

e in

sure

d ag

ains

t lia

bilit

y ar

isin

g ou

t of

certa

inof

fens

esof

certa

inof

fens

es–

Libe

l (w

ritte

n w

ord)

–S

land

er (s

poke

n w

ord)

–In

vasi

on o

f priv

acy

–Fa

lse

arre

stdi

scrim

inat

ion

orhu

mili

atio

n

22©

2011

Kap

lan,

Inc.

Fals

ear

rest

,dis

crim

inat

ion,

orhu

mili

atio

n

–C

opyr

ight

infri

ngem

ent

–M

isus

e of

som

eone

’s a

dver

tisin

g id

eas

Cov

erag

e C

: Med

ical

Pay

men

ts

•Pa

ys th

e m

edic

al e

xpen

ses

of a

cla

iman

t re

gard

less

offa

ult

rega

rdle

ssof

faul

t

•Se

rves

as

a go

odw

ill ge

stur

e to

an

inju

red

party

to

pre

vent

a la

wsu

it

•Ap

plie

s to

med

ical

exp

ense

s th

at a

re in

curre

d w

ithin

one

year

of th

e ac

cide

nt

23©

2011

Kap

lan,

Inc.

y

•Bo

dily

inju

ry to

the

insu

red

or e

mpl

oyee

s is

not

co

vere

d

Supp

lem

enta

l Pay

men

ts

•Bo

nds

•Ai

d

•In

tere

st o

n ju

dgm

ents

•Lo

ss o

f ear

ning

s

•Ex

pens

es

24©

2011

Kap

lan,

Inc.

p

•D

efen

se c

osts

MN_P&C_CN.indb 187 6/23/2011 8:57:54 AM

188

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Excl

usio

ns

•Ap

ply

to th

e en

tire

polic

y:–

War

/nuc

lear

–P

ollu

tion

loss

es

–Li

quor

liab

ility

(soc

ial h

ost l

iquo

r lia

bilit

y is

cov

ered

)

–A

uto,

airc

raft,

and

wat

ercr

aft l

iabi

lity

Thl

il

lit

ldi

d

25©

2011

Kap

lan,

Inc.

•Th

e ex

clus

ion

also

app

lies

tolo

adin

g an

dun

load

ing

–th

ese

oper

atio

ns a

re c

over

ed u

nder

th

e bu

sine

ss a

uto,

airc

raft,

and

wat

ercr

aft p

olic

ies

Excl

usio

ns

•Ap

ply

to th

e en

tire

polic

y:–

Dam

age

to p

rope

rty o

f oth

ers

in th

e ca

re, c

usto

dy, o

r co

ntro

l of t

he in

sure

d (n

o co

vera

ge fo

r bai

lees

)

–P

rofe

ssio

nal l

iabi

lity

(cov

ered

by

E&

O, m

alpr

actic

e)

–W

ork-

rela

ted

inju

ries

(thos

e co

vere

d un

der w

orke

rs’

com

pens

atio

n or

em

ploy

ers’

liab

ility

law

s)

26©

2011

Kap

lan,

Inc.

–In

tent

iona

l act

s

Excl

usio

ns

•Ap

ply

to p

erso

nal a

nd a

dver

tisin

g in

jury

co

vera

geon

ly:

cove

rage

only

:–

Insu

red

knew

the

fals

ity o

f the

mat

eria

l prio

r to

oral

or

writ

ten

publ

icat

ion

–G

oods

/ser

vice

s do

not

con

form

to a

dver

tised

qua

lity

–W

rong

des

crip

tion

of p

rice

Ad

tii

ij

ittd

bi

dh

27©

2011

Kap

lan,

Inc.

–A

ny a

dver

tisin

gin

jury

com

mitt

edby

an

insu

red

who

sebu

sine

ss is

adv

ertis

ing,

bro

adca

stin

g, p

ublis

hing

, de

sign

ing

cont

ent o

r web

site

s fo

r oth

ers,

or i

s an

in

tern

et s

ervi

ce p

rovi

der

Lim

its o

f Ins

uran

ce

•Th

e lim

its s

how

n in

the

decl

arat

ions

are

the

mos

ttha

twill

bepa

idpe

rlos

sm

ostt

hatw

illbe

paid

perl

oss

•Th

ere

are

seve

ral d

iffer

ent c

over

age

limits

and

su

blim

its th

at a

pply

to p

aym

ents

mad

e un

der t

he

CG

L

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 188 6/23/2011 8:57:55 AM

189

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Lim

its o

f Ins

uran

ce

•Pe

r occ

urre

nce

limit

–Th

e m

ost t

he in

sure

r will

pay

for b

odily

inju

ry,

prop

erty

dam

age,

and

med

ical

pay

men

ts a

risin

g fro

m

any

one

occu

rren

ce u

nder

Cov

erag

e A

and

C

•Pe

rson

al a

nd a

dver

tisin

g in

jury

lim

it–

The

mos

t the

insu

rer w

ill p

ay fo

r per

sona

l and

29©

2011

Kap

lan,

Inc.

adve

rtisi

ng in

jury

aris

ing

out o

f any

one

occ

urre

nce

unde

r Cov

erag

e B

Lim

its o

f Ins

uran

ce

•M

edic

al p

aym

ents

lim

it–

The

mos

t the

insu

rer w

ill p

ay to

any

one

per

son

for

med

ical

pay

men

ts u

nder

Cov

erag

e C

•Fi

re d

amag

e lim

it–

The

mos

t the

insu

rer w

ill p

ay fo

r fire

lega

l lia

bilit

y ar

isin

g fro

m a

ny o

ne o

ccur

renc

e un

der C

over

age

A

30©

2011

Kap

lan,

Inc.

Lim

its o

f Ins

uran

ce

•G

ener

al a

ggre

gate

lim

it(o

ther

than

pro

duct

s/

com

plet

edop

erat

ions

)co

mpl

eted

oper

atio

ns)

–Th

e m

ost t

he in

sure

r will

pay

per

pol

icy

perio

dfo

r all

clai

ms

and

loss

es u

nder

Cov

erag

esA

, B, a

nd C

co

mbi

ned

•Pr

oduc

ts/c

ompl

eted

ope

ratio

ns a

ggre

gate

li

it

31©

2011

Kap

lan,

Inc.

limit

–Th

e m

ost t

he in

sure

r will

pay

per

pol

icy

perio

dfo

r all

clai

ms

and

loss

es a

risin

g fro

m th

is s

peci

fic h

azar

d

Lim

its o

f Ins

uran

ce

•G

ener

al a

ggre

gate

lim

it(o

ther

than

pro

duct

s/

com

plet

edop

erat

ions

)co

mpl

eted

oper

atio

ns)

–P

er o

ccur

renc

e lim

it (C

over

age

A a

nd C

)

•$1

milli

on

–P

erso

nal a

nd a

dver

tisin

g lim

it (C

over

age

B)

•$1

milli

on

–M

edic

al p

aym

ents

lim

it (C

over

age

C)

32©

2011

Kap

lan,

Inc.

•$5

,000

–Fi

re d

amag

e lim

it (C

over

age

A)

•$4

0,00

0

•Pr

oduc

ts a

nd c

ompl

eted

ope

ratio

ns a

ggre

gate

lim

it

MN_P&C_CN.indb 189 6/23/2011 8:57:55 AM

190

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Who

is a

n In

sure

d

•In

divi

dual

ly o

wne

d bu

sine

sses

–B

usin

esso

wne

r and

spo

use,

as

it re

late

s to

the

busi

ness

–E

mpl

oyee

s, a

s it

rela

tes

to th

e bu

sine

ss

•Pa

rtner

ship

sA

llpa

rtner

san

dth

eirs

pous

esas

itre

late

sto

the

33©

2011

Kap

lan,

Inc.

–A

llpa

rtner

san

dth

eirs

pous

es,a

sit

rela

tes

toth

ebu

sine

ss

–E

mpl

oyee

s, a

s it

rela

tes

to th

e bu

sine

ss

Who

is a

n In

sure

d

•C

orpo

ratio

ns–

Dire

ctor

s an

d ex

ecut

ive

offic

ers,

as

it re

late

s to

the

busi

ness

–E

mpl

oyee

s, a

s it

rela

tes

to th

e bu

sine

ss

•Tr

usts

34©

2011

Kap

lan,

Inc.

Who

is a

n In

sure

d

•Ad

ditio

nal i

nsur

eds

(as

it re

late

s to

the

busi

ness

)–

A n

onem

ploy

ee o

r org

aniz

atio

n w

hile

act

ing

as th

e in

sure

d’s

real

est

ate

man

ager

–A

nyon

e dr

ivin

g m

obile

equ

ipm

ent o

wne

d by

the

insu

red

–Th

e in

sure

d’s

lega

l rep

rese

ntat

ive

if th

e in

sure

d di

es

35©

2011

Kap

lan,

Inc.

–Th

e in

sure

d’s

volu

ntee

r wor

kers

Ow

ners

and

Con

trac

tors

Ow

ners

and

Con

trac

tors

Prot

ectiv

e Li

abili

ty (O

CP

Polic

y)

MN_P&C_CN.indb 190 6/23/2011 8:57:55 AM

191

Less

on F

iftee

n C

omm

erci

al G

ener

al L

iabi

lity

Insu

ranc

e (C

GL)

Ow

ners

and

Con

trac

tors

Pro

tect

ive

Liab

ility

•An

alte

rnat

ive

to h

avin

g in

depe

nden

t con

tract

ors

cove

rage

prov

ided

thro

ugh

the

CG

Lpo

licy

cove

rage

prov

ided

thro

ugh

the

CG

Lpo

licy

•Th

is s

epar

ate

cove

rage

form

offe

rs s

epar

ate

limits

(whi

ch a

re n

ot a

ffect

ed b

y th

e in

sure

d’s

CG

L co

vera

ge fo

rm) t

hat a

pply

on

a pr

imar

y ba

sis

37©

2011

Kap

lan,

Inc.

Ow

ners

and

Con

trac

tors

Pro

tect

ive

Liab

ility

•Pr

ovid

es c

over

age

for t

he n

amed

insu

red

due

to

the

negl

igen

tact

sor

omis

sion

sof

anth

ene

glig

enta

cts

orom

issi

ons

ofan

inde

pend

ent c

ontra

ctor

whi

ch re

sult

in b

odily

in

jury

or p

rope

rty d

amag

e to

a th

ird p

arty

•D

oes

not p

rovi

de p

rote

ctio

n fo

r the

inde

pend

ent

cont

ract

or

38©

2011

Kap

lan,

Inc.

Ow

ners

and

Con

trac

tors

Pro

tect

ive

Liab

ility

•Th

e na

med

insu

red

mus

t be

the

owne

r of t

he

prop

erty

ate

nant

ofth

epr

oper

tyor

anot

her

prop

erty

,ate

nant

ofth

epr

oper

ty,o

rano

ther

cont

ract

or fo

r who

m th

e de

sign

ated

con

tract

or is

pe

rform

ing

oper

atio

ns

•Th

e lia

bilit

y pr

ovid

ed is

lim

ited

to th

e sp

ecifi

c pr

ojec

t or l

ocat

ion,

and

cov

erag

e en

ds w

hen

the

jti

fii

hd

til

td

39©

2011

Kap

lan,

Inc.

proj

ecti

sfin

ishe

d or

ope

ratio

ns a

re c

ompl

eted

MN_P&C_CN.indb 191 6/23/2011 8:57:56 AM

MN_P&C_CN.indb 192 6/23/2011 8:57:56 AM

Lesson SixteenCommercial Auto insurance, Commercial Crime insurance, and Bonds

MN_P&C_CN.indb 193 6/23/2011 8:57:56 AM

194

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Less

on S

ixte

enC

omm

erci

al A

uto

Insu

ranc

e,

Com

mer

cial

Crim

e In

sura

nce,

an

d B

onds

Com

mer

cial

Aut

o In

sura

nce

Com

mer

cial

Aut

o In

sura

nce

•Pr

ovid

es c

over

age

for a

utos

use

d pr

imar

ily fo

r bu

sine

sspu

rpos

esbu

sine

sspu

rpos

es

•C

an b

e a

mon

olin

e po

licy

or in

clud

ed in

the

com

mer

cial

pac

kage

pol

icy

•M

ust c

onta

in th

e co

mm

on d

ecla

ratio

ns, c

omm

on

cond

ition

s, a

pplic

able

cov

erag

e fo

rms,

and

3©

2011

Kap

lan,

Inc.

,pp

g,

decl

arat

ions

for e

ach

cove

rage

form

sel

ecte

d

Bus

ines

s A

uto

Cov

erag

e Fo

rm

MN_P&C_CN.indb 194 6/23/2011 8:57:56 AM

195

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Pr

ovid

es c

over

age

for b

usin

esse

s th

at o

wn

or

oper

ate

auto

mob

iles

aspa

rtof

thei

rbus

ines

sop

erat

eau

tom

obile

sas

part

ofth

eirb

usin

ess

•Sy

mbo

ls a

re u

sed

to d

esig

nate

the

vehi

cles

co

vere

d by

the

polic

y

•Th

e sy

mbo

l will

be e

nter

ed n

ext t

o ea

ch

cove

rage

on

the

decl

arat

ions

pag

e to

des

igna

te

5©

2011

Kap

lan,

Inc.

gp

gg

to w

hich

veh

icle

s th

e co

vera

ge a

pplie

s

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Sy

mbo

l 1–

any

auto

(inc

lude

s ow

ned,

hire

d,

and

non

owne

d)an

dno

n-ow

ned)

•Sy

mbo

l 2–

owne

d au

tos

only

•Sy

mbo

l 8–

hire

d au

tos

(veh

icle

s re

nted

for

busi

ness

pur

pose

s)

Sb

l9d

t(

hil

d

6©

2011

Kap

lan,

Inc.

•Sy

mbo

l9–

non-

owne

d au

tos

(veh

icle

s ow

ned

by e

mpl

oyee

s)

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Li

abili

ty c

over

age

–C

over

s bo

dily

inju

ry a

nd p

rope

rty d

amag

e re

sulti

ng

from

the

owne

rshi

p, m

aint

enan

ce, o

r use

of a

cov

ered

au

to; i

nclu

des

supp

lem

enta

l pay

men

ts

–In

sure

ds in

clud

e th

e na

med

insu

red

and

perm

issi

ve

user

s

7©

2011

Kap

lan,

Inc.

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Li

abili

ty c

over

age

(con

tinue

d)–

Em

ploy

ees

and

thei

r aut

os

•A

n em

ploy

ee d

rivin

g th

eir o

wn

car o

n bu

sine

ss is

no

t an

insu

red

unde

r the

bus

ines

s au

to c

over

age

form

. The

em

ploy

ees’

per

sona

l aut

o po

licy

is

prim

ary.

Thl

’b

idd

libi

lit

8©

2011

Kap

lan,

Inc.

•Th

e em

ploy

ee’s

car

can

be

prov

ided

liabi

lity

cove

rage

thro

ugh

sym

bols

1 o

r 9. T

his

will

pr

otec

t the

em

ploy

er fr

om v

icar

ious

liab

ility

cl

aim

s.

MN_P&C_CN.indb 195 6/23/2011 8:57:57 AM

196

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Li

abili

ty c

over

age

(con

tinue

d)–

Load

ing

and

unlo

adin

g

•C

over

age

for b

odily

inju

ry a

nd p

rope

rty d

amag

e cl

aim

s w

hile

obj

ects

are

bei

ng m

oved

to a

nd fr

om

the

insu

red

auto

9©

2011

Kap

lan,

Inc.

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Ph

ysic

al d

amag

e co

vera

ge–C

ollis

ion

and

com

preh

ensi

ve

–P

erm

anen

tly a

ttach

ed c

herr

y pi

cker

s, g

ener

ator

s, a

nd

air c

ompr

esso

rs a

re c

over

ed fo

r phy

sica

l dam

age

–P

erm

anen

tly a

ttach

ed p

ower

cra

nes

are

cons

ider

ed

mob

ile e

quip

men

t and

are

not

cov

ered

10©

2011

Kap

lan,

Inc.

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•M

edic

al p

aym

ents

cov

erag

e–

adde

d by

en

dors

emen

ten

dors

emen

t–

Typi

cally

use

d on

ly w

hen

requ

ired

by la

w o

r whe

n ca

rryi

ng p

asse

nger

s fo

r hire

–P

ays

for i

njur

y su

stai

ned

by th

e na

med

insu

red

and

fam

ily m

embe

rs in

an

auto

acc

iden

t and

cov

ers

the

inju

ries

ofan

yone

occu

pyin

gan

insu

red

vehi

cle

11©

2011

Kap

lan,

Inc.

inju

ries

ofan

yone

occu

pyin

gan

insu

red

vehi

cle

–E

xclu

des

inju

ries

sust

aine

d by

em

ploy

ees

whi

le o

n th

e jo

b, w

hich

is c

over

ed b

y w

orke

rs’ c

ompe

nsat

ion

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Ex

clus

ions

–In

tent

iona

l act

s

–W

ork-

rela

ted

inju

ries

to e

mpl

oyee

s

–D

amag

e to

pro

perty

ow

ned

by, t

rans

porte

d by

, or i

n th

e ca

re o

f the

insu

red

–P

ollu

tion

dam

age

12©

2011

Kap

lan,

Inc.

Pol

lutio

nda

mag

e

–W

ar/n

ucle

ar

MN_P&C_CN.indb 196 6/23/2011 8:57:57 AM

197

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Bus

ines

s A

uto

Cov

erag

e Fo

rm

•Ex

clus

ions

(con

tinue

d)–

Rac

ing,

dem

oliti

on, o

r stu

ntin

g ac

tiviti

es

–S

ound

repr

oduc

tion

equi

pmen

t and

acc

esso

ries

–W

ear a

nd te

ar, f

reez

ing,

bre

akdo

wn,

road

dam

age

to

tires

13©

2011

Kap

lan,

Inc.

Gar

age

Cov

erag

e Fo

rm

Gar

age

Cov

erag

e Fo

rm

•D

esig

ned

for v

ehic

le d

eale

rs, i

nclu

ding

thos

e w

ithre

pair

oper

atio

nson

the

busi

ness

prem

ises

with

repa

irop

erat

ions

onth

ebu

sine

sspr

emis

es

•C

anno

t be

mad

e pa

rt of

the

CP

P

•C

ombi

nes

gene

ral l

iabi

lity

insu

ranc

e,

gara

geke

eper

sin

sura

nce

(a ty

pe o

f bai

lee’

sco

vera

ge),

and

phys

ical

dam

age

cove

rage

into

a 15

©20

11 K

apla

n, In

c.

g),

py

gg

sing

le p

olic

y

Gar

age

Cov

erag

e Fo

rm

•In

sure

d ve

hicl

es (c

over

ed a

utos

) will

be li

sted

an

das

sign

edco

vera

geth

roug

hth

eus

eof

and

assi

gned

cove

rage

thro

ugh

the

use

ofsy

mbo

ls s

imila

r to

busi

ness

aut

o co

vera

ge

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 197 6/23/2011 8:57:58 AM

198

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Gar

age

Cov

erag

e Fo

rm

•Li

abili

ty c

over

age

–C

over

s bo

th a

uto

liabi

lity

and

busi

ness

liab

ility

aris

ing

out o

f the

ow

ners

hip,

mai

nten

ance

, or u

se o

f a

cove

red

auto

, and

out

of g

arag

e op

erat

ions

–A

gen

eral

liab

ility

com

pone

nt c

over

s pr

emis

es,

oper

atio

ns, p

rodu

cts,

and

com

plet

ed o

pera

tions

lia

bilit

y

17©

2011

Kap

lan,

Inc.

liabi

lity

–A

n au

to li

abili

tyco

mpo

nent

cov

ers

bodi

ly in

jury

and

pr

oper

ty d

amag

e re

sulti

ng fr

om th

e in

sure

d’s

use

of a

co

vere

d au

to

Gar

age

Cov

erag

e Fo

rm

•Li

abili

ty c

over

age

(con

tinue

d)–

Insu

reds

incl

ude

the

nam

ed in

sure

d, e

mpl

oyee

s, a

nd

perm

issi

ve u

sers

18©

2011

Kap

lan,

Inc.

Gar

age

Cov

erag

e Fo

rm

•G

arag

ekee

pers

cov

erag

e–

Cov

ers

the

insu

red’

s le

gal l

iabi

lity

for d

amag

e to

cu

stom

ers’

pro

perty

that

the

insu

red

has

for s

ervi

cing

, re

pair,

par

king

, or s

tora

ge (t

his

expo

sure

is e

xclu

ded

unde

r the

liab

ility

sec

tion

of th

e ga

rage

cov

erag

e fo

rm)

–C

over

sco

llisi

onan

dco

mpr

ehen

sive

loss

esto

19©

2011

Kap

lan,

Inc.

Cov

ers

colli

sion

and

com

preh

ensi

velo

sses

tocu

stom

ers’

pro

perty

in th

e in

sure

d’s

cust

ody,

whe

ther

or

not

the

insu

red

is li

able

Gar

age

Cov

erag

e Fo

rm

•G

arag

ekee

pers

cov

erag

e(c

ontin

ued)

–A

uto

busi

ness

es th

at d

o no

t ow

n ve

hicl

es c

an

purc

hase

gar

agek

eepe

rs c

over

age

as a

sta

ndal

one

cove

rage

(par

king

gar

age,

val

et s

ervi

ce)

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 198 6/23/2011 8:57:58 AM

199

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Gar

age

Cov

erag

e Fo

rm

•Ph

ysic

al d

amag

e co

vera

ge–

Com

preh

ensi

ve a

nd c

ollis

ion

cove

rage

for c

over

ed

auto

s

–A

uto

deal

ers

typi

cally

pur

chas

e ph

ysic

al d

amag

e co

vera

ge o

n a

blan

ket b

asis

21©

2011

Kap

lan,

Inc.

Gar

age

Cov

erag

e Fo

rm

•Ex

clus

ions

–C

onta

ins

man

y of

the

sam

e lia

bilit

y ex

clus

ions

as

the

busi

ness

aut

o co

vera

ge fo

rm

22©

2011

Kap

lan,

Inc.

Com

mer

cial

Crim

e In

sura

nce

Com

mer

cial

Crim

e In

sura

nce

•Ty

pica

lly u

sed

as p

art o

f the

CP

P to

pro

vide

cr

ime

cove

rage

forb

usin

esse

scr

ime

cove

rage

forb

usin

esse

s

•Th

ere

are

com

mer

cial

crim

e fo

rms

and

gove

rnm

entc

rime

form

s

24©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 199 6/23/2011 8:57:58 AM

200

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Com

mer

cial

Crim

e In

sura

nce

•Ea

ch c

rime

form

is a

vaila

ble

in tw

o ve

rsio

ns–

Loss

sus

tain

ed fo

rm

•C

over

s lo

sses

sus

tain

ed d

urin

g th

e po

licy

perio

d an

d di

scov

ered

dur

ing

the

polic

y pe

riod

or u

p to

on

e ye

ar a

fter t

he p

olic

y ex

pire

s

–D

isco

very

form

25©

2011

Kap

lan,

Inc.

•C

over

s lo

sses

sus

tain

ed a

t any

tim

e an

d di

scov

ered

dur

ing

the

polic

y pe

riod

or u

p to

60

days

afte

r the

pol

icy

expi

res

Crim

e In

sura

nce

–D

efin

ition

s

•Th

eft–

the

unla

wfu

l tak

ing

of m

oney

, sec

uriti

es,

orot

herp

rope

rtyor

othe

rpro

perty

•B

urgl

ary

–th

e th

eft o

f pro

perty

from

insi

de th

e pr

emis

es w

hen

the

busi

ness

is c

lose

d; re

quire

s vi

sibl

e ev

iden

ce o

f for

cibl

e en

try o

r exi

t

•Sa

fe b

urgl

ary

–th

e un

law

ful t

akin

g of

pro

perty

26©

2011

Kap

lan,

Inc.

gy

gp

py

from

with

in a

lock

ed s

afe

or v

ault

by fo

rcib

le

entry

; als

o in

clud

es th

eft o

f the

ent

ire s

afe

or

vaul

t

Crim

e In

sura

nce

–D

efin

ition

s

•R

obbe

ry–

the

thef

t of p

rope

rty fr

om a

noth

er

pers

on;r

equi

res

ath

reat

ofbo

dily

harm

pers

on;r

equi

res

ath

reat

ofbo

dily

harm

•C

usto

dian

–so

meo

ne w

ho h

as c

are

and

cust

ody

of th

e in

sure

d pr

oper

ty in

side

the

prem

ises

•M

esse

nger

–so

meo

ne w

ho h

as c

are

and

27©

2011

Kap

lan,

Inc.

gcu

stod

y of

the

insu

red

prop

erty

out

side

the

prem

ises

Crim

e In

sura

nce

–D

efin

ition

s

•M

yste

rious

dis

appe

aran

ce–

whe

n pe

rson

al

prop

erty

ism

issi

ngan

dth

ere

isno

expl

anat

ion

prop

erty

ism

issi

ngan

dth

ere

isno

expl

anat

ion

for i

ts d

isap

pear

ance

•W

atch

pers

on–

any

pers

on re

tain

ed s

peci

fical

ly

by th

e in

sure

d w

hose

sol

e du

ty is

to h

ave

care

an

d cu

stod

y of

pro

perty

insi

de th

e pr

emis

es

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 200 6/23/2011 8:57:59 AM

201

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•Th

e in

sure

d m

ust s

elec

t the

cov

erag

es th

at w

ill

appl

yto

the

polic

yap

ply

toth

epo

licy

•Fo

r eac

h in

surin

g ag

reem

ent s

elec

ted,

a li

mit

of

insu

ranc

e an

d de

duct

ible

mus

t be

liste

d on

the

decl

arat

ions

•Th

e po

licy

limit

and

dedu

ctib

le a

pply

per

29©

2011

Kap

lan,

Inc.p

ypp

yp

occu

rren

ce

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•Em

ploy

ee th

eft

–C

over

s lo

ss to

mon

ey, s

ecur

ities

, and

oth

er p

rope

rty

resu

lting

from

em

ploy

ee th

eft

–If

an e

mpl

oyee

is c

augh

t ste

alin

g, a

ny s

ubse

quen

t th

efts

by

that

em

ploy

ee a

re e

xclu

ded

30©

2011

Kap

lan,

Inc.

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•Fo

rger

y or

alte

ratio

n–Th

e in

sure

d un

know

ingl

y ac

cept

s a

forg

ed o

r alte

red

chec

k, p

rom

isso

ry n

ote,

and

so

forth

from

som

eone

el

se

–S

omeo

ne fo

rges

or a

lters

a c

heck

dra

wn

on th

e in

sure

d’s

bank

acc

ount

31©

2011

Kap

lan,

Inc.

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•In

side

the

prem

ises

: the

ft of

mon

ey a

nd

secu

ritie

sse

curit

ies

–C

over

s th

eft,

disa

ppea

ranc

e, o

r des

truct

ion

of m

oney

an

d se

curit

ies

from

with

in th

e pr

emis

es

–C

over

s da

mag

e to

the

prem

ises

cau

sed

durin

g a

cove

red

thef

t

32©

2011

Kap

lan,

Inc.

–C

over

s da

mag

e to

a s

afe,

vau

lt, o

r cas

h re

gist

er

caus

ed d

urin

g a

cove

red

thef

t

MN_P&C_CN.indb 201 6/23/2011 8:57:59 AM

202

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•In

side

the

prem

ises

: rob

bery

or s

afe

burg

lary

of

othe

rpro

pert

yof

othe

rpro

pert

y–

Cov

ers

robb

ery

of a

cus

todi

an a

nd s

afe

burg

lary

from

w

ithin

the

prem

ises

–C

over

s da

mag

e to

the

prem

ises

cau

sed

durin

g a

cove

red

thef

t

33©

2011

Kap

lan,

Inc.

–C

over

s da

mag

e to

a s

afe,

vau

lt, o

r cas

h re

gist

er

caus

ed d

urin

g a

cove

red

thef

t

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•In

side

the

prem

ises

: rob

bery

or b

urgl

ary

of

othe

rpro

pert

yot

herp

rope

rty

–C

over

s ac

tual

or a

ttem

pted

robb

ery

of a

wat

chpe

rson

–C

over

s bu

rgla

ry o

f pro

perty

oth

er th

an m

oney

, se

curit

ies,

mot

or v

ehic

les,

trai

lers

, or s

emi-t

raile

rs (o

r at

tach

ed e

quip

men

t or a

cces

sorie

s)

34©

2011

Kap

lan,

Inc.

–M

ust t

ake

plac

e w

ithin

the

prem

ises

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•O

utsi

de th

e pr

emis

es: t

heft,

dis

appe

aran

ce,

and

dest

ruct

ion

and

dest

ruct

ion

–C

over

s th

eft,

disa

ppea

ranc

e, a

nd d

estru

ctio

n of

m

oney

and

sec

uriti

es w

hile

out

side

the

prem

ises

and

in

the

care

of a

mes

seng

er o

r arm

ored

car

com

pany

–C

over

s lo

ss o

f oth

er p

rope

rty d

ue to

act

ual o

r at

tem

pted

robb

ery

whi

leou

tsid

eth

epr

emis

esan

din

35©

2011

Kap

lan,

Inc.

atte

mpt

edro

bber

yw

hile

outs

ide

the

prem

ises

and

inth

e ca

re o

f a m

esse

nger

or a

rmor

ed c

ar c

ompa

ny

Crim

e C

over

age

–In

surin

g A

gree

men

ts

•M

oney

ord

ers

and

coun

terf

eit c

urre

ncy

–C

over

s lo

sses

that

resu

lt w

hen

the

insu

red

acce

pts

inva

lid m

oney

ord

ers

or c

ount

erfe

it m

oney

in g

ood

faith

36©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 202 6/23/2011 8:58:00 AM

203

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Bon

ds

Bon

ds

•A

bond

bac

ks a

pro

mis

e th

at a

spe

cific

dut

y w

ill be

com

plet

eda

certa

inpe

rform

ance

beco

mpl

eted

,ace

rtain

perfo

rman

cem

aint

aine

d, o

r a s

peci

fic o

blig

atio

n fu

lfille

d

38©

2011

Kap

lan,

Inc.

Def

initi

ons

•Pr

inci

pal

–Th

e pa

rty w

ho p

rom

ises

to d

o, o

r not

do,

a s

peci

fic

thin

g

–Th

is is

the

pers

on o

r com

pany

that

is b

onde

d (e

.g.,

empl

oyee

, con

tract

or)

•O

blig

ee

39©

2011

Kap

lan,

Inc.

–Th

e pa

rty to

who

m th

e pr

inci

pal m

akes

the

prom

ise

and

for w

hose

pro

tect

ion

the

bond

is w

ritte

n

–Th

is p

arty

rece

ives

the

bene

fit (e

.g.,

empl

oyer

, pro

ject

ow

ner)

Def

initi

ons

•Su

rety

–Th

e pa

rty re

spon

sibl

e fo

r the

loss

if th

e pr

inci

pal d

oes

not k

eep

its p

rom

ise

(the

bond

ing

com

pany

, whi

ch is

of

ten

the

insu

ranc

e co

mpa

ny)

•Pe

nalty

–Th

e fa

ce a

mou

nt o

f the

bon

d

40©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 203 6/23/2011 8:58:00 AM

204

Less

on S

ixte

en

Com

mer

cial

Aut

o In

sura

nce,

Com

mer

cial

Crim

e In

sura

nce,

and

Bon

ds

Sure

ty B

onds

•Su

rety

bon

ds g

uara

ntee

the

prin

cipa

l’s

perfo

rman

cean

dif

that

perfo

rman

cefa

llssh

ort

perfo

rman

ce,a

ndif

that

perfo

rman

cefa

llssh

ort,

the

sure

ty is

resp

onsi

ble

to th

e ob

ligee

41©

2011

Kap

lan,

Inc.

Sure

ty B

onds

•C

ontr

act b

onds

–us

ed b

y bu

ildin

g co

ntra

ctor

s–

Bid

bon

d–

used

whe

n su

bmitt

ing

a bi

d fo

r a c

ontra

ct;

guar

ante

es th

at th

e co

ntra

ctor

will

sig

n a

firm

ag

reem

ent t

o co

mpl

ete

wor

k if

the

bid

is a

ccep

ted

–Pe

rfor

man

ce b

ond

–gu

aran

tees

that

the

cont

ract

or

will

com

plet

e th

e w

ork

to s

peci

ficat

ions

42©

2011

Kap

lan,

Inc.

Sure

ty B

onds

•Ju

dici

al b

onds

–us

ed in

crim

inal

and

civ

il co

urt

proc

eedi

ngs

proc

eedi

ngs

–B

ail b

ond

–gu

aran

tees

that

a d

efen

dant

in a

crim

inal

ca

se w

ill a

ppea

r in

cour

t whe

n or

dere

d

–A

ppea

l bon

d–

guar

ante

es p

aym

ent o

f a ju

dgm

ent i

f th

e de

fend

ant l

oses

on

appe

al

43©

2011

Kap

lan,

Inc.

Sure

ty B

onds

•Li

cens

e an

d pe

rmit

bond

s–

Req

uire

d of

thos

e w

ho m

ust o

btai

n a

licen

se o

r per

mit

to c

ondu

ct b

usin

ess

–U

sed

to g

uara

ntee

that

the

prin

cipa

l will

com

ply

with

al

l sta

tute

s, re

gula

tions

, or o

rdin

ance

s th

at re

gula

te

the

prin

cipa

l’s b

usin

ess

activ

ities

44©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 204 6/23/2011 8:58:01 AM

Lesson Seventeen the Businessowners Policy (BoP)

MN_P&C_CN.indb 205 6/23/2011 8:58:01 AM

206

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

LS

tLe

sson

Seve

ntee

nTh

e B

usin

esso

wne

rsPo

licy

(BO

P)

Bus

ines

sow

ners

Pol

icy

•D

esig

ned

to m

eet t

he in

sura

nce

need

s of

sm

all

and

med

ium

size

dbu

sine

sses

and

med

ium

size

dbu

sine

sses

•Pr

ovid

es c

over

age

sim

ilar t

o ot

her c

omm

erci

al

polic

ies

•C

ombi

nes

liabi

lity

and

prop

erty

cov

erag

e in

to

one

polic

y

2©

2011

Kap

lan,

Inc.p

y

Bus

ines

sow

ners

Pol

icy

•Pr

oper

ty c

over

age

for b

uild

ings

and

bus

ines

s pe

rson

alpr

oper

type

rson

alpr

oper

ty

•Bu

sine

ss in

com

e an

d ex

tra e

xpen

se c

over

age

•C

rime

cove

rage

•G

ener

al li

abilit

y co

vera

ge

3©

2011

Kap

lan,

Inc.

•O

ptio

nal c

over

ages

and

end

orse

men

ts

Bus

ines

sow

ners

Pol

icy

•Th

e po

licy

is d

ivid

ed in

to th

ree

sect

ions

:–

Sec

tion

I—pr

oper

ty c

over

ages

–S

ectio

n II—

liabi

lity

cove

rage

s

–S

ectio

n III

—co

mm

on p

olic

y co

nditi

ons

•In

add

ition

to s

tand

ard

polic

y co

nditi

ons,

the

BOP

also

stat

esth

aton

lyth

efir

stna

med

4©

2011

Kap

lan,

Inc.

BOP

also

stat

esth

aton

lyth

efir

stna

med

insu

red

can

requ

est c

hang

es to

the

polic

y or

ca

ncel

the

polic

y

MN_P&C_CN.indb 206 6/23/2011 8:58:01 AM

207

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

Bus

ines

sow

ners

Pol

icy

•If

the

build

ing

has

been

vac

ant o

r uno

ccup

ied

for

60da

ys:

60da

ys:

–Th

ere

is n

o co

vera

ge fo

r the

ft, v

anda

lism

, wat

er

dam

age,

or g

lass

bre

akag

e cl

aim

s

–Th

e in

sure

r may

can

cel c

over

age

with

five

day

s’no

tice

5©

2011

Kap

lan,

Inc.

•Pr

oper

ty m

ay b

e de

emed

vac

ant w

hen

70%

is

not i

n us

e (a

t lea

st 3

1% o

f pro

perty

mus

t be

in

use)

Bus

ines

sow

ners

Pol

icy

•Po

licy

rene

wal

–P

rem

ium

s at

rene

wal

will

be

base

d on

the

insu

rer’s

ra

tes

and

rule

s in

effe

ct a

t the

tim

e of

rene

wal

–Th

e re

new

al p

rem

ium

mus

t be

paid

bef

ore

the

anni

vers

ary

date

of t

he p

olic

y

–In

sure

r mus

t pro

vide

60

days

adv

ance

not

ice

of

l

6©

2011

Kap

lan,

Inc.

nonr

enew

al

Bus

ines

sow

ners

Pol

icy

•In

spec

tions

and

sur

veys

–Th

e in

sure

r has

the

right

to m

ake

insp

ectio

ns a

nd

surv

eys

at a

ny ti

me

rela

ted

to th

e in

sura

bilit

y an

d pr

emiu

ms

char

ged

(not

saf

ety

insp

ectio

ns)

–Th

e in

sure

r will

pro

vide

a re

port

on th

e co

nditi

ons

and

reco

mm

end

chan

ges

7©

2011

Kap

lan,

Inc.

Elig

ibili

ty

•O

ffice

bui

ldin

gs u

p to

100

,000

squ

are

feet

and

si

xst

orie

sor

less

six

stor

ies

orle

ss

•R

etai

l (m

erca

ntile

) sto

res

up to

25,

000

squa

re

feet

/gro

ss a

nnua

l sal

es u

p to

$3,

000,

000

•Ap

artm

ent b

uild

ings

Cki

df

tfd

tbl

ih

tt

8©

2011

Kap

lan,

Inc.

•C

ooki

ng a

ndfa

stfo

od e

stab

lishm

ents

up

to7,

500

squa

re fe

et/g

ross

ann

ual s

ales

up

to

$1,0

00,0

00

MN_P&C_CN.indb 207 6/23/2011 8:58:02 AM

208

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

Elig

ibili

ty

•Ex

ampl

es o

f elig

ible

bus

ines

ses:

–B

aker

ies

–C

onve

nien

ce s

tore

s

–D

ry c

lean

ers

–W

hole

sale

rs

Ftf

dt

t

9©

2011

Kap

lan,

Inc.

–Fa

stfo

od re

stau

rant

s

Elig

ibili

ty

•Ex

ampl

es o

f ine

ligib

le b

usin

esse

s:–

Aut

o re

pair

shop

s

–B

anks

and

cre

dit u

nion

s

–S

choo

ls a

nd g

over

nmen

t ent

ities

–Fa

rms

B

10©

2011

Kap

lan,

Inc.

–B

ars

–M

anuf

actu

ring

oper

atio

ns

Prop

erty

Cov

erag

e

•R

eal a

nd b

usin

ess

pers

onal

pro

perty

is in

sure

d ag

ains

tspe

cial

form

peril

sag

ains

tspe

cial

form

peril

s

•N

o co

insu

ranc

e re

quire

men

t–

If th

e bu

ildin

g is

insu

red

to a

t lea

st 8

0% o

f its

val

ue,

loss

es w

ill b

e se

ttled

for r

epla

cem

ent c

ost

11©

2011

Kap

lan,

Inc.

Prop

erty

Cov

erag

e

•Bu

ildin

g an

d bu

sine

ss p

erso

nal p

rope

rty

cove

rage

isvi

rtual

lyid

entic

alto

com

mer

cial

cove

rage

isvi

rtual

lyid

entic

alto

com

mer

cial

prop

erty

insu

ranc

e

•W

hile

end

orse

men

ts o

r inl

and

mar

ine

insu

ranc

e ar

e us

ed in

con

junc

tion

with

com

mer

cial

pr

oper

ty in

sura

nce,

the

BO

P in

clud

es c

over

age

ti

12©

2011

Kap

lan,

Inc.

exte

nsio

ns

MN_P&C_CN.indb 208 6/23/2011 8:58:02 AM

209

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

Prop

erty

Cov

erag

e

•C

over

age

exte

nsio

ns–

Seas

onal

incr

ease

on

pers

onal

pro

pert

y: th

e lim

its

on b

usin

ess

pers

onal

pro

perty

will

aut

omat

ical

ly

incr

ease

by

25%

to p

rovi

de e

xtra

pro

tect

ion

whe

n th

ere

are

seas

onal

fluc

tuat

ions

of i

nven

tory

–Pe

rson

al p

rope

rty

tem

pora

rily

off p

rem

ises

cove

red

to$5

,000

13©

2011

Kap

lan,

Inc.

cove

red

to$5

,000

–Va

luab

le p

aper

s an

d re

cord

s(in

clud

ing

thos

e st

ored

in e

lect

roni

c/m

agne

tic m

edia

) are

cov

ered

up

to $

10,0

00 if

dam

aged

by

a co

vere

d pe

ril

Prop

erty

Cov

erag

e

•C

over

age

exte

nsio

ns (c

ontin

ued)

–A

ccou

nts

rece

ivab

le: $

10,0

00 a

llow

ance

to c

olle

ct

amou

nts

owed

whe

n re

cord

s ar

e de

stro

yed

by a

co

vere

d lo

ss

–In

crea

sed

cost

of c

onst

ruct

ion:

$10

,000

is a

vaila

ble

for c

onst

ruct

ion

cost

s re

quire

d by

bui

ldin

g co

de o

r or

dina

nce

follo

win

ga

cove

red

peril

14©

2011

Kap

lan,

Inc.

ordi

nanc

efo

llow

ing

aco

vere

dpe

ril

Bus

ines

s In

com

e an

d Ex

tra

Expe

nse

Cov

erag

e•Si

mila

r to

the

cove

rage

und

er c

omm

erci

al

prop

erty

insu

ranc

epr

oper

tyin

sura

nce

•Fe

atur

es u

niqu

e to

a B

OP

:–

Bus

ines

s in

com

e is

pro

vide

dfo

r 12

mon

ths

with

no

mon

thly

lim

it of

inde

mni

ty

–P

ayro

ll ex

pens

es a

re o

nly

paid

for 6

0 da

ys

15©

2011

Kap

lan,

Inc.y

py

py

–P

aym

ents

will

be

mad

e af

ter a

72-

hour

wai

ting

perio

d

Crim

e C

over

age

•M

oney

ord

ers

and

coun

terfe

it m

oney

(up

to

$100

0pe

rlos

s)$1

,000

perl

oss)

•Fo

rger

y an

d al

tera

tion

(up

to $

2,50

0 pe

r los

s)

16©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 209 6/23/2011 8:58:03 AM

210

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

Liab

ility

Cov

erag

e

•Pr

ovid

es c

over

age

for b

odily

inju

ry, p

rope

rty

dam

age

pers

onal

inju

ryad

verti

sing

inju

ryan

dda

mag

e,pe

rson

alin

jury

,adv

ertis

ing

inju

ry,a

ndm

edic

al p

aym

ents

in th

e sa

me

way

as

the

CG

L

•Po

licy

is a

n oc

curr

ence

vers

ion

polic

y

•Li

bel c

laim

s re

late

d to

the

inte

rnet

are

exc

lude

d (W

ebsi

tes,

cha

t roo

ms)

17©

2011

Kap

lan,

Inc.

(,

)

•In

clud

es s

uppl

emen

tal p

aym

ents

Opt

iona

l Cov

erag

es

•D

esig

nate

d in

the

decl

arat

ions

and

incl

uded

for

anad

ditio

nalp

rem

ium

anad

ditio

nalp

rem

ium

–O

utdo

or s

igns

•P

rovi

des

cove

rage

for u

natta

ched

sig

ns a

nd

atta

ched

sig

ns n

ot a

dequ

atel

y co

vere

d by

the

$2,5

00 li

mit

–M

oney

and

sec

uriti

es

18©

2011

Kap

lan,

Inc.

y•In

side

the

prem

ises

–th

eft o

f mon

ey a

nd s

ecur

ities

•O

utsi

de th

e pr

emis

es –

thef

t, di

sapp

eara

nce,

and

de

stru

ctio

n

Opt

iona

l Cov

erag

es

–Em

ploy

ee d

isho

nest

y

Mh

ilb

kd–

Mec

hani

calb

reak

dow

n

•P

rovi

des

equi

pmen

t bre

akdo

wn

cove

rage

for

boile

rs, a

ir co

nditi

onin

g un

its, a

nd o

ther

pre

ssur

e ve

ssel

s

19©

2011

Kap

lan,

Inc.

Hire

d A

uto

and

Non

-Ow

ned

Aut

o Li

abili

ty

Endo

rsem

ent

•C

over

s th

e in

sure

d fo

r bod

ily in

jury

or p

rope

rty

dam

age

that

aris

esou

toft

hem

aint

enan

ceor

dam

age

that

aris

esou

toft

hem

aint

enan

ceor

use

of a

hire

d au

toby

the

insu

red

or th

e in

sure

d’s

empl

oyee

s in

the

cour

se o

f bus

ines

s–

Hire

d au

tos

are

auto

s th

e in

sure

d le

ases

, ren

ts, o

r bo

rrow

s

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 210 6/23/2011 8:58:03 AM

211

Less

on S

even

teen

The

Bus

ines

sow

ners

Pol

icy

(BO

P)

Hire

d A

uto

and

Non

-Ow

ned

Aut

o Li

abili

ty

Endo

rsem

ent

•C

over

s th

e in

sure

d fo

r bod

ily in

jury

or p

rope

rty

dam

age

that

aris

esou

toft

heus

eof

any

dam

age

that

aris

esou

toft

heus

eof

any

nono

wne

d au

toin

the

insu

red’

s bu

sine

ss b

y an

y pe

rson

–N

onow

ned

auto

s ar

e ve

hicl

es u

sed

in th

e bu

sine

ss

that

are

not

ow

ned,

leas

ed, o

r bor

row

ed b

y th

e in

sure

d

21©

2011

Kap

lan,

Inc.

insu

red

Hire

d A

uto

and

Non

-Ow

ned

Aut

o Li

abili

ty

Endo

rsem

ent

•Pr

ovid

es li

abilit

y pr

otec

tion

only

and

is n

ot

desi

gned

toin

sure

auto

sth

ata

busi

ness

owns

desi

gned

toin

sure

auto

sth

ata

busi

ness

owns

or o

pera

tes

22©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 211 6/23/2011 8:58:03 AM

MN_P&C_CN.indb 212 6/23/2011 8:58:03 AM

Lesson EighteenWorkers’ Compensation

MN_P&C_CN.indb 213 6/23/2011 8:58:04 AM

214

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Prio

r to

Wor

kers

’ Com

pens

atio

n La

ws

•If

an e

mpl

oyee

was

inju

red

on th

e jo

b, in

ord

er

toco

llect

any

rest

itutio

nth

atem

ploy

eeha

dto

to c

olle

ct a

ny re

stitu

tion,

that

em

ploy

ee h

ad to

pr

ove

thro

ugh

a la

wsu

it th

at th

e em

ploy

er w

as

negl

igen

t

2©

2011

Kap

lan,

Inc.

Prio

r to

Wor

kers

’ Com

pens

atio

n La

ws

•As

a re

sult,

few

cla

ims

wer

e pa

id b

y em

ploy

ers

due

toth

ree

com

mon

law

defe

nses

:du

e to

thre

e co

mm

on la

w d

efen

ses:

–C

ontri

buto

ry n

eglig

ence

–if

the

empl

oyee

con

tribu

tes

to th

e lo

ss, t

he e

mpl

oyer

is n

ot li

able

for d

amag

es

–A

ssum

ptio

n of

risk

–if

the

empl

oyee

ass

umed

the

risk

of a

dan

gero

us w

ork

plac

e, th

e em

ploy

er is

not

re

spon

sibl

efo

rany

dam

ages

3©

2011

Kap

lan,

Inc.

resp

onsi

ble

for a

ny d

amag

es

–Fe

llow

ser

vant

rule

–if

a fe

llow

em

ploy

ee c

ause

d th

e in

jury

, the

em

ploy

er is

not

resp

onsi

ble

for a

ny

dam

ages

Gen

eral

Info

rmat

ion

•Pr

ovid

es b

enef

its to

wor

kers

who

bec

ome

inju

red

disa

bled

ordi

edu

ring

the

cour

seof

inju

red,

dis

able

d, o

r die

dur

ing

the

cour

se o

f em

ploy

men

t or i

f the

loss

aris

es o

ut o

f em

ploy

men

t

•Be

nefit

s ar

e pa

id re

gard

less

of a

ny fa

ult o

f eith

er

the

empl

oyer

or e

mpl

oyee

4©

2011

Kap

lan,

Inc.

•Be

nefit

s ar

e de

term

ined

by

law

and

var

y by

sta

te

•Po

licie

s m

ay b

e en

dors

ed to

incl

ude

dedu

ctib

les

or to

com

ply

with

fede

ral l

aws

MN_P&C_CN.indb 214 6/23/2011 8:58:04 AM

215

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Gen

eral

Info

rmat

ion

•W

orke

rs’ c

ompe

nsat

ion

pays

for:

–M

edic

al c

are

for i

njur

ies

–W

age-

loss

and

dis

abili

ty b

enef

its

–B

enef

its to

dep

ende

nts

if a

wor

ker i

s ki

lled

–V

ocat

iona

l reh

abili

tatio

n se

rvic

es if

wor

ker c

anno

t re

turn

toth

esa

me

job

orem

ploy

er

5©

2011

Kap

lan,

Inc.

retu

rn to

the

sam

e jo

b or

em

ploy

er

Gen

eral

Info

rmat

ion

•W

orke

rs’ c

ompe

nsat

ion

bene

fits

are

prim

ary

over

any

othe

rben

efits

avai

labl

eov

er a

ny o

ther

ben

efits

ava

ilabl

e–

Indi

vidu

al o

r gro

up d

isab

ility

pol

icie

s

6©

2011

Kap

lan,

Inc.

Gen

eral

Info

rmat

ion

•W

orke

rs’ c

ompe

nsat

ion

is g

over

ned

at th

e st

ate

leve

lle

vel

•M

inne

sota

law

requ

ires

all e

mpl

oyer

s to

car

ry

wor

kers

’ com

pens

atio

n in

sura

nce

with

few

ex

cept

ions

•Po

licie

s m

ay b

e en

dors

ed to

com

ply

with

fede

ral

7©

2011

Kap

lan,

Inc.

yp

yla

ws

–C

over

age

for m

ariti

me

empl

oyee

s, fe

dera

l em

ploy

ees,

and

railr

oad

wor

kers

Stat

e W

orke

rs’ C

ompe

nsat

ion

Law

s

•St

ate

wor

kers

’ com

pens

atio

n la

ws

may

be

eith

er:

eith

er:

–C

ompu

lsor

y

–E

lect

ive

8©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 215 6/23/2011 8:58:05 AM

216

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Com

puls

ory

Com

pens

atio

n La

w

•C

over

age

is re

quire

d fo

r eve

ry e

mpl

oyer

exc

ept

fora

few

spec

ified

exce

ptio

nsfo

r a fe

w s

peci

fied

exce

ptio

ns

•Em

ploy

ers

mus

t acc

ept a

nd c

ompl

y w

ith a

ll pr

ovis

ions

of t

he la

w

•St

ate

pena

lties

are

ass

esse

d if

the

empl

oyer

fa

ils to

sec

ure

or m

aint

ain

cove

rage

9©

2011

Kap

lan,

Inc.

g

•M

ost s

tate

s ha

ve c

ompu

lsor

y la

ws

Elec

tive

Com

pens

atio

n La

w

•Th

e em

ploy

er c

an d

ecid

e w

heth

er to

pro

vide

w

orke

rs’c

ompe

nsat

ion

bene

fits

wor

kers

com

pens

atio

n be

nefit

s–

If be

nefit

s ar

e no

t pro

vide

d, a

n in

jure

d em

ploy

ee c

an

sue

the

empl

oyer

–If

sued

, the

em

ploy

er c

anno

t use

the

com

mon

law

de

fens

es o

f con

tribu

tory

neg

ligen

ce, a

ssum

ptio

n of

ris

kor

fello

wse

rvan

trul

e

10©

2011

Kap

lan,

Inc.

risk,

or f

ello

w s

erva

nt ru

le

Fund

ing

for W

orke

rs’ C

ompe

nsat

ion

Ben

efits

•Pr

ivat

e in

sura

nce

–E

mpl

oyer

tran

sfer

s co

mpe

nsat

ion

oblig

atio

ns to

the

insu

ranc

e co

mpa

ny

–In

sura

nce

com

pany

pay

s be

nefit

s as

requ

ired

by la

w

11©

2011

Kap

lan,

Inc.

Fund

ing

for W

orke

rs’ C

ompe

nsat

ion

Ben

efits

•M

onop

olis

tic s

tate

fund

s–To

be

insu

red

agai

nst w

orke

rs’ c

ompe

nsat

ion

clai

ms,

th

e em

ploy

er m

ust b

uy c

over

age

from

the

stat

e fu

nd

–P

rivat

e in

sura

nce

com

pani

es a

re n

ot a

llow

ed to

co

mpe

te a

gain

st th

ese

fund

s

12©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 216 6/23/2011 8:58:05 AM

217

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Fund

ing

for W

orke

rs’ C

ompe

nsat

ion

Ben

efits

•C

ompe

titiv

e st

ate

fund

s–

Em

ploy

ers

can

choo

se b

etw

een

purc

hasi

ng w

orke

rs’

com

pens

atio

n in

sura

nce

from

a s

tate

fund

or a

priv

ate

insu

ranc

e co

mpa

ny

–S

tate

fund

com

pete

s w

ith p

rivat

e in

sura

nce

13©

2011

Kap

lan,

Inc.

Fund

ing

for W

orke

rs’ C

ompe

nsat

ion

Ben

efits

•Se

lf-in

sura

nce

–E

mpl

oyer

set

s up

a fu

nd to

pay

wor

kers

’ co

mpe

nsat

ion

clai

ms

and

files

evi

denc

e of

its

exis

tenc

e w

ith th

e st

ate

wor

kers

’ com

pens

atio

n au

thor

ity

–E

mpl

oyer

mus

t han

dle

bene

fit c

osts

and

cla

im

expe

nses

,as

wel

las

med

ical

and

lega

lser

vice

s

14©

2011

Kap

lan,

Inc.

expe

nses

, as

wel

l as

med

ical

and

lega

l ser

vice

s

Excl

usiv

e R

emed

y

•Th

e be

nefit

s st

ipul

ated

in w

orke

rs’

com

pens

atio

nla

ws

are

the

only

mea

nsth

eco

mpe

nsat

ion

law

s ar

e th

e on

ly m

eans

—th

e ex

clus

ive

rem

edy—

avai

labl

e to

em

ploy

ees

agai

nst e

mpl

oyer

s fo

r inj

urie

s co

vere

d by

thos

e la

ws

•Em

ploy

ees

cann

ot s

ue th

eir e

mpl

oyer

s in

cou

rt t

bti

dditi

lti

15©

2011

Kap

lan,

Inc.

to o

btai

n ad

ditio

nal c

ompe

nsat

ion

Min

neso

ta S

tate

-Man

date

d B

enef

its

•R

easo

nabl

e m

edic

al a

nd re

habi

litat

ion

bene

fits

are

prov

ided

with

nolim

itbe

nefit

sar

e pr

ovid

ed w

ith n

o lim

it

•W

age-

loss

ben

efits

to re

imbu

rse

a po

rtion

of

lost

inco

me

–N

o be

nefit

s ar

e pa

id fo

r the

firs

t thr

ee c

alen

dar d

ays

afte

r the

dis

abili

ty b

egin

s

16©

2011

Kap

lan,

Inc.

–B

enef

its a

re e

qual

to 6

6� o

f the

em

ploy

ee’s

gro

ss

wee

kly

wag

e at

the

time

of in

jury

to a

max

imum

of

$850

per

wee

k

MN_P&C_CN.indb 217 6/23/2011 8:58:06 AM

218

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Min

neso

ta S

tate

-Man

date

d B

enef

its

•Su

rviv

or/d

eath

ben

efits

to d

epen

dent

s of

an

empl

oyee

who

died

due

toa

wor

kin

jury

empl

oyee

who

die

d du

e to

a w

ork

inju

ry

•Vo

catio

nal r

ehab

ilita

tion

bene

fits

if th

e em

ploy

ee c

anno

t ret

urn

to th

e sa

me

job

or

empl

oyer

17©

2011

Kap

lan,

Inc.

Wor

kers

’ Com

pens

atio

n an

d Em

ploy

ers’

Li

abili

ty P

olic

y•

Gen

eral

sec

tion

•Pa

rt I –

Wor

kers

’ com

pens

atio

n in

sura

nce

•Pa

rt II

–Em

ploy

ers’

liab

ility

insu

ranc

e

•Pa

rt III

–O

ther

sta

tes’

insu

ranc

e

•Pa

rt IV

–In

sure

d’s

dutie

s

18©

2011

Kap

lan,

Inc.

•Pa

rt V

–Pr

emiu

m

•Pa

rt V

I –C

ondi

tions

Gen

eral

Sec

tion

•D

efin

ition

s–

Who

is a

n in

sure

d –

the

empl

oyer

list

ed o

n th

e de

clar

atio

ns p

age

and

any

one

of th

e pa

rtner

s in

a

partn

ersh

ip li

sted

on

the

decl

arat

ions

pag

e. W

orke

rs’

com

pens

atio

n is

a c

ontr

act b

etw

een

the

empl

oyer

an

d in

sure

r.

–W

orke

rs’c

ompe

nsat

ion

law

–th

ew

orke

rs’

19©

2011

Kap

lan,

Inc.

Wor

kers

com

pens

atio

n la

w

the

wor

kers

co

mpe

nsat

ion

law

of e

ach

stat

e an

d te

rrito

ry is

list

ed

on th

e de

clar

atio

ns p

age

Gen

eral

Sec

tion

•D

efin

ition

s (c

ontin

ued)

–S

tate

–an

y st

ate

of th

e U

nite

d S

tate

s an

d th

e D

istri

ct

of C

olum

bia

–Lo

catio

ns –

the

polic

y co

vers

all

wor

kpla

ces

liste

d on

th

e de

clar

atio

ns p

age

unle

ss th

e em

ploy

er h

as o

ther

in

sura

nce

for s

uch

wor

kpla

ces

20©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 218 6/23/2011 8:58:06 AM

219

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Part

I: W

orke

rs’ C

ompe

nsat

ion

Insu

ranc

e

•O

utlin

es th

e du

ties

and

right

s of

the

insu

rer

•O

blig

ates

the

insu

rer t

o pa

y st

atut

ory

bene

fits

acco

rdin

g to

the

law

s of

any

sta

te li

sted

on

the

info

rmat

ion

page

•Th

e in

sure

r agr

ees

to p

ay b

enef

its p

rom

ptly

and

de

fend

any

cla

im a

gain

st th

e in

sure

d (in

clud

ing

21©

2011

Kap

lan,

Inc.

yg

(g

defe

nse

and

litig

atio

n co

sts)

Part

I: W

orke

rs’ C

ompe

nsat

ion

Insu

ranc

e

•Th

e in

sure

r is

not r

equi

red

to m

ake

paym

ents

in

exce

ssof

the

stat

em

anda

ted

bene

fits

exce

ss o

f the

sta

te-m

anda

ted

bene

fits

•Th

e in

sure

r ret

ains

the

right

of s

ubro

gatio

n in

the

even

t a n

eglig

ent t

hird

par

ty c

ause

d th

e lo

ss

22©

2011

Kap

lan,

Inc.

Part

II: E

mpl

oyer

s’ L

iabi

lity

•H

andl

es th

ird-p

arty

cla

ims

filed

aga

inst

the

em

ploy

erem

ploy

er–

Sui

ts b

roug

ht b

y sp

ouse

s or

dep

ende

nts

of in

jure

d w

orke

rs

•Pa

rt II

isn’

t no-

faul

t cov

erag

e go

vern

ed b

y st

ate

law

. The

re m

ust b

e ne

glig

ence

to p

ursu

e a

li

lii

bli

hd

bh

id

d

23©

2011

Kap

lan,

Inc.

clai

m, l

imits

are

est

ablis

hed

by th

e in

sure

d, a

nd

dam

ages

are

aw

arde

d th

roug

h ci

vil p

roce

edin

gs.

•D

oes

not c

over

pun

itive

dam

ages

Part

III:

Oth

er S

tate

s’ In

sura

nce

•C

over

s be

nefit

s to

em

ploy

ees

if an

em

ploy

er

begi

nsw

ork

inan

othe

rsta

tebe

gins

wor

k in

ano

ther

sta

te

•Th

e st

ate

mus

t be

liste

d on

the

decl

arat

ions

pa

ge a

nd th

e em

ploy

er m

ust p

rovi

de n

otic

e to

th

e in

sure

r as

soon

as

wor

k be

gins

in a

new

st

ate

24©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 219 6/23/2011 8:58:07 AM

220

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Part

IV: T

he In

sure

d’s

Dut

ies

•If

inju

ry o

ccur

s, th

e in

sure

d m

ust:

–Im

med

iate

ly n

otify

the

insu

ranc

e co

mpa

ny

–P

rovi

de im

med

iate

med

ical

atte

ntio

n an

d ot

her

serv

ices

requ

ired

by la

w

–C

oope

rate

with

and

ass

ist t

he in

sura

nce

com

pany

–D

ono

thin

gth

atw

ould

inte

rfere

with

the

insu

rer’s

right

25©

2011

Kap

lan,

Inc.

Do

noth

ing

that

wou

ld in

terfe

re w

ith th

e in

sure

rs ri

ght

to s

ubro

gate

–N

ot v

olun

taril

y m

ake

paym

ents

or a

ssum

e ob

ligat

ions

co

nnec

ted

with

the

inju

ry

Part

V: P

rem

ium

•In

itial

pol

icy

prem

ium

s ar

e ba

sed

on p

ayro

ll an

d an

estim

ate

ofth

eris

kex

posu

res

the

insu

red

will

an e

stim

ate

of th

e ris

k ex

posu

res

the

insu

red

will

have

dur

ing

the

polic

y pe

riod

•W

orke

rs’ c

ompe

nsat

ion

rate

s ar

e ba

sed

on h

ow

man

y $1

00 o

f pay

roll

is p

aid

to e

ach

job

clas

sific

atio

n

26©

2011

Kap

lan,

Inc.

•Jo

b cl

assi

ficat

ion

–Th

e in

sure

r cat

egor

izes

em

ploy

ees

base

d on

thei

r job

du

ties

and

expo

sure

to w

ork-

rela

ted

inju

ries

Part

V: P

rem

ium

•Ex

ampl

e:–

The

rate

for c

leric

al w

orke

rs is

60

cent

s fo

r eve

ry

$100

of p

ayro

ll. T

he to

tal p

ayro

ll fo

r cle

rical

wor

kers

is

$100

,000

.

–Th

e nu

mbe

r of $

100

of p

ayro

ll pa

id to

cle

rical

wor

kers

is

1,0

00 ($

100,

000

÷$1

00 =

1,0

00)

Thl

ii

$600

fth

ij

bl

ifiti

27©

2011

Kap

lan,

Inc.

–Th

e an

nual

pre

miu

m is

$60

0 fo

r thi

s jo

b cl

assi

ficat

ion

(1,0

00 ×

60 c

ents

)

Part

V: P

rem

ium

•Ex

perie

nce

mod

ifica

tion

fact

or–

The

prem

ium

is m

odifi

ed a

ccor

ding

to th

e in

sure

d’s

clai

ms

expe

rienc

e of

the

past

thre

e ye

ars

–Th

e em

ploy

er is

com

pare

d to

oth

ers

in th

e in

dust

ry

with

rega

rds

to lo

ss fr

eque

ncy

and

seve

rity

28©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 220 6/23/2011 8:58:07 AM

221

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Part

V: P

rem

ium

•Ex

perie

nce

mod

ifica

tion

fact

or (c

ontin

ued)

–If

the

insu

red

has

a lo

ss h

isto

ry th

at is

bet

ter t

han

the

aver

age

wor

kers

’ com

pens

atio

n ris

k, a

n ex

perie

nce

mod

ifica

tion

fact

or w

ill b

e ap

plie

d to

redu

ce th

e pr

emiu

m

–If

the

insu

red

has

a lo

ss h

isto

ry w

orse

than

ave

rage

, a

surc

harg

ew

illbe

appl

ied

toin

crea

seth

epr

emiu

m

29©

2011

Kap

lan,

Inc.

a su

rcha

rge

will

be

appl

ied

to in

crea

se th

e pr

emiu

m

Part

V: P

rem

ium

•Si

nce

the

initi

al w

orke

rs’ c

ompe

nsat

ion

prem

ium

is

paid

inad

vanc

eba

sed

ones

timat

edfa

ctor

sa

is p

aid

in a

dvan

ce b

ased

on

estim

ated

fact

ors,

a

prem

ium

aud

it is

con

duct

ed a

t the

end

of t

he

polic

y pe

riod

–If

the

expo

sure

is d

eter

min

ed to

be

grea

ter t

han

orig

inal

ly e

stim

ated

, the

firs

t nam

ed in

sure

d is

bill

ed

fort

head

ditio

nala

mou

ntof

prem

ium

due

30©

2011

Kap

lan,

Inc.

for t

he a

dditi

onal

am

ount

of p

rem

ium

due

–If

the

expo

sure

is d

eter

min

ed to

be

less

than

orig

inal

ly

estim

ated

, the

firs

t nam

ed in

sure

d re

ceiv

es a

refu

nd

for t

he a

pplic

able

am

ount

Part

VI:

Con

ditio

ns

•Th

e in

sure

r has

the

right

to in

spec

t all

insu

red

wor

kpla

ces

fors

afet

yw

orkp

lace

s fo

r saf

ety

•Th

e fir

st n

amed

insu

red

will

rece

ive

all n

otic

es

and

over

paid

pre

miu

ms

31©

2011

Kap

lan,

Inc.

Ass

igne

d R

isk

Plan

•Pr

ovid

es c

over

age

to e

mpl

oyer

s th

at h

ave

been

re

fuse

dco

vera

geby

alic

ense

din

sura

nce

refu

sed

cove

rage

by

a lic

ense

d in

sura

nce

com

pany

32©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 221 6/23/2011 8:58:08 AM

222

Less

on E

ight

een

Wor

kers

’ Com

pens

atio

n

Min

neso

ta S

peci

al C

ompe

nsat

ion

Fund

•Pr

ovid

es b

enef

its to

em

ploy

ees

who

hav

e be

en

inju

red

onth

ejo

ban

dth

eire

mpl

oyer

faile

dto

inju

red

on th

e jo

b an

d th

eir e

mpl

oyer

faile

d to

pr

ovid

e w

orke

rs’ c

ompe

nsat

ion

cove

rage

33©

2011

Kap

lan,

Inc.

Min

neso

ta R

egul

atio

ns

•R

evie

w th

e M

inne

sota

Pro

perty

and

Cas

ualty

In

sura

nce

law

supp

lem

entf

orad

ditio

nal

Insu

ranc

e la

w s

uppl

emen

t for

add

ition

al

wor

kers

’ com

pens

atio

n re

gula

tions

34©

2011

Kap

lan,

Inc.

MN_P&C_CN.indb 222 6/23/2011 8:58:08 AM

Class notesLesson Reviews

MN_P&C_CN.indb 223 6/23/2011 8:58:08 AM

MN_P&C_CN.indb 224 6/23/2011 8:58:08 AM

225

L E S S O N O N E R E v i E W

1. Which of the following legal terms indicates that a life insurance contract contains the legally enforceable promise of only 1 party?

AdhesionA. UnilateralB. ConditionalC. AleatoryD.

2. The owner of a camera store is worried that her new employees may help themselves to items from inventory without paying for them. What kind of hazard does this describe?

PhysicalA. EthicalB. MoraleC. MoralD.

3. All of the following statements describe risk avoidance EXCEPT

Bill won’t fly an airplaneA. Wendy keeps her money out of the stock B. marketPat pays his insurance premiumC. John never drives a carD.

4. Which of the following statements is CORRECT?

Only speculative risks are insurable.A. Only pure risks are insurable.B. Both pure risks and speculative risks are C. insurable.Neither pure risks nor speculative risks are D. insurable.

5. Buying insurance is one of the most effective ways of

avoiding riskA. transferring riskB. reducing riskC. retaining riskD.

6. An example of an insurance company that is owned by its policyholders is

a mutual life insurance companyA. a stock insurance companyB. a parent companyC. a domestic companyD.

7. Which of the following statements regarding utmost good faith in insurance contracts is CORRECT?

The concept of utmost good faith only A. applies to the insurer.Although a warranty is a statement, it is not B. technically part of the contract.A representation is a statement that the C. applicant guarantees to be true.Statements made in an application for an D. insurance policy are usually considered to be representations, not warranties.

8. An insurable risk has all of the following characteristics EXCEPT

the loss produces financial distressA. the loss is accidentalB. there are a small number of similar risk C. exposuresthe loss must not be catastrophic to the D. insurer

9. The conditions section of an insurance contract sets forth

the limits of liability under the contractA. the coverages provided by the contractB. the duties of the insured and insurance C. companythe exclusions of coverage under the D. contract

10. A property/casualty policy may be amended withan endorsementA. a riderB. an amendmentC. an adjustmentD.

MN_P&C_CN.indb 225 6/23/2011 8:58:08 AM

226

11. When must an insurable interest exist in property/casualty insurance?

At the time of applicationA. At the time the policy is deliveredB. At the time of lossC. At the policy’s renewal dateD.

12. Which section of the policy will identify those losses NOT covered?

DefinitionsA. Insuring agreementB. ConditionsC. ExclusionsD.

13. The limits of liability are found in which of the following sections of a casualty policy?

ConditionsA. Insuring agreementB. DeclarationsC. DefinitionsD.

14. An insurance policy covers fire, will not cover nuclear contamination, and losses must be reported as soon as possible. In that order, where are these facts found in a policy?

Insuring agreement, exclusions, conditionsA. Declarations, insuring agreement, exclusionsB. Insuring agreement, exclusions, proof of lossC. Conditions, declarations, exclusionsD.

15. After a fire loss, a homeowner incurs hotel, dining, and laundry expenses. The additional expenses are an example of

a direct lossA. a subsequential lossB. an indirect lossC. an unrelated lossD.

16. Which of the following terms best describes the uncertainty of loss?

HazardA. RiskB. PerilC. InsuranceD.

17. A peril is best defined asthe cause of a lossA. a condition that increases the likelihood of B. lossthe certainty of lossC. the impossibility of lossD.

18. A small business owner sets fire to his warehouse to collect the insurance proceeds. This is considered what kind of hazard?

PerilA. PhysicalB. MoraleC. MoralD.

19. A wet floor in a grocery store would be considered what type of hazard?

PerilA. PhysicalB. MoraleC. MoralD.

20. Which of the following is TRUE about mutual companies?

They always pay dividends to their A. stockholders.They are owned by policyholders.B. They are managed by an attorney-in-fact.C. They are managed by the lodge system.D.

21. Who decides if a risk is acceptable to the insurance company?

AdjusterA. AgentB. UnderwriterC. ActuaryD.

22. An insurance brokerrepresents the consumerA. represents the insurerB. cannot sell group insuranceC. must have at least 3 years’ experience as an D. agent before becoming licensed as a broker

MN_P&C_CN.indb 226 6/23/2011 8:58:08 AM

227

23. Who sets premiums for the insurance company?AdjusterA. AgentB. UnderwriterC. ActuaryD.

24. Stock insurers will typically sell which of the following policies?

Participating policiesA. Mutual policiesB. Non-participating policiesC. Assessable policiesD.

25. Which principle of insurance states that the insured should be restored to approximately the same financial position that existed prior to the loss?

Insurable interestA. Utmost good faithB. SubrogationC. IndemnityD.

26. Which of the following loss settlement methods uses replacement cost minus depreciation?

Replacement costA. Actual cash valueB. Valued policyC. Face valueD.

27. All of the following statements regarding the principle of subrogation are true EXCEPT

prevents the insured from collecting twiceA. holds the negligent person responsible for B. the losstends to hold down insurance rates for good C. risksnot used in property/casualty insuranceD.

28. Hold harmless agreements are an example of which risk management technique?

RetentionA. DeductiblesB. TransferC. AvoidanceD.

29. Which of the following statements are TRUE regarding warranties?

Must be true if the insurer is to be liable for A. the lossBecomes part of the policyB. Voids the policy if breachedC. All of the aboveD.

30. Which of the following modifies coverage in a life insurance policy?

ConsiderationA. RiderB. EndorsementC. DeclarationsD.

31. Which of the following modifies coverage in a property insurance policy?

ConsiderationA. RiderB. EndorsementC. DeclarationsD.

32. Which of the following is NOT a reason for a deductible?

Increases premiumsA. Reduces morale hazardsB. Eliminates small claimsC. Reduces premiumsD.

33. A statement on an application for insurance that is believed to be entirely true is called

a warrantyA. a representationB. a binderC. a lieD.

34. A material misrepresentation will usually do which of the following?

Decrease premiumsA. Result in a higher deductibleB. Speed up the underwriting processC. Void coverageD.

35. A contract of adhesion is one thatcan never be cancelledA. is valid for only 1 yearB. cannot be negotiatedC. involves the use of an oral binderD.

MN_P&C_CN.indb 227 6/23/2011 8:58:09 AM

228

36. The perils covered by the policy will be found in the conditionsA. the insuring agreementB. the declarationsC. the exclusionsD.

37. What policy provision is used to determine claim payments when more than 1 property insurance policy covers the same loss?

Coordination of benefitsA. CoinsuranceB. Pro-rata liabilityC. Duplication of benefitsD.

38. What type of deductible is an all or nothing proposition?

StraightA. FranchiseB. AggregateC. CorridorD.

39. What type of insurance is used to insure unique, one-of-a-kind risks?

Surplus linesA. Inland marineB. Allied linesC. CasualtyD.

40. What type of additional license is required to sell variable life insurance and variable annuities?

MEWAA. Surplus linesB. Credit lifeC. FINRAD.

41. What part of an insurance policy will state the period of coverage?

DeclarationsA. Insuring agreementB. ConditionsC. ExclusionsD.

42. Which principle states that as the number of risk exposures increases, the accuracy of the insurer’s loss projections increases?

Adverse selectionA. Risk managementB. Law of large numbersC. Law of indemnityD.

43. Which of the following is NOT an insurable risk?

The risk of losing money from theftA. The risk of premature deathB. The risk of losing a domestic shipment due C. to the perils of transportationThe risk of losing money due to changes in D. the value of investments

44. Which of the following is a hazard?FireA. Missing handrail on a roller coasterB. Reduction of property value due to hail C. damageDeathD.

45. Subrogation is best described asthe insurance company transfers excess to A. another partyhigh-risk individuals seek out insurance B. before othersthe insurer acts in place of the insured to C. collect loss payments from a negligent third partyan incorrect statement made on an D. application for insurance

46. Which of the following terms best describes the intentional failure to disclose a material fact on an application for insurance?

ConcealmentA. Material misrepresentationB. WarrantyC. ReplevinD.

MN_P&C_CN.indb 228 6/23/2011 8:58:09 AM

229

47. The first premium payment and the statements made by the insured on an application constitute

the declarationsA. the adhesionB. the binderC. the considerationD.

48. All of the following are characteristics of an insurance contract EXCEPT

the insurance company assumes risk from A. the insuredthe insured must make truthful B. representations when applying for coveragethere is an equal value exchanged between C. the parties to the contractthe insurance company is the only party that D. makes a legally enforceable promise

49. An insurance company incorporated in the state of Wisconsin that does business in Minnesota is considered

a domestic companyA. a foreign companyB. an alien companyC. a non-resident companyD.

MN_P&C_CN.indb 229 6/23/2011 8:58:09 AM

230

L E S S O N O N E A N S W E R S A N D R A T i O N A L E S

1. B. The insurance company is the only party whose promise is legally enforceable.

2. D. A moral hazard involves dishonest tendencies.

3. C. Avoiding a risky activity is 1 method of risk management.

4. B. Pure risk involves the chance of loss only and therefore is insurable.

5. B. Purchasing insurance involves shifting, or transferring, the financial burden of a loss to the insurer.

6. A. Mutual insurers sell insurance to the general public and are owned by their policyholders.

7. D. Warranties are statements that must be true at the time of the loss.

8. C. For a risk to be insurable, there must be a large number of similar exposures.

9. C. The conditions section of a policy outlines the duties of the company and the customer.

10. A. Endorsements are used to amend (change) property/casualty contracts.

11. C. With property/casualty contracts, an insurable interest must be demonstrated at the time of loss for the insurer to handle the claim.

12. D. The exclusions section of the policy will list those perils/losses not covered by the policy.

13. C. The declarations page will provide policy limits (aka limits of liability).

14. A. The insuring agreement describes what is covered; exclusions outlines what’s not covered, and the conditions sections describes duties of the insured.

15. C. Hotel and laundry expenses following a fire loss are examples of indirect losses.

16. B. Risk is the uncertainty of loss.

17. A. Perils directly cause a loss.

18. D. Fraud is a moral hazard.

19. B. Physical hazards are visible.

20. B. Mutuals can, but don’t always, pay dividends and are managed by a board of directors.

21. C. Underwriters are primarily responsible for accepting or rejecting new applications.

22. A. Brokers represent the customer; agents represent the insurer. Brokers can sell group insurance and need not have 3 years of experience as an agent.

23. D. Actuaries establish premiums.

24. C. Stock insurers are for-profit corporations. They generally issue non-participating policies.

25. D. Through indemnity, insurers restore customers to their pre-loss condition.

26. B. Actual cash value equals replacement cost minus depreciation.

27. D. Subrogation is commonly used in property/casualty contracts.

MN_P&C_CN.indb 230 6/23/2011 8:58:09 AM

231

28. C. Through a hold harmless agreement, landlords transfer liability to their tenants.

29. D. All of these statements are true.

30. B. Riders modify life policies.

31. C. Endorsements modify property policies.

32. A. Deductibles reduce premiums.

33. B. Representations are statements made that are believed to be entirely true.

34. D. Material misrepresentations will usually void coverage.

35. C. Contracts of adhesion must be accepted “as-is” and cannot be altered through negotiation.

36. B. The insuring agreement outlines the perils covered by the policy.

37. C. Pro-rata provisions determine payments when multiple property policies provide coverage.

38. B. Franchise deductibles will pay nothing for losses beneath the deductible and will pay in full for losses that exceed the deductible.

39. A. Surplus lines insurance is used to insure unique one-of-a-kind risks.

40. D. A FINRA license is required to sell variable insurance products.

41. A. The period of coverage would be stated in the declarations section.

42. C. The law of large numbers states that the accuracy of an insurer’s projections improves as the number of individual risk exposures increases.

43. D. Investing involves a chance for loss or gain. This is a form of speculative risk and cannot be insured.

44. B. Physical hazards (e.g., missing handrail on a rollercoaster) increase the frequency or severity of a loss.

45. C. If an insured is not to blame for an accident, the insured can pursue a claim against the negligent party. If the insured instead collects from his own insurer, his insurer will then collect from the negligent party.

46. A. Concealment is the intentional failure to disclose a material fact on an application for insurance.

47. D. A customer’s consideration includes her premium dollars and her statements on the application.

48. C. Insurance contracts are aleatory—an unequal value is exchanged between parties to the contract (e.g., after a modest premium, a customer may receive a large claim settlement).

49. B. A company that is incorporated in another state doing business in Minnesota is a foreign company.

MN_P&C_CN.indb 231 6/23/2011 8:58:09 AM

232

L E S S O N S i X R E v i E W

1. All of the following people are required to be licensed as an insurance producer in Minnesota EXCEPT

a telemarketing assistant who works part A. time at an insurance agencyan underwriter at the home office of an B. insurance companya bank teller who occasionally sells annuities C. to customersa group insurance broker who explains D. policy provisions to clients

2. To whom may the Commissioner of Commerce issue a 180-day temporary license?

The surviving spouse of a deceased producerA. A person who has registered to take the B. insurance licensing examA resident producer in another state who C. has no intention of establishing residency in MinnesotaAn insurance company that is waiting to D. obtain its Certificate of Authority

3. All of the following are requirements of individuals seeking to obtain a Minnesota insurance license for the first time EXCEPT

apply for a permanent insurance license A. within 3 years of passing the licensing exampass a licensing exam with a score of 70% or B. higherpost a performance bond of $20,000 or moreC. pay the appropriate licensing feeD.

4. When producers renew their insurance licenses, how many hours of continuing education will they be required to take in the subsequent license period?

40A. 24B. 20C. 10D.

5. What is the maximum fine that the Commerce Department may levy against a producer or insurance company that has violated Minnesota insurance law?

$700A. $3,000B. $5,000C. $10,000D.

6. If an insurance company terminates a producer’s company appointment based on a complaint or alleged violation of law, it must forward written notification to the Commerce Department within how many days?

30 daysA. 15 daysB. 10 daysC. 5 daysD.

7. What term describes a producer’s responsibility to promptly remit all premiums received in connection with an insurance transaction to the insurer?

EstoppelA. Vicarious liabilityB. Utmost good faithC. Fiduciary responsibilityD.

8. All of the following acts by a licensed insurance producer would be a violation of Minnesota law EXCEPT

recommending that a client increase policy A. limitsproviding a policy brochure that is not B. materially accuratecriticizing another insurer’s financial C. standingfailing to maintain complaint files for 6 yearsD.

MN_P&C_CN.indb 232 6/23/2011 8:58:09 AM

233

9. According to Minnesota law, who bears ultimate responsibility for all misrepresentations made by an insurance producer?

The producerA. The Commissioner of CommerceB. The insurerC. The policyownerD.

10. When licensed producers change their addresses, they must notify the Commerce Department within how many days?

30 daysA. 7 daysB. 10 daysC. 14 daysD.

11. Which of the following acts by an insurance producer would be an automatic gross misdemeanor on the first offense?

MisrepresentationA. TwistingB. Misappropriation of fundsC. ForgeryD.

12. If a licensed insurance producer in Minnesota charges a service fee to customers, what is the producer required to do?

Provide written disclosure of the fee to A. clientsFile the fee with the Commerce DepartmentB. Immediately remit the fee to the insurerC. Notify the clients that any fees charged by D. the producer are part of the regular premium payment

13. An admitted carrier is an insurance company that has received

a letter of clearance from the National A. Association of Insurance Commissionersa certificate of authorization from the B. Securities and Exchange Commissiona certificate of authority from the C. Department of Commercea producer’s license from the Department of D. Commerce

14. If a licensed insurance producer is a party to a criminal prosecution, what must the producer do?

Plead guilty to the charge and forward a A. confession to the Commerce Department within 5 daysNotify the Commerce Department of the B. charges within 30 days of the initial pretrial hearing dateRefrain from selling insurance until the C. matter has been resolved and the producer has been found innocent of all chargesNotify the Commerce Department of the D. charges within 30 days of the jury’s final decision

15. If producers are convicted of a felony, they must notify the Commerce Department within

10 daysA. 14 daysB. 30 daysC. 60 daysD.

16. Which of the following statements best describes a producer’s responsibility to obtain a company appointment before selling insurance on behalf of an insurance company?

A producer may never sell insurance on A. behalf of an insurance company unless the producer has first received an appointment from that company.A producer only needs to obtain an B. appointment from an insurance company if the producer sells for the company on a full-time basis.If a producer is not appointed with an C. insurance company, the producer may only sell for that company if the producer receives no commissions from the sale.If a producer is not appointed with an D. insurance company, the producer must be appointed within 15 days of submitting the producer’s first application to the insurer.

MN_P&C_CN.indb 233 6/23/2011 8:58:09 AM

234

17. If a licensed insurance producer has disciplinary action taken against another regulated, professional license, the producer must notify the Commerce Department within

14 days of being accused of the offenseA. 30 days of the final disposition of the matterB. 30 days of the initial pretrial hearing C. 14 days of arraignment in district courtD.

18. Minnesota law requires all insurance policies sold in this state to

be readable to a person of average A. intelligence, experience, and educationbe written at a 6th grade reading levelB. be written at a 10th grade reading levelC. be readable to most insurance producersD.

19. How is the Commissioner of Commerce selected?

Elected by the peopleA. Elected by the legislatureB. Appointed by the Attorney GeneralC. Appointed by the GovernorD.

20. Which of the following actions by an insurance company would be considered an unfair claims settlement practice under Minnesota law?

Denying a claim because the insured did not A. comply with all policy provisionsRequiring the insured to submit to a medical B. exam before approving coverage for surgeryRequiring the insured’s car to be taken to C. the insurer’s drive-in claims facility before paying the claimDenying a claim because the insured refused D. to cooperate with the insurer

21. The authority that an insurer gives to its producers by means of the agency agreement is known as

implied authorityA. express authorityB. fiduciary responsibilityC. general authorityD.

22. One who acts on behalf of someone else is called a principalA. an estoppelB. an agentC. a consignorD.

23. Oral binders must be followed up in writing within

1 business dayA. 3 business daysB. 5 business daysC. 10 business daysD.

24. According to the Fair Credit Reporting Act, which of the following statements is TRUE regarding information collected about an applicant for insurance?

No permission is required to collect A. information about the applicant.The insurer may share information about B. the applicant with anyone.The insurer is prohibited from collecting C. information about the applicant under any circumstances.The applicant’s permission is required before D. any information can be collected.

25. When do insurance licenses expire in Minnesota?

On the first day of the producer’s birth A. monthOctober 15 of the renewal periodB. On the last day of the producer’s birth C. monthOctober 31 of the renewal periodD.

26. Agent Ann promised an applicant for insurance a $50 gift certificate if the applicant buys insurance from her. What illegal trade practice has she committed?

RebatingA. RefundingB. TwistingC. CoercionD.

MN_P&C_CN.indb 234 6/23/2011 8:58:10 AM

235

27. Broker Bill convinces a prospect to cancel an existing life insurance policy that is better than the replacement policy he is selling. In what illegal trade practice has he engaged?

FlippingA. RebatingB. DiscountingC. TwistingD.

28. Refund checks must be delivered to the insured within

3 daysA. 5 daysB. 10 daysC. 30 daysD.

29. Powers that a reasonable person would assume the agent has that are NOT outlined in the agency agreement are referred to as

express authorityA. apparent authorityB. implied authorityC. limited authorityD.

30. The Commissioner of Commerce has all of the following powers EXCEPT

the power to create rules that assist the A. enforcement of lawthe power to make lawsB. the power to enforce lawsC. the power to approve policy formsD.

31. If a non-admitted carrier sells insurance in Minnesota without using a surplus lines agent

the carrier has done nothing wrongA. the policies will be declared null and voidB. the policies are legally enforceableC. the policies will be regulated by the state in D. which the carrier is domiciled

32. According to Minnesota Statute, which of the following course topics cannot be approved for continuing education credit?

Universal life insurance A. Surplus lines insuranceB. Using umbrella policies to protect against C. catastrophic lossesUsing agency management software to D. streamline business operations

33. How many hours of continuing education credit can be carried over from one license period to the next?

0A. 5B. 15C. 30D.

34. Who is eligible to receive a non-resident agent’s license in the state of Minnesota?

A resident of Wisconsin who is not licensed A. in her home state but wants to sell insurance in MinnesotaA resident of Minnesota who wants to sell B. insurance in other statesA resident of Michigan who is licensed C. in her home state and would like to sell insurance in MinnesotaA resident of Illinois who would like to D. move to Minnesota and establish permanent residency here

35. If agents wish to reapply for their insurance licenses after having them revoked, what must they do?

Submit 5 letters of reference indicating that A. they have been reformedWait at least 5 years after revocation before B. reapplying and post an appeal bond of $10,000Wait at least 3 years before reapplying C. and submit at least 3 letters of reference indicating that they have not engaged in illegal or unethical behaviorWait at least 2 years before reapplying and D. post a performance bond of $20,000

36. If an agent’s company appointment is terminated, how many days does the agent have to file comments about the termination with the Commerce Department?

30 daysA. 14 daysB. 10 daysC. 5 daysD.

MN_P&C_CN.indb 235 6/23/2011 8:58:10 AM

236

37. What must agents do any time they make a personal solicitation for insurance?

Notify the Commerce Department A. Provide verbal disclosure of their name, the B. insurer or agency they represent, and the fact that they are in the business of selling insuranceInquire about the applicant’s character, C. general reputation, and mode of livingProvide written disclosure of their name, the D. insurer or agency they represent, and the fact that they are in the business of selling insurance

38. What term describes the practice of charging different premiums to entities in the same risk classification?

RebatingA. DiscriminationB. UnderwritingC. DefamationD.

39. Licensed agents are required to keep their complaint records on file for

3 years from the date the complaint is madeA. 3 years from the date the Commerce B. Department completes its investigation6 years from the date the complaint is madeC. 7 years from the date the complaint is madeD.

40. Licensed agents must abide by all of the following standards EXCEPT

high standards of commercial honorA. deliver new policies within 30 days of B. receiptuse receipts when accepting money from a C. clientconspicuously display all company D. appointments in their place of business

41. Insurance policies must be writtenat an 8th grade reading level or lessA. at a 6th grade reading level or lessB. in a manner that the Commerce C. Commissioner can understandin a manner that a licensed agent can D. understand

42. Which of the following is an unfair claims settlement practice?

Reaching an out-of-court settlement with a A. claimantRefusing to pay a claim that occurred after B. the policy was cancelled for non-payment of premiumReducing the amount of a claim to reflect C. depreciation of the insured propertyRefusing to pay a claim because the insured D. did not use the proper claim form

43. All of the following are forms of insurance advertising that are subject to regulation by the Commerce Department EXCEPT

a prepared sales presentationA. a form letter sent to clientsB. a brochure designed to recruit new agentsC. a radio advertisement for an insurance D. company

44. Minnesota law would prohibit which of the following statements made by an insurance agent?

“Our insurance company has a proven track A. record of financial strength and stability.”“Our insurance company guarantees B. dividend payments to policyholders.”“Our insurance company cares about our C. customers.”“Our insurance company guarantees your D. satisfaction.”

45. The Commerce Department may discipline an agent using any of the following punishments EXCEPT

a 90-day jail sentenceA. a $5,000 fineB. a 6-month license suspensionC. a letter of censureD.

46. Who is ultimately responsible for the fraudulent activities of an agent who otherwise acts within the scope of his authority?

The Commerce DepartmentA. The Attorney GeneralB. The insurerC. No oneD.

MN_P&C_CN.indb 236 6/23/2011 8:58:10 AM

237

47. All of the following individuals are required by Minnesota law to hold an insurance agent’s license EXCEPT

a person who takes inbound sales calls but A. does not initiate the contacta person who works in an insurance agency B. and answers questions about insurance policiesa person who works in the home office of an C. insurance company and determines whether or not to accept an application for insurancea person who sells annuitiesD.

48. Who is responsible for determining whether or not an insurance policy is suitable for a client’s individual circumstances?

The insurance companyA. The agentB. The clientC. The Commerce DepartmentD.

49. Implied authority is authority held by the agent that

is specifically referred to in the agency A. agreementis provided by statuteB. a reasonable person would presume the C. agent hasis not given by the agency agreement but is D. necessary to complete the functions allowed in the agency agreement

50. Insurance companies are required to keep their claim records on file for

6 years from the date the claim is paid or A. denied4 years from the date the claim is paid or B. denied3 years from the date the claim is paid or C. denied1 year from the date the claim is paid or D. denied

51. The free-look period for newly issued insurance policies lasts for

10 days from the date the policy is delivered A. to the insured10 days from the date the policy is issuedB. 30 days from the date the policy is delivered C. to the insured30 days from the date the policy is issuedD.

52. Which of the following individuals must be licensed as a producer?

An insurance company underwriterA. A member of a stock company’s board of B. directorsA person who settles claims for an insurerC. A person who explain policy benefits and D. provisions to a client

MN_P&C_CN.indb 237 6/23/2011 8:58:10 AM

238

L E S S O N S i X A N S W E R S A N D R A T i O N A L E S

1. B. An underwriter is not required to be licensed as a sales producer due to the fact that the underwriter is not selling insurance to the consumer.

2. A. A surviving spouse would have the right to assume ownership of the deceased agent’s “book of business.” The surviving spouse would be granted the opportunity to either sell the book back to the insurance company or step in and start running the agency.

3. C. The $20,000 performance bond is only required if an agent is allowed to be relicensed after revocation.

4. B. The required amount of continuing education in every licensing period other than the initial period is 24 hours.

5. D. The Commerce Department is allowed to fine a producer up to $10,000 per violation.

6. A. Thirty days’ notification must be sent to the Commerce Department if an insurance company cancels an appointment for any reason.

7. D. Fiduciary responsibility is part of the agency agreement and includes the agent’s promise to remit all money from the sale of insurance contracts in a prompt and timely manner.

8. A. Recommending an increase in coverage is not a violation of Minnesota laws or statutes; it is an expectation of the producer to safeguard the clients’ best interest.

9. C. The insurance company is ultimately responsible for all acts of the agent when the agent is acting within the scope of the agent’s authority. This would include any errors or omissions made by the agent.

10. C. The agent must notify the Commerce Department in writing within 10 days if there is a change to any of the information provided on the initial license application.

11. D. While all answers would lead to disciplinary action against the agent, forgery is the only offense that is an automatic gross misdemeanor on the first offense.

12. A. While it is legal for a licensed producer to charge a service fee to a client, Minnesota statute specifies that this fee must be reasonable and must be fully disclosed in writing to the client.

13. C. An admitted carrier is an insurance company that has been granted a certificate of authority from the Commerce Department. The certificate of authority is the insurance company license to legally transact business in the state of Minnesota.

14. B. If a licensed agent is a party to a criminal prosecution, the agent must notify the Commerce Department within 30 days of the initial pretrial hearing date and forward all relevant documents and paperwork involved in the case to the attention of the Commissioner of Commerce.

MN_P&C_CN.indb 238 6/23/2011 8:58:10 AM

239

15. A. If a licensed agent is convicted of, pleads guilty to, or pleads no contest to a felony, the agent must notify the Commerce Department within 10 days of the conviction.

16. D. A licensed producer, if given permission by an insurer, may transact business on behalf of that company. The company must obtain an appointment for this producer within 15 days of receiving the agent’s first written application submission.

17. B. If the producer holds another professional license and disciplinary action is taken against that other license, the producer must notify the Commerce Department in writing within 30 days of the final disposition of that matter.

18. A. The Flesch Test, held to be the standard under Minnesota statute, requires that all insurance policies sold in the state of Minnesota be readable to a person of average intelligence and to someone with an 8th grade reading level.

19. D. The Commissioner of Commerce is appointed by the Governor. This is a subset provision to the McCarran Ferguson Act, which gives the individual states and not the federal government the right to regulate the insurance industry within their own borders and boundaries.

20. C. The insurance company cannot require the insured bring the insured’s car to a specific spot or require the insured drive unreasonable distances for the purpose of being able to have the insured’s claim paid. The claim cannot be denied based on refusal to go to the insurance company’s drive-in claims facility.

21. B. Express authority is given under the agency agreement. The authority is specifically expressed in writing in the contract.

22. C. Under the general rules of agency, an agent acts on behalf of someone else (the principal).

23. C. Oral binders must be followed up in writing within 5 business days.

24. D. The Fair Credit Reporting Act requires permission from an applicant before information can be collected.

25. C. Licenses are good for 2 years and expire on the last day of the producer’s birth month.

26. A. Offering anything of value as an inducement to buy insurance is called rebating.

27. D. Replacement of insurance to the detriment of a customer is called twisting.

28. B. Refund checks must be returned within 5 days.

29. B. The powers a reasonable person would assume an agent to possess that are not specifically outlined by an agency agreement are referred to as apparent authority.

30. B. The Commissioner of Commerce does not have the power to make laws.

31. C. While it is illegal for a non-admitted carrier to sell insurance without using a surplus lines agent, the policies sold are considered legally enforceable (to protect consumers).

32. D. A course on office management or business software does not qualify for continuing education credits.

33. A. Continuing education credits may not be carried from one licensing period into another licensing period.

MN_P&C_CN.indb 239 6/23/2011 8:58:10 AM

240

34. C. Non-resident licenses are granted to agents who are licensed in (and who reside in) another state.

35. D. After revocation, agents must wait 2 years and post a $20,000 performance bond before reapplying for a license.

36. A. An agent who has lost a company appointment has 30 days to file comments with the Commerce Department.

37. D. Written disclosure of name, business, and the company represented is required when making personal (in-person) solicitations. While verbal disclosure is permitted over the phone, D is the best choice.

38. B. Charging different premiums to entities in the same risk classification is discrimination.

39. C. Financial and complaint records must be retained by agents for 6 years.

40. D. Agents must display their licenses, not their company appointments.

41. A. Policies must be written at an 8th grade reading level.

42. D. Refusing to pay a claim because the proper claim form was not completed is an unfair claims practice. Choices A, B, and C are all acceptable practices.

43. C. Material used to recruit new agents is exempt from advertising regulations.

44. B. Agents are prohibited from stating that dividends are guaranteed.

45. A. The Commerce Department can fine, suspend, or censure agents but cannot impose a jail sentence.

46. C. The insurer (principal) is responsible for the actions of the agent (including fraudulent actions).

47. C. Underwriters do not actively solicit insurance business and do not need to be licensed.

48. B. Agents have a duty to determine the suitability of products for consumers.

49. D. Implied authority is not given by the agency agreement but is necessary to complete agency functions.

50. C. Insurers must retain claim records for 3 years.

51. A. The free-look period lasts for 10 days from the date of delivery.

52. D. Persons who explain policy benefits must be licensed as producers.

MN_P&C_CN.indb 240 6/23/2011 8:58:10 AM

241

L E S S O N S E v E N R E v i E W

1. Which of the following statements best describes actual cash value?

Replacement cost plus appreciationA. Replacement cost less depreciationB. Original cost less appreciationC. Original cost less depreciationD.

2. A car is sold for salvage value following payment of a loss. Who receives the proceeds?

InsuredA. ClaimantB. Insurance companyC. Lien holderD.

3. What does the liberalization clause do to a property policy?

Waives the premium in some situationsA. Broadens coverage if the company adopts a B. change that does not affect the premiumAllows more lenient treatment of C. concealment or fraud in making settlementsGives the company the right to collect D. reimbursement for losses from a negligent 3rd party for damage to insured property

4. Which statement best describes the purpose of the definition of the insured?

To list the named insuredA. To list who is not insuredB. To list who is covered in addition to the C. named insuredTo clearly state that the named insured is D. the only person covered by the policy

5. Which of the following statements about the standard mortgage clause is TRUE?

Nothing the insured does can prevent the A. mortgagee from collecting under the policy.The mortgagee can only collect from the B. policy with the prior written consent of the policyowner.The mortgagee is the only party that can C. submit claims under the policy.The mortgagee has no rights under the D. policy.

6. According to the standard appraisal clause, how are the appraisal expenses handled?

Each party assumes the cost for its own A. appraiser and shares the cost of the arbitrator.The party that loses the decision assumes all B. appraisal expenses.Each party assumes the cost for its own C. appraisal and shares the cost of the umpire.Each party assumes the cost for its own D. appraiser; the losing party pays for the umpire.

7. Bryce owns a $50,000 lake cabin that he has insured for $40,000. If he suffers a $5,000 loss, how much will his insurer pay?

$5,000A. $4,000B. $3,000C. $2,500D.

8. Monica owns a $150,000 home. She carries 2 insurance policies on it; Company A insures $100,000 and Company B insures $50,000. If she suffers a loss to her home of $9,000, how much will Company A pay her?

$9,000A. $6,000B. $4,500C. $3,000D.

MN_P&C_CN.indb 241 6/23/2011 8:58:10 AM

242

9. A court awards $15,000 to an injured party for pain and suffering resulting from a car accident. This is an example of

special damagesA. subjective damagesB. comprehensive damagesC. general damagesD.

10. All of the following perils are covered under broad peril form EXCEPT

domestic animalsA. windstormB. collapseC. vehiclesD.

11. A bailee is defined assomeone who escorts litigants into a A. courtroomsomeone who has taken temporary custody B. of another person’s property for a special purposea bond posted to free someone from jailC. a temporary reprieve from liabilityD.

12. A $1,000,000 commercial property is insured for $400,000. In the event of a $100,000 loss, the insurer would pay

$50,000A. $80,000B. $100,000C. nothingD.

13. Which of the following best describes vacancy?Moderately furnished property, with less A. than 10 residentsInadequately furnished property with no B. residentsFully furnished property with no residentsC. Inadequately furnished property with D. residents

14. All of the following statements about supplemental payments are true EXCEPT

they are paid in addition to applicable limitsA. medical expenses to an injured party will be B. paid without limitdefense and investigation costs are paid C. without limitinterest on judgments are paid without limitD.

15. Which of the following statements best describes open-peril policies?

The insurer will pay for any type of damage A. a property sustains.The insurer will only pay for losses from the B. specific perils listed.The insurer will only pay for those losses C. specifically excluded by the policy.The insurer will not provide coverage for D. those perils specifically excluded by the policy.

16. All of the following perils are covered by the basic peril form EXCEPT

windstormA. pipes freezing or burstingB. hailC. fireD.

17. Which of the following best illustrates vicarious liability?

An employer is sued after an employee A. physically assaulted a customer.A manufacturer is sued for a dangerous B. product.A homeowner is sued for failing to secure an C. exotic animal that attacked a neighbor.A car owner is sued after colliding with a D. parked car.

18. The standard mortgage clause gives the mortgagee all of the following rights EXCEPT

the right to file a claim even if the insured A. has committed a fraudulent or dishonest act that would otherwise void coveragethe right to pay insurance premiums on B. behalf of the insuredthe right to select an insurance company for C. the insuredthe right to recovery of all amounts owed D. under the mortgage

MN_P&C_CN.indb 242 6/23/2011 8:58:10 AM

243

L E S S O N S E v E N A N S W E R S A N D R A T i O N A L E S

1. B. Actual cash value equals replacement cost minus depreciation.

2. C. After settling a total loss claim, the insurer becomes the property owner and has the right of salvage—salvage proceeds go to the insurer.

3. B. The liberalization clause states that policy enhancements that don’t require an increased premium will be provided to all policyholders automatically.

4. C. The definition of the insured will list who is covered by the policy in addition to the named insured.

5. A. Nothing the insured does, even dishonesty, can prevent the mortgagee from collecting under the policy.

6. C. Under the appraisal clause, each party assumes the cost of its own appraiser and shares the cost of the umpire’s labor.

7. A. The coinsurance provision states that when a property is insured to at least 80% of its value, claims will be paid in full up to policy limits. Eighty percent of $50,000 is $40,000.

8. B. When 2 policies will cover the same loss, each company will pay its proportional (prorated) share of the claim. In this example, Company A insures 2/3 of the property’s value and will pay 2/3 of the claim.

9. D. General damages awarded include pain, suffering, and mental anguish.

10. A. Broad-form perils automatically include basic perils (e.g., vehicles and windstorm) and collapse. Damage produced by a domestic animal is excluded under all peril forms.

11. B. Bailees take care, custody, and control of another person’s property for special purpose (and usually a fee).

12. A. Under the coinsurance provision, a $1,000,000 property should be insured to 80% or $800,000. If insured to less, a formula is used to calculate claim payment. Insurance carried ÷ insurance required × loss = payment. In this case, $400,000 ÷ $800,000 × $100,000 = $50,000.

13. B. A property that is unoccupied and inadequately furnished is considered vacant.

14. B. A claim for medical expenses would be paid from a liability policy’s underlying limits and would not be handled as a supplemental (court and defense) payment.

15. D. Open peril policies will cover all losses except those specifically excluded under the contract.

16. B. Pipes freezing or bursting are covered as a broad form (not basic) peril.

17. A. Vicarious liability (imputed negligence) has been applied when one is held responsible for the actions of another.

18. C. The standard mortgage clause does not allow the mortgagee to select an insurance company for an insured.

MN_P&C_CN.indb 243 6/23/2011 8:58:10 AM

244

L E S S O N E i G H T R E v i E W

1. A house has a replacement cost of $50,000. To make sure that the replacement cost provision of a homeowners policy applies, the minimum policy amount for the dwelling should be

$24,000A. $30,000B. $40,000C. $50,000D.

2. A $100,000 property sustains $80,000 worth of damage. How much money can the policy provide for debris removal?

$0A. $5,000B. $20,000C. $25,000D.

3. An insured’s HO-2 form has a $100,000 coverage limit on the dwelling and a $50,000 personal property limit. If a sailboat valued at $7,000 is stolen from the insured’s premises, the insured will collect (ignoring any deductibles) a maximum of

$1,000A. $1,500B. $2,000C. $7,000D.

4. If a homeowners policy insures the dwelling to less than 80% of replacement cost, how would a dwelling loss be adjusted?

Actual cash valueA. Cost to repairB. Cost to replaceC. 100% of the lossD.

5. A dog chews up the insured’s fur coat. Which of the following homeowners policies would cover this property loss?

HO-2A. HO-3B. HO-4C. None of the homeowners policiesD.

6. Section II of the homeowners policy provides coverage for all of the following EXCEPT

the actions of a residence employeeA. the use of a hovercraftB. the actions of a domestic animal in the care C. of the insuredthe use of a 17-foot sailboatD.

7. When is the additional coverage for debris removal payable under the homeowners policy?

Whenever the insured suffers a lossA. Whenever the amount of the loss exceeds B. the deductibleWhenever the amount of the loss exceeds C. the actual cash value of the homeWhenever the applicable policy limit has D. been exhausted

8. All of the following properties can be insured under an unendorsed homeowners policy EXCEPT

a home under construction that the owner A. intends to occupya duplex that is owner-occupiedB. a mobile home that is owner-occupiedC. a townhouse that is owner-occupiedD.

9. Homeowners Coverage F covers reasonable medical expenses incurred within how many years of an accident?

1A. 2B. 3C. 5D.

MN_P&C_CN.indb 244 6/23/2011 8:58:11 AM

245

10. An HO-3 policy will pay for all of the following losses EXCEPT

damage to the dwelling caused by a falling A. treedamage to a shed caused by ice buildupB. damage to a television set caused by C. dropping itadditional living expenses incurred when D. the dwelling is damaged by a fire

11. An HO-6 would be used bythe owner of a rental houseA. the owner of a condominiumB. the owner of a duplexC. the tenant of a rental houseD.

12. All of the following statements regarding HO-8 policies are true EXCEPT

claims are handled on an ACV basisA. basic peril form coverage applies to B. Coverage Cbroad peril form coverage applies to C. Coverage Athey are typically used to insure older D. properties with a replacement cost that exceeds market value

13. Judy insures her home on an HO-3 policy with a $75,000 coverage limit on the dwelling. All of the following losses would be covered EXCEPT

Judy’s home is burglarized and her diamond A. ring worth $365 is stolenJudy lost her wallet and the person who B. finds it demands a reward of $100Judy suffers a kitchen fire resulting in C. personal property damage of $4,500Judy’s detached garage suffers $3,000 of D. lightning damage in a thunderstorm

14. How much would an unendorsed homeowners policy pay for a theft claim involving a $500 stereo, $400 television, and $3,000 fur coat (without regard to deductibles)?

$0A. $900B. $2,400C. $3,900D.

15. An insured was playing soccer at a public park and injured another player. For what would the medical payments coverage of his policy pay?

Nothing because it did not happen on the A. insured’s premisesAmbulance, hospital, and funeral expenses B. up to the policy limitMedical expenses and wage lossC. First aid expenses onlyD.

16. Which of the following structures is eligible for coverage under Coverage B of the homeowners policy?

An ice house that is stored in the insured’s A. backyard during the summer monthsA workshop that is used by the insured for B. home improvement projectsA greenhouse that is used to grow plants for C. the insured’s landscaping businessA tent that has been pitched in the insured’s D. backyard for a family campout

17. Which of the following dwelling losses would NOT be covered by an HO-3?

A wild boar rampages through the insured A. premises, causing damage to a patio door and several interior walls within the homeA hail storm damages roof shingles and B. sidingThe insured premises is partially damaged C. by fire A recently passed city ordinance requires D. the insured to update the plumbing inside the dwelling

18. Which of the following personal property losses would be covered by an HO-6?

A computer is destroyed by a power surgeA. Several articles of clothing are ruined by an B. overflowing toiletSeveral dishes fall from a kitchen cabinet C. and break when they hit the floorA sofa is stained when the insured’s child D. spills a glass of grape juice

MN_P&C_CN.indb 245 6/23/2011 8:58:11 AM

246

19. All of the following dwellings would be eligible for coverage under the homeowners policy EXCEPT

a 4-unit residential housing complex that A. has a live-in landlorda single-family home that is under B. construction and has an owner that is ready to move ina condominium unit that is owner-occupiedC. a farm house that is owner-occupied D.

20. Which of the following types of property would be covered by the homeowners policy?

A lawn tractor that is owned by the insuredA. A pet dog that is owned by the insuredB. A table saw that is owned by the insured C. and is being rented to another personA television set that is owned by a tenant D.

MN_P&C_CN.indb 246 6/23/2011 8:58:11 AM

247

L E S S O N E i G H T A N S W E R S A N D R A T i O N A L E S

1. C. Claims will be paid on a replacement cost basis if the property is insured to 80% of its value. In this example, $40,000 is the minimum coverage required.

2. D. Debris removal will be paid from the remaining policy limits ($20,000) and can provide an additional 5% of the applicable limit ($5,000).

3. B. An unendorsed homeowners policy will pay $1,500 for watercraft and related equipment in storage.

4. A. When a property is insured to less than 80% of its value, claims can be handled on an actual cash value basis.

5. D. Damage to property produced by a domestic animal would be excluded under all perils forms (basic, broad, and special) and would not be covered by any homeowners (HO) contracts.

6. B. Claims resulting from the use of an automobile or hovercraft are not covered under the liability section of the homeowners policy.

7. D. The additional allowance for debris removal is available once the underlying policy limits have been exhausted.

8. C. Mobile homes cannot be insured by a standard (unendorsed) homeowners policy.

9. C. Homeowners Coverage F (medical payments) will pay medical and funeral expenses incurred within 3 years of the loss.

10. C. Special peril form coverage applies to Coverages A, B, and D of the HO-3 policy. Broad peril form coverage applies to personal property. Dropping a television (personal property) is not covered as a broad form peril.

11. B. HO-6 policies are intended for owners of townhomes and condominium units.

12. C. Under an HO-8 policy, basic peril form coverage applies to all coverages.

13. B. There is no reward coverage for the return of lost or stolen property in the homeowners policy. There is, however, coverage to a limit of $200 for loss of money following a covered peril.

14. C. Theft of jewelry and fur claims are limited to $1,500. As special limits do not apply to home electronics, those losses would be paid in full. $1,500 + $500 + $400 = $2,400.

15. B. Coverage F will provide coverage for off-premises liability claims and will pay for medical and funeral expenses incurred by a 3rd party claimant (injured person).

16. B. An ice house and tent would be covered as personal property under Coverage C; other structures used for business (greenhouse) are not covered. The workshop is covered.

17. D. The HO-3 policy provides special form peril coverage for the dwelling (Coverage A). Special form excludes expenses related to building code or ordinance.

MN_P&C_CN.indb 247 6/23/2011 8:58:11 AM

248

18. B. HO-6 (unit owners policy) provides broad form peril coverage for personal property. Overflow of a water system is covered. The power surge peril covers damage to a fuse box but not to electronics or appliances damaged from the power surge.

19. D. Farms cannot be insured by any HO policy form—they are insured by the farm policy.

20. A. Vehicles used to maintain the premises are covered. Pets, property rented to others for a fee (business purpose), and property of renters are excluded from property coverage.

MN_P&C_CN.indb 248 6/23/2011 8:58:11 AM

249

L E S S O N N i N E R E v i E W

1. Which of the following statements regarding dwelling policies is TRUE?

They do not provide special form cause of A. loss coverage.They do not automatically include theft B. coverage.They may only be written for owner C. occupants.They are no longer used since the advent of D. homeowners coverage.

2. A dwelling policy is most often used to provide coverage

better than that available under a A. homeowners policyfor a home that is not eligible for a B. homeowners policyat a lower price than a homeowners policyC. when the insured cannot obtain full D. coverage on the dwelling

3. How much additional coverage does the dwelling property policy provide for debris removal?

5% of the applicable policy limitA. 5% of the amount of the lossB. 25% of the amount of the lossC. NoneD.

4. If an insured has a dwelling property policy with a Coverage A limit of $150,000, how much coverage would be provided for personal property?

$15,000A. Personal property limit is selected by B. customer$75,000C. $112,500D.

5. A DP-2 policy would cover losses from all of the following perils EXCEPT

falling objectsA. weight of ice, snow, or sleetB. scorched countertopsC. civil commotionD.

6. How is theft coverage provided by the dwelling property policy?

It is automatically included in the policy.A. It is only included in the DP-2 and DP-3.B. It is included in the DP-3 only.C. It must be added by endorsement to all D. policy forms.

MN_P&C_CN.indb 249 6/23/2011 8:58:11 AM

250

L E S S O N N i N E A N S W E R S A N D R A T i O N A L E S

1. B. Dwelling policies do not automatically include theft coverage because they are typically purchased by a non-occupant owner. The coverage can be added by endorsement if needed.

2. B. The HO policy is usually used for an owner-occupant, while DP policies are usually written for owned property rented to others.

3. D. The dwelling policy does not provide an additional allowance for debris removal.

4. B. Coverage B (personal property) of the dwelling policy is not expressed as a percentage of Coverage A—the limit provided is selected by the customer.

5. C. DP-2 policies are comparable to an HO-2 policy. Broad form applies to Coverages A, B, C, and D. Scorched countertops are not a covered peril under broad form.

6. D. Theft coverage is added by endorsement to all dwelling policies.

MN_P&C_CN.indb 250 6/23/2011 8:58:11 AM

251

L E S S O N T E N R E v i E W

1. Who underwrites flood insurance sold through the National Flood Insurance Program?

Individual insurance companiesA. The federal governmentB. The community in which the insured residesC. The joint underwriting associationD.

2. When does flood insurance take effect?As soon as the policy is issuedA. As soon as the insured pays the first B. premiumAs soon as the producer binds coverageC. 30 days after the first premium is paidD.

3. Which of the following would be covered by flood insurance?

Kitchen appliances above groundA. Basement furnitureB. A propane tankC. Damage to lawn and shrubsD.

4. Earthquake coverage covers aftershocks for how many hours after the original earthquake?

72 hoursA. 168 hoursB. 96 hoursC. 120 hoursD.

5. Which of the following is excluded from flood insurance?

Overflow of inland watersA. Surface water run-offB. MudslideC. Sewer backupD.

6. What is the maximum limit on contents located in a residential structure under the dwelling form coverage of the flood policy?

$10,000A. $100,000B. $250,000C. $500,000D.

MN_P&C_CN.indb 251 6/23/2011 8:58:11 AM

252

L E S S O N T E N A N S W E R S A N D R A T i O N A L E S

1. A. While the federal government reinsures flood policies, the policies are underwritten by individual companies.

2. D. Flood policies take effect 30 days after the first premium is collected.

3. A. Above-ground kitchen appliances are covered by a flood policy—choices B, C, and D are excluded losses.

4. A. Earthquake coverage will cover aftershocks for up to 72 hours after the earthquake.

5. D. A flood policy specifically excludes backup of sewers and drains.

6. B. Under the dwelling form coverage, the maximum limits on contents of a residential structure is $100,000.

MN_P&C_CN.indb 252 6/23/2011 8:58:11 AM

253

L E S S O N E L E v E N R E v i E W

1. Under a Standard Fire Policy, indemnification for a loss is limited to

replacement costA. replacement cost minus salvage valueB. market valueC. actual cash value at time of lossD.

2. According to the Minnesota Standard Fire Policy, suits against the insurer must be initiated within how many months of the loss?

6 monthsA. 12 monthsB. 18 monthsC. 24 monthsD.

3. According to Minnesota law, once a homeowner’s loss has been settled, payment for the claim must be made within

3 daysA. 5 daysB. 10 daysC. 60 daysD.

4. According to Minnesota law, an insurance company may refuse to renew a homeowners policy for any of the following reasons EXCEPT

submitting a fraudulent claimA. submitting claims for 3 natural losses in the B. past 3 yearsmore than 2 years worth of delinquent C. property taxesillegal activity on premisesD.

5. Which of the following properties are eligible for coverage under the FAIR plan?

A commercial office buildingA. A single-family homeB. A 6-unit apartment complexC. All of the aboveD.

6. The FAIR plan may reject or terminate coverage for all of the following reasons EXCEPT

the physical condition of the buildingA. the neighborhood where the building is B. locatednon-payment of premiumC. the FAIR plan committee voted to D. terminate coverage

MN_P&C_CN.indb 253 6/23/2011 8:58:11 AM

254

L E S S O N E L E v E N A N S W E R S A N D R A T i O N A L E S

1. D. Standard Fire policies pay claims on an actual cash value basis, which is the depreciated value at the time of the loss.

2. D. Suits must be instituted within 24 months of the loss in a Minnesota Standard Fire Policy.

3. B. Under the Minnesota Amendatory Endorsement, claims must be paid within 5 days of reaching settlement.

4. B. Natural losses (e.g., hail) cannot be used as a basis for non-renewal.

5. D. All of the properties listed may be covered by the FAIR plan.

6. B. The neighborhood where a home is located cannot be used as a basis for FAIR plan rejection/termination.

MN_P&C_CN.indb 254 6/23/2011 8:58:11 AM

255

L E S S O N T W E L v E R E v i E W

1. The declarations page of the commercial package policy will include

the perils insured againstA. the insured’s business descriptionB. the duties of both parties to the contractC. the modifications to coverageD.

2. Who is responsible for making the premium payments due under a commercial package policy?

The first named insuredA. All named insuredsB. The insurance companyC. The producerD.

3. Building coverage on the building and personal property coverage form insures all of the following EXCEPT

other structures described on the A. declarations pagefloor coveringsB. desks and office equipmentC. permanently installed fixturesD.

4. Property of others coverage on the building and personal property coverage form can insure all of the following things EXCEPT

a coat belonging to a visitor that was A. accidentally left behind at the insured premisesleased office equipmentB. floor cleaning equipment loaned to the C. businesstelevisions belonging to customers that are D. in the insured’s care for repair work

5. If the policy limits of the building and personal property form have been exhausted, how much additional coverage is available for debris removal?

25% of the policy limitA. $10,000B. 25% of the amount of the actual lossC. $25,000D.

6. All of the following things are excluded from the building and personal property form EXCEPT

air conditioning unitsA. power boatsB. currencyC. detached outdoor signsD.

7. What type of policy would cover loss of use exposures for a business that will close during the period of restoration?

Extra expenseA. Additional living expensesB. Business incomeC. SpoilageD.

8. What is the purpose of the extended business income period?

To provide payments after a business reopens A. until it can regain its normal volume of businessTo provide coverage if the period of B. restoration lasts longer than expectedTo provide additional payments to offset the C. costs of reopening a businessTo reduce the premiums D.

9. An insured buys a business income policy with a maximum policy limit of $100,000 and a 25% monthly limit of indemnity. If the loss lasts 3 months, what is the maximum the insured will be able to collect from the policy?

$25,000A. $50,000B. $75,000C. $100,000D.

10. A bailee’s customer floater written on a broad form basis will cover all of the following perils EXCEPT

fireA. intentional actB. confusion of goodsC. overflow of a water systemD.

MN_P&C_CN.indb 255 6/23/2011 8:58:11 AM

256

11. Which of the following must an insured do after suffering a property loss?

Have the damaged property appraisedA. Take steps to reduce any further lossB. Hire an outside claims adjusterC. Increase his coverageD.

12. A building and personal property coverage form provides coverage for all of the following types of property EXCEPT

growing crops and lawnsA. completed additionsB. business personal propertyC. a riding lawnmower used to maintain the D. premises

13. Sam insures his television repair shop under a building and personal property coverage form, with limits of $100,000 on the building and $70,000 on the contents. A fire causes $10,000 in damage to the building and $20,000 in losses to the contents. Sam also has to pay $1,000 for debris removal. If the policy has a deductible of $100, Sam will receive a maximum of which of the following amounts from his insurance company?

$29,900A. $30,000B. $30,900C. $31,000D.

14. An insured carries $24,000 property insurance with an 80% coinsurance requirement on a building worth $40,000. How much would she collect in the event of a $12,000 loss?

$0A. $4,000B. $9,000C. $12,000D.

15. Which of the following types of property would be included under building coverage on a building and personal property coverage form?

A central air conditioning systemA. Wall-to-wall carpetingB. A permanently installed intercom systemC. All of the aboveD.

16. A building and personal property coverage form automatically provides for which of the following extensions of coverage?

Outdoor signsA. Replacement costB. Newly acquired propertyC. Rental valueD.

17. Extra expense insurance covers which of the following?

The additional cost of taking safety measures A. before a lossThe additional cost of continuing a business B. after a lossThe extra money needed to cover a firm’s C. loss of earningsThe extra money needed to cover a D. landlord’s loss of rental income

MN_P&C_CN.indb 256 6/23/2011 8:58:11 AM

257

L E S S O N T W E L v E A N S W E R S A N D R A T i O N A L E S

1. B. The declarations page of the CPP will include a description of the insured’s business. Covered perils, contractual duties, and modifications are outlined by other parts of the contact.

2. A. The CPP holds the first named insured responsible for payment of premiums.

3. C. Desks and office equipment would be covered by business personal property coverage on the building and personal property coverage form.

4. D. Personal property of others coverage on the building and personal property form covers the property of others in the care, custody, and control of the insured but does not cover bailee (television repair shop) exposures.

5. B. The building and personal property form provides debris removal at 25% of the loss itself and an additional $10,000 if available policy limits have been exhausted.

6. A. The building and personal property form of the commercial property contract will not provide coverage for power boats, currency, and detached outdoor signs.

7. C. Business income coverage will cover loss of use exposures when a business is closed during a period of restoration.

8. A. Extended business income coverage provides payments to businesses that have reopened but have not regained their normal volume of business.

9. C. If business income coverage is purchased with limits of $100,000 with a 25% monthly limit of indemnity, the contract will pay $25,000 for 3 months ($75,000).

10. B. Bailees’ customer floater endorsements (and insurance policies in general) will not cover intentional acts.

11. B. The insured has several duties after a loss, including protecting the property from further damage or loss.

12. A. Crops and lawns are not covered. The remaining 3 items are covered under building coverage and business personal property coverage.

13. C. The building damage, contents damage, and debris removal are all covered by the policy, subject to the $100 deductible.

14. C. If a coinsurance requirement is not met, claim settlements are reduced by a coinsurance penalty.

15. D. In addition to insuring buildings and other structures, building coverage insures permanently installed machinery and equipment and floor coverings.

16. C. Newly acquired property is covered for 30 days with a $100,000 limit.

17. B. Extra expense coverage is used by businesses that will remain open during the period of restoration and covers any necessary continuing operation expenses.

MN_P&C_CN.indb 257 6/23/2011 8:58:11 AM

258

L E S S O N T H i R T E E N R E v i E W

1. A personal auto policy provides coverage for all of the following drivers of an insured car EXCEPT

a neighbor who uses the car with the A. insured’s permissiona thief who steals the carB. the insured’s spouseC. the insured’s child who attends school in D. another state

2. The insured has an auto policy with liability limits of $30,000/$60,000/$10,000. He negligently runs off the road and causes $70,000 damage to an apartment building. How much would the policy pay for the damage to the building?

$10,000A. $25,000B. $50,000C. $70,000D.

3. An insured rents a car while on vacation in Canada and causes an accident. To what extent would coverage be provided for this loss under the personal auto policy?

The loss would not be covered.A. The loss would be covered if the insured has B. purchased a rental car endorsement.The loss would be covered if the insured has C. purchased a foreign country endorsement.The loss would be covered under an D. unendorsed policy.

4. If an insured hits a deer while driving her own vehicle, which part of the personal auto policy will pay to repair the vehicle?

Other than collisionA. LiabilityB. CollisionC. Medical paymentsD.

5. An insured is injured in a car accident while driving his personal vehicle on a sales call for work. What coverage will pay for his injuries?

Workers’ compensationA. His own PIP protectionB. His own liability insuranceC. His own uninsured and underinsured D. motorists coverage

6. To what extent are newly acquired vehicles insured by the ISO personal auto policy?

They are automatically covered for 30 days A. in the same manner as the vehicle with the best coverage in the household.They are automatically covered for 14 days B. in the same manner as the vehicle with the best coverage in the household.They are automatically covered for 4 days C. in the same manner as the vehicle with the best coverage in the household.They are not covered until the insurer has D. been notified.

7. Which of the following would be considered a temporary substitute vehicle under the terms of the personal auto policy?

A new car purchased by the insured 3 days A. agoA truck borrowed from a friend while B. movingA company car provided by an employerC. A loaner vehicle provided by an auto repair D. shop

8. Which of the following statements is TRUE about an insured who wishes to cancel her insurance policy?

She must give the insurance company 5 A. days’ written notice.She must give the insurance company legal B. notice on a preapproved form.She may cancel the policy only after it has C. been in effect for 10 days.She may cancel the policy at any time.D.

MN_P&C_CN.indb 258 6/23/2011 8:58:12 AM

259

9. Under what circumstances may someone sue for a car accident in Minnesota?

Claimant is disabled for 30 daysA. Claimant incurs property damage of $10,000B. Claimant incurs property damage of $2,500C. Accident results in a deathD.

10. Who is required to participate in the assigned claims bureau?

All insurers who sell auto insurance in A. MinnesotaAll insurers who collect more than B. $5,000,000 per year in auto insurance premiums from Minnesota residentsAll insurers who collect more than C. $1,000,000 per year in auto insurance premiums from Minnesota residentsThe 5 largest insurers who sell auto D. insurance in Minnesota

11. If an insurance company refuses to renew an existing auto insurance policy, it must provide the insured with how many days’ advance notice?

10A. 30B. 60C. 90D.

12. Minnesota law permits insurance companies to cancel an auto policy after it has been in force for more than 60 days for all of the following reasons EXCEPT

the vehicle is mechanically defectiveA. the insured has too many speeding ticketsB. the insured’s drivers license has been C. revokedthe vehicle is being used to transport D. explosive materials

13. Which of the following is a 4-point violation on the auto policy point schedule?

Speeding ticketA. Careless drivingB. Felony with an autoC. Accident under $500D.

14. The 4 coverage parts of the personal auto policy are

liability, medical payments, uninsured A. motorist coverage, and physical damageliability, medical payments, collision, and B. other than collisionliability, uninsured motorist coverage, C. damage to your auto, and other than collisionliability, uninsured motors, damage to your D. auto, and non-owned vehicles

15. Which of these statements regarding supplemental payments is TRUE?

The insurer may subrogate the insured for A. defense costs if the insured is at fault.The personal auto policy will pay loss of B. earnings and bail bond expenses without limit.The insured’s defense costs will be paid in C. addition to the liability limits.The insured must pay for all supplemental D. payments that exceed the liability limits.

16. Dan sustains $40,000 in medical bills from a 2-car accident. All of the following statements are true EXCEPT

if another driver is at fault, Dan may pursue A. a liability claimall of his bills may be covered under his B. policy if Dan has standard PIP coverage with stacking on 2 vehiclesif another driver is at fault but is uninsured, C. Dan can pursue an uninsured motorist claimif another driver is at fault, all of Dan’s bills D. will be handled by the negligent driver’s policy

17. Medical payments coverage on your personal auto policy will cover all of the following losses EXCEPT

you are struck by a car as a pedestrianA. your child is injured as a passenger in a B. neighbor’s caryou twist your ankle while exiting your carC. your neighbor is injured as passenger in your D. car

MN_P&C_CN.indb 259 6/23/2011 8:58:12 AM

260

18. Darren is insured under a personal auto policy with a split limit of 100/300/50. While driving a friend’s car, Darren injures a pedestrian. If Darren’s friend carries a personal auto policy with a combined single limit of $300,000, how much liability coverage will be available to cover injuries to the pedestrian?

$100,000A. $300,000B. $400,000C. $600,000 D.

19. Lawrence’s auto policy includes no physical damage coverage. If he purchased a new car, to what extent would physical damage coverage be provided?

There will be no physical damage coverage A. for his new vehicle.There will be 4 days of physical damage B. coverage with a $500 deductible.There will be 14 days of physical damage C. coverage with a $500 deductible.There will be 4 days of physical damage D. coverage with no deductible.

20. The personal auto policy will cover the insured for the use of all of the following vehicles EXCEPT

a pickup truck that the insured has borrowed A. from a frienda motorcycle that is owned by the insuredB. a van that has been rented by the insured C. while on vacationa sports car that was recently purchased by D. the insured

21. What is the primary purpose of uninsured and underinsured motorist’s coverage?

To cover the insured’s injuries when the at-A. fault driver does not carry liability insuranceTo protect uninsured drivers against liability B. claims by the insuredTo cover the injuries of uninsured drivers C. who are involved in an accident with the insuredTo prevent subrogation against uninsured D. drivers

22. Arlene is injured in a car accident when she is struck by a hit-and-run driver. How will her personal auto policy pay for her injuries?

Her UM/UIM will pay first, and her medical A. payments coverage will pay second.Her liability coverage will pay first, and her B. UM/UIM will pay second.Her UM/UIM will pay first, and her liability C. coverage will pay second.Her medical payments coverage will pay D. first, and her UM/UIM will pay second.

23. If Harvey is injured in an accident while riding as a passenger in a friend’s car, whose personal auto policy will provide Harvey with a medical payments benefit for his injuries?

The policy of the vehicle he was occupyingA. The policy of the at-fault driverB. His own policyC. The Assigned Claims Bureau D.

24. In order to qualify for benefits through the Assigned Claims Bureau, a person must file a claim for benefits within

6 months of the accidentA. 6 months of receiving medical treatmentB. 90 days of the lossC. 90 days of filing a police report D.

25. All of the following statements about the Minnesota Auto Insurance Plan are true EXCEPT

eligibility for coverage ends when the A. insured can obtain auto insurance through the traditional insurance marketagents who place business through the B. Minnesota Auto Insurance Plan are entitled to a commissionlosses in the Minnesota Auto Insurance C. Plan cannot affect agents’ standings with their insurance companiesall insurers who are authorized to write D. auto insurance business in Minnesota may participate in the plan at their own choice

MN_P&C_CN.indb 260 6/23/2011 8:58:12 AM

261

L E S S O N T H i R 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. Resident relatives, college students, and permissive users are covered as insureds under the auto policy—a thief (non-permissive user) would not be covered.

2. A. A policy with split liability limits of $30,000/$60,000/$10,000 will pay up to $10,000 for a property damage claim.

3. D. The personal auto policy provides coverage for rented vehicles, without an endorsement.

4. A. Damage to a vehicle caused by hitting an animal is covered under comprehensive (other than collision) coverage.

5. A. Injuries sustained during the course of employment are covered by workers’ compensation.

6. B. The broadest coverage available from another insured vehicle extends to newly acquired vehicles for 14 days.

7. D. Temporary substitute vehicles are those used while the insured’s vehicle is inoperable (in for repairs).

8. D. The policyholder may cancel the insurance policy at any time. It is the insurance company that is required to provide advance written notice.

9. D. Minnesota no-fault law uses tort thresholds to define when a lawsuit can be brought against a negligent party—disabilities of more than 60 days and accidents resulting in death are losses that meet tort threshold requirements.

10. A. All insurers who sell auto insurance in Minnesota are required to participate in the assigned claims bureau.

11. C. Under Minnesota law, non-renewal requires 60 days’ notice.

12. B. Too many speeding tickets may raise premiums or lead to non-renewal, but it is not grounds for cancellation.

13. C. Felony with an auto is a 4-point violation on the auto policy point (non-renewal) schedule.

14. A. The 4 parts of the personal auto policy are liability, medical payments, uninsured motorist, and physical damage coverage.

15. C. The personal auto policy will cover supplemental (court/defense) costs, including $250 in bail bonds and up to $200 per day in wage loss.

16. D. Dan’s medical bills will be handled first by his own policy—not the other driver’s policy. Choices A, B, and C are all true.

17. D. A neighbor injured as passenger in your car would draw medical payments benefits first from his own auto policy.

18. C. Liability coverage is provided first from the vehicle being driven (friend’s policy); excess coverage may be drawn from Darren’s policy. In this example, the 2 policies provide a combined benefit of $400,000.

19. B. If physical damage (Coverage D) is not provided by another household vehicle, newly acquired cars will be provided 4 days of physical damage coverage with a $500 deductible.

20. B. Motorcycles are not covered by an unendorsed personal auto policy.

MN_P&C_CN.indb 261 6/23/2011 8:58:12 AM

262

21. A. The primary purpose of Coverage C (UM/UIM) is to provide coverage for an injured insured if the negligent driver does not have any (or enough) liability coverage.

22. D. An insured car owner injured as a pedestrian by a hit-and-run driver will draw benefits first from her own policy’s medical payments coverage and then from her own policy’s UM/UIM coverage.

23. C. Harvey, injured as a passenger in a friend’s car, will draw benefits first from his own policy’s medical payments coverage.

24. A. Assigned bureau claims must be filed within 6 months of an accident.

25. D. All insurers who sell auto insurance in Minnesota must participate in the Minnesota Auto Insurance Plan. Choices A, B, and C are all true.

MN_P&C_CN.indb 262 6/23/2011 8:58:12 AM

263

L E S S O N F O U R T E E N R E v i E W

1. Which policy provides coverage for professional liability?

General liability policyA. Homeowners policyB. Errors and omissions policyC. Personal umbrella policyD.

2. An insured has a $2,000,000 personal umbrella policy and allows the underlying $500,000 policy to lapse. If the insured subsequently suffers a $1,500,000 loss, how much would the umbrella policy pay?

$0A. $500,000B. $1,000,000C. $1,500,000D.

3. Which of the following losses would NOT be covered by professional liability insurance?

An agent failed to renew a policy a customer A. wished to renew.An agent failed to update coverage as B. requested.An agent failed to recommend needed C. coverage.An agent embezzles money from a client.D.

4. The reason to purchase an umbrella liability policy is to

provide higher limits of liabilityA. expand coverage beyond primary policiesB. provide coverage when primary limits are C. exhaustedaccomplish all of the aboveD.

5. An umbrella policy provision that requires the insured to participate in a portion of a loss NOT covered by primary insurance is

a coinsurance clauseA. a participation clauseB. a deductibleC. a self-insured retentionD.

MN_P&C_CN.indb 263 6/23/2011 8:58:12 AM

264

L E S S O N F O U R 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. C. Errors and omissions coverage is 1 type of professional liability coverage.

2. C. Since the underlying policy lapsed, the umbrella policy pays what it would have paid had the underlying policy been in force.

3. D. E&O policies will not cover fraudulent, criminal, or dishonest acts.

4. D. Umbrella policies provide higher limits than primary coverages, broaden the coverage the underlying policies offer, and drop down to provide primary insurance in some cases.

5. D. A self-insured retention is used in an umbrella policy when the umbrella pays for the loss on a primary basis.

MN_P&C_CN.indb 264 6/23/2011 8:58:12 AM

265

L E S S O N F i F T E E N R E v i E W

1. Which of the following types of liability coverages would handle injuries to a customer who has slipped at the entrance of a building the insured owns?

ProductsA. PremisesB. Completed operationsC. OperationsD.

2. Steve, an electrician, caused damage to the main wiring of a shopping center while working on another building. As a result, the shopping center was forced to close early for the day. What type of liability claim has been produced by Steve’s actions?

ProductsA. Completed operationsB. PremisesC. OperationsD.

3. Which of the following occurrences would be included under the definition of a personal injury?

A customer is injured in a department store A. when a sign falls on her and sues the store for medical costs and pain and suffering.An employee is injured lifting a heavy B. carton and sues his employer for costs.An individual is fired from her job and sues C. her employer for unemployment benefits.A tenant is evicted by his landlord and sues D. the landlord for invasion of privacy and wrongful eviction.

4. A contractor built a home for a family. After the family had occupied the home for about 4 months, the kitchen sink fell on a family member’s foot, breaking it. This is an example of what type of loss?

Premises liabilityA. Completed operationsB. Insured contractsC. Personal injuryD.

5. What is meant by aggregate limit of liability?The most the insurance company will pay to A. 1 personThe maximum amount the policy will pay B. per policy period regardless of the number of claimsThe most the insurance company will pay C. for defense costsThe maximum amount payable in any 1 D. occurrence

6. Which of the following is NOT a supplemental payment provided in the commercial general liability policy?

Premiums for court bondsA. Medical paymentsB. Costs of investigation and defenseC. Costs of judgment interestD.

7. Mark wants to purchase a policy for his manufacturing company to include premises liability, products liability, insured contracts, and completed operations. Which policy would cover all of these losses?

Contractual liabilityA. Products and completed operations liabilityB. Commercial general liabilityC. Personal injury liabilityD.

8. A commercial general liability policy will cover a policyholder for contractual liability arising from all of the following EXCEPT

an easement agreementA. a railroad sidetrack agreementB. an elevator maintenance agreementC. an escrow agreementD.

MN_P&C_CN.indb 265 6/23/2011 8:58:12 AM

266

9. Under the basic extended reporting period of a claims-made liability form, the loss must be reported within 60 days after policy expiration and claims must be filed within

1 yearA. 3 yearsB. 5 yearsC. 10 yearsD.

10. Coverage C of the commercial general liability policy will cover reasonable medical expenses incurred within how many years of the accident?

1A. 2B. 3C. 5D.

11. All of the following can be an insured under a commercial general liability policy EXCEPT

employees of the named insured, as it relates A. to the businessa real estate management firmB. family members of the insured, for their C. personal activitiesthe insured’s legal representativeD.

12. Which of the following claims would be covered under Coverage B (personal and advertising injury) of the CGL?

Copyright infringementA. A libel claim arising from actions of a B. newspaper publisherA claim for pain and suffering resulting from C. a doctor’s actionsA claim against an employer filed by an D. injured employee

13. What is the purpose of the retroactive date found in the claims-made form of the commercial general liability policy?

It caps the insurer’s liability to a certain A. dollar amount per loss.It permits the insured to extend coverage B. beyond the end of the policy period. It permits the insurer to pay beyond the C. general aggregate limit for losses that occurred prior to the policy period.It precludes coverage for losses that occurred D. before a certain date.

14. Coverage B of the commercial general liability policy would cover which of the following losses?

Misuse of someone’s advertising ideasA. Wrong description of priceB. Goods not conforming to their advertised C. qualityContractual liabilityD.

15. The basic extended reporting period under the claims-made form of the commercial general liability policy will provide coverage for a claim made during the 60 days after the policy end date if

the loss relates to bodily injury sustained by A. an employeethe loss is not covered by another policy B. that is owned by the named insuredthe loss occurred between the retroactive C. date and the policy end datethe named insured neglects to purchase D. another commercial general liability policy at the end of the current policy period

16. The Commercial General Liability (CGL) policy includes all of the following types of limits EXCEPT

aggregateA. personal injuryB. occurrenceC. combinedD.

17. Which is NOT covered under Commercial General Liability insurance?

An employee who is injured on an escalator A. in the storeA shopper who accidentally walks through a B. plate glass window in the storeA shopper who trips on a bucket left by a C. janitorA patron who is injured after choking on D. food in a restaurant

MN_P&C_CN.indb 266 6/23/2011 8:58:12 AM

267

18. A commercial general liability policy covers the policyholder for contractual liability arising from all of the following EXCEPT

easement agreementA. railroad sidetrack agreementB. elevator maintenance agreementC. escrow agreementD.

19. The commercial general liability policy covers which of the following accidents?

Injury to a customer that is never reported A. to the companyInjury caused by an employee to a B. customer while acting within the scope of employmentInjury to an employee of the insured while C. acting within the scope of employmentInjury caused by an employee while on D. vacation

20. Which of the following is included under the commercial general liability policy as premises and operations coverage?

Guest slips on carpet in the insured’s A. apartment buildingInsured is injured while repairing the roofB. Customer becomes ill after eating at the C. insured’s restaurantRoof begins to leak after the insured installs D. new shingles

21. A laundromat might purchase a CGL policy to protect against which of the following situations?

Employees leaving to continue the same A. business elsewhere, resulting in a loss of customersLoss of revenues if the electricity goes off as B. a result of the utility’s negligenceBurning of a person in a restroom from hot C. waterDamage to property from ruptured water D. pipes

MN_P&C_CN.indb 267 6/23/2011 8:58:12 AM

268

L E S S O N F i F 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. The commercial general liability policy would handle customer injuries as a premises liability claim.

2. D. As the loss resulted from Steve’s actions/ operations, this would be handled as an operations liability claim.

3. D. Personal injury claims under the CGL policy would include claims for losses that arise from something other than bodily injury or property damage (e.g., wrongful eviction or invasion of privacy).

4. B. As the work has been done (completed) when the injury occurs, this is a completed operations claim.

5. B. The CGL aggregate limits of liability represent the most the insurer will pay for all liability claims per policy period regardless of the number of claims.

6. B. Supplemental payments handle court and defense costs. Medical payments to an injured claimant would be covered under Parts A or C of the CGL policy.

7. C. The commercial general liability (CGL) policy will provide all of the coverages this commercial customer requires.

8. D. The CGL policy provides coverage for several forms of contractual liability but would not cover an escrow agreement.

9. C. Under the extended reporting period of a claims-made contract, claims must be filed within 5 years, assuming the loss occurred within the standard (60-day) extended reporting period. That “tail” may be increased in length through endorsement.

10. A. Coverage C (medical payments) of the CGL will provide benefits for claims filed within 1 year of the accident.

11. C. The CGL policy may cover the actions of a family member related to the business but will not cover that family member’s personal activities.

12. A. Coverage B of the CGL will cover copyright infringement but will not cover employer liability/professional liability claims and claims if the insured’s business is publishing.

13. D. The retroactive date in a claims-made liability contract defines how far back the policy will extend to handle past (old) claims. Claims that precede that date are not covered (precluded from coverage).

14. A. Coverage B of the CGL will cover personal and advertising injury claims, including the misuse of someone’s advertising ideas.

15. C. Under the basic extended reporting period, claims made during the first 60 days after the policy end date are handled if the loss occurred between the retroactive date and policy expiration date.

16. D. CGL policies have a personal injury limit, per occurrence limit, and an annual aggregate limit.

17. A. Injuries to employees are covered by workers’ compensation.

18. D. Insured contracts under the CGL policy include leases, easements, agreements to indemnify municipalities, sidetrack agreements, and elevator maintenance agreements only.

MN_P&C_CN.indb 268 6/23/2011 8:58:12 AM

269

19. B. Coverage does not apply to employee injuries on or off the job.

20. A. Premises and operations coverage applies to occurrences that take place on the insured premises or that arise from current activities. Coverage does not apply to the insured.

21. C. The CGL policy covers bodily injury and property damage, as well as personal and advertising injury. It does not extend coverage for consequential losses or for losses to property.

MN_P&C_CN.indb 269 6/23/2011 8:58:12 AM

270

L E S S O N S i X T E E N R E v i E W

1. Theft includes all of the following EXCEPTlarcenyA. burglaryB. robberyC. mysterious disappearanceD.

2. To be defined as a burglary, an event must include which of the following conditions?

Fear or threat of violenceA. Bodily injuryB. Mysterious disappearanceC. Visible signs of forced entry or exitD.

3. The insuring agreement for employee theft coverage excludes losses

to money and securitiesA. caused by an employee who has already been B. caught stealingcaused by a new employeeC. caused by an employee who is acting in D. collusion with others

4. The insuring agreement for inside theft of money and securities will cover all of the following losses EXCEPT

robbery of money from a convenience storeA. damage to the premises caused during a B. covered theftaccounting errorsC. damage to a cash register caused during a D. covered theft

5. All of the following would be an insured under the business auto policy EXCEPT

an employee driving her own personal car A. while on businessan employee driving a rented car while on B. businessan employee driving a car owned by the C. business for personal reasonsthe named insured driving a car owned by D. the business

6. Which of the following is considered mobile equipment by the business auto policy?

A 4-wheel, self-propelled automobile with a A. permanently installed power craneA cargo vanB. A 4-wheel, self-propelled automobile with a C. permanently installed cherry pickerA flat-bed truckD.

7. Which part of the garage coverage form insures vehicles that are in the care, custody, or control of the insured?

Liability A. Physical damageB. Garagekeeper’s coverageC. Additional coveragesD.

8. Which of the following incidents best meets the definition of a robbery as covered by crime insurance?

After the business has closed for the day, a A. person kicks in a door and takes $10,000 of cash from the business.A masked intruder threatens to inflict injury B. on an employee unless the employee hands over a large sum of money.A random stranger attempts to swindle a C. clerk out of $300 by claiming he is entitled to a refund for merchandise that was never returned to the store.A customer reaches into a cash register D. when no one is looking and runs off with $75.

9. A convenience store is being held up and the robber escapes with money from the cash register. Which crime coverage would handle the loss?

Employee theftA. Inside the premises—theft of money and B. securitiesInside the premises—robbery or safe C. burglary of other propertyCustodian coverageD.

MN_P&C_CN.indb 270 6/23/2011 8:58:13 AM

271

10. Forcible entry or exit is required in which of the following?

BurglaryA. RobberyB. TheftC. FidelityD.

11. Who pays the losses under a bond?SuretyA. ObligeeB. ObligorC. PrincipalD.

12. What type of bond is used by a contractor to guarantee that work will be completed to specifications?

Bid bondA. Permit bondB. Performance bondC. Bail bondD.

13. The relationship between principal/surety is comparable to

insured/insurerA. beneficiary/insuredB. insurer/insuredC. insurer/beneficiaryD.

MN_P&C_CN.indb 271 6/23/2011 8:58:13 AM

272

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. Mysterious disappearance (something’s been lost) is not covered under the various crime forms.

2. D. Burglary must be accompanied by visible signs of forced entry.

3. B. The employee theft coverage will not cover theft claims if that employee has already been caught stealing.

4. C. The inside theft of money and securities form will not cover losses related to accounting errors.

5. A. An employee driving her own car for business purposes is covered first by her own (personal) auto policy.

6. A. Power cranes permanently attached to a vehicle are considered mobile equipment.

7. C. The garagekeeper’s coverage would provide coverage to customer vehicles in the care, custody, and control of the insured.

8. B. Robbery involves the threat of force and typically occurs during business hours.

9. B. Theft of money while on the premises is covered under inside the premises—theft of money and securities.

10. A. The definition of burglary is the taking of property from another through forcible entry or exit of the premises.

11. A. The surety (insurer) pays for losses under a surety bond.

12. C. Performance bonds are used to insure a contractor’s promise to complete work on time and within specifications.

13. A. In a surety contract, the relationship between the principal and surety is comparable to the relationship between insured and insurer.

MN_P&C_CN.indb 272 6/23/2011 8:58:13 AM

273

L E S S O N S E v E N T E E N R E v i E W

1. Which of the following businesses would be eligible for a businessowners policy?

An auto repair shopA. A neighborhood barB. A dry cleaning establishmentC. A manufacturing facilityD.

2. Coverage under a businessowners policy may be voided if the building has been vacant or unoccupied for

15 daysA. 30 daysB. 45 daysC. 60 daysD.

3. Renewal premiums for a businessowners policy are based on

the insurer’s rates and rules in force at the A. time of renewalthe insurer’s rates and rules in force when B. the policy was first issuedthe rates set by the state insurance C. commissionerthe loss experience of all other businesses in D. the insured’s geographic area

4. What is the monthly limit of indemnity for the business income coverage provided by a BOP?

20% of the policy limitA. 25% of the policy limitB. 33% of the policy limitC. No monthly limit of indemnityD.

5. All of the following risk exposures are covered by the liability section of the businessowners policy EXCEPT

premises liabilityA. employers’ liabilityB. product liabilityC. advertising injuryD.

6. The businessowners policy will provide $10,000 of property coverage for

water damage to a vacant propertyA. theft of electronicsB. increased restoration costs required by C. building codepersonal property temporarily off premisesD.

7. The liability insurance provided by a businessowners policy is written as

an endorsement to the policyA. an occurrence form policyB. a supplement to other sources of liability C. insurancea claims-made policyD.

8. Which of the following crime insurance forms is automatically included in the businessowners policy?

Outside—theft of money and securitiesA. Outside—theft disappearance and B. destructionEmployee dishonestyC. Forgery and alterationD.

9. What is the automatic increase available for seasonal fluctuations in personal property on the businessowners policy?

10%A. 15%B. 25%C. 50%D.

10. Medical payment claims on a businessowners policy must be filed within

6 monthsA. 1 yearB. 3 yearsC. 5 yearsD.

MN_P&C_CN.indb 273 6/23/2011 8:58:13 AM

274

11. Liability coverage on the BOP will cover all of the following losses EXCEPT

a premises liability claim that occurred while A. the policy was in forcea libel claim arising from information B. displayed on the insured’s Websitea personal injury claim filed by a customer C. wrongfully detained for shoplifting an injury claim filed by a pedestrian injured D. by the insured’s business activities away from the insured premises

12. Which of the following losses would be covered by the hired and non-owned auto liability endorsement to the businessowners policy?

The insured is sued when an employee A. causes an accident while driving a rented vehicle on a business trip.The insured is sued when an employee B. causes an accident while driving a vehicle that is owned by the insured.An employee files a claim for damage to her C. personal vehicle damaged in a 2-car loss.An employee files a claim for damage to her D. personal vehicle vandalized while parked at work.

MN_P&C_CN.indb 274 6/23/2011 8:58:13 AM

275

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. C. Manufacturing facilities, auto repair shops, and bars are not eligible for a businessowners policy.

2. D. BOP coverage may be voided (cancelled) if the building has been vacant or unoccupied for 60 days.

3. A. Renewal premiums for a businessowners policy are based on the insurer’s rates and rules in force at the time of renewal.

4. D. There is no monthly limit of indemnity for business income coverage in the BOP.

5. B. Employer liability and workers’ compensation are not covered under CGL or BOP liability coverages.

6. C. The BOP provides $10,000 of coverage for increased costs of construction, valuable papers, and accounts receivable. The BOP provides $5,000 property off-premises.

7. B. Liability coverage on the BOP is written as an occurrence form contract.

8. D. An unendorsed BOP automatically provides coverage for forgery and alteration.

9. C. The BOP provides an automatic increase of 25% for seasonal fluctuations in inventory.

10. B. As with the CGL, medical payment claims must be filed within 1 year of the loss.

11. B. The BOP will not provide coverage for libel claims related to the Internet. Choices A, C, and D are all covered losses.

12. A. The hired and non-owned auto liability endorsement provides liability protection for businesses whose employees use personal cars for business or rental cars while on business trips—it provides liability protection only and is not designed for businesses that own or operate their own vehicles.

MN_P&C_CN.indb 275 6/23/2011 8:58:13 AM

276

L E S S O N E i G H T E E N R E v i E W

1. What is the primary purpose of workers’ compensation?

To provide compensation to employees for A. injuries arising out of their employmentTo pay benefits to employees that are B. temporarily laid offTo provide accident insurance for C. employees, both on and off the jobTo improve employees’ working conditionsD.

2. Which of the following individuals is likely to have a valid workers’ compensation claim?

A retired employee injured while visiting his A. old workplaceAn employee who suffers a diabetic coma B. from failure to take prescribed medicineA sole proprietor injured in a car accident C. while driving to a friend’s houseAn employee injured while performing an D. operation in a manufacturing facility

3. An injured employee receives payments under workers’ compensation insurance from

the employerA. the insurance companyB. the Division of Workers’ CompensationC. the State Department of EmploymentD.

4. All of the following are true if an employer fails to carry workers’ compensation insurance EXCEPT

the employer may still have to pay benefitsA. the employer may have to pay a fineB. workers’ compensation officials may close C. the business downthe injured employee will never be able to D. obtain benefits

5. Workers’ compensation paysonly when the employer is negligentA. only when another employee is negligentB. without regard to faultC. only when the employee is at faultD.

6. All of the following statements regarding workers’ compensation are true EXCEPT

workers’ compensation is governed at the A. state levelworkers’ compensation is a contract between B. the employer and the insurerworkers’ compensation policies can never be C. endorsedworkers’ compensation is generally primary D. over other coverage available

7. The standard workers’ compensation policy imposes all of the following duties on the employer EXCEPT

make voluntary payments to an injured A. employeecooperate with the insurance companyB. immediately notify the insurance company C. of a work-related injuryprovide for immediate medical services as D. required by law

8. When calculating premiums for a workers’ compensation policy, the insurer will multiply the job classification factor by

the total payroll for the companyA. the number of $100 payroll units paid to B. employees in each job classificationa risk factor provided by the National C. Association of Insurance Commissionersthe employer’s experience modification D. factor

9. In Minnesota, who provides workers’ compensation benefits when an employer fails to carry the legally required insurance?

The Assigned Claims BureauA. The Minnesota Guaranty AssociationB. MedicaidC. The Minnesota Special Compensation FundD.

MN_P&C_CN.indb 276 6/23/2011 8:58:13 AM

277

10. The employers’ liability section of the workers’ compensation policy is designed to cover

injuries sustained by an employee in an on-A. the-job accident3rd-party claims arising out of the death B. or injury of an employee in a work-related accidentclaims for injury sustained by a 3rd party C. arising out of the actions of an employeepunitive damages that arise from the D. insured’s gross and willful negligence

11. All of the following are true regarding workers’ compensation EXCEPT

it provides benefits for rehabilitationA. it provides for replacement of 2/3 of the B. employee’s wagesit provides for unemployment insuranceC. it provides for medical expensesD.

12. Workers’ compensation benefits that are only available through a state fund are considered

electiveA. compulsoryB. monopolisticC. competitiveD.

13. What part of the workers’ compensation policy handles 3rd-party liability claims?

Part 1A. Part 2B. Part 3C. Part 4D.

14. When an injury occurs, the workers’ compensation policy requires the employer to fulfill all of the following duties EXCEPT

immediately notify the insurance companyA. voluntarily make payments and assume B. obligationsdo nothing that would interfere with the C. insurer’s right to subrogatecooperate with and assist the insurance D. company

15. What is the purpose of the experience modification factor used in rating a workers’ compensation insurance policy?

To adjust the premium to reflect the A. insured’s actual loss experienceTo modify the premium to reflect the impact B. of inflation on medical and rehabilitation expensesTo discount the premium in states that have C. not made workers’ compensation insurance compulsoryTo provide insurers an inflated profit marginD.

16. To what extent are litigation costs covered by the workers’ compensation policy?

They are only covered when required by A. state law.They are only covered when required by B. federal law.They are covered in excess of the policy C. limit if the insured is sued over a workers’ compensation claim.They are not covered unless the insured has D. purchased an endorsement to the policy.

MN_P&C_CN.indb 277 6/23/2011 8:58:13 AM

278

L E S S O N E i G H 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. A. The primary purpose of workers’ compensation is to provide compensation to employees for injuries arising out of their employment.

2. D. Work-related injuries to someone actively employed would be covered by workers’ compensation.

3. B. The insurance company, not the employer, pays workers’ compensation benefits to the employee.

4. D. Injured workers may still be able to collect workers’ compensation benefits through the Minnesota Special Compensation Fund.

5. C. Workers’ compensation pays benefits without regard to fault.

6. C. Workers’ compensation policies may be endorsed.

7. A. Under workers’ compensation policies, an employer is not to make voluntary payments to an injured employee.

8. B. Workers’ compensation premiums are based on the number of $100 payroll units assigned to each job classification.

9. D. When an employer fails to provide workers’ compensation coverage, an injured worker may still be able to collect benefits through the Minnesota Special Compensation Fund.

10. B. Third party claims arising from death or injury of a worker are handled under the Employers Liability (Part 2) coverage.

11. C. Workers’ compensation provides benefits for an employee’s lost wages, rehabilitation, and medical expenses.

12. C. Monopolistic workers’ compensation laws allow benefits be made available exclusively through a fund managed by the state.

13. B. Third party claims are handled by Part 2 of the workers’ compensation policy.

14. B. An employer should not make payments or assume obligations when a workers’ compensation claim occurs.

15. A. The experience modification factor is used to adjust premiums based on the insured’s actual loss experience.

16. C. Litigation (court/defense) costs are paid in addition to policy limits.

MN_P&C_CN.indb 278 6/23/2011 8:58:13 AM

Class notestrue/False Questions

MN_P&C_CN.indb 279 6/23/2011 8:58:13 AM

280

L E S S O N O N E R E v i E W

1. Speculative risk involves a chance of loss only.TrueA. FalseB.

2. Pure risk is NOT insurable.TrueA. FalseB.

3. Loss is an unintentional decline or disappearance in value.

TrueA. FalseB.

4. An example of a morale hazard is a dishonest or unhealthy person.

TrueA. FalseB.

5. Broken glass is an example of a physical hazard.TrueA. FalseB.

6. Insurance involves a transfer of risk from one to many.

TrueA. FalseB.

7. The law of large numbers states that as the number of individual risk exposures increases, the ability to accurately predict losses declines.

TrueA. FalseB.

8. The principle of indemnity allows insureds to make a profit from their insurance policies after filing a claim.

TrueA. FalseB.

9. Insurance companies are usually willing to accept risks when there is a chance that the insurer may suffer a catastrophic loss.

TrueA. FalseB.

10. Mutual insurance companies are owned by their policyholders.

TrueA. FalseB.

11. Mutual insurance companies may assess their policyholders.

TrueA. FalseB.

12. A fraternal insurance company is usually allowed to only sell insurance to members of a particular social or religious group.

TrueA. FalseB.

13. Fraternal insurance companies are legal reserve companies.

TrueA. FalseB.

14. Stock insurance companies usually sell PAR (participating) policies.

TrueA. FalseB.

15. Stock insurance companies are managed by a board of directors.

TrueA. FalseB.

16. Stock insurance companies are legal reserve companies.

TrueA. FalseB.

MN_P&C_CN.indb 280 6/23/2011 8:58:13 AM

281

17. A reciprocal exchange is a group of individuals/organizations that insure each other.

TrueA. FalseB.

18. A unilateral contract is a contract where both parties make a legally enforceable promise.

TrueA. FalseB.

19. Any ambiguities in a contract of adhesion will usually be interpreted in favor of the insured.

TrueA. FalseB.

20. Representations are statements that are believed to be at least partially TRUE.

TrueA. FalseB.

21. Material misrepresentations will usually void coverage.

TrueA. FalseB.

22. The conditions section of an insurance policy is where the insurance company describes the property that is insured by the policy.

TrueA. FalseB.

23. The declarations page will list the name of the loss payee or lien holder (if one exists).

TrueA. FalseB.

24. The term proximate cause is an exclusion under special peril form.

TrueA. FalseB.

25. An accident is an unexpected, fortuitous event, fixed in time and place, that leads to a financial loss.

TrueA. FalseB.

26. An occurrence is an unforeseen and unintended event, fixed in time or place, that leads to an injury or loss.

TrueA. FalseB.

MN_P&C_CN.indb 281 6/23/2011 8:58:13 AM

282

L E S S O N O N E A N S W E R S A N D R A T i O N A L E S

1. B. It involves a chance of loss or gain.

2. B. It involves a chance of loss only and is insurable.

3. A.

4. B. An example of a morale hazard is when a person acts differently because that person has insurance.

5. A.

6. A.

7. B. As the number of individual exposures increases, so does the ability to accurately predict the loss experience of the group.

8. B. The insurer will restore the insured to their pre-loss condition without allowing the insured to make a profit.

9. B. There cannot be a risk of catastrophic loss to the insurer.

10. A.

11. B. They are non-assessable/legal reserve companies.

12. A.

13. B. They may assess their policyholders.

14. B. They usually sell non-PAR policies.

15. A.

16. A.

17. A.

18. B. Only 1 party makes a legally enforceable promise.

19. A.

20. B. They are believed to be entirely true.

21. A.

22. B. The declarations page describes the property insured by the policy.

23. A.

24. B. Proximate cause relates to negligence.

25. A.

26. B. An occurrence is a sudden event causing loss or a continuous or repeated exposure to conditions, neither expected nor intended, that results in injury or loss.

MN_P&C_CN.indb 282 6/23/2011 8:58:13 AM

283

L E S S O N S i X R E v i E W

1. A non-admitted carrier is an insurance company who has Certificate of Authority from the Minnesota Department of Commerce.

TrueA. FalseB.

2. Non-admitted carriers may only sell insurance through a producer who has a surplus lines license.

TrueA. FalseB.

3. A resident insurance producer’s license is issued to a person who resides or maintains his principal place of business in the state of Minnesota.

TrueA. FalseB.

4. A resident of another state may be licensed to sell insurance in Minnesota as a non-resident if the resident is NOT already licensed as an insurance producer in her home state.

TrueA. FalseB.

5. A 180-day temporary insurance license may be issued to a person who has passed the licensing exam and has a company appointment.

TrueA. FalseB.

6. A 180-day temporary insurance license may be issued to the designee of a licensed producer who is entering active duty in the U.S. military.

TrueA. FalseB.

7. A 180-day temporary insurance license may be issued to a person who is already licensed in another state and has moved to Minnesota with the intention of obtaining a resident license.

TrueA. FalseB.

8. A 180-day temporary insurance license may be issued to the surviving spouse of a disabled or deceased producer.

TrueA. FalseB.

9. The employee of an insurance agency who explains policy provisions to a customer must obtain an insurance license.

TrueA. FalseB.

10. An underwriter who works for the home office of an insurance company must obtain an insurance license.

TrueA. FalseB.

11. A sales representative working directly for an insurance company must obtain an insurance license.

TrueA. FalseB.

12. A company that offers group insurance benefits to its employees must license all employees who explain the group benefit package to new hires.

TrueA. FalseB.

13. Anyone who wishes to obtain a permanent insurance license must first pass a licensing exam with a score of 70% or higher.

TrueA. FalseB.

MN_P&C_CN.indb 283 6/23/2011 8:58:13 AM

284

14. A company appointment from at least 1 admitted carrier is required to apply for an insurance license.

TrueA. FalseB.

15. A new insurance producer must apply for his insurance license within 6 months of passing his licensing exam.

TrueA. FalseB.

16. An applicant for an insurance license must be at least 18 years of age before a license can be issued.

TrueA. FalseB.

17. Insurance agencies do NOT need to be licensed as long as every individual producer working at the agency holds his own insurance license.

TrueA. FalseB.

18. An insurance license is valid for 2 years.TrueA. FalseB.

19. Insurance licenses expire on October 15 of the second year that the license has been in force.

TrueA. FalseB.

20. Oral binders must be followed up in writing within 5 business days.

TrueA. FalseB.

21. A person who holds an insurance license must notify the Commerce Department within 14 days of changing the person’s name or address.

TrueA. FalseB.

22. Three hours of continuing education in the area of ethics is required during a producer’s license period.

TrueA. FalseB.

23. After a producer has renewed her insurance license for the first time, 45 hours of continuing education is required during every subsequent license period.

TrueA. FalseB.

24. If a person wishes to reinstate his insurance license after it has been revoked, he must wait at least 2 years and post a performance bond of at least $20,000.

TrueA. FalseB.

25. If a licensed insurance producer violates insurance regulations, the Commerce Department may suspend that person’s insurance license for any period of time NOT less than 3 months.

TrueA. FalseB.

26. If the Commerce Department censures a licensed insurance producer, the producer will be prohibited from selling insurance for 6 months.

TrueA. FalseB.

27. Acting as an insurance producer without a valid insurance license is a gross misdemeanor on the first offense.

TrueA. FalseB.

28. The Commerce Department may file criminal charges against an insurance producer who has violated the law.

TrueA. FalseB.

MN_P&C_CN.indb 284 6/23/2011 8:58:14 AM

285

29. The Governor of Minnesota appoints the Commerce Commissioner.

TrueA. FalseB.

30. The Commerce Department may conduct investigations into, and hold hearings on, any issue that affects the insurance industry in Minnesota.

TrueA. FalseB.

31. Insurance companies are required to retain their complaint records for 3 years after the complaint has been made.

TrueA. FalseB.

32. Insurance companies are responsible for appointing all insurance producers who sell insurance in Minnesota on the company’s behalf.

TrueA. FalseB.

33. Company appointments expire at the end of the second year the appointment has been in force.

TrueA. FalseB.

34. Insurance companies are responsible for any advertisements and representations regarding their policies, even if a producer created the advertisement or made the representation.

TrueA. FalseB.

35. Commissions for the sale of an insurance policy can be paid to anyone, even if the person receiving the commission is not a licensed insurance producer.

TrueA. FalseB.

36. A producer who charges service fees to a customer is NOT required to make written disclosure of the fee as long as the producer verbally disclosed the fee to the customer.

TrueA. FalseB.

37. Any time a producer meets with a prospective customer for the first time, the producer must provide written disclosure of her name, the name of the agency or insurer she represents, and the fact that she is in the business of selling insurance.

TrueA. FalseB.

38. Licensed insurance producers have a fiduciary responsibility to the insurance company they represent.

TrueA. FalseB.

39. Licensed insurance producers must use a receipt any time they take possession of a customer’s policy to conduct a policy review.

TrueA. FalseB.

40. A licensed insurance producer must deliver a newly issued policy to the customer within 10 days of receiving it from the insurance company.

TrueA. FalseB.

41. Licensed insurance producers are required to display their insurance license in a conspicuous location for public view and inspection.

TrueA. FalseB.

42. Licensed insurance producers are required to keep their complaint records on file for 4 years after the complaint was made.

TrueA. FalseB.

MN_P&C_CN.indb 285 6/23/2011 8:58:14 AM

286

43. False advertising is defined as making a statement to a customer that is untrue, deceptive, or misleading.

TrueA. FalseB.

44. Misrepresentation, as it applies to insurance producers, is only a crime if a customer suffers a financial loss because of the producer’s misstatement.

TrueA. FalseB.

45. An insurance producer can only be punished for defamation if the statement made about another producer or insurer is clearly false.

TrueA. FalseB.

46. Unfair discrimination can be defined as charging different premiums to persons or entities that are in the same class of insureds.

TrueA. FalseB.

47. A producer can be found guilty of misappropriation of funds if he improperly withholds or converts money belonging to a customer.

TrueA. FalseB.

48. It is acceptable for a producer to disobey the instructions of the insurance company when the instructions are illegal.

TrueA. FalseB.

49. The law of agency allows a producer to act on behalf of the insurer.

TrueA. FalseB.

50. According to the law of agency, a principal is someone who acts on the behalf of another person.

TrueA. FalseB.

51. Implied authority is authority given to the producer by means of the agency agreement.

TrueA. FalseB.

MN_P&C_CN.indb 286 6/23/2011 8:58:14 AM

287

L E S S O N S i X A N S W E R S A N D R A T i O N A L E S

1. B. An insurance company with a Certificate of Authority is called an admitted carrier.

2. A.

3. A.

4. B. A non-resident must be a licensed resident producer in her home state as a condition of being licensed as a non-resident in Minnesota.

5. B.

6. A.

7. B.

8. A.

9. A.

10. B. The underwriter is a salaried employee of an insurance company who negotiates the terms of a policy but does not actually sell insurance.

11. A.

12. B. An employer that offers a group benefit plan to its employees is exempt from licensing requirements.

13. A.

14. B. In most cases, it is required when placing business with an insurance company.

15. B. He must apply within 3 years of passing his licensing exam.

16. A.

17. B. Any insurance agency organized as a partnership or corporation must be licensed as an insurance agency, and every producer working there must also be licensed as an insurance producer.

18. A.

19. B. They expire on the last day of the producer’s birth month.

20. A.

21. B. Must notify the Commerce Department within 10 days.

22. A.

23. B. Twenty-four hours is required during every subsequent license period.

24. A.

25. A.

26. B. A letter of censure does not affect the producer’s ability to sell insurance. Rather, it serves as a formal reprimand.

27. A.

28. B. Only the district attorney may file criminal charges. Any disciplinary action taken by the Commerce Department is considered a license penalty rather than a criminal penalty.

29. A.

30. A.

31. B. Complaint records must be kept by the insurance company for 4 years.

32. A.

MN_P&C_CN.indb 287 6/23/2011 8:58:14 AM

288

33. B. They remain in force indefinitely.

34. A.

35. B. Commissions may only be paid to licensed producers.

36. B. Written disclosure is always required.

37. A.

38. A.

39. A.

40. B. It must be delivered within 30 days of receipt.

41. A.

42. B. Producers must keep their complaint records for 6 years.

43. A.

44. B. Misrepresentation is illegal whether or not a customer actually suffers financial injury.

45. B. Defamation is defined as a statement that is false or maliciously critical.

46. A.

47. A.

48. A.

49. A.

50. B. The principal is the party for whom the action is taken, whereas the producer is the person who acts on behalf of the principal.

51. B. Express authority is found in the agency agreement, whereas implied authority is not in writing, but necessary for a producer to do her job.

MN_P&C_CN.indb 288 6/23/2011 8:58:14 AM

289

L E S S O N S E v E N R E v i E W

1. Replacement cost is best described as the original price that was paid for property when it was brand new.

TrueA. FalseB.

2. A valued policy is often times used to insure property when the insurer and the insured agree on the value of the property in advance.

TrueA. FalseB.

3. Actual cash value is best described as replacement cost minus depreciation.

TrueA. FalseB.

4. The insured must abandon property to the insurer immediately after a loss.

TrueA. FalseB.

5. The insured must make reasonable and necessary repairs after a loss to protect the insured property from additional damage.

TrueA. FalseB.

6. After a loss, the insurer must prepare an inventory of damaged personal property.

TrueA. FalseB.

7. The insured may give notice of loss to the insurer at any time.

TrueA. FalseB.

8. The insurer is required to exercise the right to subrogation every time a negligent 3rd party is responsible for a loss.

TrueA. FalseB.

9. If damaged property has been declared a total loss by the insurer, the insurer becomes the new owner of the damaged property through the right of salvage.

TrueA. FalseB.

10. According to the terms of most liability insurance policies, the insurer has the responsibility to defend the insured against all claims that would be covered by the policy, even if the suit is frivolous.

TrueA. FalseB.

11. The liberalization clause is used to endorse a homeowners policy to provide replacement cost coverage in the event of a total loss.

TrueA. FalseB.

12. According to the terms of the standard mortgage clause, the insured is required to provide the mortgagee with a minimum of 10 days’ advance written notice if the policy is cancelled for any reason.

TrueA. FalseB.

13. The standard mortgage clause gives the mortgagee the right to recover any amounts owed under the mortgage at the time of loss.

TrueA. FalseB.

14. According to the terms of the standard mortgage clause, the mortgagee cannot collect from the policy if the insured commits a fraudulent or dishonest act.

TrueA. FalseB.

MN_P&C_CN.indb 289 6/23/2011 8:58:14 AM

290

15. The assignment clause prevents the insurance policy from being transferred to another owner without first getting prior written consent from the insurance company.

TrueA. FalseB.

16. According to the terms of the appraisal clause, each party hires its own appraiser and shares the cost of the umpire’s labor.

TrueA. FalseB.

17. Under the appraisal clause, the decision is binding when agreed upon by a majority.

TrueA. FalseB.

18. A property is deemed vacant when no one has occupied the building for 60 consecutive days.

TrueA. FalseB.

19. If the insured cancels a personal lines insurance policy in the middle of the policy period, the insurer will pay a short-rated refund of any unearned premiums.

TrueA. FalseB.

20. The standard coinsurance requirement is 80% of the value of the insured building.

TrueA. FalseB.

21. If the insured has met the coinsurance requirement, the insurer will pay in full for all losses to the insured property, even if the loss payment exceeds the policy limit.

TrueA. FalseB.

22. An employer being held responsible for the actions of an employee is an example of strict liability.

TrueA. FalseB.

23. The doctrine of comparative negligence prevents an injured party from suing for damages if he contributed to the loss in any way.

TrueA. FalseB.

24. Medical bills and lost wages are both examples of special damages that may be awarded by a court after a lawsuit.

TrueA. FalseB.

25. Punitive damages are awarded by the court for losses that cannot be easily defined (i.e., mental anguish, pain, and suffering).

TrueA. FalseB.

26. Basic form peril coverage will cover damage caused by smoke that comes from a fireplace.

TrueA. FalseB.

27. According to basic form peril coverage, damage to personal property that is caused by hail is only covered if the building is damaged first.

TrueA. FalseB.

28. Basic form does NOT cover losses caused by spacecraft or self-propelled missiles.

TrueA. FalseB.

29. Basic form will cover damage caused by a vehicle.

TrueA. FalseB.

30. A tree limb that collapsed through the roof of a home would be covered under basic peril form.

TrueA. FalseB.

MN_P&C_CN.indb 290 6/23/2011 8:58:14 AM

291

31. Broad form will cover damage caused by pipes freezing or bursting, even if the insured did NOT attempt to maintain heat in the building or drain the water system.

TrueA. FalseB.

32. Broad form does NOT cover collapse of an insured building if earth movement causes the collapse.

TrueA. FalseB.

33. Broad form will cover damage to the internal wiring of a home that is caused by a power surge but will NOT cover damage to electronic equipment and appliances that is caused by a power surge.

TrueA. FalseB.

34. Broad form will NOT cover damage that is caused by a hot water heater that suddenly ruptures due to the build-up of pressure within the hot water heater.

TrueA. FalseB.

35. Broad form covers damage caused by ice dams.TrueA. FalseB.

36. Special form covers damage caused by ice dams.TrueA. FalseB.

37. Arbitration is used to determine the value of a property item.

TrueA. FalseB.

38. An independent arbitrator decides which property appraisal is most accurate.

TrueA. FalseB.

39. The insured is responsible for paying all fees associated with arbitration.

TrueA. FalseB.

MN_P&C_CN.indb 291 6/23/2011 8:58:14 AM

292

L E S S O N S E v E N A N S W E R S A N D R A T i O N A L E S

1. B. It is the cost to replace the property with like kind and like quality construction at today’s costs.

2. A.

3. A.

4. B. The insured may not abandon property to the insurer.

5. A.

6. B. The insured is responsible for preparing the inventory, not the insurer.

7. B. The insured must give notice of loss promptly.

8. B. The insurer may exercise the right of subrogation at its option, but nothing requires the insurer to utilize subrogation.

9. A.

10. A.

11. B. If the insurer changes the policy forms in a manner that would broaden coverage at no additional cost, the liberalization clause provides the insured with the additional coverage without the need to reissue the policy.

12. B. The insurer will notify the mortgagee, not the insured.

13. A.

14. B. Nothing the insured does, even dishonesty, can prevent the mortgagee from collecting under the policy.

15. A.

16. A.

17. A.

18. B. To meet the definition of vacant, the building must also have inadequate furnishings to function at capacity.

19. B. Short-rated refunds are not used with personal lines policies.

20. A.

21. B. If the coinsurance requirement is met, the insurer will pay in full for all losses, up to the policy limit. However, any loss payment will be capped at the policy limit, even if the coinsurance requirement has been met. Remember this simple rule: the insurer will never pay more than the maximum policy limit.

22. B. This is an example of vicarious liability.

23. B. The injured party may sue, but his judgment may be reduced by his degree of fault.

24. A.

25. B. Punitive damages are awarded solely to punish the defendant for gross negligence, whereas general damages are awarded for mental anguish, pain and suffering, and so forth.

26. B. Smoke damage is covered in general, but there is no coverage for smoke from a fireplace, industrial smoke, or agricultural smudging.

27. A.

MN_P&C_CN.indb 292 6/23/2011 8:58:14 AM

293

28. B. Both are considered aircraft, and any losses they cause will be covered.

29. A.

30. B. Falling objects are covered under broad form.

31. B. The insured must attempt to maintain heat or drain the water system. However, if the insured makes a good faith attempt to maintain heat, and the pilot light goes out on the furnace, any damage caused by freezing pipes is covered.

32. A.

33. A.

34. B. This is covered as the sudden tearing, cracking, burning, or bulging of a heating system.

35. B. It covers damage caused by the weight of ice, snow, or sleet. Ice dams are destructive because the ice freezes and thaws, and the expansion and contraction of the ice causes the damage, not the weight.

36. A.

37. B. Arbitration is used to resolve a dispute over fault. Appraisal is used to resolve a dispute over a property’s value.

38. B. According to the appraisal provision, an umpire makes a binding decision.

39. B. The insured and insurer pay for their own arbitrators and split the cost of the umpire.

MN_P&C_CN.indb 293 6/23/2011 8:58:14 AM

294

L E S S O N E i G H T R E v i E W

1. All residential structures with 1 to 4 living units are eligible for coverage under the homeowners policy.

TrueA. FalseB.

2. The named insured meets the definition of an insured under a homeowners policy.

TrueA. FalseB.

3. A guest staying overnight at the insured residence meets the definition of an insured under a homeowners policy.

TrueA. FalseB.

4. A 21-year-old foreign exchange student living with the named insured meets the definition of an insured under a homeowners policy.

TrueA. FalseB.

5. A 16-year-old foster child living with the named insured meets the definition of an insured under a homeowners policy.

TrueA. FalseB.

6. The named insured’s mother who is currently living with the named insured meets the definition of an insured under a homeowners policy.

TrueA. FalseB.

7. When the named insured dies, his legal representative becomes the insured.

TrueA. FalseB.

8. Dwelling coverage under Section I of the homeowners policy includes coverage for land.

TrueA. FalseB.

9. Section I of the homeowners policy will insure a shed on the insured premises that is used to store commercial lawn mowing equipment.

TrueA. FalseB.

10. Personal property coverage under Section I of the homeowners policy is only provided while the personal property is located within the United States, Canada, and Puerto Rico.

TrueA. FalseB.

11. Personal property located at another residence is covered under Section I of the homeowners policy with no limit.

TrueA. FalseB.

12. Section I of the homeowners policy provides personal property protection to any motorized vehicles owned by the insured or a resident relative.

TrueA. FalseB.

13. Section I of the homeowners policy will automatically insure the personal property of any renters that reside in the insured premises.

TrueA. FalseB.

14. Loss of use coverage under Section I of the homeowners policy will not reimburse the insured for any lost rental revenue if part of the insured premises is held out for rental.

TrueA. FalseB.

MN_P&C_CN.indb 294 6/23/2011 8:58:14 AM

295

15. Loss of use coverage under Section I of the homeowners policy is provided for 2 weeks if an adjoining property is damaged by a covered peril and a civil authority prohibits use of the insured premises.

TrueA. FalseB.

16. The additional coverage provided by the homeowners policy for debris removal is only payable once the applicable policy limit has been exhausted.

TrueA. FalseB.

17. The homeowners policy does NOT provide additional coverage for loss assessments.

TrueA. FalseB.

18. The homeowners policy automatically provides replacement cost coverage for the dwelling and other structures if the dwelling is insured to at least 80% of its replacement value.

TrueA. FalseB.

19. The homeowners policy automatically provides replacement cost coverage for personal property if the dwelling is insured to at least 80% of its replacement value.

TrueA. FalseB.

20. The personal liability insurance provided by Section II of the homeowners policy covers bodily injury, property damage, and personal injury that the insured is legally liable for.

TrueA. FalseB.

21. Section II of the homeowners policy will cover the liability of the insured’s secretary who is delivering business property to the insured’s residence.

TrueA. FalseB.

22. Section II of the homeowners policy will cover the liability of the insured’s butler who is off premises buying groceries for the insured’s family.

TrueA. FalseB.

23. Section II of the homeowners policy does NOT cover liability for dog bites caused by a dog that is owned by or in the care of the insured.

TrueA. FalseB.

24. The personal liability insurance provided by Section II of the homeowners policy will pay a benefit regardless of who was at fault for the accident.

TrueA. FalseB.

25. The medical payments to others coverage provided by Section II of the homeowners policy will pay a benefit regardless of who was at fault for the accident.

TrueA. FalseB.

26. Medical payments to others coverage will pay any lost wages incurred within 3 years of an accident, as long as the lost wages result from an accident that was covered by the policy.

TrueA. FalseB.

27. Medical payments to others coverage does NOT cover injuries sustained by a residence employee

TrueA. FalseB.

28. The supplemental payments provided by Section II of the homeowners policy will pay any defense costs, first aid expenses, and interest on judgments against the insured, subject to the policy limits.

TrueA. FalseB.

MN_P&C_CN.indb 295 6/23/2011 8:58:14 AM

296

29. Section II of the homeowners policy provides a $1,000 benefit for damage to the property of others that is in the care, custody, or control of the insured. This benefit pays full replacement cost but is subject to a deductible.

TrueA. FalseB.

30. Section II of the homeowners policy will cover liability resulting from the negligent operation of a riding lawnmower owned by the insured

TrueA. FalseB.

31. Section II of the homeowners policy will cover liability resulting from the negligent operation of a golf cart owned by the insured while the golf cart is being operated on a public road or highway.

TrueA. FalseB.

32. The HO-4 policy covers real property.TrueA. FalseB.

33. The HO-6 policy is used by the owner of a condominium or townhouse.

TrueA. FalseB.

34. The HO-3 policy insures personal property using the same peril form as is provided on the dwelling and other structures.

TrueA. FalseB.

35. The HO-8 policy settles all losses to the dwelling on a replacement cost basis.

TrueA. FalseB.

MN_P&C_CN.indb 296 6/23/2011 8:58:15 AM

297

L E S S O N E i G H T A N S W E R S A N D R A T i O N A L E S

1. B. In order to be eligible, at least 1 of the living units must be owner-occupied.

2. A.

3. B. The person is a guest, not a resident of the household.

4. B. The student is in the care of the named insured but must be under age 21 to be considered an insured under the policy.

5. A.

6. A.

7. A.

8. B. It covers the dwelling and any attached structures but does not insure the land itself.

9. B. Cannot use other structures for business purposes, unless renting out the garage for use as a private garage.

10. B. Worldwide coverage is extended to personal property as long as it is damaged by a covered peril.

11. B. Personal property located at another residence is capped at 10% of the Coverage C limit.

12. B. It only provides personal property coverage for vehicles that are used to maintain the premises or assist the handicapped. All other motorized vehicles are excluded.

13. B. Property of renters is specifically excluded, unless the renter also happens to be a relative of the named insured.

14. B. It will reimburse the insured for lost rent if part of the insured premises is held out for rental.

15. A.

16. A.

17. B. There is a $1,000 benefit for loss assessments.

18. A.

19. B. Replacement cost coverage for personal property is only available by endorsement.

20. B. It covers bodily injury and property damage but not personal injury. Coverage for personal injury is only available by endorsement.

21. B. Liability arising from business operations is not covered.

22. A. Liability arising from the actions of a residence employee is covered.

23. B. It does cover liability resulting from the actions of an animal that is owned by or in the care of the insured.

24. B. In order for the comprehensive personal liability insurance to pay, the insured must be at fault.

25. A.

26. B. Medical payments to others coverage only pays medical and funeral expenses, not lost wages.

27. B. It does cover injuries sustained by a residence employee.

MN_P&C_CN.indb 297 6/23/2011 8:58:15 AM

298

28. B. The supplemental payments are not subject to the policy limits. Rather, they are paid in addition to the policy limits.

29. B. No deductible applies.

30. A.

31. B. Liability coverage for golf carts is only provided when the cart is being used on a golf course.

32. B. The HO-4 lacks Coverages A and B because the building is insured by the landlord rather than the tenant.

33. A.

34. B. The dwelling and other structures are insured using special form, while the personal property is insured using broad form.

35. B. While most policies use replacement cost to settle losses to the dwelling, the HO-8 settles dwelling losses using actual cash value.

MN_P&C_CN.indb 298 6/23/2011 8:58:15 AM

299

L E S S O N N i N E R E v i E W

1. The dwelling property policy can only be used to insure buildings that are owner-occupied.

TrueA. FalseB.

2. Coverage B of the dwelling property policy will cover a greenhouse on the insured premises that is used to grow plants that are sold for profit at the farmer’s market.

TrueA. FalseB.

3. Coverage C of the dwelling property policy does NOT cover the property of renters.

TrueA. FalseB.

4. Coverage D of the dwelling property policy is designed to reimburse the tenant of a rental property for any additional living expenses she incurs when the rental property is damaged by a covered peril.

TrueA. FalseB.

5. Coverage E of the dwelling property policy can be used to cover additional living expenses when the dwelling is owner-occupied.

TrueA. FalseB.

6. The dwelling property policy provides additional coverage equal to 5% of the applicable policy limit to cover debris removal expenses.

TrueA. FalseB.

7. The DP-3 policy covers personal property to the same extent that it covers the dwelling and other structures.

TrueA. FalseB.

8. The personal liability supplement that can be endorsed to the dwelling property policy will cover the insured’s liability for the actions of a residence employee.

TrueA. FalseB.

9. The broad theft endorsement to the dwelling policy will only cover personal property that is owned by the named insured.

TrueA. FalseB.

MN_P&C_CN.indb 299 6/23/2011 8:58:15 AM

300

L E S S O N N i N E A N S W E R S A N D R A T i O N A L E S

1. B. Non-owner-occupied dwellings, such as lake cabins and rental properties, are also eligible for coverage.

2. B. Like the homeowners policy, Coverage B will not insure other structures that are used for business purposes.

3. A.

4. B. Coverage D will reimburse the landlord for lost rental revenue, and the tenant must buy her own HO-4 to cover her own living expenses.

5. A. But it does not cover the additional living expenses of renters.

6. B. The dwelling property will only pay for debris removal out of the applicable policy limit and does not provide additional coverage when the policy limit has been exhausted.

7. B. It provides special form on the dwelling and other structures, while providing broad form on the personal property.

8. A.

9. B. It also covers personal property that is owned by a resident relative or person under age 21 that is in the care of the insured.

MN_P&C_CN.indb 300 6/23/2011 8:58:15 AM

301

L E S S O N T E N R E v i E W

1. Flood insurance is usually sold by the federal government.

TrueA. FalseB.

2. Seventy-five percent or more of a building’s insurable value must be above ground in order to be eligible for coverage under the National Flood Insurance Program.

TrueA. FalseB.

3. Flood insurance will cover mudslides that are caused by flooding.

TrueA. FalseB.

4. Flood insurance will NOT cover damage caused by tidal surge.

TrueA. FalseB.

5. Flood insurance does NOT take effect until 30 days after the first premium has been received, and it will NOT cover a flood in progress.

TrueA. FalseB.

6. Flood insurance will cover additional living expenses that are incurred by the insured after a covered loss.

TrueA. FalseB.

7. A producer may bind flood insurance if the first premium is received with the application for coverage.

TrueA. FalseB.

8. Flood insurance will NOT cover most types of personal property that is located beneath the lowest ground floor of the insured building.

TrueA. FalseB.

9. The ownership of a flood insurance policy can be automatically assigned when the insured property is sold to a new owner.

TrueA. FalseB.

10. Earthquake coverage applies 1 deductible per 48-hour period so that the insured may lump multiple aftershocks under 1 deductible.

TrueA. FalseB.

11. Mobile home coverage can be used to insure a trailer that is used as an office at a construction site.

TrueA. FalseB.

MN_P&C_CN.indb 301 6/23/2011 8:58:15 AM

302

L E S S O N T E N A N S W E R S A N D R A T i O N A L E S

1. B. Flood insurance is usually sold by the private sector, and federal government serves as the reinsurer.

2. B. Fifty-one percent or more of the building’s insurable value must be above ground.

3. A.

4. B. Damage caused by tidal surge is covered.

5. A.

6. B. Any losses that result from loss of use of the insured property are not covered.

7. B. Binding of flood insurance is prohibited.

8. A.

9. A.

10. B. This coverage applies 1 deductible per 72-hour period.

11. B. No business use is allowed.

MN_P&C_CN.indb 302 6/23/2011 8:58:15 AM

303

L E S S O N E L E v E N R E v i E W

1. The Standard Fire Policy settles losses using actual cash value.

TrueA. FalseB.

2. The Minnesota Standard Fire Policy takes effect at 12:00 pm CST.

TrueA. FalseB.

3. The Minnesota Standard Fire Policy requires that any lawsuits against the insurer must be initiated within 24 months of the loss.

TrueA. FalseB.

4. Valued policy law is used to settle total losses under the Minnesota Standard Fire Policy.

TrueA. FalseB.

5. Minnesota law states that all suits against the insurer must be filed within 2 years of the loss.

TrueA. FalseB.

6. The standard underwriting experience period in Minnesota is 7 years.

TrueA. FalseB.

7. The insurer may cancel a newly issued homeowners policy for any reason if it has been in force for less than 60 days.

TrueA. FalseB.

8. The insurer may cancel a homeowners policy at any time for non-payment of premium, but only after providing 30 days’ advance written notice to the insured.

TrueA. FalseB.

9. According to Minnesota law, non-renewal of a homeowners policy requires 30 days’ advance written notice.

TrueA. FalseB.

10. Cancellation of coverage under the FAIR plan requires 10 days’ advance written notice.

TrueA. FalseB.

11. The FAIR plan is administered by the Minnesota Property Insurance Placement Facility.

TrueA. FalseB.

12. If a property is accepted for coverage under the FAIR plan, the property will be assigned to an insurance company and coverage will take effect within 5 days of acceptance.

TrueA. FalseB.

MN_P&C_CN.indb 303 6/23/2011 8:58:15 AM

304

L E S S O N E L E v E N A N S W E R S A N D R A T i O N A L E S

1. A.

2. B. It takes effect at 12:01 am CST.

3. A.

4. A.

5. A.

6. B. It is 3 years.

7. A. Twenty days’ advance written notice is required.

8. B. The policy may be cancelled for non-payment of premium at any time, but the insurer only needs to provide 20 days’ advance written notice.

9. B. Sixty days’ advance written notice is required for non-renewal.

10. B. Cancellation under the FAIR plan requires 15 days’ advance written notice.

11. A.

12. A.

MN_P&C_CN.indb 304 6/23/2011 8:58:15 AM

305

L E S S O N T W E L v E R E v i E W

1. The commercial package policy can include workers’ compensation insurance.

TrueA. FalseB.

2. There are no mandatory coverages in a commercial package policy.

TrueA. FalseB.

3. The commercial package policy designates the first named insured as the person responsible for paying premiums.

TrueA. FalseB.

4. Before canceling a commercial package policy, the insurer must notify all named insureds of the cancellation.

TrueA. FalseB.

5. A commercial package policy that only features 1 of the available coverages is sometimes referred to as a monoline policy.

TrueA. FalseB.

6. The common declarations page of the commercial package policy will include the perils covered by the policy.

TrueA. FalseB.

7. The common declarations page of the commercial package policy will include the insured’s business description.

TrueA. FalseB.

8. The common declarations page of the commercial package policy will include the policy period.

TrueA. FalseB.

9. The common declarations page of the commercial package policy will include the insuring agreement.

TrueA. FalseB.

10. The common declarations page of the commercial package policy will include the premium for each part of the policy.

TrueA. FalseB.

11. Sprinkler leakage can only be added to the building and personal property coverage form by using an endorsement.

TrueA. FalseB.

12. Earthquake coverage is automatically covered by the building and personal property coverage form.

TrueA. FalseB.

13. Fixtures and floor coverings are covered under the building and personal property coverage form as part of the building.

TrueA. FalseB.

14. The building and personal property coverage form does NOT have a coinsurance requirement.

TrueA. FalseB.

MN_P&C_CN.indb 305 6/23/2011 8:58:15 AM

306

15. The building and personal property coverage form insures all buildings and other structures that are listed on the declarations page of the policy.

TrueA. FalseB.

16. The building and personal property coverage form will insure any owned business personal property that is in, on, or within 250 feet of the insured premises.

TrueA. FalseB.

17. If the insured regularly keeps business personal property at an off-site storage locker, coverage can be extended to the contents of the storage locker by adding the locker as an additional insured location under the building and personal property coverage form.

TrueA. FalseB.

18. The accounts receivable floater will NOT pay interest on any loans the business must obtain to continue business operations.

TrueA. FalseB.

19. If the policy limit has been exhausted, the building and personal property coverage form will provide 25% of the actual loss sustained to cover debris removal.

TrueA. FalseB.

20. The building and personal property coverage form will provide up to $500 for a fire department service charge.

TrueA. FalseB.

21. The building and personal property coverage form automatically covers signs that are NOT attached to the insured building.

TrueA. FalseB.

22. If the insured has a $5,000 outdoor sign attached to the exterior of the building, and has purchased a separate outdoor signs floater to cover it, the sign will be excluded under the building and personal property coverage form.

TrueA. FalseB.

23. The building and personal property coverage form insures land, foundations, piers, wharves, and retaining walls.

TrueA. FalseB.

24. The primary purpose of extra expense coverage is to fund the insured’s extra continuing operating expenses when the insured premises is damaged or destroyed by a covered peril.

TrueA. FalseB.

25. The restoration period under business income coverage ends when the property should be repaired or when business resumes at a new permanent location.

TrueA. FalseB.

26. The basic extended business income period lasts 45 days after the restoration period ends.

TrueA. FalseB.

27. When business income coverage is written with coinsurance, the minimum coinsurance requirement is 50% of the insured’s annual business income.

TrueA. FalseB.

28. When business income coverage is written with coinsurance, there is a monthly limit of indemnity that applies to the policy.

TrueA. FalseB.

MN_P&C_CN.indb 306 6/23/2011 8:58:15 AM

307

29. When business income coverage is written without coinsurance, the insured must select a monthly limit of indemnity that caps the amount payable by the policy on a monthly basis.

TrueA. FalseB.

30. Business income coverage will provide a benefit for up to 2 weeks when a civil authority prohibits use of the insured premises.

TrueA. FalseB.

31. Jewelers block coverage will insure any jewelry that is being worn by an employee.

TrueA. FalseB.

32. The bailee’s customer floater will cover losses caused by wear and tear, inherent vice, and damage caused by processing.

TrueA. FalseB.

33. The bailee’s customer floater covers the property of customers that is off premises but in the bailee’s control.

TrueA. FalseB.

34. The commercial articles floater does NOT provide temporary protection for newly acquired items.

TrueA. FalseB.

35. The policy territory for the commercial articles floater is the United States, Canada, and Puerto Rico.

TrueA. FalseB.

36. The outdoor signs floater provides all-risk coverage for signs that cannot be adequately covered by the building and personal property coverage form.

TrueA. FalseB.

37. When property is insured by an inland marine floater, the floater provides primary coverage, and any coverage under the building and personal property coverage form is excess.

TrueA. FalseB.

MN_P&C_CN.indb 307 6/23/2011 8:58:15 AM

308

L E S S O N T W E L v E A N S W E R S A N D R A T i O N A L E S

1. B. The commercial package policy can include property, liability, crime, inland marine, auto, and equipment breakdown coverage.

2. A.

3. A.

4. B. The insurer will only notify the first named insured.

5. A.

6. B.

7. A.

8. A.

9. B.

10. A.

11. B. It is automatically included as a covered peril under all cause of loss forms.

12. B. It can only be added by an endorsement.

13. A.

14. B. It has an 80% coinsurance requirement.

15. A.

16. B. It will insure any business personal property that is in, on, or within 100 feet of the insured premises.

17. A.

18. B. It will cover extra collection expenses and interest on any loans the insured must obtain to stay in business until collections are restored.

19. B. The insurer will pay 25% of the actual loss sustained for debris removal out of the policy limit. If the policy limit has already been exhausted, the insurer will provide an additional $10,000.

20. B. It will provide up to $1,000 for a fire department service charge.

21. B. Attached signs have a coverage limit of $2,500, while detached signs are not covered at all.

22. A. If it is covered under a separate floater, it falls under the “property insured elsewhere” exclusion.

23. B. They are all excluded from coverage.

24. A.

25. A.

26. B. It lasts for 30 days after the restoration period ends.

27. A.

28. B. When business income coverage is written with coinsurance, the insured is entitled to receive the actual loss sustained with no monthly limit of indemnity.

29. A.

30. B. It will provide a benefit for up to 3 weeks.

31. B. It will not cover property worn by an employee, but it will cover items on display in the store and any property of customers that is in the care, custody, or control of the insured jewelry store.

MN_P&C_CN.indb 308 6/23/2011 8:58:15 AM

309

32. B. These are all excluded from the bailee’s customer floater.

33. A.

34. B. Coverage is available for 30 days if the newly acquired property is of the same class of property already insured by the policy. The temporary coverage is limited to the lesser of 25% of the policy limit or $10,000.

35. B. The commercial articles floater provides worldwide coverage on an all-risk basis.

36. A.

37. B. While it is true that the floater provides primary coverage, the building and personal property coverage form will not cover “property insured elsewhere.” Therefore, there is no excess coverage available under the building and personal property coverage form.

MN_P&C_CN.indb 309 6/23/2011 8:58:15 AM

310

L E S S O N T H i R T E E N R E v i E W

1. Newly acquired vehicles are automatically covered for 30 days under the personal auto policy with the same coverage that is provided on the best-covered vehicle in the household.

TrueA. FalseB.

2. If the vehicle in the household with the best coverage does NOT have physical damage coverage, the newly acquired vehicle is provided physical damage coverage for 4 days, but only if the insured contacts their producer and requests it within the 4-day time period.

TrueA. FalseB.

3. Trailers are only covered by the personal auto policy if an endorsement is added to the policy.

TrueA. FalseB.

4. If the insured drives a loaner vehicle that is provided by a body shop while the insured’s vehicle is being repaired, the loaner vehicle meets the definition of a temporary substitute vehicle.

TrueA. FalseB.

5. If a personal auto policy has a liability limit of 100/300/50, and the insured caused a car accident that caused $200,000 in injuries to a 3rd party, the policy will pay the 3rd party for all of her injuries.

TrueA. FalseB.

6. If a personal auto policy has a combined single limit of $300,000, the insurer will pay for bodily injury and property damage out of the same limit.

TrueA. FalseB.

7. The liability coverage provided by the personal auto will pay the insured for his own injuries that result from a car accident.

TrueA. FalseB.

8. The medical payments coverage provided by the personal auto policy will pay the insured for her own injuries, regardless of whose fault the accident was.

TrueA. FalseB.

9. The medical payments coverage provided by the personal auto policy will only pay for the insured’s injuries if the car was moving at the time of the accident.

TrueA. FalseB.

10. The medical payments coverage provided by the personal auto policy will cover injuries sustained by the insured if the insured is struck by a hit-and-run driver while crossing the street as a pedestrian.

TrueA. FalseB.

11. Uninsured and underinsured motorists coverage will always cover the insured for his injuries if the other driver does NOT have enough liability insurance.

TrueA. FalseB.

12. If the insured vehicle is damaged when colliding with an animal, collision coverage will cover the damage to the vehicle.

TrueA. FalseB.

MN_P&C_CN.indb 310 6/23/2011 8:58:16 AM

311

13. Collision coverage only covers damage to the insured vehicle.

TrueA. FalseB.

14. Other than collision will handle damage to a windshield resulting from a rock chip.

TrueA. FalseB.

15. If an insured causes an accident with a customer’s car while working as a valet parking attendant, the insured’s personal auto policy will cover the loss.

TrueA. FalseB.

16. If Jane has someone else’s vehicle available for her to use on a regular basis (e.g., company car, roommate’s car), her own personal auto policy will NOT cover her while operating the vehicle that has been furnished to her.

TrueA. FalseB.

17. After a loss, the insured is NOT required to allow a claims adjuster to examine the damaged vehicle before repairing the vehicle.

TrueA. FalseB.

18. After a loss, the insured is required to cooperate with the insurer and immediately forward the insurer notice of legal action.

TrueA. FalseB.

19. Minnesota law prohibits lawsuits arising from a car accident unless certain tort thresholds have been met.

TrueA. FalseB.

20. Owners of motorcycles in Minnesota are NOT required to carry liability insurance.

TrueA. FalseB.

21. Off-road vehicles such as ATVs and snowmobiles are required by Minnesota no-fault law to carry a minimum amount of liability insurance.

TrueA. FalseB.

22. Minnesota law requires the owner of a motor vehicle to carry liability insurance protection equal to, or greater than, a split limit of 30/60/10 or a combined single limit of $70,000.

TrueA. FalseB.

23. Minnesota law does NOT require that the personal auto policy cover rental cars.

TrueA. FalseB.

24. Minnesota law requires that all personal auto policies sold in this state include a $40,000 benefit to pay for medical expenses that result from a car accident.

TrueA. FalseB.

25. Minnesota law requires all personal auto policies sold in this state to include a minimum benefit of 30/60 for uninsured and underinsured motorists coverage.

TrueA. FalseB.

26. If Bill is driving a friend’s car and causes an at-fault accident that injures the occupant of another vehicle, the policy that insures the vehicle that Bill was driving will provide primary liability coverage, and Bill’s policy will provide excess liability coverage.

TrueA. FalseB.

MN_P&C_CN.indb 311 6/23/2011 8:58:16 AM

312

27. If Bill is injured in an accident while driving a friend’s car, the policy that insures the vehicle that Bill was driving will provide primary PIP coverage, and Bill’s policy will provide excess PIP coverage.

TrueA. FalseB.

28. All admitted carriers who sell auto insurance in Minnesota are legally required to take cases from the assigned claims bureau, based on that insurer’s proportion of total auto insurance policies sold in Minnesota.

TrueA. FalseB.

29. In order to receive a benefit from the assigned claims bureau, the claimant must notify the assigned claims bureau within 1 year of the accident.

TrueA. FalseB.

30. An insurance company may cancel an auto policy for non-payment of premium at any time, as long as it provides the insured with at least 10 days’ advance written notice of the pending cancellation.

TrueA. FalseB.

31. If an auto insurance policy has been in force for less than 60 days, the insurer may cancel the policy for any reason by providing the insured with at least 5 days’ advance written notice of the pending cancellation.

TrueA. FalseB.

32. If the insured submits a fraudulent claim, or makes a material misrepresentation on an application for auto insurance, the insurer can cancel the insured’s auto insurance even if the policy has been in force for 60 days or longer.

TrueA. FalseB.

33. Canceling an auto policy is the same thing as non-renewing an auto policy.

TrueA. FalseB.

34. Minnesota law requires the insurer to provide at least 60 days’ advance written notice to the insured when non-renewing an auto policy.

TrueA. FalseB.

35. If an insured has 2 vehicles in her household, Minnesota law would allow the insurer to non-renew the insured’s policy if the insured was convicted of driving while intoxicated.

TrueA. FalseB.

36. The Minnesota Auto Insurance Plan (MAIP) only insures drivers who cannot obtain auto insurance through the private sector.

TrueA. FalseB.

37. Insurance producers are legally obligated to offer coverage through the Minnesota Auto Insurance Plan (MAIP) to all persons who are ineligible for coverage through the producer’s company.

TrueA. FalseB.

38. The Minnesota Auto Insurance Plan (MAIP) is an optional program out of which private insurance companies may opt out.

TrueA. FalseB.

39. Once covered by MAIP, the insured may choose to keep auto insurance through MAIP for as long as the insured resides in the state of Minnesota.

TrueA. FalseB.

40. Uninsured and underinsured motorists’ coverage is for bodily injury only.

TrueA. FalseB.

MN_P&C_CN.indb 312 6/23/2011 8:58:16 AM

313

L E S S O N T H i R 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. Coverage is provided for 14 days with the same coverage as the best-covered vehicle in the household.

2. A.

3. B. Trailers that are hitched to the vehicle are automatically provided liability coverage without the need for an endorsement.

4. A.

5. B. The policy will pay the $100,000 limit that applies per person for bodily injury, and the insured will pay the 3rd party the other $100,000 out of her own pocket.

6. A.

7. B. Liability insurance will only pay to a 3rd party that is injured due to the insured’s negligence.

8. A.

9. B. Coverage is provided when the insured is occupying, upon, or getting in or out of a motor vehicle.

10. A.

11. B. It does not always cover the insured; rather it only covers the insured when the other driver is at fault. If the insured is at fault, uninsured and underinsured motorists coverage does not apply.

12. B. The damage will be covered by other than collision coverage.

13. A.

14. A.

15. B. The personal auto policy specifically excludes losses that occur while working in the business of parking, selling, servicing, or storing automobiles.

16. A. The personal auto policy has an exclusion for vehicles that are furnished or available for the regular use of the insured, meaning the vehicle owner must add Jane as an additional driver to the policy.

17. B. The insured must permit inspection and appraisal of the vehicle before repair.

18. A.

19. A.

20. B. Motorcycle owners are required to carry liability insurance but are not required to carry the other mandatory no-fault coverages.

21. B. Off-road vehicles are not subject to Minnesota no-fault law.

22. A.

23. B. Minnesota law requires that all personal auto policies sold in this state include a benefit of at least $35,000 for damage to a rental car that was rented to the insured.

24. B. Minnesota law requires a total PIP benefit of $40,000, of which half, or $20,000, pays for medical expenses.

25. B. The minimum for uninsured and underinsured motorists coverage is 25/50.

26. A.

MN_P&C_CN.indb 313 6/23/2011 8:58:16 AM

314

27. B. PIP follows the occupant of the vehicle, meaning that Bill will go to his own PIP protection for his injuries.

28. A.

29. B. The claimant must notify the assigned claims bureau within 6 months of the accident.

30. A.

31. B. 10 days’ advance written notice is required if the policy has been in force for less than 60 days.

32. A. Cancellation requires 30 days’ advance notice when the policy has been in force for 60 days or longer.

33. B. Canceling involves terminating a policy in the middle of the policy period, while non-renewal allows the insured to keep coverage until the end of the policy period.

34. A.

35. A. Three or more points are required to non-renew a household with 2 vehicles, and DWI is a 4-point violation.

36. A.

37. A.

38. B. All insurers that sell auto insurance in Minnesota are required to participate in MAIP based on their market share.

39. B. Eligibility for MAIP ends when the insured can secure auto insurance through the private sector.

40. A.

MN_P&C_CN.indb 314 6/23/2011 8:58:16 AM

315

L E S S O N F O U R T E E N R E v i E W

1. Richard has a $1,000,000 personal umbrella policy and is required to carry $300,000 of underlying auto and homeowners liability coverage. If the underlying coverage lapses, Richard’s umbrella policy will provide primary coverage if he is involved in an auto accident.

TrueA. FalseB.

2. When a personal umbrella policy covers a loss that would NOT otherwise be covered by the underlying coverage, the umbrella policy will provide primary coverage.

TrueA. FalseB.

3. Insurance producer errors and omissions coverage will cover losses that arise from criminal, dishonest, and fraudulent acts.

TrueA. FalseB.

4. Insurance producer errors and omissions coverage would likely cover a producer who accidentally forgot to place insurance coverage for a customer who requested it.

TrueA. FalseB.

5. The insured can maintain low liability limits on the underlying policy, therefore relying on the umbrella policy to pay for most losses.

TrueA. FalseB.

6. The insured must pay a Self-Insured Retention (SIR) whenever the umbrella policy pays for a claim.

TrueA. FalseB.

7. An errors and omissions policy will pay for defense costs in addition to the liability limits.

TrueA. FalseB.

8. Most errors and omissions policies allow the insurer to settle a claim on behalf of the insured without the insured’s consent.

TrueA. FalseB.

MN_P&C_CN.indb 315 6/23/2011 8:58:16 AM

316

L E S S O N F O U R 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. If the underlying policy lapses, the umbrella will only pay the part of the loss that exceeds the amount of underlying coverage that was required.

2. A.

3. B. Criminal, fraudulent, and dishonest acts are excluded.

4. A.

5. B. Because the umbrella policy is an excess policy, the insurer will require a substantial amount of underlying coverage before issuing an umbrella policy.

6. B. The insured pays a SIR only when the umbrella pays on a primary basis.

7. B. Defense costs count against the limits on an E&O policy.

8. A.

MN_P&C_CN.indb 316 6/23/2011 8:58:16 AM

317

L E S S O N F i F T E E N R E v i E W

1. The aggregate limit of liability is the most the insurer will pay in any policy period, regardless of the number of claims or losses.

TrueA. FalseB.

2. An occurrence form CGL will cover any losses that occurred during the policy period as long as the claim is filed within 5 years of the loss.

TrueA. FalseB.

3. XYZ Corporation was recently sued for a loss that occurred on May 3, 1994. If XYZ Corporation has owned occurrence form liability policies for its entire history, it would be safe to presume that this claim would be covered by the liability policy that was in force on May 3, 1994.

TrueA. FalseB.

4. The claims-made form of the CGL will provide coverage for all losses that occurred in the past, as long as the claim is filed during the current policy period.

TrueA. FalseB.

5. The claims-made form of the CGL features a basic extended reporting period of 60 days.

TrueA. FalseB.

6. The purpose of the extended reporting period is to give the insured extra time to report losses to his liability carrier when canceling a claims-made CGL.

TrueA. FalseB.

7. The declarations page of the CGL will list the insured’s form of business (i.e., corporation, partnership, sole proprietorship).

TrueA. FalseB.

8. A good example of premises and operations liability is when a customer is injured by the actions of an independent contractor that was hired to perform work on behalf of the named insured.

TrueA. FalseB.

9. Premises and operations liability arises from losses that occur on the business premises or as a result of the insured’s business activities away from the business premises.

TrueA. FalseB.

10. The CGL covers all forms of contractual liability.

TrueA. FalseB.

11. The CGL does NOT cover losses that arise from products and completed operations liability.

TrueA. FalseB.

12. Libel, slander, and copyright infringement are all examples of advertising injury that would be covered under Coverage B of the CGL.

TrueA. FalseB.

13. Coverage C of the CGL will pay for reasonable medical and funeral expenses that are incurred within 3 years of a covered loss, regardless of whose fault the loss was.

TrueA. FalseB.

MN_P&C_CN.indb 317 6/23/2011 8:58:16 AM

318

14. In order for the insurer to pay beyond the medical payments limit under Coverage C of the CGL, the claimant must typically prove that the insured was negligent.

TrueA. FalseB.

15. The CGL does NOT cover social host liquor liability.

TrueA. FalseB.

16. Professional liability, employers’ liability, and pollution liability are all exclusions under the CGL.

TrueA. FalseB.

17. Coverage B of the CGL will cover advertising injury that arises from a wrong description of price or when the insured’s goods and services do NOT conform to their advertised quality.

TrueA. FalseB.

18. When a CGL is used to insure a sole proprietorship, the policy will NOT cover employees of the sole proprietor for liability that arises from their job duties.

TrueA. FalseB.

19. Under the CGL, if the insured dies, her legal representative becomes the insured.

TrueA. FalseB.

20. Anyone driving mobile equipment on a highway with the insured’s permission is considered an additional insured under the CGL.

TrueA. FalseB.

MN_P&C_CN.indb 318 6/23/2011 8:58:16 AM

319

1. A.

2. B. An occurrence form CGL will cover all losses that occur during the policy period, regardless of when the claim is actually filed.

3. A.

4. B. In order for the claims-made form to provide coverage, the loss must occur on or after the policy’s retroactive date. If the loss occurred before the retroactive date, the loss will not be covered, even if the claim is filed during the current policy period.

5. A.

6. A.

7. A.

8. B. This is a good example of independent contractors’ liability.

9. A.

10. B. It only covers 5 types of contractual liability. They are lease of premises, easement agreement, agreement to indemnify a municipality, sidetrack agreement, and elevator maintenance agreement.

11. B. Products and completed operations liability is covered by the CGL.

12. A.

13. B. Coverage C of the CGL covers reasonable medical and funeral expenses that are incurred with 1 year of a covered loss.

14. A. High-dollar liability claims involving negligence are generally handled under Coverage A of the CGL.

15. B. The CGL will cover social host liquor liability.

16. A.

17. B. These are both exclusions from Coverage B of the CGL.

18. B. Employees of the sole proprietor are covered by the CGL while they are performing their job duties.

19. A.

20. A.

L E S S O N F i F T E E N A N S W E R S A N D R A T i O N A L E S

MN_P&C_CN.indb 319 6/23/2011 8:58:16 AM

320

L E S S O N S i X T E E N R E v i E W

1. The business auto policy is the most appropriate type of auto coverage for businesses that have a fleet of vehicles.

TrueA. FalseB.

2. The liability coverage of the business auto policy would pay for injuries sustained by an employee who is injured while unloading the back of a truck owned by the named insured.

TrueA. FalseB.

3. If an employee causes an auto accident while driving a personal vehicle on the job, the business auto policy will cover the employer for any vicarious liability that results from the accident.

TrueA. FalseB.

4. If an employee causes an auto accident while driving a personal vehicle on the job, the business auto policy will cover the employee for any liability that results from the accident.

TrueA. FalseB.

5. The business auto policy will cover liability that arises from the use of mobile equipment, such as front-end loaders, forklifts, and bulldozers.

TrueA. FalseB.

6. The business auto policy will cover injuries sustained by an employee of the named insured who is injured in an auto accident while on the job.

TrueA. FalseB.

7. The business auto policy will cover a vehicle that is owned by the named insured and being used with permission by an employee of the named insured.

TrueA. FalseB.

8. The business auto policy will cover the named insured for the use of any covered auto.

TrueA. FalseB.

9. The garage coverage form does NOT provide liability coverage for employees of the named insured under any circumstances.

TrueA. FalseB.

10. The garage coverage form typically provides physical damage coverage for car dealerships on a blanket basis.

TrueA. FalseB.

11. The purpose of garagekeeper’s coverage under the garage coverage form is to provide insurance for vehicles that are owned and operated by the named insured.

TrueA. FalseB.

12. The garage coverage form is designed for car dealerships, including dealerships with repair operations.

TrueA. FalseB.

13. In order for a covered theft to be considered a robbery, a weapon must be used during the commission of the crime.

TrueA. FalseB.

MN_P&C_CN.indb 320 6/23/2011 8:58:16 AM

321

14. A custodian is a person who has care, custody, or control of the insured property when it is off premises.

TrueA. FalseB.

15. If an employee is caught stealing, the employee theft insuring agreement will exclude any subsequent theft losses caused by that employee.

TrueA. FalseB.

16. The “inside the premises—theft of money and securities” insuring agreement will provide coverage if an employee is caught stealing money from a cash register.

TrueA. FalseB.

17. The actual or attempted robbery of a watchperson within the premises is covered under the “inside the premises—robbery or burglary of other property” form.

TrueA. FalseB.

18. The “inside the premises—robbery or safe burglary of other property” insuring agreement will cover damage to the premises that is caused during a covered theft.

TrueA. FalseB.

19. The “employee theft” insuring agreement will cover losses that result from accounting errors.

TrueA. FalseB.

20. A bail bond is used to guarantee appearance in court.

TrueA. FalseB.

21. A license and permit bond is used to guarantee that the licensee will abide by all laws that regulate the industry in which the licensee is licensed.

TrueA. FalseB.

22. The face amount of a bond is sometimes referred to as the surety.

TrueA. FalseB.

23. The relationship between the principal and the surety is similar to the relationship between the insured and the insurer.

TrueA. FalseB.

MN_P&C_CN.indb 321 6/23/2011 8:58:16 AM

322

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. A.

2. B. This would be a workers’ compensation claim.

3. A.

4. B. The business auto policy will cover the named insured (i.e., the employer), but the employee still needs his own personal auto policy for coverage.

5. B. Liability coverage for mobile equipment is provided by the CGL or through an endorsement.

6. B. This is a workers’ compensation claim.

7. A.

8. A.

9. B. Insureds include the named insured, employees of the named insured, and anyone driving an insured vehicle with permission.

10. A.

11. B. The purpose of garagekeeper’s coverage is to provide coverage for vehicles of others that are in the care, custody, or control of the insured.

12. A.

13. B. Robbery merely requires the threat of violence. A weapon need not be involved to be considered a robbery.

14. B. A custodian has care, custody, or control of the insured property when it is on premises.

15. A.

16. B. Employee dishonesty is only covered under the “employee theft” insuring agreement.

17. A.

18. A.

19. B. Accounting errors are excluded from all crime insuring agreements.

20. A.

21. A.

22. B. The face amount of a bond is called the penalty.

23. A.

MN_P&C_CN.indb 322 6/23/2011 8:58:17 AM

323

L E S S O N S E v E N T E E N R E v i E W

1. The declarations page of the BOP includes the insured’s business description.

TrueA. FalseB.

2. Coverage under the BOP can be terminated with 5 days’ notice if the building has been vacant or unoccupied for 60 days or longer.

TrueA. FalseB.

3. Business income coverage under the BOP terminates 60 days after the building is reoccupied.

TrueA. FalseB.

4. A BOP can be used to insure a bakery.TrueA. FalseB.

5. A BOP can be used to insure a farm.TrueA. FalseB.

6. A BOP can be used to insure an auto repair shop.

TrueA. FalseB.

7. A BOP can be used to insure a convenience store.

TrueA. FalseB.

8. A BOP can be used to insure a large restaurant.TrueA. FalseB.

9. A BOP can be used to insure a fast food restaurant.

TrueA. FalseB.

10. A BOP can be used to insure a manufacturing operation.

TrueA. FalseB.

11. The BOP has an 80% coinsurance requirement.TrueA. FalseB.

12. The conditions section of the BOP states that the first named insured is the only insured that can cancel the policy.

TrueA. FalseB.

13. The BOP automatically renews at the end of the current policy period, even if the first named insured has NOT paid the renewal premium.

TrueA. FalseB.

14. When a BOP is renewed, premiums are based on the rates and rules that are in effect at the time of renewal.

TrueA. FalseB.

15. The BOP automatically includes 12 months of coverage for business income and extra expenses.

TrueA. FalseB.

16. The business income and extra expense coverage that is provided by the BOP will cover payroll expenses for up to 12 months.

TrueA. FalseB.

MN_P&C_CN.indb 323 6/23/2011 8:58:17 AM

324

17. The BOP provides special form perils on the building and personal property.

TrueA. FalseB.

18. The BOP includes a claims-made commercial general liability policy.

TrueA. FalseB.

19. Coverage for outdoor signs can be added to the BOP by endorsement.

TrueA. FalseB.

20. Coverage for money and securities is included in the BOP.

TrueA. FalseB.

21. The “hired and non-owned auto liability” endorsement to the BOP can be used to insure vehicles that are owned by the named insured.

TrueA. FalseB.

22. The “outdoor signs” coverage that is available with the BOP covers losses that are caused by mechanical breakdown, wear and tear, and latent defect.

TrueA. FalseB.

23. When coverage for money and securities is added to the BOP by endorsement, it will cover losses that result from the dishonest acts of employees.

TrueA. FalseB.

24. The BOP insures business personal property that is in, on, or within 100 feet of the insured premises.

TrueA. FalseB.

25. A 10-story office building would be a good risk to insure under a BOP.

TrueA. FalseB.

MN_P&C_CN.indb 324 6/23/2011 8:58:17 AM

325

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. A.

2. A.

3. B. Coverage terminates when work is expected to be completed or when the insured permanently relocates to a new location.

4. A.

5. B.

6. B.

7. A.

8. B.

9. A.

10. B.

11. B. There is no coinsurance requirement under the BOP. However, if the building is insured to 80% or more of its value, full replacement cost coverage is automatically provided.

12. A.

13. B. The first named insured must pay the renewal premium before the end of the current policy period.

14. A.

15. A.

16. B. Payroll expenses are only covered for 60 days.

17. A.

18. B. It includes an occurrence form CGL.

19. A.

20. A.

21. B. It only provides liability protection for the business when employees rent vehicles or use their personal vehicles during the course of their employment.

22. B. These are all exclusions from outdoor signs coverage.

23. B. The businessowner would also need to add employee dishonesty coverage.

24. A.

25. B. In order to qualify for coverage under a BOP, office buildings must be 6 stories or less and have 100,000 square feet or less.

MN_P&C_CN.indb 325 6/23/2011 8:58:17 AM

326

L E S S O N E i G H T E E N R E v i E W

1. The premium rate for workers’ compensation insurance is based on $100 units of payroll.

TrueA. FalseB.

2. The general provisions of workers’ compensation insurance define a workers’ compensation law as any federal law that applies to work-related injuries.

TrueA. FalseB.

3. Employers’ liability insurance (Part II of the workers’ compensation policy) is designed to cover the claims of 3rd parties that arise from injury or death of an employee.

TrueA. FalseB.

4. Workers’ compensation insurance will NOT pay litigation costs if they exceed the required benefits under state law.

TrueA. FalseB.

5. Minnesota law states that an employee who is injured on the job may sue the employer for negligence after receiving workers’ compensation benefits.

TrueA. FalseB.

6. If an at-work injury is caused by a negligent 3rd party who has no relationship to the employer, the injured employee is still eligible to receive workers’ compensation benefits.

TrueA. FalseB.

7. If a workers’ compensation policy provides benefits to an employee that was injured by a negligent 3rd party, the insurer retains the right to recover those benefits from the 3rd party through the process of subrogation.

TrueA. FalseB.

8. Minnesota workers’ compensation law caps benefits for medical and rehabilitation expenses at $1,000,000 per injured employee.

TrueA. FalseB.

9. The purpose of other states’ coverage (Part III of the workers’ compensation policy) is to provide temporary coverage if the employer begins work in any of the states listed on the declarations page for Part III of the policy.

TrueA. FalseB.

10. If the employer volunteers payments to an injured employee that exceed what state law requires, the workers’ compensation policy will provide the employer with partial reimbursement.

TrueA. FalseB.

11. The employer has 30 days to notify its workers’ compensation carrier of any injuries that have been reported by an employee.

TrueA. FalseB.

12. The purpose of the experience modification factor is to alter the premium to reflect the insured’s actual claims experience.

TrueA. FalseB.

MN_P&C_CN.indb 326 6/23/2011 8:58:17 AM

327

13. When calculating the premium for workers’ compensation insurance, it is assumed that all employees of the same company face a similar likelihood of being injured on the job.

TrueA. FalseB.

14. The final premium for a workers’ compensation policy is calculated at the beginning of the policy period.

TrueA. FalseB.

15. The purpose of the Minnesota Special Compensation Fund is to provide workers’ compensation insurance for employers that are uninsurable through the standard insurance market.

TrueA. FalseB.

16. Minnesota workers’ compensation law caps payments for lost wages at 66-2/3 of the covered worker’s wage, up to the maximum weekly compensation allowed by law.

TrueA. FalseB.

MN_P&C_CN.indb 327 6/23/2011 8:58:17 AM

328

L E S S O N E i G H 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. A.

2. B. A workers’ compensation law is defined as the workers’ compensation law of any state listed on the declarations page.

3. A.

4. B. Litigation and defense costs are always paid in addition to any required benefits.

5. B. Workers’ compensation insurance serves as an exclusive remedy under Minnesota law, and an employee who receives benefits may not sue the employer for negligence.

6. A.

7. A.

8. B. Minnesota law requires that all reasonable medical and rehabilitation expenses be paid with no limit.

9. A.

10. B. The employer expressly agrees not to volunteer payments as a condition of coverage.

11. B. The employer must notify its workers’ compensation carrier immediately.

12. A.

13. B. Employees are categorized based on their job classification, and employees in higher-risk jobs are assigned a higher premium rate.

14. B. The deposit premium is calculated at the beginning of the year. The final premium is calculated at the end of the year after a premium audit has been conducted.

15. B. The Minnesota Special Compensation Fund provides benefits to employees that are injured when their employer is illegally uninsured.

16. A.

MN_P&C_CN.indb 328 6/23/2011 8:58:17 AM

329

Aaccident An unintended and unforeseen event.actual cash value The sum of money required to

pay for damages or loss, computed on the basis of replacement value less its depreciation. Today’s replacement cost less physical depreciation.

actuary A person who calculates rates and reserves for an insurance company.

adjuster An individual who determines the amount of a loss.

admitted company An insurance company autho-rized and licensed to do business in a given state.

adverse selection Those with higher risk situations attempt to purchase insurance more often than those with average or below average risks.

agent An individual, partnership, or corporation appointed by an insurance company to solicit, negotiate, or countersign insurance contracts on its behalf.

all risk Insurance against loss or damage to property arising from any cause, except those specifically excluded. May also be referred to as open peril.

appraisal An evaluation of property made for deter-mining its insurable value or the amount of loss sustained.

appraisal clause The procedure in the policy used only for disputes involving the value of the prop-erty.

assigned risk plan A plan that provides insurance protection for risks that underwriters do not care to insure. This plan is handled through the state and the risks are assigned to companies.

assignment The transfer of the legal rights under a contract from one person to another.

Bbailee A person or business having temporary pos-

session (care, custody, and control) of property entrusted to them by the owner.

binder An agreement to provide insurance coverage.blanket insurance A contract that covers all prop-

erty specified rather than each item of property. Often used to provide physical damage coverage on a car dealership’s garage coverage form.

bond A three-party contract that backs a promise one party makes to another.

broker An individual, partnership, or corporation that represents a client, not the insurance com-pany.

burglary Taking of property of another through the forcible entry or exit of the premises.

business income coverage form (business interruption insurance) An indirect form of property insurance that provides coverage for expenses and loss of profits which occur as a result of a direct loss.

Ccertificate of authority A license issued to an

admitted insurance company.coinsurance clause A requirement that causes

the insured to purchase insurance to value or to participate in a loss (become a coinsurer).

commercial building and personal property form (general property form) An insurance policy that provides coverage for business build-ings and business personal property (contents).

commercial general liability policy (CGL) A policy that provides basic liability protection for business organizations.

commercial package policy A policy used by large businesses that provides property and liabil-ity insurance under a single contract.

concealment Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

concurrent insurance Two or more policies that provide coverage on the same risk.

consideration Anything of value or promise of value.

contractual liability Liability assumed under any contract or agreement.

crime insurance A type of casualty insurance that includes coverages for the perils of burglary, rob-bery, and theft.

Ddeclarations A section of an insurance contract

that sets forth information which includes the named insured, the property covered, rates and premiums, limits, deductibles, and coinsurance percentages.

deductible A portion of the covered loss that is paid by the insured.

direct loss When a covered peril causes physical damage to the insured property.

direct writer A company selling direct to the public.

Glossary

MN_P&C_CN.indb 329 6/23/2011 8:58:17 AM

330 Glossary

dividend The portion of the premium that is returned to the policyholder of a participating (par) insur-ance policy when losses and expenses are less than anticipated.

eendorsement An attachment to a property and casu-

alty insurance policy that modifies coverage.exclusions A limitation or restriction of coverages.experience rating An increase or decrease in rates

based on the past loss history of the insured.

FFair Access to Insurance requirements plan

(FAIr) A program established within a state to provide coverage to those unable to obtain property insurance through the private market.

fidelity bond A bond obtained by the employer to protect against the economic loss of dishonest acts of employees.

floater policy Provides coverage for those goods for which it is difficult to establish a specific location.

garagekeepers legal liability policy Coverage for losses for which the insured is legally liable involv-ing automobiles in the insured’s care, custody, and control.

garage liability Liability protection for the owner of a garage operation. Necessary due to the special hazards that exist there.

grace period A period of time after the premium due date during which the policy remains in force even though the premium is unpaid.

hhazard A condition that increases the frequency or

severity of a loss or the chance that it will occur.hold harmless agreement An agreement under

which the insured agrees to assume the liability of another party during a period of time in which a specific activity is taking place.

homogeneous units Units that are similar in size, value, and use.

host liquor liability Liability imposed on the insured as a result of giving or serving alcoholic beverages at social functions incidental to the insured’s business.

Iindemnity Restore the insured to pre-loss financial

condition (no better—no less).independent producer An individual or firm who

represents one or more insurance companies and operates as an independent business.

indirect loss (Time element loss) A loss of income and/or profits that occurs as a consequence of the direct loss to a property by an insured peril.

inland marine insurance Various types of insurance that cover property while in transit to various loca-tions (portable property) or property of high value.

insurable interest A requirement that states that an individual or organization will suffer a financial loss. In property and casualty insurance, it must exist at the time of loss.

insurance A device where many members or a group accumulate funds to pay the losses of a few mem-bers. It is a transfer of risk.

Insurance services office (Iso) A rating, inspec-tion, and policy drafting organization formed in 1971 by combining six existing national rating bureaus.

insurance solicitor An individual who directs clients to a producer or broker and receives some commis-sion or fee for doing so. Solicitors may not bind or sign policies.

insured The individual or organization for whom insurance protection is being provided.

insurer An insurance company.insuring agreement A section of an insurance policy

that states the perils and the insurance company’s promise to pay covered perils.

Llaw of large numbers A mathematical rule stating

that as the number of exposures increase, the more closely the actual results may be predicted.

legal liability A term used by the insurance industry to refer to damages that an insured causes to another party through negligence under tort law. Damages may include bodily injury or property damage.

legal reserve company An insurance company that maintains the minimum reserves required. Not required of assessment insurance companies.

liberalization clause A clause that automatically extends to an insured any advantageous change made in a policy form during the term of the policy if no additional premium is charged.

licensee An individual or organization that has met the requirements to qualify for a license and has been granted that license.

MN_P&C_CN.indb 330 6/23/2011 8:58:17 AM

331Glossary

limits The maximum amount the insurance company agrees to pay.

limits of coverage The amount beyond which the insurance company will not pay.

livery vehicle A vehicle that is used for hire (e.g., taxi or bus).

loading A dollar amount added to the pure cost of insurance to cover the operating expenses of the insurance company.

loss An unintentional decline in or disappearance of value.

MMinnesota Auto Insurance Plan (MAIP) This pro-

gram provides state-mandated auto insurance cover-ages to those unable to secure coverage through the private market.

Minnesota Property Insurance Placement Facil-ity The organization that administers the FAIR (Fair Access to Insurance Requirements) plan.

Minnesota special Compensation Fund Pro-vides workers’ compensation benefits to injured employees whose employers failed to carry workers’ compensation coverage.

monoline policy Any insurance coverage written as a single line policy.

mortgagee (the lender) An individual or financial institution that holds a mortgage (pledge of security in property for payment of a debt).

mortgagor (the debtor) The purchaser or owner who conveys real property as security for a loan.

multi-line insurance A combination of several coverages from the traditional lines of property and casualty insurance into a single contract. Example: homeowners, automobile, or special multiple peril.

mysterious disappearance When personal property is missing and there is no explanation for its disap-pearance.

nnamed insured An individual, partnership, or corpo-

ration who is specifically named as the insured in the declarations section of an insurance contract.

negligence A tort involving failure to use a degree of care considered reasonable under a given set of circumstances.

non-participating (non-par) An insurance policy that does not pay dividends to policyholders.

oobligee An individual or organization which has

entered into an agreement with an obligor and expects performance.

obligor A party that is to perform under an agreement with an obligee.

occurrence A situation that exists over a period of time.

other insurance clause A provision found in nearly every insurance policy stating how a loss is handled if another insurance policy covers the same property or hazard.

Pparticipating (par) An insurance policy that pays

dividends to policyholders.peril A condition that can cause loss (e.g., fire or hur-

ricane).personal article floater A type of insurance that

provides coverage for personal property that is at a non-permanent location or is of high value (used for such items as art, jewelry, etc.).

personal injury Examples include libel, slander, defamation, humiliation, wrongful eviction, and invasion of privacy.

policy A formal, written contract containing a declara-tions section, an insuring agreement, and conditions and exclusions.

premium The monetary consideration that the policy-holder pays to the insurer for a contract of insur-ance.

producer A general term to describe anyone in the business of insurance sales.

products and completed operations liability Coverage that provides protection if the insured causes injuries or property damage to another by a product or a completed operation of the insured. Operations include materials, parts, buildings, or equipment.

pro-rata cancellation When a policy is canceled, there is no penalty charged against the premiums to be returned.

pro-rata liability clause A clause that states that, if there is more than one policy covering a loss, pay-ment will be shared based on each insurer’s coverage to the total amount of insurance.

proximate cause The first cause in a continuous unbroken chain of events that causes injury or property damage.

pure risk An uncertainty against financial loss.

MN_P&C_CN.indb 331 6/23/2011 8:58:17 AM

332 Glossary

rrebating Refunding part of the commission, premium,

services, or anything of value to the purchaser as an inducement to buy insurance coverage. Rebating is a prohibited practice.

reinstatement To put a lapsed policy back in force.replacement cost insurance A policy or endorse-

ment that states that property will be replaced without any deduction for depreciation.

representations Statements made by an applicant for insurance which are true to the best of the appli-cant’s knowledge.

risk Uncertainty concerning the occurrence of a loss.robbery A face-to-face criminal confrontation where a

threat is present.

ssalvage The right of the insurance company to take

title to damaged property after payment of loss.self-insurance A program set up by an individual or

organization in which funds are set aside to pay losses that could possibly occur.

short rate cancellation When a policy is canceled, there is a penalty (usually 5–10%) charged against the premium to be returned.

subrogation The right of an insurance company to recover funds paid to the insured for damages caused by an at-fault third party.

surety The party that guarantees that the principal/obligor will fulfill their obligation or damages will be paid (See obligee; obligor).

Ttort An intentional or unintentional wrong that

involves a violation of another’s natural right. This includes injury to another person or property.

tort-feasor The party that commits a tort.twisting A misrepresentation made by an agent/pro-

ducer to induce a policyholder to switch insurers. Twisting is a prohibited practice.

uunderwriter A person (or organization) that deter-

mines if a risk should be accepted by the insurance company the individual represents.

unearned premium That portion of an advance pre-mium that has not yet been used for coverage writ-ten. For example, in the case of an annual premium, at the end of the first month, 11 months of premium would still be unearned.

vvacancy or un-occupancy clause A clause that

suspends coverage if the building or structure is completely empty or there are no people occupying the building for a continuous stated period of time (usually 60 days).

valued policy law A requirement that states that the face value of the policy is to be paid in the event of a total loss to a structure.

wwarranty Statement of fact or a promise made by the

insured that is part of the insurance contract and which must be true if the insurer is to be liable under the contract.

workers’ Compensation and employer’s Lia-bility Act A state law which provides that an employer is liable for death or injury to employees that occurs in the course of their employment.

MN_P&C_CN.indb 332 6/23/2011 8:58:17 AM

Post-testProperty and Casualty

MN_P&C_CN.indb 333 6/23/2011 8:58:17 AM

MN_P&C_CN.indb 334 6/23/2011 8:58:17 AM

335

Property I

1. Laura purchased an HO-3 policy to insure her home which is valued at $75,000. One week after coverage took effect, a fire caused $10,000 in damage to an unattached double garage located on the same premises as the home. Ignoring any deductible, how much can Laura expect to receive as settlement for this claim?

$2,500A. $5,000B. $7,500C. $10,000D.

2. Which of the following losses would be covered under the personal liability section of a homeowners policy?

Bodily injury sustained by a guest while at A. the insured’s homeBodily injury to an insured caused by a B. neighbor’s dogBodily injury or property damage caused by C. warDamage to an insured’s property caused by a D. visitor

3. A pipe in the upstairs bathroom of Matt’s home has burst, causing extensive damage to the dwelling. All of the following homeowners forms would cover this loss EXCEPT

HO-2A. HO-3B. HO-5C. HO-8D.

4. All of the following statements are true regarding the dwelling property forms EXCEPT

the structure does not need to be owner-A. occupiedtheft coverage must be purchased separately B. with an endorsementthey provide coverage for lost rental revenue C. after a covered peril up to 10% of Coverage Aan additional 5% is available for debris D. removal

5. A publishing company wants to purchase insurance protection that will cover the increased cost of doing business that might arise if their printing facility is damaged by a covered peril. Which of the following coverages would best cover the additional cost of staying open after a covered loss?

Extra expense coverageA. Open peril coverageB. Basic peril coverageC. Loss of rent coverageD.

6. Under a commercial building and personal property policy, which cause of loss form would cover damage resulting from sprinkler leakage?

Cause of loss form basicA. Cause of loss form broadB. Cause of loss form all-riskC. All cause of loss forms cover sprinkler D. leakage

P O S T - T E S T

Instructions

1. Write your answers on the Post-Test Answer Sheet. 2. When you have completed the exam, correct it using the Post-Test Answer Key found on the back

page of the exam.3. Compile your results and complete the bottom portion of your answer sheet. Then, transfer your

scores to the My Test Results page found at the back of your Class Notes.4. Turn in your answer sheet after correcting your exam.

MN_P&C_CN.indb 335 6/23/2011 8:58:18 AM

336

7. Equipment breakdown coverage policies provide coverage for all of the following losses EXCEPT

expediting expensesA. direct loss to the insured’s propertyB. losses to non-owned property that is not in C. the care, custody, and control of the insuredthe loss value of spoiled products or D. materials

8. Vincent insures his hardware store with a special form commercial building and personal property policy that has limits of $200,000 on the building and $100,000 on contents. A windstorm causes $25,000 in damage to the building and $40,500 in losses to the contents. Vincent also incurs $1,000 of debris removal expenses because of the loss. What will be the maximum Vincent’s insurer will pay to settle this loss if he has a $250 deductible?

$65,750A. $66,000B. $66,250C. $66,500D.

9. Which of the following statements is TRUE regarding business income coverage?

It guarantees the insured will make a profit A. should a fire result.It requires the insured to go back into B. business in order to collect under the policy.It pays the insured for lost income during C. the time it takes to restore the premises to its former position.It pays for loss due to interruption by civil D. authority for up to 14 weeks.

10. The property coverage found in a businessowners policy would cover losses to all of the following EXCEPT

industrial floor cleaning equipment used to A. maintain the premisesproperty of a customer that is being held by B. the insured for repairan office building that the insured owns and C. occupiesa small parking ramp that is attached to D. the insured premises and listed on the declarations page of the policy

11. The deductible on earthquake coverage is written as

a straight deductibleA. a percentage deductibleB. a calendar year deductibleC. a commercial rate deductibleD.

12. Flood insurance policies issued as part of the National Flood Insurance Program (NFIP) will cover losses caused by all of the following perils EXCEPT

tidal surgeA. sewer backupB. mudslideC. unusual accumulation of natural surface D. waters

Property II

13. Which of the following statements is TRUE regarding additional coverages in a property insurance policy? They are

sold as an endorsement to property policiesA. added to a policy for a 10% premium B. surchargeonly available to insureds who have a lower C. than normal loss rate with the insurerincluded in the policy at no additional D. charge

14. The definition of an insured under a homeowners policy includes

a friend of the insured’s daughter who has A. come to play at the insured premisesa person under the age of 25 who is under B. the insured’s carea sister who is visiting the insured for two C. weeksan uncle who lives with the insuredD.

MN_P&C_CN.indb 336 6/23/2011 8:58:18 AM

337

15. All of the following statements are true regarding additional coverages in a homeowners policy EXCEPT

they reduce the policy limit under Coverage A. A (Dwelling)they include coverage for fire department B. chargesthey include coverage for reasonable repairs C. to protect property after the insured has suffered a covered lossthey are provided at no additional costD.

16. Billy, an insured of XYZ Insurance Company, has not paid his homeowners insurance premium. In order to cancel Billy’s coverage for non-payment of premium, how many days notice must Billy’s insurer give him?

5 A. 20 B. 30 C. 60 D.

17. Coverage under the businessowners policy may be terminated after a building has been vacant or unoccupied for how long?

15 daysA. 60 daysB. 90 daysC. 120 daysD.

18. Maria owns a commercial office building valued at $125,000. Maria’s commercial building and personal property policy insures the building and has an 80% coinsurance requirement. If Maria has insured the building for $100,000 and suffers a $15,000 loss, how much will the insurer pay to settle the claim (disregarding any deductibles)?

$15,000A. $12,000B. $10,000C. $3,000D.

19. Ursula owns the building where her lawnmower repair shop is located. The value of the building is $75,000. A freak accident causes a fire that does $43,000 in damage to the building. What insurance principle would prevent Ursula from collecting $75,000 from her insurance company for this loss?

NegligenceA. Insurable interestB. IndemnityC. RemovalD.

20. All of the following statements are true regarding the cancellation of an insurance policy EXCEPT

the insured has an unlimited right to cancel A. the policy at anytimethe insurer must notify the state insurance B. department when the policy is cancelledthe insurer may cancel the contract only C. under certain conditionsif an insured cancels, they may receive a D. prorated return of unearned premiums

21. Which of the following statements best describes the concept of risk?

The uncertainty of a lossA. The amount of a lossB. The result of a lossC. The cause of a lossD.

22. Which of the following is a possible moral hazard?

Careless storage of flammable liquidsA. An arsonistB. Unguarded machinery in a factoryC. Worn carpeting in a hallwayD.

Property III

23. Jose suffers a $6,000 fire loss to a detached garage because a careless neighbor was burning trash on a windy day. After settling the loss with Jose, Jose’s insurer has the right to

apply the principle of pro-rata liabilityA. exercise concurrency of contractB. subrogate the careless neighborC. assign the policy proceedsD.

MN_P&C_CN.indb 337 6/23/2011 8:58:18 AM

338

24. A mortgagee (lender) has all of the following rights under a dwelling property policy EXCEPT

the right to cancel the policyA. the right to receive a 10-day advance notice B. of cancellation in writingthe right to file proof of loss if the insured C. fails to do sothe right to pay a premium on behalf of the D. insured

25. Property insurance policies generally require the insured to take which of the following steps after suffering a loss?

Hire a claims adjusterA. Notify the mortgagorB. Have the damaged property appraisedC. Protect the property from further lossD.

26. The other insurance provision of most property policies states that which of the following will happen in the event that more than one insurance policy covers a loss?

The insurance policy that has been in A. force the longest will become primary coverage and any other policies will become secondary coverage.One policy will remain in force and the B. other policies will be cancelled.Each insurer will pay a pro-rata share of the C. loss.Each insurer will pay the full amount of the D. loss.

27. In order for an insurance contract to be valid, all of the following must be true EXCEPT

it must be signed by two officers of the A. insurance companythere must be an exchange of considerationB. it must be printed in black inkC. it must be between competent partiesD.

28. Agent Kay issues an oral binder to her client and forgets to follow up on the binder in writing. Which of the following statements is TRUE regarding the oral binder that Agent Kay issued?

The coverage remains in force whether or A. not Agent Kay follows up in writing.The coverage is voided if Agent Kay fails B. to follow up in writing within five business days.Agent Kay has the right to deny that the C. binder was ever issued.There was never any coverage in force D. because oral binders are prohibited by law.

29. According to the Fair Credit Reporting Act, an applicant for insurance has the right to see any report the insurer obtains that contains information about the applicant. Who would the applicant get a copy of this report from?

The insurance companyA. The organization that compiled the reportB. The insurance agentC. The creditor who reported the informationD.

30. The Fair Credit Reporting Act requires the agent to take which of the following steps at the time a prospect applies for insurance?

Notify the prospect’s employer of any A. adverse information contained in the application.Leave a copy of the credit report behind B. with the applicant.Have the applicant sign the credit report C. and attach it to the application.Notify the applicant both verbally and in D. writing that a credit report may be obtained during the underwriting process.

MN_P&C_CN.indb 338 6/23/2011 8:58:18 AM

339

Casualty I

31. Two cars are involved in an auto accident. Walter, the driver of the first car, carries a personal auto policy with a combined single limit of $150,000. Nora, the driver of the second car, does not carry auto insurance and is determined to be the at-fault driver. What will Walter’s uninsured motorist coverage pay for in this situation?

Bodily injury that was sustained by Walter A. due to Nora’s negligenceDamage to Walter’s auto that was caused by B. NoraBodily injury that was sustained by NoraC. Damage to Nora’s autoD.

32. All of the following losses would be covered under the other than collision section of a personal auto policy EXCEPT

collision with another objectA. collision with a bird or other animalB. losses caused by a falling objectC. losses caused by vandalismD.

33. All of the following are considered insured vehicles under the terms of a personal auto policy EXCEPT

a temporary substitute vehicle used by an A. insured while the primary auto is being repaireda trailer attached to an insured vehicle used B. for the purposes of hauling refuse to the local landfilla half-ton pickup truck owned and used C. by the insured in the insured’s part-time delivery businessa vehicle rented by an insured while on D. vacation

34. Syl has his car insured with Company A with a combined single limit of $40,000. He borrows Jordan’s car, which is insured by Company B with a combined single limit of $80,000. Syl is involved in an at-fault accident while driving Jordan’s car, and has a judgment rendered against him for $105,000. How will the loss be settled? Company A Company B

$25,000 $80,000A. $40,000 $65,000B. $52,500 $52,500C. $65,000 $25,000D.

35. Rob owns two cars that are both covered under a personal auto policy. After visiting a local car dealer, Rob decides to purchase a third car. What kind of coverage is available for Rob’s new car under his existing personal auto policy?

The new car will receive the same coverage A. as the best covered vehicle owned by the insured for a period of 14 days.The new car will not have any coverage on B. it.The new car is not covered unless Rob calls C. his agent and receives a binder.The new car will receive the same coverage D. as the best covered vehicle owned by the insured for a period of 10 days.

36. The commercial general liability (CGL) policy provides coverage in all of the following situations EXCEPT

an employee is injured at work when a shelf A. falls on her foota customer slips and falls on a wet floor near B. the entrancea consumer is injured by a faulty product C. made by the insureda landlord has wrongfully evicted a tenantD.

MN_P&C_CN.indb 339 6/23/2011 8:58:18 AM

340

37. ZYX Department Store has a commercial general liability (CGL) policy with protection limits of 100/300. Customer Paul is injured when leaving the elevator on the fourth floor. It is determined that the injury resulted from ZYX Department Store’s negligence. Which part of the CGL would cover this liability loss?

Contractual liabilityA. Owners and contractors protective liabilityB. Products and completed operations liabilityC. Premises and operationsD.

38. Medical payments coverage provided by a commercial general liability (CGL) policy would provide benefits for all of the following people who were injured on the insured’s premises EXCEPT

a customer who is injured in an area of the A. premises that was clearly marked employees onlya customer who is struck by a falling ceiling B. panel while shopping at the insured’s premisesa tourist who tripped on the welcome mat C. while entering the insured’s premises to ask for directionsan employee of the insured who is injured D. on premises due to a negligent act of the insured

39. All of the following losses would be covered by a commercial general liability (CGL) policy EXCEPT

an employee of the insured damages the A. property of a customer while doing work at the customer’s homean employee of the insured causes a motor B. vehicle accident while operating a delivery vehicle owned by the insureda customer is injured by a falling surfboard C. while shopping at the insured’s premiseslosses incurred because of an elevator D. maintenance agreement

40. QRS Industries owned a commercial general liability (CGL) policy through the Careless Casualty Company from January 2000 through January 2005. They currently own a CGL from Minefield Mutual that took effect in February 2005. QRS Industries recently discovered a loss caused by a covered peril that occurred in April of 2004. Minefield Mutual is paying the claim. What kind of policy does QRS Industries own?

A claims-made policyA. A past claims policyB. An accident-only policyC. An occurrence policyD.

41. An inside-the-premises policy will pay for all of the following losses EXCEPT

two thieves break into a warehouse after A. hours and tie up the night watchperson; the thieves steal $25,000 of electronic equipment from the warehousea door is kicked in during a break-in attempt B. after the business has closed for the day, causing $1,000 in damage to the lock and door frame$5,000 of computer equipment is discovered C. missing from an office complex when the office opens for the day; there is evidence of forcible entry into the room where the computer was stored an employee steals $2,500 in cash from a D. locked drawer in the middle of the night

42. Theft generally meansany act of stealingA. any act of stealing, other than burglary or B. robberyburglary and robbery onlyC. employee dishonesty onlyD.

43. All of the following are excluded under Coverage A of the CGL EXCEPT

damage the insured causes intentionallyA. pollution losses caused by the insuredB. liability assumed under an insured contractC. liquor liability for those in the business of D. serving liquor

MN_P&C_CN.indb 340 6/23/2011 8:58:18 AM

341

44. All of the following reduce the CGL’s general aggregate limit EXCEPT

the medical payments sublimitA. the personal and advertising injury limitB. the fire damage limitC. the products and completed operations D. aggregate limit

45. As a shipping clerk is stacking televisions in a warehouse, he is surprised by two men, both carrying guns. They proceed to empty the warehouse of televisions. This is an example of

burglaryA. robberyB. mysterious disappearanceC. a fidelity lossD.

46. All of the following are common supplemental payments provided by liability insurance policies EXCEPT

interest on judgmentsA. first aid expenses incurred by the insured at B. the scene of an accidentexpenses incurred by the insured at the C. insurer’s requestthe furnishing of all bonds needed by the D. insured with no limit

47. An insured has an automobile policy with bodily injury limits of 50/100. Three persons were injured by the insured in an auto accident and were awarded $10,000, $70,000, and $15,000, respectively. There was also $10,000 in defense costs. What is the total amount the insured’s policy will pay in this situation?

$75,000A. $85,000B. $95,000C. $105,000D.

48. An insured automobile with an actual cash value (ACV) of $6,500 is legally parked near the baseball stadium on the day the local team wins the World Series. It is destroyed in a riot that ensues after the game. There is a loan on the car, with an outstanding balance of $3,500. After settling the loss, the insurer will pay $3,500 to the lender and $3,000 to the insured. This scenario is an illustration of the principle(s) of

indemnity and insurable interestA. insurable interest and subrogationB. replacement costC. proximate causeD.

49. Kyle owns a personal auto policy from Leadfoot Indemnity Company with a combined single limit of $300,000 for bodily injury and property damage. Kyle causes an accident and a judge enters a judgment against Kyle for the following:

Claimant A: $50,000 in bodily injury and $40,000 in property damage

Claimant B: $40,000 in property damage Other expenses related to the accident include:

$5,000 in defense costs, $100 in traffic tickets, and $500 in appeal bond expenses. How much will Kyle’s insurer pay to settle this loss?

$130,000A. $135,000B. $135,500C. $135,600D.

50. If a contractor does NOT complete the job according to contract specifications, who will pay under the terms of the bond?

The suretyA. The contractorB. The obligeC. The bond will not be paid since the D. contractor did not fulfill his obligation

51. Stan, an insurance agent, is concerned about liability exposures arising out of the professional advice he gives his clients. What type of insurance policy would best protect Stan from any professional liability?

Commercial general liability A. Businessowners policyB. Errors and omissionsC. Agent’s malpractice coverageD.

MN_P&C_CN.indb 341 6/23/2011 8:58:18 AM

342

52. Which of the following benefits are NOT paid under workers’ compensation laws?

Pain and sufferingA. Disability incomeB. MedicalC. RehabilitationD.

53. Which of the following injuries would qualify as a compensable injury under workers’ compensation laws?

A hotel maid falls down the stairs while A. cleaning her own home.A factory worker fractures her arm while B. working overtime on the assembly line.An employee accidentally swallows his C. gum while in the company lunchroom and chokes when it gets lodged in his windpipe.A carpenter injures his hand while helping D. his neighbor build a shelf in the garage.

Casualty II

54. Under a personal auto policy, insurance companies will usually charge a deductible for which of the following coverages?

Property damage liabilityA. Medical payments coverageB. Physical damage coverageC. Bodily injury liabilityD.

55. Mario owns a small gift shop. One evening, after the shop has closed for the day, two thieves break a window, enter the shop and steal $1,700 worth of merchandise. This loss is related to the peril of

batteryA. robberyB. embezzlementC. burglaryD.

56. The manager of a jewelry store discovers that several expensive rings are missing from a display case. There is no visible evidence of breaking and entering. This is an example of the peril of

embezzlementA. robberyB. burglaryC. mysterious disappearanceD.

57. All of the following are insured contracts under the terms of a commercial general liability (CGL) policy EXCEPT

side track agreementsA. agreements to indemnify a municipalityB. electrical system maintenance agreementsC. lease of premisesD.

58. The concept of personal injury is best illustrated by which of the following situations?

A customer slips and falls on a floor while A. shopping, fracturing a collarbone.An employee of a retail store publicly B. embarrasses a shopper by wrongly detaining him for shoplifting.An employee of a grocery store trips on an C. extension cord and falls into a display case full of fresh cauliflower.A hotel guest is wrongfully overcharged by a D. clerk when checking out of the hotel.

59. Manuel has an auto policy with a split limit of liability for bodily injury of 40/80. A judgment is rendered against Manuel for an auto accident he caused. Party A is awarded $10,000 for bodily injury, Party B is awarded $80,000 for bodily injury, and Party C is awarded $20,000 for bodily injury. Disregarding any defense costs, how much will Manuel’s insurer pay to settle this loss?

$70,000A. $80,000B. $90,000C. $110,000D.

60. Which of the following losses would NOT be considered an accident?

Over the course of several years, smoke from A. a local factory has caused the discoloration of siding on a home.An employee drops a case of canned B. vegetables and injures her foot while on the job.A city bus strikes a pedestrian while turning C. a corner.Two cars collide in the middle of an icy D. intersection.

MN_P&C_CN.indb 342 6/23/2011 8:58:18 AM

343

61. Which of the following statements best describes the concept of negligence?

The act of a reasonable and prudent personA. The act of an unreasonable or imprudent B. personAn intentional or unintentional wrong that C. violates the rights of anotherThe uncertainty of lossD.

62. Risk is best defined as which of the following?The uncertainty of lossA. A desirable insuredB. Something that causes a lossC. A hazardous exposureD.

63. Zach recently applied for auto insurance. When filling out his application, Zach answered all the questions to the best of his knowledge. Zach’s insurer later discovered that Zach had inadvertently provided incorrect information about his driving record. Zach’s insurer is now terminating coverage because of the incorrect information. Which of the following statements best describes what happened in this situation?

Zach is guilty of concealment.A. Zach has committed a breach of warranty.B. Zach made a misrepresentation on his C. application for insurance.Zach made a material misrepresentation on D. his application for insurance.

64. An underwriter is processing an application for a business auto policy and discovers that one of the trucks that will be covered has bad brakes. This is an example of

a hazardA. a perilB. an occurrenceC. a lossD.

Casualty III

65. Renee owns a homeowners policy that she wishes to cancel. Which of the following statements is TRUE regarding Renee’s ability to cancel coverage? She

has an unlimited right to cancel the policy A. at any timeis required to give the insurer 30 days’ B. advance notice if she wishes to cancel after the policy has been in force for more than 60 daysis required to give the insurer 10 days’ C. advance notice if she wishes to cancel after the policy has been in force for more than 60 daysis required to receive a variance from the D. state insurance department if she wishes to cancel her policy midterm

66. What part of an insurance policy would state who may be insured in addition to the named insured(s)?

Insuring agreementA. Declarations pageB. Definition of the insuredC. ExclusionsD.

67. Earl has a personal auto policy and suffers a loss to his vehicle due to hail damage. Earl and his insurer disagree on the amount to be paid for the damage to his vehicle. Under the terms of the personal auto policy, which of the following statements is TRUE?

Each party will retain an appraiser, and the A. appraisers will determine the amount to be paid.Each party will retain an appraiser, and the B. appraisers will select an umpire to determine the amount to be paid.Earl must accept the amount offered by the C. insurer.The insurer must pay the amount demanded D. by Earl.

MN_P&C_CN.indb 343 6/23/2011 8:58:19 AM

344

68. Vandelay Industries is sued by a customer over a defective product. A judge holds Vandelay Industries responsible for the injuries sustained by the customer that were caused by the defective product and enters a judgment against Vandelay Industries for $2.5 million. In addition to paying for the judgment, Vandelay Industries’ CGL policy will provide all of the following supplemental payments EXCEPT

any interest imposed on the judgment by the A. courtany expenses incurred by Vandelay B. Industries at the request of their insurerany public relations expenses incurred by C. Vandelay Industries to regain their good nameany appeal bonds required by the court D. should Vandelay Industries’ insurer decide to appeal the decision

69. What is the primary reason insurance policies contain a declarations page? To list

the perils covered by the policyA. the persons or property covered by the B. policythe duties of the insurer and insuredC. the obligations assumed by the insurer under D. the policy

70. DEF Department Stores owns a commercial package policy that contains a commercial building and personal property form, a commercial general liability form, a business auto form, and an inland marine form. Where in this policy is the duties of the insured found?

The abstract of coverage endorsementA. The declarations pageB. The insuring agreementC. The conditions sectionD.

71. A fire destroys a multi-story office building owned by MNO Property Management Corporation. MNO’s insurer pays them in full for the loss to the building. After the loss has been settled, it is discovered that the fire was caused by the negligent acts of an employee of PQR Worldwide, one of the building’s tenants. Which of the following statements is TRUE regarding MNO’s right to recover from the negligent party in this loss?

MNO will file a claim under PQR’s A. commercial general liability policy to recover losses caused by the fire.MNO’s insurer will file a claim under PQR’s B. commercial general liability policy to recover losses paid to MNO.Neither MNO nor their insurer can recover C. from PQR’s commercial general liability policy because the CGL does not provide coverage for fire legal liability.The process will be governed by the D. liberalization clause found in MNO’s insurance policy.

72. Which part of an insurance policy will contain any modifications to coverage?

DeclarationsA. ExclusionsB. EnhancementsC. EndorsementsD.

state

73. The insurance company can cancel a policy midterm for which of the following reasons?

The insured suffers several small losses. A. The insured’s business grows so that the B. premium will be increased upon audit. The insurance company has stopped doing C. business with the agent who sold the policy. The insured has made a substantial breach D. in a policy warranty.

74. How long is the standard underwriting experience period for homeowners policies sold in Minnesota?

5 yearsA. 2 yearsB. 3 yearsC. 90 days D.

MN_P&C_CN.indb 344 6/23/2011 8:58:19 AM

345

75. An insurance company intends NOT to renew the insured’s auto policy. They must give the insured

a 10-day written notice prior to expirationA. a 30-day written notice prior to expirationB. a 45-day notice by mail, phone, or deliveryC. a 60-day notice by mail or delivery before D. expiration date

76. The insurer may cancel a personal auto policy for all of the following reasons EXCEPT

the insured’s driver’s license has been A. suspendedthe insured’s vehicle is mechanically B. defectivethe insured’s gender C. the insured submitted a fraudulent claimD.

77. When canceling an auto policy, the insurer must disclose to the insured that the insured has the right to complain to the Commerce Department within how many days of the notice?

10A. 15B. 30C. 60D.

78. The purpose of uninsured and underinsured motorists coverage is to

protect the insured when the at-fault driver A. does not have enough assets to pay for the insured’s injuriesprotect the insured when the at-fault driver B. has not carried enough liability insurance to cover the insured’s injuriesprotect the at-fault driver from subrogationC. benefit drivers who do not carry insuranceD.

79. Jamal was injured in a motor vehicle accident. According to the Minnesota no-fault law, Jamal may sue the at-fault party if

Jamal’s medical expenses exceed $2,000A. Jamal suffers a permanent injuryB. Jamal’s vehicle is a total lossC. Jamal required medical care as a result of the D. accident

80. The Minnesota no-fault law requires a minimum total benefit on personal injury protection (PIP) of

$20,000A. $30,000B. $40,000C. $60,000D.

81. Which of the following properties cannot be insured under the FAIR plan?

AutosA. HomesB. Apartment buildingsC. CondominiumsD.

82. Coverage under the FAIR plan goes into effect how many days after the acceptance of the premium and the application?

5A. 10B. 15C. 30D.

83. What is the purpose of the employer’s liability section of a workers’ compensation policy? To pay for

liability resulting from business operations in A. other stateslawsuits filed by an employeeB. third-party claims filed against a negligent C. employerbenefits that are normally required by state D. workers’ compensation laws

84. All of the following statements regarding workers’ compensation are true EXCEPT

workers’ compensation is governed at the A. state levelbenefits are payable regardless of who is at B. faultworkers’ compensation policies can never be C. endorsedworkers’ compensation is generally primary D. over other coverage available

MN_P&C_CN.indb 345 6/23/2011 8:58:19 AM

346

85. What changes in the status of agents have to be reported to the commissioner?

A felony convictionA. A change in addressB. Becoming employed by a different agencyC. All of the aboveD.

86. Which of the following may be paid commissions for insurance policies?

An employee of a licensed agentA. A relative of a licensed agentB. A client of a licensed agentC. A partnership of which an agent is a D. member

87. An agent who has his license revoked by the Minnesota Commissioner of Commerce is required to do which of the following?

Wait at least two years before applying for a A. new license Submit all previous written policies to the B. commissioner’s office for servicing of the accountsCancel all policies currently in effect and C. advise the insured to place them elsewhereContinue to service existing clients and D. accounts but not solicit new business

88. The commissioner may issue a temporary license to which of the following?

A non-resident agent moving into A. Minnesota with the intention of obtaining a resident license Next of kin to the deceased or disabled B. agentA designee of a licensed agent entering C. active service in the armed forces All the aboveD.

89. No more than __________ of the amount of required continuing education can be earned through courses offered or sponsored by the agent’s insurance company.

25% A. 50%B. 75%C. 100%D.

90. Surplus lines insurance refers to the placement of insurance

by an unlicensed agentA. with a nondomestic licensed insurerB. with an unauthorized (non-licensed) insurerC. with insurers who are from foreign countriesD.

91. Selling insurance without an insurance license isa felonyA. a gross misdemeanorB. a misdemeanorC. a petty misdemeanorD.

92. An insurance company appointment is good foran indefinite periodA. one yearB. two yearsC. five yearsD.

93. The Commissioner of Commerce isappointed by the Attorney GeneralA. electedB. appointed by the GovernorC. appointed by the Securities and Exchange D. Commission

94. The organization responsible for the licensing of insurance agents is

the Interstate Commerce CommissionA. the NAICB. the Department of CommerceC. the Federal Trade CommissionD.

95. The commissioner determines that an agent has committed an unfair trade practice. The commissioner can

censure the agent’s license A. suspend the agent’s license B. revoke the agent’s license C. all of the aboveD.

96. An insurance agent informs a prospect about another insurance company’s poor claims handling procedure. If she had no evidence to verify her accusation, she could be charged with

twistingA. tamperingB. defamationC. coercionD.

MN_P&C_CN.indb 346 6/23/2011 8:58:19 AM

347

97. The responsibility for determining whether or not an individual policy of insurance is suitable for a prospective buyer rests with

the buyerA. the insurerB. the agentC. the Minnesota Department of CommerceD.

98. Which of the following would be grounds for disciplinary action?

An agent retains complaint records for six A. years after the date of complaint.A producer delivers a client refund 10 days B. after receiving it.A producer displays her insurance license on C. her office wall.An agent provides a receipt when taking D. client premium payments.

99. To whom does a licensed agent have a fiduciary responsibility?

The customerA. The insurance company they representB. The Minnesota Department of CommerceC. The people of MinnesotaD.

100.Which term best describes the practice of replacing insurance to the detriment of the insured?

TamperingA. ExtortionB. ConvolutingC. TwistingD.

MN_P&C_CN.indb 347 6/23/2011 8:58:19 AM

MN_P&C_CN.indb 348 6/23/2011 8:58:19 AM

Prop

erty

and

Cas

ualt

y in

sura

nce

Post

-Tes

t A

nsw

er K

ey

Prop

erty

iPr

oper

ty ii

Prop

erty

iii

Cas

ualt

y i

Cas

ualt

y ii

Cas

ualt

y iii

Stat

e

1.

C13

. D

23.

C31

. A

54.

C65

. A

73.

D87

. A

2.

A14

. D

24.

A32

. A

55.

D66

. C

74.

C88

. D

3.

D15

. A

25.

D33

. C

56.

D67

. B

75.

D89

. B

4.

D16

. B

26.

C34

. A

57.

C68

. C

76.

C90

. C

5.

A17

. B

27.

C35

. A

58.

B69

. B

77.

C91

. B

6.

D18

. A

28.

A36

. A

59.

A70

. D

78.

B92

. A

7.

C19

. C

29.

B37

. D

60.

A71

. B

79.

B93

. C

8.

C20

. B

30.

D38

. D

61.

B72

. D

80.

C94

. C

9.

C21

. A

39.

B62

. A

81.

A95

. D

10.

B22

. B

40.

A63

. D

82.

A96

. C

11.

B41

. D

64.

A83

. C

97.

C12

. B

42.

A84

. C

98.

B43

. C

85.

D99

. B

44.

D86

. D

100.

D45

. B

46.

D47

. B

48.

A49

. C

50.

A51

. C

52.

A53

. B

MN_P&C_CN.indb 349 6/23/2011 8:58:19 AM

MN_P&C_CN.indb 350 6/23/2011 8:58:19 AM

MY

TES

T R

ESU

LTS

MY

SC

OR

E (T

OTA

L N

UM

BER

CO

RR

ECT)

:

(PA

SSiN

G S

CO

RE

= 7

0)

Topi

c ar

ea:

Prop

erty

i:

Type

s of

Pol

icie

s

Prop

erty

ii:

Insu

ranc

e Te

rms

and

Rel

ated

C

once

pts

Prop

erty

iii:

Polic

y Pr

ovis

ions

an

d C

ontr

act

Law

Cas

ualt

y i:

Type

s of

Pol

icie

s,

Bond

s, a

nd R

elat

ed

Term

s

Cas

ualt

y ii:

In

sura

nce

Term

s an

d R

elat

ed

Con

cept

sC

asua

lty

iii:

Polic

y Pr

ovis

ions

Stat

e:

Law

s, R

ules

, and

R

egul

atio

ns

Perc

enta

ge

of t

otal

po

st-t

est:

12%

10%

8%23

%11

%8%

28%

Que

stio

ns

and

less

ons

for

stud

y

refe

renc

e:

#1–3 #4

#5–1

0#1

1–12

Less

ons

8 Le

sson

9Le

sson

12

Less

on 1

0

#13–

16#1

7–20

#21–

22

Less

on 8

Less

on 7

Less

on 1

#23–

26#2

7–28

#29–

30

Less

on 7

Less

on 1

Less

on 6

#31–

35

#36–

45#4

6–49

#50–

51#5

2–53

Less

on 1

3Le

sson

s 15

and

16

Less

on 1

3Le

sson

16

Less

on 1

8

#54

#55–

58#5

9–61

#62–

64

Less

on 1

3Le

sson

s

15 a

nd 1

6Le

sson

7Le

sson

1

#65

- 72

Less

on 1

#73–

74#7

5–80

#81–

82#8

3–84

#85–

100

Less

on 1

1Le

sson

13

Less

on 1

1Le

sson

18

Less

on 6

Your

sco

re

(num

ber

co

rrec

t):

ou

t of

12

ou

t of

10

ou

t of

8

out

of 2

3

out

of 1

1

out

of 8

ou

t of

28

MN_P&C_CN.indb 351 6/23/2011 8:58:19 AM

MN_P&C_CN.indb 352 6/23/2011 8:58:19 AM

Prop

erty

and

Cas

ualt

y in

sura

nce

Post

-Tes

t A

nsw

er S

heet

Nam

e: _

____

____

____

____

____

____

____

____

____

_ D

ate:

___

____

____

____

____

____

____

____

____

Prop

erty

iPr

oper

ty ii

Prop

erty

iii

Cas

ualt

y i

Cas

ualt

y ii

Cas

ualt

y iii

Stat

e

1.

____

__13

. __

____

23.

____

__31

. __

____

54.

____

__65

. __

____

73.

____

__87

. __

____

2.

____

__14

. __

____

24.

____

__32

. __

____

55.

____

__66

. __

____

74.

____

__88

. __

____

3.

____

__15

. __

____

25.

____

__33

. __

____

56.

____

__67

. __

____

75.

____

__89

. __

____

4.

____

__16

. __

____

26.

____

__34

. __

____

57.

____

__68

. __

____

76.

____

__90

. __

____

5.

____

__17

. __

____

27.

____

__35

. __

____

58.

____

__69

. __

____

77.

____

__91

. __

____

6.

____

__18

. __

____

28.

____

__36

. __

____

59.

____

__70

. __

____

78.

____

__92

. __

____

7.

____

__19

. __

____

29.

____

__37

. __

____

60.

____

__71

. __

____

79.

____

__93

. __

____

8.

____

__20

. __

____

30.

____

__38

. __

____

61.

____

__72

. __

____

80.

____

__94

. __

____

9.

____

__21

. __

____

39.

____

__62

. __

____

81.

____

__95

. __

____

10.

____

__22

. __

____

40.

____

__63

. __

____

82.

____

__96

. __

____

11.

____

__41

. __

____

64.

____

__83

. __

____

97.

____

__12

. __

____

42.

____

__84

. __

____

98.

____

__43

. __

____

85.

____

__99

. __

____

44.

____

__86

. __

____

100.

___

___

45.

____

__46

. __

____

47.

____

__48

. __

____

49.

____

__50

. __

____

51.

____

__52

. __

____

53.

____

__

# co

rrec

t:

# co

rrec

t:

# co

rrec

t:

# co

rrec

t:

# co

rrec

t:

# co

rrec

t:

# co

rrec

t:

# po

ssib

le:

12#

poss

ible

: 10

# po

ssib

le:

8#

poss

ible

: 23

# po

ssib

le:

11#

poss

ible

: 8

# po

ssib

le:

28

Tota

l cor

rect

Pro

pert

y po

rtio

n:

(

out

of 3

0 po

ssib

le c

orre

ct).

Pas

sing

sco

re =

21

Tota

l cor

rect

Cas

ualt

y po

rtio

n:

(

out

of 4

2 po

ssib

le c

orre

ct).

Pas

sing

sco

re =

29

Tota

l cor

rect

Sta

te p

ortio

n:

(

out

of 2

8 po

ssib

le c

orre

ct).

Pas

sing

sco

re =

20

Tota

l cor

rect

Ove

rall:

(ou

t of

100

pos

sibl

e co

rrec

t).

Pass

ing

scor

e =

70

MN_P&C_CN.indb 353 6/23/2011 8:58:20 AM

Required Disclaimers:

CFA Institute does not endorse, promote, or warrant the accuracy or quality of the products or services offered by Kaplan Schweser. CFA Institute, CFA®, and Chartered Financial Analyst® are trademarks owned by CFA Institute.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete initial and ongoing certification requirements. Kaplan University does not certify individuals to use the CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP (with flame design) certification marks. CFP® certification is granted only by Certified Financial Planner Board of Standards Inc. to those persons who, in addition to completing an educational requirement such as this CFP® Board-Registered Program, have met its ethics, experience, and examination requirements.

Kaplan Schweser and Kaplan University are review course providers for the CFP® Certification Examination administered by Certified Financial Planner Board of Standards Inc. CFP Board does not endorse any review course or receive financial remuneration from review course providers.

GARP® does not endorse, promote, review, or warrant the accuracy of the products or services offered by Kaplan Schweser of FRM® related information, nor does it endorse any pass rates claimed by the provider. Further, GARP® is not responsible for any fees or costs paid by the user to Kaplan Schweser, nor is GARP® responsible for any fees or costs of any person or entity providing any services to Kaplan Schweser. FRM®, GARP®, and Global Association of Risk Professionals™ are trademarks owned by the Global Association of Risk Professionals, Inc.

CAIAA does not endorse, promote, review or warrant the accuracy of the products or services offered by Kaplan Schweser, nor does it endorse any pass rates claimed by the provider. CAIAA is not responsible for any fees or costs paid by the user to Kaplan Schweser nor is CAIAA responsible for any fees or costs of any person or entity providing any services to Kaplan Schweser. CAIA®, CAIA Association®, Chartered Alternative Investment AnalystSM, and Chartered Alternative Investment Analyst Association® are service marks and trademarks owned by CHARTERED ALTERNATIVE INVESTMENT ANALYST ASSOCIATION, INC., a Massachusetts non-profit corporation with its principal place of business at Amherst, Massachusetts, and are used by permission.

CPCU® is a registered mark owned by the American Institute for CPCU and the Insurance Institute of America.

ChFC®, Chartered Financial Consultant®, CLU®, Chartered Life Underwriter®, and CASL®, Chartered Advisor for Senior Living®, are registered marks owned by The American College. Kaplan Schweser is not affiliated or associated in any way with The American College. The American College does not endorse, promote, review, or warrant the accuracy of any courses, exam preparation materials, or other products or services offered by Kaplan Schweser and does not verify or endorse any claims made by Kaplan Schweser regarding such products or services, including any claimed pass rates.

8375x10875 disclaimer-Kaplan.indd 269 10/22/2010 10:09:17 AM