State Farm License- Standard Fire Policy
Standard Fire Policy ANS: - the policy written for both Personal Lines (residential home or dwelling) or
as Commercial Lines (official building) are the same!
- fire insurance is another name for property insurance
- can insure the building structure and/or the personal property.
- not a HO policy since it does not cover theft of content and does not have liability coverage
- never sold w/o adding Endorsement to the policy. (Endorsement is a form added to a policy that
changes the policy's provision, usually with extra premium)
what are the 4 parts of standard fire coverage? ANS: 1. Declaration (Dec Page): states the name of
insurance comp (1st party) and the insured (2nd party); address of property; amount of coverage,
premium, and policy period.
2. Insuring Agreement
3. Condition: The condition apply to both the insurer and the insured. Ex: the insured must notify the
insurance comp in writing of any loss. Must do this in order for coverage to apply.
4. Exclusions: Something that never covered. Ex: war is not covered by standard fire policy.
What are the things that are part of the insuring agreement? (standard fire policy) ANS: 1.
Consideration Clause: the applicant 's consideration is the amount of the premium paid and the
company's agreement to pay covered claims and abide by the provisions. REQUIRED TO MAKE A VALID
CONTRACT.
2. Effective Time: policy starts and end @ 12:01 am on the Inception and Expiration date shown on Dec
Page. Usually written for 1 year.
3. Effective Location: Location of the property insured
4. Policy Limit: In the event of a claim, the policy will never pay the insured more than the policy limit
that is indicated in the Dec Page.
5. ACV: The depreciated value or also called "today's replacement cost minus depreciation." The policy
will pay the insured the policy limit or the ACV whichever is less. The policy will depreciate a building at
a rate of 1% per year up to max 40% (or 40 years). If the building is brand new, there is no depreciation
and the replacement cost (R/C) is the same as the ACV.
(Note that Property Insurance does pay claims on a replacement cost basis, but the Standard Fire Policy
will not. They will only pay in ACV)
6. Company's Options: Insurance comp has the option to repair the property or to pay the claim with
materials of like kind and quality whichever is best for the comp.
, 7. Direct Versus Indirect Losses: only covers Direct Losses. Ex: Fire
Indirect losses are not covered.
Ex: in the case of fire, the fire cause damage to the building is the direct cost. Now as a result of the fire,
you can't operate your business until the repairs were completed. The loss of business income during
this time is the indirect result of the fire and is NOT covered.
8. Insurable Interest: must exist at the time of lost. You cannot recover more than the interest you lost.
You can name your bank as a mortgagee on the policy, so that the bank's equity interest (Collateral
Security Interest) is also protected by the policy.
9. Perils: defines a a cause of loss. Standard Fire Policy cover only three perils:
- Direct loss by Fire
- Lighting
- Removal
What is Actual Cash Value (ACV) in Standard Fire Policy? ANS: Insurance company does not pay the
replacement cost to replace the building at today's price. They ONLY pays the depreciated value of the
structure. Insurance company will pay 1% per year and up to 40%. If the building is brand new, there is
no depreciation and the replacement cost is the same as the ACV.
Ex: a building is 10 years old. Meaning it depreciate by 10%. The replacement cost today is 100,000. So
the ACV value paid by the insurance company is 90,000.
Perils in Standard Fire Policy ANS: - standard fire policy is a "named perils" or "specified Peril" policy. If
the perils is not listed in the Insuring Agreement, it is not covered. If your property is being hit by lighting
or fire, then the coverage will applied.
- you may apply for additional coverage called peril of removal (or All-risk coverage).
- peril of removal: protect the dwelling and its content in the event of fire. The content that are removed
from the premise to prevent damage in the fire is also covered. You must pay extra premium to apply
the peril of removal and it must be listed in Declarations under Content Coverage.
DO NOT ASSUME THAT STANDARD FIRE POLICY AUTOMATICALLY COVER THE CONTENT.
When will the policy be void (cancelled)? Line 1 and 2 ANS: this happen when the insured willfully
conceal or misrepresent any material fact concerning insurance when filling out application. Must fill out
everything to the best of their knowledge. This is called "representation"
What types of property are not covered by this policy? ANS: These lines (7-9) states that certain
property are not covered even if it was damaged by fire. Line (11-24) states that the fire occur to this
property was caused by war. In addition, if the insured neglects to use all reasonable means to save the
property after a loss or when the property is endangered by fire in a neighboring premises, no
coverage!!
Line 24, no coverage for theft!
No coverage for money!
Standard Fire Policy ANS: - the policy written for both Personal Lines (residential home or dwelling) or
as Commercial Lines (official building) are the same!
- fire insurance is another name for property insurance
- can insure the building structure and/or the personal property.
- not a HO policy since it does not cover theft of content and does not have liability coverage
- never sold w/o adding Endorsement to the policy. (Endorsement is a form added to a policy that
changes the policy's provision, usually with extra premium)
what are the 4 parts of standard fire coverage? ANS: 1. Declaration (Dec Page): states the name of
insurance comp (1st party) and the insured (2nd party); address of property; amount of coverage,
premium, and policy period.
2. Insuring Agreement
3. Condition: The condition apply to both the insurer and the insured. Ex: the insured must notify the
insurance comp in writing of any loss. Must do this in order for coverage to apply.
4. Exclusions: Something that never covered. Ex: war is not covered by standard fire policy.
What are the things that are part of the insuring agreement? (standard fire policy) ANS: 1.
Consideration Clause: the applicant 's consideration is the amount of the premium paid and the
company's agreement to pay covered claims and abide by the provisions. REQUIRED TO MAKE A VALID
CONTRACT.
2. Effective Time: policy starts and end @ 12:01 am on the Inception and Expiration date shown on Dec
Page. Usually written for 1 year.
3. Effective Location: Location of the property insured
4. Policy Limit: In the event of a claim, the policy will never pay the insured more than the policy limit
that is indicated in the Dec Page.
5. ACV: The depreciated value or also called "today's replacement cost minus depreciation." The policy
will pay the insured the policy limit or the ACV whichever is less. The policy will depreciate a building at
a rate of 1% per year up to max 40% (or 40 years). If the building is brand new, there is no depreciation
and the replacement cost (R/C) is the same as the ACV.
(Note that Property Insurance does pay claims on a replacement cost basis, but the Standard Fire Policy
will not. They will only pay in ACV)
6. Company's Options: Insurance comp has the option to repair the property or to pay the claim with
materials of like kind and quality whichever is best for the comp.
, 7. Direct Versus Indirect Losses: only covers Direct Losses. Ex: Fire
Indirect losses are not covered.
Ex: in the case of fire, the fire cause damage to the building is the direct cost. Now as a result of the fire,
you can't operate your business until the repairs were completed. The loss of business income during
this time is the indirect result of the fire and is NOT covered.
8. Insurable Interest: must exist at the time of lost. You cannot recover more than the interest you lost.
You can name your bank as a mortgagee on the policy, so that the bank's equity interest (Collateral
Security Interest) is also protected by the policy.
9. Perils: defines a a cause of loss. Standard Fire Policy cover only three perils:
- Direct loss by Fire
- Lighting
- Removal
What is Actual Cash Value (ACV) in Standard Fire Policy? ANS: Insurance company does not pay the
replacement cost to replace the building at today's price. They ONLY pays the depreciated value of the
structure. Insurance company will pay 1% per year and up to 40%. If the building is brand new, there is
no depreciation and the replacement cost is the same as the ACV.
Ex: a building is 10 years old. Meaning it depreciate by 10%. The replacement cost today is 100,000. So
the ACV value paid by the insurance company is 90,000.
Perils in Standard Fire Policy ANS: - standard fire policy is a "named perils" or "specified Peril" policy. If
the perils is not listed in the Insuring Agreement, it is not covered. If your property is being hit by lighting
or fire, then the coverage will applied.
- you may apply for additional coverage called peril of removal (or All-risk coverage).
- peril of removal: protect the dwelling and its content in the event of fire. The content that are removed
from the premise to prevent damage in the fire is also covered. You must pay extra premium to apply
the peril of removal and it must be listed in Declarations under Content Coverage.
DO NOT ASSUME THAT STANDARD FIRE POLICY AUTOMATICALLY COVER THE CONTENT.
When will the policy be void (cancelled)? Line 1 and 2 ANS: this happen when the insured willfully
conceal or misrepresent any material fact concerning insurance when filling out application. Must fill out
everything to the best of their knowledge. This is called "representation"
What types of property are not covered by this policy? ANS: These lines (7-9) states that certain
property are not covered even if it was damaged by fire. Line (11-24) states that the fire occur to this
property was caused by war. In addition, if the insured neglects to use all reasonable means to save the
property after a loss or when the property is endangered by fire in a neighboring premises, no
coverage!!
Line 24, no coverage for theft!
No coverage for money!
