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State Farm License- Standard Fire Policy Exam Questions and Answers
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State Farm License- Standard Fire Policy Exam Questions and Answers
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State Farm License- Standard Fire PolicyExam Questions and Answers
Standard Fire Policy - Answers -- 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? - Answers -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) -
Answers -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 prot
What is Actual Cash Value (ACV) in Standard Fire Policy? - Answers -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 - Answers -- 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 - Answers -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? - Answers -These lines (7-9)
states that certain property are not covered even if it was damaged by fire. Line (11-24)
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