Level 5 chapter 2 Assorted Personal Lines Casualty Products

Question 1

What is a personal umbrella policy?

Answer 1

Supplemental liability insurance that provides additional coverage after auto or homeowners liability limits are exhausted and fills certain coverage gaps.

Question 2

What is typically the minimum coverage limit for a personal umbrella policy?

Answer 2

Usually $1 million or more, with worldwide coverage.

Question 3

What must an insured maintain for umbrella coverage to function properly?

Answer 3

Required minimum liability limits on their auto and homeowners policies.

Question 4

What is a self-insured retention (SIR)?

Answer 4

An amount the insured pays out of pocket for losses that are covered only by the umbrella policy—similar to a deductible.

Question 5

What is the difference between a true umbrella policy and excess insurance?

Answer 5

True umbrella: Increases limits and covers new types of liability not covered by primary policies.

Excess insurance: Only increases dollar limits; does not add new coverage.

Question 6

When does the SIR not apply?

Answer 6

When both the umbrella policy and the primary policy cover the loss; only the primary deductible applies.

Question 7

What is the purpose of a commercial umbrella policy?

Answer 7

To provide additional liability protection for businesses beyond their primary policy limits.

Question 8

How does a commercial umbrella act when a covered loss exceeds primary policy limits?

Answer 8

It provides excess liability coverage.

Question 9

When can a commercial umbrella policy act as primary coverage?

Answer 9

When a liability loss is not covered by any of the business’s underlying insurance policies.

Question 10

What types of acts are excluded from umbrella coverage?

Answer 10

Intentional acts.

Question 11

What major exclusions are found in umbrella insurance policies?

Answer 11

Umbrella policies typically exclude:

Business liability (unless it’s a commercial umbrella)

Aircraft liability

Workers’ compensation liability

Transmission of communicable diseases

Nuclear liability

Question 12

What does “follow form” mean in excess liability insurance?

Answer 12

It means the excess policy duplicates the terms and conditions of the primary policy to ensure a smooth transition when primary limits are exhausted.

Question 13

Why is follow-form excess insurance beneficial?

Answer 13

It prevents policyholders from unexpectedly having to meet new or different coverage requirements when switching from primary to excess insurance.

Question 14

Why might an excess policy not be able to follow form completely?

Answer 14

When the excess policy is from a different carrier, it may be impossible to match every term or condition of the primary policy.

Question 15

What must insurers do when an excess policy cannot fully follow form?

Answer 15

Carefully structure the coverage and clearly disclose any differences in terms or conditions to the policyholder.

Question 16

What is aircraft liability insurance?

Answer 16

Insurance for people who fly their own planes, providing liability and optional aircraft damage (hull) coverage.