FL Adjusters Claim Professional Exam Study Guide

Types of Insurable Property

Real Property: Includes land, buildings, and attached items (e.g., trees, shrubs, patios).

Personal Property: Any tangible item not classified as real property, including contents of a building (e.g., appliances, jewelry, cameras, outdoor furniture).

Key Point: Not all personal property is covered under homeowners policies. For example, automobiles require a separate auto policy.

Types of Building Construction

Frame Construction: Combustible materials (e.g., wood, stucco, aluminum siding). Common in houses, highest fire risk.
Masonry Veneer Construction: Combustible frame with brick/stone veneer. Offers some fire protection.
Masonry Construction: Walls of noncombustible materials (e.g., brick, concrete). More resistant to fire but susceptible to earthquake damage.
Superior Construction: Noncombustible or fire-resistive (e.g., metal, cement, steel). Common in commercial buildings.

Key Point: Frame construction has the highest fire insurance premium, followed by masonry veneer, then masonry. Superior construction is the most fire-resistant.

Types of Property Losses

Direct Loss: Damage to the insured property (e.g., fire damage to a building and its contents).

Indirect Loss: Secondary losses resulting from a direct loss (e.g., additional living expenses, business income loss).

Consequential Loss: Losses related to equipment failure (e.g., spoiled food due to refrigeration failure).

Insurable Interest

Policyholders must have a financial interest in the insured property at the time of loss. If the property is sold, the original owner loses insurable interest.

Example: If Julie sells her home but keeps the insurance policy, she cannot collect for a loss as she no longer has a financial interest.

Secondary Insurable Interest: Banks or lienholders may have an insurable interest (e.g., mortgage holders on homes, finance companies on auto loans).

Loss Valuation Methods

Replacement Cost: Cost to replace damaged property (e.g., houses, commercial buildings).
Functional Replacement Cost: Cost to repair/replace with equivalent modern materials for older buildings.
Actual Cash Value (ACV): Replacement cost minus depreciation (e.g., household contents).
Market Value: Used for automobiles and personal property, not real property.
Stated Amount: Pays the lesser of actual cash value, repair/replacement cost, or listed amount in the policy.
Agreed Value: Pays the agreed-upon amount for unique items (e.g., art, antiques).

Key Point: Most property insurance policies are indemnity contracts, reimbursing a percentage of the loss. Agreed value policies are valued contracts, paying the listed amount.

Broad Evidence Rule: Considers multiple factors (e.g., age, profit, tax value) to determine actual cash value for total loss.

Test Your Knowledge

1. A grocery store's food spoils due to a circuit breaker fire. This is an example of a(n):

Direct Loss Indirect Loss Consequential Loss

2. What is the difference between stated amount and agreed value methods?

Both pay the listed amount. Stated amount pays the lesser of listed amount or actual/replacement value; agreed value pays the listed amount. Agreed value pays less than stated amount.