The national guide covers the core property principles: insurable interest, indemnity, ACV and replacement cost, coinsurance, deductibles, covered causes of loss and policy conditions. Connecticut puts many of those conditions into its standard fire policy, which is written into statute at Conn. Gen. Stat. 38a-307. It also has statutes on binders and certificates of insurance. The exam quotes the standard fire policy's time limits directly, so learn them.

The national concepts in brief

• Indemnity restores the insured to the pre-loss position without a profit. Subrogation lets the insurer recover what it paid from the party responsible.
• Actual cash value is replacement cost minus depreciation. A pro rata other-insurance clause divides a loss among insurers in proportion to their limits.
• Proximate cause is the event that starts an unbroken chain leading to the loss. Coverage depends on whether that cause is an insured peril.

The Connecticut standard fire policy (38a-307)

• Insuring agreement: direct loss by fire, lightning, and removal from premises endangered by those perils. Property removed for safekeeping is covered pro rata for five days at each location it is moved to.
• ACV: for a building, ACV is the cost to repair or replace with material of like kind and quality, less reasonable depreciation. Depreciation is the loss of value over time from wear and tear.
• Property that can't be insured under the form: accounts, bills, currency, deeds, evidences of debt, money and securities. Bullion and manuscripts are covered only if specifically named.
• Perils not included: among others, theft. Explosion or riot are covered only if fire follows, and then only for the fire damage.
• Concealment and fraud: the entire policy is void if the insured willfully concealed or misrepresented a material fact, or committed fraud or false swearing.
• Suspension of coverage:
  • while the hazard is increased by means within the insured's control or knowledge
  • while the building is vacant or unoccupied beyond 60 consecutive days
• Cancellation:
  • The insurer gives 30 days' written notice with the reason, or 10 days for nonpayment.
  • If the insured cancels, the refund is the premium paid minus the customary short rate.
  • If the insurer cancels, the refund is pro rata.
• Mortgagee clause:
  • The mortgagee's interest can be canceled with 10 days' written notice to the mortgagee.
  • If the insured doesn't file proof of loss, the mortgagee must file it within 60 days after notice.
• Pro rata liability: the insurer pays no more than its share, in proportion to its limit against all insurance on the property.

Loss settlement under the standard fire policy

• There can be no abandonment of property to the insurer.

Package policies, binders and certificates

• Package policies: multi-peril policies may depart from the standard form if the fire coverage is at least substantially equivalent. They must still include the mortgagee, ACV, payment-time and suit-time provisions (38a-308(b)). The standard form isn't required for auto or aircraft physical damage, inland marine or reinsurance.
• Binders may be oral or written, for no more than 60 days (38a-309, 38a-322). At a real estate closing, a lender must accept a written binder from a licensed insurer as evidence of hazard insurance.
• Certificates of insurance (38a-322a):
  • A certificate is not a policy, binder, endorsement or auto ID card.
  • No one may claim a certificate gives rights beyond the policy.
  • No one may use a certificate to warrant that a contract's insurance requirements are met.

Exam traps

• 60 days for proof of loss, 20 days to name an appraiser, 30 days to pay, 24 months to sue.
• Coverage is suspended after 60 consecutive days of vacancy.
• Insured cancels: short rate. Insurer cancels: pro rata. Insurer notice: 30 days, or 10 for nonpayment.
• Binders run at most 60 days and may be oral.