API cheat sheet

Insurable interest must exist at policy inception for property coverage and at the time of loss for life coverage.

Indemnity principle: property claims restore the insured to pre-loss financial position, capped at the limit of liability; life insurance is valued, not indemnity.

Utmost good faith obligates both parties to disclose material facts; concealment or misrepresentation can void coverage.

Actual cash value = replacement cost minus depreciation; replacement cost pays new-for-old without depreciation deduction.

Coinsurance clause (property): payout = (limit carried / limit required) x loss, subject to the policy limit; required limit = coinsurance % x replacement cost.

Deductible applies per occurrence and is subtracted before applying coinsurance or limits unless the policy states otherwise.

Declarations page states named insured, limits, deductibles, and effective dates; the insuring agreement grants coverage, exclusions remove it, conditions set duties.

Subrogation transfers the insured's recovery rights against a negligent third party to the insurer after payment.

Other insurance clauses (pro rata, excess, primary) determine how concurrent policies share a single loss.

HO-2 broadens HO-1 to include named-peril coverage for falling objects, weight of ice/snow, and accidental discharge of water.

HO-3 covers the dwelling on an open-peril basis and personal property on a named-peril basis; HO-5 extends open peril to personal property.

HO-4 (renters) covers personal property and liability but not the building structure; HO-6 (condo) adds building elements the unit owner must insure.

Coverage A (dwelling), B (other structures), C (personal property), D (loss of use) default to percentages of Coverage A: typically 10/50-70/20-30.

Coverage C special limits commonly apply to money, jewelry theft, silverware theft, firearms theft, and business property on premises.

Replacement cost on dwelling is often enforced by a margin clause or 80% replacement-cost condition for partial losses.

Loss of use pays additional living expense and fair rental value for the shortest reasonable time to repair or relocate.

Flood and earthquake are excluded under standard homeowners forms and require separate policies or endorsements.

Personal property off premises is usually covered worldwide at a stated percentage (often 10% of Coverage C) for named perils.

Coverage E (personal liability) pays sums the insured is legally obligated to pay for bodily injury or property damage from an occurrence.

Coverage F (medical payments to others) pays reasonable medical expenses regardless of fault, subject to a per-person limit and a time window.

Section II exclusions typically bar business pursuits, intentional acts, professional services, and injury to insureds.

Personal injury coverage (libel, slander, invasion of privacy) is an endorsement or separate coverage, not part of bodily injury.

Defense costs are paid in addition to the liability limit under homeowners forms; the duty to defend ends when the limit is exhausted.

Homeowners liability applies to the insured's legal liability worldwide but usually excludes premises owned by others and rented to the insured.

Umbrella liability provides excess limits over underlying auto/home policies and may drop down for gaps with a self-insured retention.

An occurrence is an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

Intentional acts by an insured are excluded, but coverage may apply to innocent coinsureds in some forms.

Underwriting evaluates hazard, exposure, and moral risk: loss history (CLUE), credit-based insurance score, and inspection data.

Protection class reflects distance to fire hydrant and fire station; class 1-10 scale where lower numbers indicate better protection.

Replacement cost is estimated from dwelling characteristics (square footage, construction, roof, features), not market value or land value.

Moral hazard indicators include frequent small claims, late payments, and misrepresented occupancy; morale hazard is carelessness.

Adverse selection occurs when higher-risk applicants buy coverage disproportionately; underwriting seeks rate adequacy through tiering.

Inspection and photo requirements often trigger for older roofs, high values, vacant or rental properties, and prior losses.

Vacancy and unoccupancy increase risk; policies typically reduce or suspend coverage after 30 or 60 days of vacancy.

Renewal underwriting reviews claims frequency and severity; nonrenewal requires statutory notice periods.

Risk mitigation credits commonly apply for monitored alarms, impact-resistant roofing, and gated communities.