Policy Coverage and Claims Analysis
Domain 2 tests coverage analysis: reading the policy before the estimate, matching facts to the grant of coverage, then applying exclusions, limits, deductibles, and valuation rules.
Analysis sequence
- Identify the policy, forms, endorsements, effective dates, named insured, insured property, and perils.
- For first-party property, the insured must show direct physical loss by a covered peril. The insurer then bears the burden on an exclusion; the insured must bring the loss within any exception to that exclusion.
- Determine valuation: actual cash value or replacement cost, with depreciation and holdback conditions. Apply the deductible once per occurrence, not once per coverage.
- Homeowners forms: Coverage A dwelling, B other structures, C personal property, D loss of use. On an HO-3, the dwelling is open-peril while personal property is named-peril. Sub-limits commonly apply to special categories such as jewelry, money, and electronics in vehicles.
- Commercial property: coinsurance, agreed value, blanket limits, business income with a period of restoration, extra expense, and ordinance-or-law coverage.
Delaware-specific points
Delaware’s standard fire policy and insurance regulations impose content and time requirements on property forms, including proof-of-loss and suit-limitation provisions. Endorsements can change those terms, so read the actual form and any amendatory endorsement rather than relying on a generic summary.
Worked example
A burst pipe damages a dwelling ($40,000 replacement cost) and personal property ($15,000 actual cash value). The HO-3 has a $2,500 deductible. Covered payment is $40,000 + $15,000 − $2,500 = $52,500, allocated between Coverages A and C and subject to replacement-cost conditions. A common error is subtracting $2,500 from each coverage, which understates the payment by $2,500. If the personal property included $8,000 of jewelry, the special sub-limit would cap that category separately.
Traps that cost marks
Applying the deductible per coverage; treating replacement cost as payable before repair; ignoring Coverage B or C sub-limits; missing ordinance-or-law exposure; confusing business income with extra expense; overlooking the mortgagee clause; and assuming an exclusion disappears because the loss also had a covered cause.