Perils, Exclusions, and Endorsements
Domain 5 tests whether you can classify a loss by peril, then apply exclusions and endorsements in the right order. Most missed questions involve water, earth movement, mold, and anti-concurrent causation.
Perils and exclusions
- Named peril policies list covered causes; open peril (special) covers all risks unless excluded.
- Common property exclusions: ordinance or law, earth movement, water damage (flood, surface water, sewer backup unless endorsed), neglect, intentional loss, governmental action, war, nuclear hazard, wear and tear, insects, animals, freezing, collapse (limited), and mold (limited).
- Anti-concurrent causation language can exclude a loss when an excluded peril and a covered peril act together.
Endorsements
- Water backup endorsement adds sewer or drain backup coverage, usually with a sublimit.
- Scheduled personal property moves jewelry, art, or silverware out of special limits.
- Replacement cost, inflation guard, agreed value, vacancy permit, and building ordinance endorsements change valuation or eligibility.
Worked example
A storm causes a power outage; sump pumps fail and water damages a basement. If the policy excludes water damage and has no backup endorsement, the loss is denied. If a $10,000 water backup endorsement applies and the damage is $14,000 with a $1,000 deductible, payment is $9,000 ($10,000 sublimit minus $1,000). The reasoning: the endorsement adds a capped grant of coverage, not a new policy limit.
Traps
Do not call all water damage flood. Do not assume mold is fully covered; it is often capped or excluded. Do not ignore the order of exclusions and endorsements.