Property & Casualty Insurance Exam (National Portion)Property InsuranceEasy
An insured owns a commercial building and is concerned about potential damage from an earthquake. They purchase a commercial property policy that explicitly excludes earthquake damage. To obtain coverage, they would typically need to add which of the following?
- AA special perils endorsement.
- BA broad perils endorsement.
- CA named perils policy.
- DAn Earthquake endorsement.
Show answer & explanationAnswer & explanation
Correct answer: D. An Earthquake endorsement.
Earthquake is a common exclusion in standard property insurance policies. To cover losses from earthquakes, an insured typically needs to purchase a specific 'Earthquake endorsement' or a separate earthquake policy. Neither a 'special perils' nor 'broad perils' form inherently includes earthquake coverage without a specific endorsement addressing this exclusion.
Why the other options are wrong
- A. This is incorrect; a special perils form still typically excludes earthquake.
- B. This is incorrect; a broad perils form typically excludes earthquake.
- C. This is incorrect; a named perils policy would only cover perils explicitly listed, and earthquake is usually excluded.
Earthquake Endorsement
An add-on to a property insurance policy that provides coverage for damage caused by earthquakes, which are typically excluded from standard policies.
- Adds coverage for earth movement perils (earthquake, landslide, volcanic eruption).
- Often carries a separate, percentage-based deductible.
- Can be purchased as an endorsement or a separate policy.
Memory trick: If the earth moves, your policy needs an 'Earthquake' handshake!