Study guide
5.2 Homeowners Conditions and Duties After Loss
Arkansas Property & Casualty Insurance State
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1 Standalone Coverage Map
Standalone Coverage Map
2 Introduction: Arkansas Property & Casualty Insurance Exam Overview
Arkansas Property & Casualty Exam Overview
3 National Portion: Insurance Fundamentals
1.1 Risk, Hazards, Perils, and the Law of Large Numbers 1.2 Insurable Interest, Indemnity, and Other Insurance Principles 1.3 Insurance Contract Law and Elements 1.4 Policy Structure: Declarations, Insuring Agreement, Conditions, Exclusions 1.5 Parties, Agents vs. Brokers, and Authority
4 National Portion: Property Insurance Concepts
2.1 Causes of Loss / Named-Peril vs. Open-Peril 2.2 Valuation: ACV, Replacement Cost, and Functional Value 2.3 Coinsurance and the Coinsurance Formula 2.4 Deductibles, Limits, and Loss Settlement 2.5 Common Property Policy Conditions and Clauses
5 National Portion: Dwelling Policies (DP)
3.1 Dwelling Policy Forms DP-1, DP-2, DP-3 3.2 Dwelling Coverages A-E and Other Coverages 3.3 Dwelling Perils, Conditions, and Endorsements 3.4 Mobile Home and Specialized Dwelling Coverage
6 National Portion: Homeowners Policies - Forms & Section I
4.1 Homeowners Forms HO-2 through HO-8 and Eligibility 4.2 Section I Coverages A-D and Additional Coverages 4.3 Section I Perils Insured Against and Exclusions 4.4 Replacement Cost vs. ACV and Loss Settlement in Homeowners
7 National Portion: Homeowners Policies - Section II & Endorsements
5.1 Section II Coverages E (Liability) and F (Medical Payments) 5.2 Homeowners Conditions and Duties After Loss 5.3 Common Homeowners Endorsements (scheduled property, water backup, ordinance or law)
8 National Portion: Personal Auto Policy - Liability & Injury
6.1 Personal Auto Policy Structure and Eligibility 6.2 Part A Liability and Supplementary Payments 6.3 Part B Medical Payments 6.4 Part C Uninsured/Underinsured Motorists
9 National Portion: Personal Auto Policy - Physical Damage & Duties
7.1 Part D: Coverage for Damage to Your Auto 7.2 Exclusions and Part E: Duties After an Accident 7.3 Part F: General Provisions, Endorsements, and No-Fault Concepts
10 National Portion: Liability Insurance Concepts
8.1 Negligence, Torts, and Legal Liability 8.2 Defenses, Damages, and Vicarious Liability 8.3 Occurrence vs. Claims-Made Triggers 8.4 Bodily Injury, Property Damage, and Personal/Advertising Injury
11 National Portion: Commercial Property Insurance
9.1 Commercial Package Policy Structure and Common Policy Conditions 9.2 Building and Personal Property Coverage Form (BPP) 9.3 Causes of Loss Forms (Basic, Broad, Special) 9.4 Business Income and Extra Expense 9.5 Commercial Property Endorsements and the BOP
12 National Portion: Commercial General Liability - Coverages
10.1 CGL Coverage A: Bodily Injury and Property Damage Liability 10.2 CGL Coverage B: Personal and Advertising Injury, Coverage C: Medical Payments 10.3 Who Is an Insured and Supplementary Payments
13 National Portion: Commercial General Liability - Limits, Triggers & Exclusions
11.1 CGL Limits of Insurance and Aggregates 11.2 Occurrence vs. Claims-Made CGL and Retroactive Dates 11.3 Key CGL Exclusions and Endorsements
14 National Portion: Commercial Auto Insurance
12.1 Business Auto Coverage Form and Covered Auto Symbols 12.2 Commercial Auto Liability and Physical Damage 12.3 Motor Carrier / Trucking and MCS-90 12.4 Garage Coverage Form and Garagekeepers 12.5 Commercial Auto Endorsements
15 National Portion: Workers Compensation
13.1 Workers Compensation Statutory Background and Benefits 13.2 Part One (Workers Comp) and Part Two (Employers Liability) 13.3 Premium Basis, Experience Modification, and Classification 13.4 Other States, USL&H, and Federal Acts 13.5 Workers Comp Exclusions and Endorsements
16 National Portion: Other Commercial Lines - BOP, Crime & Marine
14.1 Businessowners Policy (BOP) in Depth 14.2 Crime and Fidelity Coverage 14.3 Inland Marine and Nationwide Marine Definition 14.4 Ocean Marine Coverages (Hull, Cargo, Freight, P&I)
17 National Portion: Other Commercial Lines - Specialty & Professional
15.1 Farm and Agricultural Coverage 15.2 Commercial Umbrella and Excess Liability 15.3 Professional Liability and Errors & Omissions 15.4 Directors & Officers and Employment Practices Liability
18 National Portion: Other Commercial Lines - Surety, Flood & Specialty
16.1 Surety and Fidelity Bonds 16.2 National Flood Insurance Program (NFIP) 16.3 Cyber, Aviation, and Other Specialty Lines
19 National Portion: Insurance Regulation & Market Conduct
17.1 State Regulation, Licensing, and the McCarran-Ferguson Act 17.2 Rates, Forms, Solvency, and Guaranty Associations 17.3 Producer Authority, Fiduciary Duty, and Company Operations
20 National Portion: Ethics & Unfair Trade Practices
18.1 Unfair Trade Practices and Unfair Claims Settlement 18.2 Producer Ethics, Errors & Omissions Exposure, and Fiduciary Conduct 18.3 Privacy, Fraud, and Consumer Protection
21 Chapter 1: Arkansas P&C Insurance Regulation & Licensing
1.1 Arkansas Insurance Department 1.2 Arkansas P&C Producer Licensing Requirements 1.3 Arkansas Producer Responsibilities
22 Chapter 2: Arkansas Property Insurance
2.1 Arkansas Homeowners Insurance 2.2 Arkansas Commercial Property Insurance
23 Chapter 3: Arkansas Casualty & Auto Insurance
3.1 Arkansas Auto Insurance Requirements 3.2 Arkansas Liability Insurance 3.3 Arkansas Workers' Compensation Insurance
24 Chapter 4: Arkansas Ethics & Professional Conduct
4.1 Ethical Practices and Consumer Protection
5.2 Homeowners Conditions and Duties After Loss
Key Takeaways Explain This Topic AI
Buildings settle at replacement cost only if insured to at least 80% of full RCV; otherwise the larger of ACV or the coinsurance penalty applies.
Coinsurance formula: (Did carry / Should carry) x Loss - Deductible; recoverable depreciation is held back until repairs are completed.
Duties After Loss include prompt notice, protect property, inventory, examination under oath, and a sworn proof of loss within 60 days of request.
Appraisal resolves disputes over the amount of loss only; suit against the insurer must be brought within 2 years (Section I).
Last updated: June 2026
5.2 Homeowners Conditions and Duties After Loss
Conditions are the rules that govern how the policy works once it is in force and after a loss occurs. They appear in Section I Conditions , Section II Conditions , and Conditions Applicable to Both Sections of the ISO HO 3. Memorize the major property-side conditions; they generate a large share of national exam questions, especially the valuation and coinsurance math.
Loss settlement and the 80% coinsurance rule
Homeowners buildings (Coverage A and B) are settled on a replacement cost (RCV) basis if the insured carries at least 80% of full replacement cost at the time of loss. Carry less than 80% and the larger of the actual cash value (ACV) or the coinsurance-penalty formula applies:
Recovery = (Did carry / Should carry) x Loss - Deductible
Worked numeric: A home costs $400,000 to replace. The insured carries only $280,000 of Coverage A. A partial fire loss is $60,000 ; deductible is $1,000 .
- Should carry (80%): 0.80 x $400,000 = $320,000
- Ratio: $280,000 / $320,000 = 0.875
- Payable: 0.875 x $60,000 = $52,500 - $1,000 = $51,500
The insured eats the difference because of the coinsurance penalty. Had the insured carried $320,000+, the full $59,000 (loss minus deductible) would be paid as RCV.
ACV vs. RCV
Replacement cost (RCV): the cost to repair/replace with like kind and quality, no deduction for depreciation . Applies to buildings meeting the 80% rule.
Actual cash value (ACV): replacement cost MINUS depreciation . Applies to personal property (Coverage C) by default and to buildings that fail the 80% test.
Worked ACV example: A 10-year-old roof costs $18,000 to replace and has a 20-year useful life. Depreciation = 50%, so ACV = $9,000 . Under an RCV building settlement, the insurer pays ACV first ($9,000) and the recoverable depreciation ($9,000) only after the insured actually completes repairs and submits receipts - a frequently tested 'hold-back' rule.
Duties After Loss
The insured's Duties After Loss condition is a checklist of what an insured must do to preserve coverage. The exam tests these as conditions precedent - fail them and the insurer can deny the claim. In the typical order tested:
Give prompt notice to the insurer or agent.
Notify the police in case of theft.
Notify the credit card/EFT company for credit-card coverage losses.
Protect the property from further damage and make reasonable emergency repairs (keep records of those costs).
Cooperate with the investigation.
Prepare an inventory of damaged personal property with quantities, descriptions, and amounts.
As often as reasonably required, show the damaged property, submit to examination under oath , and produce records.
Submit a signed, sworn proof of loss within 60 days of the insurer's request.
Other heavily tested conditions
- Condition Key rule
- Loss payment Insurer pays within 60 days after proof of loss and agreement/appraisal/judgment
Appraisal Either party may demand; each picks an appraiser, the two pick an umpire ; agreement of any two sets the amount
- Suit against us Insured must bring suit within 2 years (Section I) of the date of loss
- Subrogation Insurer may recover from the at-fault third party; insured may waive in writing before a loss
- Other insurance Pays only its pro-rata share when other property insurance applies
- Mortgage clause Named mortgagee has its own rights; gets 10 days' notice of cancellation
- Concealment or fraud Voids the policy if the insured intentionally conceals or misrepresents a material fact
Trap: Appraisal resolves disputes over the amount of loss , never coverage questions. If the dispute is whether a peril is covered, appraisal does not apply.
Policy period, territory, and assignment
A few administrative conditions round out the form:
Policy period - coverage applies only to losses that occur during the policy period shown on the declarations.
Coverage territory / where applicable - Section I property coverage applies to property at the described residence premises and, with sublimits, to personal property anywhere in the world; Section II liability is worldwide .
Assignment - the policy may not be assigned without the insurer's written consent. This protects the insurer's right to underwrite the risk; an insured who sells the home cannot simply hand the policy to the buyer.
Death - if the named insured (or spouse) dies, coverage continues for the legal representative and household members, preserving protection while the estate is settled.
Reading a coinsurance question on the exam
Coinsurance problems follow a predictable pattern. Work them in this order so you never miss a step:
Compute the 'should carry' amount = coinsurance % (usually 80%) x full replacement cost.
Compute the ratio = amount carried / should-carry amount. Cap the ratio at 1.00 ; over-insuring never pays more than the loss.
Multiply the ratio by the loss .
Subtract the deductible last.
Cap the result at the policy limit .
Second worked numeric: full RC $250,000; carried $150,000; loss $40,000; deductible $500. Should carry = $200,000; ratio = 150,000/200,000 = 0.75; 0.75 x $40,000 = $30,000; minus $500 = $29,500 . The candidate who forgets to subtract the deductible answers $30,000 - a common distractor.