#10

Protecting Your Property

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Property Insurance Basics •

Property insurance

protects real and personal property from losses from various perils •

Liability insurance

protects against financial consequences from insured's responsibility to others

Types of Exposure

Property loss

economic loss due to property that is damaged, destroyed, or stolen •

Inventory

•

property Identify potential perils

Types of Exposure

Liability

damage you cause others, either through your actions or negligence.

• • •

Types of liability protection:

Homeowner’s policy Automobile policy Umbrella policy

Principle of Indemnity • Insured may not be compensated by insurance company an amount exceeding economic loss Most property and liability insurance contracts are based on this principle

Concepts Related to Indemnity • Actual cash value value assigned to insured property – Replacement cost less depreciation • Right of Subrogation Insurer’s right to request reimbursement from person who caused the loss or that person’s insurer

Concepts Related to Indemnity

Other insurance clause -

When multiple companies insure a property, together they will not pay more than the economic loss Insurance companies do not want you to profit from a loss

Coinsurance • Provision requiring policyholder to buy insurance in an amount equal to a certain percentage of replacement value of property • Or, insurance company will not fully repay the loss – You bear part of the loss as “co-insurer”

Homeowner's Insurance • • • •

Homeowners

HO-1 — Basic Form HO-2 — Broad Form HO-3 — Special Form HO-8 — Modified Form

Renters

• • HO-4 — Renter's Form HO-6 — Condominium Form

Homeowner's Insurance • • Policy states conditions (perils) under which it will pay Stipulate property covered and extent of coverage Peril —a cause of loss such as fire, lightning, windstorm

Factors Affecting Home Insurance Costs • Type of structure – Construction materials, style, age • Location of home – Crime rates, weather, proximity to fire hydrant • Other factors – Pool, trampoline, large dog

Property Covered •

Section I –

Loss to property, conditions under which it will be covered, extent of coverage – Perils rarely covered: flood, earthquake, acts of war •

Section II –

liability which may arise in connection to property, either through your actions or negligence

Personal Property Floater Provides blanket or scheduled coverage of expensive personal property not adequately covered by standardized homeowner’s policy

Renter’s Insurance • Personal furnishings and belongings are not covered although the building may be fully insured • Purchase a special type of homeowners policy

Types of Losses Covered by Homeowner’s Policies • Direct loss of property • Indirect loss occurring as a result of loss of use of damaged property • Additional expenses resulting from direct and indirect losses

Persons and Locations Covered • Policy states who is covered  Coverage for guests and students at college may be limited • Most homeowner’s policies offer coverage worldwide  Second home may be an exception

Limitations on Payments • Replacement cost amount necessary or rebuild an insured asset at today’s prices • Policy limits placed on to repair, replace, covered property and depend on amount of home coverage

Limitations on Payments • • • • Actual Cash Value - what property is worth today (its depreciated value) Replacement Cost – amount to repair, rebuild or replace at today’s price Inflation Protection Rider - automatically adjusts for inflation Internal Limits - apply to specific items such as jewelry, watercraft, or securities

Deductibles

Deductible

- amount paid out of pocket on covered losses Deductibles keep insurance costs

down

by eliminating frequent small loss claims that are proportionately more expensive to administer

Homeowner Premiums • • • Differ from company to company Depend on structure type, property location, or property hazards Discounts offered – non-smokers – security systems

Types of Automobile Insurance Coverage • • • • Part A – Liability coverage Part B – Medical Payments coverage Part C – Uninsured motorists coverage Part D – Coverage for damage to your vehicle

Part A: Liability Coverage • • • Required in most states Pays injury and property damages to others when you are responsible for the loss Covers costs of settling or defending claims for damages

Part A: Policy Limits • Insurance company may limit total damages paid for any one accident – Typical limits are $50,000, $100,000, $300,000 and $500,000 • Some insurers split the limits of liability coverage available

Four Parts of a PAP

Part A: Persons Insured Insured Person • • • the named insured family members any person using covered auto • any person or organization responsible for insured’s actions Covered Auto • listed on declaration page • acquired during policy period • any vehicle temporarily used while auto is being repaired

Part B: Medical Payments • • • Reimbursement for medical expenses resulting from an accident Covers insured, family members, and passengers in covered autos Covers injuries sustained as a pedestrian or while riding a bicycle

Part C: Uninsured Motorists • • • Pays when other driver has no insurance or if hit-and-run Usually pays for bodily injuries, not property damage Additional coverage available to protect against underinsured motorists • • • Must meet criteria: Another driver at fault Other motorist uninsured Damages were incurred

Part D: Physical Damage to a Vehicle • • •

Collision

Pays the actual cash value of the damage minus deductibles Pays no matter who is at fault Required for financed cars to protect the investment

Part D: Physical Damage to a Vehicle •

Comprehensive

Protects against loss to insured auto caused by perils other than collision – hail, fire, theft, falling objects

No-Fault Automobile Insurance • • • • Reimburses parties involved in an accident without regard to negligence Each party compensated by their own insurance company Restricts remedies and payments for pain and suffering State laws vary regarding amount of no fault benefits and restrictions for legal actions

Factors Affecting Premiums • • • • • Rating territory Use of automobile Driver’s personal characteristics Type of automobile Driving record

Financial Responsibility Laws Require motorists to buy a minimum amount of auto liability insurance • • Compulsory auto insurance laws require proof of insurance when acquiring license plates Others require proof of coverage accident

after

an

Supplemental Property Insurance Coverage • Earthquake & flood - not included in standard homeowner's policies • Other forms of transportation homes, RVs, boats, etc. - mobile Personal liability umbrella additional liability coverage for homeowner and auto insurance

Property and Liability Insurance Agents  Captive agent Represents one insurance company  Independent agent Represents multiple insurance companies Before selecting • Review total property and liability exposures • Inventory property and identify exposures • Determine appropriate covered perils, limits, deductibles, and floater policies

Buying Insurance and Settling Claims After an accident be sure to get:  names, addresses, phone numbers  driver's license, auto license, insurance policy numbers  vehicle description for all involved Remember to -  get names, addresses, phone numbers of witnesses  contact police and insurance agent

Steps in Claim Settlement 1.

2.

3.

Notice to insurance company Investigation Proof of loss Claims adjustor will: 1. Evaluate claim 2. Recommend  settlement of amount requested  settlement of a lesser amount  denial of claim