PROPERTY AND CASUALTY & OTHER INSURANCES Objective 08.02 Interpret the nature, theory, and different types of insurance PROPERTY AND CASUALTY & OTHER INSURANCES

Property/Casualty Insurance Types of policies : Fire policies Renter’s policies Homeowner’s policies *Supplemental - marine insurance

Property and Casualty Insurance Covers both individual and business property such as: Real Property: Houses, apartments, condos, office buildings and other structures Personal property: Jewelry, furniture, clothing, equipment, artwork and other valuables

Fire Policy A very basic policy covering loss resulting directly or proximately from an unfriendly fire. Unfriendly or hostile fire is uncontrollable or has escaped from the place where it should be. A friendly fire is a bonfire, furnace fire, fire in a fireplace unless it gets out of control.

Fire Policy Owner of property rented to others protects investment in structure with a fire policy. Owner has insurable interest in the property, but not in tenant’s property. Examples: Apartment Condo Office building

Renter’s Insurance Covered under Homeowner’s 4 Form Person who rents real estate from another but has personal contents on premise carries renter’s insurance to insure: personal contents against liability risk Insurable Interest law applies. A person can only insure his own property, not another’s property.

Renter’s Insurance Protection includes: Examples: Personal contents of tenant in an apartment, condo, mobile home or house Personal liability if others sue tenant for injuries Examples: Lightning strikes and damages TV owned by tenant Neighbor breaks leg when he steps on child’s skate left on steps and sues tenant for negligence

Homeowner’s Policy Provides coverage for: Home - Primary structure Personal property - Contents Related structures – Outbuildings, if any Loss of Use - Living expenses if insured can not live there due to covered damage Premise personal liability – for injuries to others who were on your property

Homeowner’s (HO) Policy Riders may extend policy for additional coverage for items such as: Boats Jewelry Furs Artworks Antiques And other special collectibles owned by a homeowner

Homeowner’s Insurance Must own home to carry policy forms: HO-1 Basic - covers limited perils HO-2 Broad – covers extended perils HO-3 Special - covers most perils with specified exclusions HO-6 Condominium Owners – coverage like an HO-3, but for homes with common walls Peril – a cause of loss

Co-insurance Homeowners policies require the insured to carry a minimum of 80% of the value of the home (called co-insurance) to get full reimbursement for a claim made. Most claims are partial losses leading policyholders to insure a home for less than value since risk of total loss is low.

Cost Factors of Property Insurance Limit of coverage for property Location of property – fire district, city, county, state Structural material - brick, block, frame Previous claims filed Company

FLOOD & EARTHQUAKE NOT COVERED UNDER HO POLICY Must buy separate flood insurance coverage Must buy separate earthquake coverage

Co-Insurance Clause * Supplemental* In property insurance, there is a high probability of a partial loss claim. The insurance policy requires actual value of property be insured. Co-insurance requires an insured to cover a minimum of 80% of the value of the property If less than 80%, the claim amount is reduced at the time of payment. Example: Insuring a $100,000 home for $50,000 because the premium is cheaper and chances are there will ever be a total loss.

Marine Insurance *Supplemental* Covers property exposed to perils of sea transport: The vessel The cargo Other property Liability for the vessel One of first types of insurance covering ancient traders in the Mediterranean Sea. The term “underwriter” coined from the process of insuring the ships and cargo.

Inland Marine *Supplemental* Covers personal property that is being transport over land Transportation methods include: TRUCK TRAIN AIRPLANE Also covers property such as jewelry, furs, fine arts, musical instrument etc wherever located and during their transport.

Fidelity and Surety Bonds *Supplemental* An insurance policy against a financial loss due to dishonesty Pays the employer money in the case of theft by employees Guarantees the honesty of employees who: Handle large sums of money Have access to customers money or assets Example: A company that cleans offices after hours might have a fidelity bond.

Lloyd’s of London *Supplemental* An insurance company that covers unique property and liability risks that are difficult to insure. Examples: An opera singer’s vocal chords Life insurance on insured with extremely risky occupations Comprehensive and collision auto insurance on drivers with numerous tickets and accidents.