Home Insurance

Important Insurance Terms Risk – Chance of loss or injury Peril – Anything that may cause a loss Hazard – Anything that increases the likelihood of loss through peril Negligence – Failure to take ordinary or reasonable care to prevent accidents

Risk Management Methods Risk Avoidance Avoid risks, but may have serious trade-offs Can avoid traffic accident by not driving, but may not be able to get to work Risk Reduction Decrease the likelihood of harm or risk Can reduce accident injury by wearing a seatbelt

Risk Management Methods Risk Assumption Taking responsibility for negative results of a risk Makes sense to assume risk when the possible loss is small like not fully insuring an old car Self-insurance is another option; set up a savings acct. to cover loss Risk Shifting Use an insurance company May have a deductible, a combination of risk assumption and shifting, which is a set amount the policyholder must pay on a loss

Property and Liability Insurance Natural disasters as well as injuries and property damage cost billions of dollars a year Two types of risk related to home 1) Risk of damage to or loss of property 2) Risk of responsibility for injuries to other people or damage to their property

Property and Liability Insurance Property Damage or Loss Two basic types of risks for property owners Physical damage such as wind, fire, flooding Loss or damage caused by criminal behavior such as robbery, burglary, vandalism, and arson Liability Legal responsibility for the financial cost of another person’s losses or injuries, even is it is not your fault Usually found responsible because negligence on your part helped cause the mishap

Homeowners Insurance A binding, legal contract between the insured and the insurer to protect their home and belongings if they are damaged or destroyed Provides against losses caused by fire, water damage, storms, theft, and other perils Provides against monetary losses as a result of negligence for medical bills, legal fees, death benefits

Who/What Do HO Policies Protect? Anyone named in the policy Spouse Children Other residents Guests Also covers garages, sheds, pools, landscaping

What isn’t Protected Cars, boats, ATVs – things that would have its own insurance One of a kind items like jewelry, art, and collections – must purchase additional coverage for these items In areas prone to natural disasters, additional coverage is needed

Renter’s Insurance Protects those who live in a “home” owned by someone else Inexpensive to purchase Covers your belongings which are not covered under the owners insurance Protects against theft, loss of personal property, and loss of use

What Renters Insurance Covers Personal possessions Loss of use (pays for you to live elsewhere) Medical payments for those injured there Doesn’t Cover Structural damage caused by carelessness

Homeowners Policies Most homeowners insurance are package policies with the following coverages Property/Structure Property/Personal belongings Liability protection Loss of use

Property/Structure Coverage Repair or rebuild your home if damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy Will not pay for damage caused by a flood, earthquake or routine wear and tear Always purchase enough coverage to rebuild your home

Property/Personal Belongings Coverage Furniture, clothes, and personal items stolen or destroyed by insured disasters Most cover 50-70% of the cost of your dwelling limit, so if your house is insured at $200,000, and they pay 50%, the payout limit would be $100,000 Covers items you take on vacation or use at school

How Much Will You Get? Actual Cash Value vs Replacement Cost Actual cash value only pay for what the property was worth at the time of the loss (depreciated value) Replacement cost coverage will pay what it actually costs to replace the items you lost Both involve paying a deductible first

Liability Insurance Protects you when you are at fault or sued Covers bodily injury for those hurt at your home Covers property damage liability for damage done to building or belongings Most policies cover behavior of household pets

Loss of Use Insurance Pays for you to stay somewhere else while home is being rebuilt or repaired May limit coverage to 10 to 20% of home’s total coverage May limit the payment period to 6 to 9 months

Personal Property Floaters Extra coverage for valuable items Jewelry Furs Fine arts Musical instruments Collections Guns

Household Inventories Documentation of personal belongings with purchase dates and cost information Should keep receipts, serial numbers, brand names, proof of value Video of home including closets and storage areas Photographs with dates and values on back Keep in fireproof box or safe deposit box and update regularly

Personal Liability and Related Coverages Amounts of coverages Most policies cover liability up to $100,000 Supplement with an umbrella policy to add protection for all kinds of personal injury claims – if someone sues you for slander (writing or saying something untrue) More expensive policies are available for the wealthy Medical payments coverage pays cost of minor accidental injuries to visitors on your property Supplemental coverage could cover damage you do to other people’s property

What Isn’t Covered Jewelry, furs, boats, electronics Animals and fish Motorized vehicles not licensed for road use, except those used for home maintenance Sound devices in motor vehicles Aircraft parts Property belonging to tenants Property in rentals Business property

Other Coverages Credit card fraud, check forgery, counterfeit money Removal of damaged property Emergency removal of property to protect it from damage Temporary repairs after a loss to prevents further damage Fire department user fees

How much coverage do you need? 80% to full coverage for homes Must have coverage if borrowing money from bank Coverage for personal belongings is usually 55 to 75% of insurance you have on your home Claim settlements Actual cash value – receive replacement cost minus depreciation Replacement value – receive full cost of repairing or replacing item

Home Insurance Cost Factors Location – water supply, fire hydrant, crime, weather Type of Structure – wood, brick Price, Coverage Amount, Policy Type – higher deductible means lower premiums Home Insurance Discounts – smoke detectors, fire extinguisher, dead bolts Company Differences – compare companies

Location Those close to water supply or hydrant get discount Those near high crime, severe weather pay more

Lower Deductibles Decreases cost because insurance company pays less out because you are assuming more financial reasonability

Discounts Smoke detectors Fire extinguisher Deadbolts Alarm system

Selecting Insurance Companies Consider prices, but also service and coverage Not all settle claims in the same way

Attractive Nuisances An attractive nuisance is an object, structure or condition that is both dangerous and irresistibly inviting or intriguing to children. Name some attractive nuisances

What is an Attractive Nuisance Unenclosed swimming pool, goldfish pool, idling lawnmower, paint sprayer, table saw, construction sites, and equipment Most natural conditions are not considered attractive nuisances To be liable for injury, an owner must create or maintain the harmful object Attractive nuisance doctrine arises when the child doesn’t realize the extent of the danger

Typical Local Laws Pools – fences and locks Discard Refrigerators – removal of doors Fences – barbed wire below a certain height Old Cars and Other Junk – must be fenced in Chemicals – discard of pesticides, paints, etc. Dangerous Dogs

Landowner can be held responsible if a child is injured by an "artificial condition" and all five of the following criteria are met: 1) Landowner knows (or should know) that children are likely to trespass on the property 2) The condition has the potential to cause death or serious bodily harm to children 3) The children involved are too young or inexperienced to understand the risk presented by the condition

Landowner can be held responsible if a child is injured by an "artificial condition" and all five of the following criteria are met: 4)The benefit of maintaining the condition or the cost required to remedy the condition is minimal compared with the risk to children. 5)The landowner fails to take reasonable measures to eliminate the danger posed by the condition.

Who is Protected Example 1 – 12 year old child climbed onto the roof of building and fell 3 stories to the ground. Owner was liable because 1. Children were known to play in area 2. Roof had an area that was sloped and slippery – something a child might not notice 3. Owner could’ve locked door to the rook

Who is Protected Example 2 – A 10 year old fell 3 stories from a roof after climbing up and playing on it. Owner was not liable because 1. This owner had no reason to know that children would play on the roof 2. No hidden danger on the roof itself caused the all

Who Is Protected Example 3: During construction of a house, a contractor left sheetrock propped against a wall and unattended. An 11 year old girl investigating the building site was injured when the sheetrock tumbled down on her. Owner was liable because: 1. Children were likely to come onto the building site 2. The sheetrock was left unattended for days 3. It could have easily been stacked in a safer manner