Home and Motor Vehicle Insurance Chapter 13 Home and Motor Vehicle Insurance

Here is what is in this chapter. We will discuss: What insurance is Types of risk people take and why insurance is important. Types of Home and renter insurance. Types of Car insurance.

Do you know that you can insure just about anything….. For a price that is….. Marilyn Monroe – had her legs insured. Gene Simmons – had his tongue insured. Kicker for the Colts – had his foot insured. Paris Hilton – has her dog insured

Insurance and Risk Management Section 13.1

Do you remember the movie “Along came Polly” http://www.imdb.com/title/tt0343135/trailers- screenplay-E18782-314

What is Insurance? Is protection against possible financial loss. If your house burns down. If someone breaks into your car? If there is a flood, tornado, hurricane….. If you have to go to the hospital, or family member has to go… Are all types of insurance….

Insurance company and how they work. An insurance company is a risk-sharing business. They agree to pay if something happens by the terms in a POLICY… It is not free though….. The company agrees to pay if something happens, but you pay money every month, or year called a premium.

The policy The person who buys the policy is called the policyholder The protection that the policy provides is called COVERAGE. The person who is protected by the policy is called the insured.

Types of Risk Risk – Defined – is the chance of loss or injury. Peril – is anything that may possibly cause a loss. Many different types – fire , wind, explosion, robbery, and accidents.

Hazard – is anything that increases the likelihood of loss through peril. Types of Hazard: Personal Risk – involves loss of income or life due to illness, disability, old age or unemployment. Property Risk – includes fire, theft… Liability Risk – losses by negligence that leads to injury or property damage.

Negligence Failure to take ordinary or reasonable care to prevent accidents from happening. If a property owner does not clear ice from a side walk and someone falls, the owner is considered to be negligent.

Pure Risk Personal, property, and liability are types of pure risk, or insurable. If something actually happens then they will pay. Pure risks are unintentional or accidental.

Speculative Risk This is uninsurable risk. For example when we start a business and it goes under. An insurance company will not insure this….

Types of Risk Management Risk Avoidance Installing a burglar system in house to prevent crime. Not driving a car, is a way to avoid risk but if you have a 20 minute car ride to work, it may not be practical.

Risk Reduction Things that we do to make what we do a little safer… Wearing a seat belt Having a fire extinguisher ready Eating properly

Risk Assumption This means taking on a responsibility for the negative results of a risk. It makes sense to assume a risk if you know that the possible loss will be small. Self-insuring a car that is not worth much. If the car wrecks it is probably better to buy a new one, than trying to fix the old one.

Risk Shifting Shifting risk means to move the responsibility of paying to someone else. The insurance company agrees to pay for your losses when you pay a fee. Usually the person who the policy falls under has to pay a little on what ever happened it is called a deductible.

Property and Liability Insurance People spend large sums of money each year on homes, cars, and valuables. Others want to take it 3million burglaries a year 500,000 fires a year 200,000 cases from other types of peril.

2 types of risk for property 1st is physical From peril – wind, fire, flooding 2nd is criminal behavior

Liability Is the legal responsibility for the financial cost of another person’s losses or injuries. You can be found legally responsible even if the injury or damage was not your fault. You have a friend fall and hurt themselves in your backyard. They can sue you, even though you did nothing wrong, you can still be liable.

Home and Property Insurance Section 13.2

Homeowner’s Insurance Provides coverage for Home building or any other structures Detached buildings Trees, shrubs, and landscaping Additional Living Expenses Pay for you to live somewhere else if something happens to your home. Usually up to 20 percent of cost of home.

Homeowners continued Personal Property Covers your goods if stolen or lost to a certain percentage of your home. Usually you can only claim certain amounts for certain things. $1000 for jewelry

Things that homeowners don’t cover. Animals or Fish Motorized vehicles not used on road or for maintenance of home maintenance. Radios or CD players in motor vehicles. Property belonging to renters Business property

Additional Property Insurance Personal Property Floater A additional policy to cover extremely expensive items that my be covered partially by homeowners.

Most policies have basic personal liability coverage of $100,000, but is not usually enough. People may take out other types of policies that give additional coverage in dollar amount. These are called Umbrella Policies or personal catastrophe policy. These are pretty expensive and can cover you for more than 1 million dollars. (doctors malpractice insurance.)

Renters Insurance When someone rents an apartment the person who is living there needs to have some sort of insurance to cover their goods. The landlord’s insurance does not cover unless they are responsible for loss. For example if they have bad wiring and the place catches on fire.

How do you get your money from the insurance company. The insurance company bases claims on two methods. Actual Cash Value Based on the replacement cost of an item minus depreciation. Depreciation is the value that you loose on an item that as it ages. Replacement value Based on the actual cost of the item and replacing it fully. Depreciation is not considered. Replacement is very expensive and can only cover to usually 400% of original value.

What are things that would make you pay higher fees for the same policy? Location of Home If you live close to a fire hydrant If you live in a low crime area Type of home If you live in a brick home Older home versus a newer home. Price of home Coverage and policy type – if you pay a higher deductible you policy will be less

Home insurance discounts If you have : Smoke Detectors Fire extinguishers Dead Bolts, locks and alarms

Motor Vehicle Insurance Section 13.3

Motor Vehicle Insurance cost more than $150 billion in lost wages and medical bills every year. 45 of the 50 states require you to have motor vehicle insurance.

Motor Vehicle Bodily Injuries Coverage's Three areas it cover’s Bodily injury liability Is insurance that covers physical injuries caused by a vehicle accident for which you are responsible. If pedestrians, people in other vehicles, or passengers in your vehicle are injured or killed, bodily injury liability coverage pays for expenses related to the crash.

Bodily Injury Liability coverage's is usually expressed in three numbers. 100/300/50 These amounts represent thousands of dollars of coverage. The first two numbers refer to bodily injury coverage. 100 is the maximum amount that the insurance company will pay for the injuries of any one person in any one accident. 300 is the maximum amount that the insurance company will pay for all injured parties in any one accident. 50 indicates the limit for payment for damages to the property of others.

Medical Payments Coverage Is insurance for medical expenses of anyone injured in your vehicle, including you. Also provides for insurance incase you get hurt in a car accident in another car.

Motor Vehicle Property Damage Coverage's Property Damage Liability Is motor vehicle insurance that applies when you damage the property of others. In addition, it protects you when you are driving another person’s vehicle with the owner’s permission. Also covers buildings and to equipment such as street signs.

Comprehensive Physical Damage Collision Is insurance that covers damage to your vehicle when it is involved in an accident. You collect money no mater who is at fault. Comprehensive Physical Damage Is insurance that protects you if your vehicle is damaged in a non-accident situation. It covers, your vehicle against risks such as fire, theft ,falling objects, vandalism, hail, floods, tornadoes, earthquakes and avalanches.

No-Fault Insurance Is an arrangement where by drivers who are involved in accidents collect money from their own insurance companies.

Other types of car insurance Rental reimbursement Wage-Loss reimbursement Emergency road service

What affects the premium for car insurance? Vehicle Type The year, make and model definitely is important. Rating Territory Owner’s place of residence High theft, crime are different than in more rural areas. Driver’s Classification Based on Age, Sex, marital status, driving record and driving habits. Assigned Risk Pool Is a group of people who cannot get motor vehicle insurance who are assigned to each insurance company Pay several times higher than the rate of the average car owner.

What things lower premiums Good driving record Multiple cars Good grades

Uninsured motorist’s protection Even when you are suppose to have insurance occasionally when you get into an accident the other person does not have insurance. Is insurance that covers you and your family members if you are involved in an accident with an uninsured or hit-and-run driver.