© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Protecting Your Property #10

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Goals Discuss the importance of and basic principles of property insurance, including exposure, indemnity, and co-insurance Identify types of coverage provided by homeowner’s insurance Select the right homeowner’s insurance for your needs Analyze the coverage in a personal automobile policy and choose the most cost-effective policy Describe the other types of property and liability insurance Choose a property and liability insurance agent and company, and settle claims

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Exposure Property loss –Economic loss due to property that is damaged, destroyed or stolen Inventory property Identified potential perils

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of liability protection: Liability - damage you cause others, either through actions or negligence Types of Exposure Homeowner’s policyAutomobile policyUmbrella policy

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Principle of Indemnity Most property and liability insurance contracts are based on this principle Insured may not be compensated by insurance company an amount exceeding economic loss

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Insurance companies do not want you to profit from a loss Concepts Related to Indemnity Other insurance clause - When multiple companies insure a property, together they will not pay more than the economic loss

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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”

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 Homeowner's Insurance

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors Affecting Home Insurance Costs Type of structureConstruction materials, style, ageLocation of home Crime rates, weather, proximity to fire hydrant Other factorsPool, trampoline, large dog

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 either property, either through your actions or negligence

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Personal Property Floater Provides blanket or scheduled coverage of expensive personal property not adequately covered by standardized homeowner’s policy

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Renter’s Insurance Personal furnishings and belongings are not covered although the building may be fully insured Purchase a special type of homeowners policy

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Limitations on Payments Replacement cost –Amount necessary to repair, replace, or rebuild an insured asset at today's prices Policy limits –Placed on covered property and depend on amount of home coverage

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Calculating Replacement Cost

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Deductibles keep insurance costs down by eliminating frequent small loss claims that are proportionately more expensive to administer Deductible - amount paid out of pocket on covered losses Deductibles

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Homeowner Premiums Differ from company to company Depend on structure type, property location, or property hazards Discounts offered:non-smokerssecurity systems

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 C: Uninsured Motorists

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Comprehensive Part D: Physical Damage to a Vehicle Protects against loss to insured auto caused by perils other than collision: hailfiretheftfalling objects

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors Affecting Premiums Rating territoryUse of automobile Driver’s personal characteristics Type of automobile Driving record

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 after an accident

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Supplemental Property Insurance Coverage Personal liability umbrella - additional liability coverage for homeowner and auto insurance Earthquake & flood - not included in standard homeowner's policies Other forms of transportation - mobile homes, RVs, boats, etc.

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 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 number of witnesses –Contact police and insurance agent –Do NOT leave the scene of the accident

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Notice to insurance company Investigation Proof of loss Claims adjuster will: –Evaluate claim –Recommend Settlement of amount requested Settlement of a lesser amount Denial of claim Steps in Claim Settlement