1. PFIN 4 Protecting Your Property 10 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. GITMAN/ JOEHNK/ BILLINGSLEY

2. 2 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1Discuss the importance and basic principles of property insurance, including types of exposure, indemnity, and co-insurance 2Identify types of coverage provided by home owner’s insurance 3Select the right home owner’s insurance policy for your needs 4Analyze the coverage in a personal automobile policy (PAP) and choose the most cost-effective policy LEARNING OUTCOMES PFIN4 | CH10

3. 3 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 5Describe the other types of property and liability insurance 6Choose a property and liability insurance agent and company, and settle claims LEARNING OUTCOMES (continued) PFIN4 | CH10

4. Basic Principles of Property Insurance 4 Copyright ©2016 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 Protects real and personal property from losses caused by various perils Liability insurance Protects against financial consequences from the insured’s responsibility for property loss PFIN4 | CH10

5. Types of Exposure 5 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exposure to property loss Property insurance contracts define: Property covered Perils: Cause of loss Property inventory Identifying perils Liability Negligence: Failing to act in a reasonable manner PFIN4 | CH10

6. Principle of Indemnity 6 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 States that an insured may not be compensated with an amount exceeding the insured’s economic laws Actual cash value: Value assigned to an insured property determined by subtracting the amount of physical depreciation from its replacement cost Right of Subrogation: Insurer’s right to request reimbursement from person who caused the loss or that person’s insurer

7. Principle of Indemnity 7 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Other insurance clause States that if a person has more than one insurance policy on a property, each company is liable for only a prorated amount of the loss

8. Exhibit 10.2 8 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG4 | CH10 A Guide to Home Owner’s Policies

9. Property and Liability Insurance Policies 9 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Covers all perils unless they are specifically excluded Comprehensive policy Individually names the perils covered Named peril policy

10. Perils Covered 10 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Section I Perils against which the home and its contents are insured Section II Includes a coverage called comprehensive personal liability Offers protection against personal liability resulting from negligence Provides limited amount of medical coverage

11. Factors Affecting Home Insurance Costs 11 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Type of structure Location of home Credit score Other factors

12. Property Covered 12 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Home owner’s policy offers property protection under Section I for: Dwelling unit Accompanying structures Personal property of home owners and their families

13. Personal Property Floater (PPF) 13 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Provides blanket or scheduled coverage of expensive personal property not adequately covered in a home owner’s policy

14. Renter’s Insurance 14 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Form HO-4 Covers contents of a house but not the structure itself Form HO-6 Required by the owners of condominium units Includes a minimum of $1000 in protection for any building alterations paid for by the policy holder

15. Coverage 15 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Types of losses covered Direct loss of property Indirect loss occurring due to loss of damaged property Additional expenses resulting from direct and indirect losses Section I Damage of the house by an insured peril leads to the insurer paying reasonable living expenses

16. Coverage 16 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Section II Home owner’s policy covers: Cost of defending the insured Reasonable expenses incurred by an insured in helping the insurance company’s defense Payment of court costs

17. Coverage 17 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Persons covered Persons named in the policy and members of their families residing in the house Guests of the insured with limited coverage Locations covered Extended worldwide when off premises temporarily

18. Factors Influencing Insurance Payment Amount for a Loss 18 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Replacement cost Amount necessary to repair, rebuild or replace an asset at current prices Policy limits Deductibles

19. Personal Automobile Policy (PAP) 19 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Designed to be easily understood by the typical insurance purchaser Liability coverage Bodily injury liability losses: Protects the insured against claims made for bodily injury Property damage liability losses: Protects the insured against claims made for damage to property Medical payments coverage

20. Personal Automobile Policy (PAP) 20 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Uninsured motorists coverage: Serves the victims of accidents injured by uninsured, underinsured, or hit-and-run motorists Underinsured motorists coverage: Covers damages in accidents involving liable underinsured motorist

21. Personal Automobile Policy (PAP) 21 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Coverage for damage to the vehicle Collision insurance: Pays for collision damage to an insured automobile Comprehensive automobile insurance: Protects against loss to an insured automobile caused by any peril other than collision

22. Factors Affecting Automobile Insurance Premiums 22 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Rating territory Amount of use the automobile receives Personal characteristics of the driver Type of automobile Insured’s driving record

23. Financial Responsibility Laws 23 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Require motorists to: Buy a specified minimum amount of automobile liability insurance Provide other proof of comparable financial responsibility

24. Other Property and Liability Insurance 24 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Supplemental property insurance coverage Earthquake insurance Flood insurance Other forms of transportation insurance Personal liability umbrella policy Provides excess liability coverage and additional coverage for home owner’s and automobile insurance

25. Property and Liability Insurance Agents 25 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Captive agent: Represents a single insurance company and is its employee Independent agent: Places coverage with any company with which he or she has an agency relationship Selecting an agent involves questions to be asked about the company’s: Financial soundness Claims-settlement practices Geographic range of operations

26. First Steps Following an Accident 26 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Record contact details of all witnesses, drivers, occupants, and injured parties Record license numbers of the automobile involved Notify law enforcement officers and insurance agent

27. Steps in Claim Settlement 27 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Notice to insurance companyInvestigationProof of loss

28. Claims Adjustment 28 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10 Insurance company will assign a claims adjustor if the loss is complex Claims adjustor: Insurance specialist who works for the insurance company or for an adjustment bureau

29. 29 Copyright ©2016 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 Liability insurance Peril Negligence Principle of indemnity Actual cash value Right of subrogation Co-insurance Comprehensive policy Named peril policy KEY TERMS Personal property floater (PPF) Replacement cost Personal automobile policy (PAP) Bodily injury liability losses Property damage liability losses Uninsured motorists coverage PFIN4 | CH10

30. 30 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Underinsured motorists coverage Collision insurance Comprehensive automobile insurance No-fault automobile insurance Financial responsibility laws Personal liability umbrella policy Captive agent KEY TERMS Independent agent Claims adjustor PFIN4 | CH10

31. 31 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SUMMARY Property insurance covers against losses of real and personal property caused by calamities Comprehensive policies cover all perils but only individual perils are covered in named peril policies Home owners can choose HO-1, HO- 2, HO-3, HO-5, or HO-8 to suit their needs Types of automobile insurance Personal automobile policy, collision insurance, and comprehensive automobile insurance PFIN4 | CH10

32. 32 Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. SUMMARY Other property and liability insurance Supplemental property insurance coverage Personal liability umbrella policy Steps to claim settlement Provide notice to the insurance company Investigation by company personnel Provide proof of loss PFIN4 | CH10