Insuring Your Future Objective: Know the types of coverage provided by property and casualty insurance. Understand the coverages provided in an automobile insurance policy. Bellwork: Brainstorm an write on a post-it a potential danger to personal or real property, such as fire or theft.

 The general type of insurance intended to indemnify for harm to the insured’s personal or real property brought about by perils such a fire, theft, and windstorm is property insurance.  The type of insurance that indemnifies for losses resulting from accident, chance, or negligence is casualty insurance.

 There is some overlap between property and casualty insurance.  For example, automotive policies are written to indemnify for both casualty and property losses.  Examples of Casualty Insurance include: workers compensation, disability insurance, and liability insurance.  Liability insurance protects the insured against other parties’ claims of negligence or other tortious conduct.

 The purpose of all property and casualty insurance is indemnification for loss.  This means that a person who experiences a loss recovers no more than the actual value of the loss.  Although property and casualty insurance can be obtained to indemnify for almost any peril that might cause a loss, certain exceptions to coverage relieve the insurance company from paying. These exclusions are expressly stated in the policy.

 Many states make certain that all exclusions are easily noticeable within a policy. States may require that exclusions be set it a different style and larger size of type, in a different color of print, or both.  Examples of common exclusions include losses due to war, invasion, rebellion, nuclear disaster, depreciation, and pollution.

 The type of property insurance that covers the direct loss to property resulting from fire, lightning strike, or removal from premises endangered by fire is known as fire insurance.  Any fire insurance contract written to cover these risks is composed of a basic or standard fire policy and one or more forms that modify the standard policy to make it apply to the specific type of property being insured.

 The standard fire policy itself is composed of basic policy provisions required by the law of the state in which the policy is written.  All the states have such provisions.  Some forms include a Dwellings and Contents Form for homes and a Mercantile Building and Stock Form for businesses.

 For those who have no need for policies to cover the building itself, such as renters, and tenants, there are special forms covering only the contents and other personal property.

 The standard policy forms may also be modified by endorsements (also known as riders.  Endorsements are attached to the policy and forms to provide for special and individual needs.  Endorsements help, for example, in determining whether a loss was caused by fire, lightning, wind, explosion, or some other peril.

 Regardless of the particular forms or endorsements added to the standard fire policy, three steps must be taken to prove that a particular loss should be indemnified.

 First, the insured must show that there was an actual fire.  A glow or a flame is required.  Damage to an item resulting from scorching, blistering, or smoke due to being too near to a heat source is not enough.

 Second, the actual fire has to be hostile.  A hostile fire is either 1. A fire started by accident, negligence, or a deliberate act uncontrolled by the insured, or 2. A friendly fire (a fire in an intended place) that becomes uncontrollable.

 Third, the hostile fire has to be the natural and foreseeable cause of the loss.  This cause is referred to as being the proximate cause of the harm.  Generally, a hostile fire is considered the proximate cause of damage produced by scorching, smoke, techniques used in extinguishing the fire, and actions in removing goods endangered by the fire.

 The capability of fire departments to respond to alarms and quickly suppress fires has increased thus, the number of structures total lost to fire has decreased.  Because of this fact, insurance companies developed coinsurance.  Coinsurance is a clause in a fire insurance policy that requires the insured to maintain coverage equal to a certain percentage of the total current value of the insured property. The coverage amount, therefore, must be increased as the property value increases. In the event of loss, the insurance company will fully indemnify up to the face amount of the policy unless the insured has failed to keep that face amount at the proper level.

 Modeled after insurance covering goods being transported on the high seas, inland marine insurance was developed by fire insurance companies to indemnify for loss to most personal property while it is being transported across land or inland waterways.  However, the carrier such as the automobile, airplane, or railroad car, is not covered by this insurance.

 In response to changing needs of insureds over time, the basic inland marine policy was altered to produce a second type, called a personal property floater.  This was issued to cover any and all of an insured’s personal property against practically any peril regardless of the location of the property.  The term floater means that the protection floats with, or follows, the property.

 Rather than have the policy written to cover all the insured’s personal property, it is also possible to contract for coverage of scheduled (specifically identified) property, such as jewelry, furs, athletic equipment…  Once can also arrange to insure a single piece of personal property, such as an organ or a neon sign.  Mail-order dealers frequently take out a blanket policy to cover all losses, including breakage and mysterious disappearances of shipped goods.

 Laundries and dry cleaners may take out policies covering possible losses to customer’s property in their possession.  Such a policy is known as lessee insurance.

 Although the application of the personal property floater is quite broad, some losses are excluded from coverage.  Common excluded losses include:  Losses from wear and tear  Repair efforts  Dampness  Temperature  War  Confiscation  Dishonesty of a party to whom the goods have been entrusted