1 Topic 13: Insurance Terms  Self-insurance: business creates fund to pay own losses Toasters and cell phones Your credit score impacts your cost of insurance  Risk avoidance: don’t drive; pets; swimming pools  Risk diversification: hold harmless, shift risk to someone else  Risk reduction: lower chance of loss Take driver’s training

2 Topic 14: Property Insurance  80% rule: required insurance (Amount Insured/Amount Should Have Insured x Loss) – Deductible = Insurance Payment  Deductible subtracted last Amount Should Have Insured = Replacement Cost x 80%  Home $400,000 replacement cost $300,000 insurance $1,000 deductible Fire causes $20,000 damage Insurance reimbursement?

3 Topic 14: Property Insurance  Homeowners Insurance HO 01: fire and named perils HO 02: broad form covers additional perils  Personal property covered up to 50% of dwelling insurance HO 03: open perils (all risk) on dwelling; broad form on personal property  Most common policy  Excludes pets, property of boarders, separately scheduled property  Excludes flood, sewer backup, wet basement Rising water versus falling water: Oakcrest

4 Topic 14: Property Insurance  Homeowners Insurance HO 04: renters insurance  Broad form coverage for personal property HO 05: open perils for dwelling and open perils for personal property HO 06: condo insurance  Dwelling covers interior walls  Broad form on personal property HO 08: older homes  Replacement cost > FMV  Insures them at a lower value

5 Topic 14: Property Insurance  Coverage A: dwelling and attachments  Coverage B: structures separated from dwelling Garages, pools, fences Generally 10% of Coverage A amount  Coverage C: personal property located anywhere Generally 50% of Coverage A amount Limits on high value items: jewelry, guns, etc.  Can be increased by endorsement Exclusions: business property above $2,500, boarders property

6 Topic 14: Property Insurance  Coverage D: Additional living expenses while home repaired Credit cards: up to $500, no deductible  Coverage E: Comprehensive personal liability for unintentional bodily injury and property damage up to $100,000 Covers damages off premises by insured, pets  Not for insured  Coverage F: $1,000 per person per occurrence medical payments Covers damages off premises by insured, pets  Not for insured

7 Topic 14: Property Insurance  Exclusions Earthquake  Coverage has high deductible Flood, rising water. (Falling water covered)  FEMA War, nuclear accidents Intentional loss  Endorsements Scheduled personal property  Jewelry, antiques, collectibles Earthquake Flood Personal property replacement cost  Versus actual cash value

8 Topic 14: Property Insurance  Miscellaneous No coverage if conceal material info Insured can cancel at any time  Insurer must give advance notice of cancellation, nonrenewal Only one year to sue insurer

9 Topic 14: Personal Auto Policy  Part A: liability: bodily injury and personal property caused by insured’s negligence Also attorney fees to defend insurance Split limits: per person/per accident/property damage  $15,000/$30,000/$50,000  Required? Get minimum?  Covered individuals Named insured Spouse and family members Others using car with permission

10 Topic 14: Personal Auto Policy  Covered vehicles All vehicles listed in policy declaration New vehicles  14 days to notify / ask about rates before you buy Trailers Loaner cars Rental cars???  Exclusions Intentional injury/damage Employees Motorcycles require separate coverage

11 Topic 14: Personal Auto Policy  Part B Medical Payments: $1,000 per person Covers, no matter fault,  Insured  Insured family members Even when pedestrians hit by car  Others in car: flying turkeys  Part D: Physical Damage to Your Auto Collision Other than collision (comprehensive)  Hitting deer: not collision, covered under comprehensive  Older cars  Deductibles $250 - $1,000

12 Topic 14: Personal Auto Policy  Uninsured motorist Coverage applies when accident fault of individual with  No insurance  Less insurance than required by law  Hit and and run drivers  Lease coverage Covers fair market value of car – amount of lease liability or car loan

13 Topic 14: Umbrella Liability Insurance  Required underlying policies Auto, home, boat, motorcycle Must have required amounts of coverage  Provides additional liability coverage Up to $5 million; generally inexpensive

14 Topic 14: Commercial Insurance  Property Homeowners coverage generally provides minimal coverage for business property in home  Endorsement Open perils or specified perils Actual cash value or replacement cost May have co-insurance (80%) requirement but not mandatory Bars, restaurants, amusement parks not eligible for this policy

15 Topic 14: Commercial Insurance  Business income coverage Replaces income and covers expenses due to closure by covered peril: fire, wind, etc.  Crime insurance Police must be notified  Liability Occurrence basis  Covers claims from events during policy period  Doesn’t matter when claim filed Claims made  Covers only claims made during policy period  Will need tail coverage for claims after policy lapse

16 Topic 14: Commercial  Liability Types  Same coverage as Personal Auto Policy  Garage Coverage: for businesses storing; selling; servicing; parking vehicles  Umbrella Self insure generally first $25,000 Occurrence basis  Professional liability Physicians, attorneys, etc. Fail to perform as promised

17 Topic 14: Commercial  Surety bonds Insures party will fulfill obligations  Insured is liable to issuing company if payment has to be made on bond  Directors and Officers Covers wrongful acts  Workers Comp Provides benefits required under state law Payment for liability claims from employee injuries  Injured on the job