1. PFIN 10 Protecting Your Property 5 BILLINGSLEY/ GITMAN/ JOEHNK/
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2. LEARNING OUTCOMES
Discuss the importance and basic principles of property insurance, including types of exposure, indemnity, and co-insurance
Identify types of coverage provided by home owner’s insurance
Select the right home owner’s insurance policy for your needs
Analyze the coverage in a personal automobile policy (PAP) and choose the most cost-effective policy
PFIN5 | CH10
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3. Describe the other types of property and liability insurance
LEARNING OUTCOMES (continued)
Describe the other types of property and liability insurance
Choose a property and liability insurance agent and company, and settle claims
PFIN5| CH10
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4. Basic Principles of 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
PFIN5 | CH10
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5. Exposure to property loss
Types of Exposure
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
PFIN5 | CH10
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6. Principle of Indemnity
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
PFIN5 | CH10
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7. Principle of Indemnity
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
PFIN5 | CH10
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8. Exhibit 10.2 A Guide to Home Owner’s Policies PFIN5| CH10
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9. Property and Liability Insurance Policies
Covers all perils unless they are specifically excluded
Comprehensive policy
Individually names the perils covered
Named peril policy
PFIN5 | CH10
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10. Perils Covered Section I Section II
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
PFIN5 | CH10
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11. Factors Affecting Home Insurance Costs
Type of structure
Location of home
Credit score
Other factors
PFIN5 | CH10
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12. Home owner’s policy offers property protection under Section I for:
Property Covered
Home owner’s policy offers property protection under Section I for:
Dwelling unit
Accompanying structures
Personal property of home owners and their families
PFIN5 | CH10
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13. Personal Property Floater (PPF)
Provides blanket or scheduled coverage of expensive personal property not adequately covered in a home owner’s policy
PFIN5 | CH10
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14. Renter’s Insurance Form HO-4 Form HO-6
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
PFIN5 | CH10
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15. Types of losses covered
Coverage
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
PFIN5 | CH10
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16. Coverage 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
PFIN5 | CH10
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17. Coverage Persons covered Locations 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
PFIN5 | CH10
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18. Factors Influencing Insurance Payment Amount for a Loss
Replacement cost
Amount necessary to repair, rebuild or replace an asset at current prices
Policy limits
Deductibles
PFIN5 | CH10
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19. Personal Automobile Policy (PAP)
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
PFIN5 | CH10
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20. Personal Automobile Policy (PAP)
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
PFIN5 | CH10
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21. Personal Automobile Policy (PAP)
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
PFIN5| CH10
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22. Factors Affecting Automobile Insurance Premiums
Rating territory
Amount of use the automobile receives
Personal characteristics of the driver
Type of automobile
Insured’s driving record
PFIN5 | CH10
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23. Financial Responsibility Laws
Require motorists to:
Buy a specified minimum amount of automobile liability insurance
Provide other proof of comparable financial responsibility
PFIN4 | CH10
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24. Other Property and Liability Insurance
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
PFIN5 | CH10
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25. Property and Liability Insurance Agents
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
PFIN5 | CH10
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26. First Steps Following an Accident
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
PFIN5 | CH10
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27. Steps in Claim Settlement
Notice to insurance company
Investigation
Proof of loss
PFIN5 | CH10
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28. Insurance company will assign a claims adjustor if the loss is complex
Claims Adjustment
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
PFIN5 | CH10
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.

29. KEY TERMS Personal property floater (PPF) Property insurance
Liability insurance
Peril
Negligence
Principle of indemnity
Actual cash value
Right of subrogation
Co-insurance
Comprehensive policy
Named peril policy
Personal property floater (PPF)
Replacement cost
Personal automobile policy (PAP)
Bodily injury liability losses
Property damage liability losses
Uninsured motorists coverage
PFIN5 | CH10
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30. KEY TERMS Independent agent Underinsured motorists coverage
Collision insurance
Comprehensive automobile insurance
No-fault automobile insurance
Financial responsibility laws
Personal liability umbrella policy
Captive agent
Independent agent
Claims adjustor
PFIN5| CH10
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.

31. Types of automobile insurance
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
PFIN5| CH10
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.

32. Other property and liability insurance
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
PFIN5 | CH10
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.