1. Home and Automobile Insurance
Chapter 14

2. How Insurance Works
Insurance – risk-management tool that limits financial loss due to illness, injury, or damage in exchange for a premium
Premium – regular payment required to purchase insurance
Policy – insurance contract
Claim – formal request made to an insurance company for payment for a loss

3. Risk Management
Shared risk – insurance principle of using premiums from many policyholders to reimburse the losses of few, so that no one suffers a financially devastating loss
Insurable interest – something of value that, if lost, would cause you financial harm (YOUR’s)
Appraisal – an expert’s determination of the value of a piece of property
Rider (or Endorsement)– addition to an insurance policy covers a specific loss not covered in the standard policy

4. Types of Insurance
Property Insurance – insurance that protects you from financial loss when something you own is stolen, damaged, or destroyed
Liability Insurance – insurance that protects you from losses that you cause to others
Personal Insurance – insurance that protects you, your spouse, and your children against financial loss due to illness, disability, or death

5. Homeowner’s Insurance
Home Insurance Needs
Property coverage
Personal property – property that can be moved, such as furniture, appliances, clothing, and jewelry
Real property – structures such as the physical house (dwelling) or garage (other structures)
Liability coverage – financial protection against losses caused to others

6. Basic Forms of Homeowner’s Insurance
Broad form
Comprehensive Form
Special form * Most common*
Renter’s form (HO-4)
Condominium form (HO-6)
Renter’s Insurance – provides about the same property and liability coverage as a homeowner’s policy except the structure itself
Video

7. Additional considerations..
Amount of Coverage
Replacement Cost versus Cash Value
80 percent rule – you must buy coverage for at least 80% of your home’s actual replacement cost at the time of your loss
Determined through an appraisal
Additional Coverages – not included
Flood Insurance (Non-Endorsement)
National Flood Insurance Program - FEMA
Earthquake Insurance

8. Family Liability Coverage
Personal Liability Coverage
Lawsuits
Physical Damage Coverage
Medical Payments Coverage
You, your family, and guests
Umbrella Policy
Provides additional liability protection
beyond that included in an
automobile or homeowner’s policy

9. Home Inventory
Detailed list (form) of personal belongings and their value
Written, photographs, or video

10. Home Insurance Rates Deductibles Local firefighting capability
$250, $500, $1,000, 1%
Local firefighting capability
Construction materials
Preventive measures
Home security systems (example: ADT)

11. RENTING - terms Lessor (or Landlord) – an owner of a rental property
Lessee (or Tenant) – person who rents property
Lease – a legal contract for renting a home (apartment) that specifies the rights and responsibilities of the tenant and landlord

12. RENTING - terms cont.
Security Deposit – a sum of money that the landlord holds until the tenant moves out, to potentially cover the cost of any damages caused by the tenant
Sublet (or Sublease) – to have another tenant take over a rental unit and pay the rent
Evict – to legally force a tenant to vacate a rental unit before the lease has expired

13. Renting vs. Owning – Venn Diagram
Renting a Home
Owning a Home
- Control
- Financial Advantages
- Conveniences
- Changes / Improvements to home
- Equity
- Tax Advantages
- Sense of Security
- Limited Responsibility
- Predictable Costs
- Greater Flexibility
- Less Maintenance
- No unplanned expenses
- Location
- Cost (Mortgage or Rent)
- Needs
- Appeal

14. Auto Insurance

15. Reasons for Auto Insurance
Losses from Auto Accidents
623 car accidents occur in U.S. every 10 minutes
$104 Billion Each Year
Each Year 1 in 50 cars is stolen
Financial Responsibility Laws
laws which require the owner of a car to show proof of insurance

16. This was a Porsche 911

17. Types of Coverage – included in “Full Coverage”
Bodily Injury Liability
Insurance that applies when your car injures or kills pedestrians, persons riding in other cars, or passengers in your car
Property Damage Liability
Insurance that applies when your car damages the property of others
100/300/100 (in thousands of $’s)
Mandatory Insurance Info. – Sec. of State

18. Types of Coverage – included in “Full Coverage” (continued)
Medical Payments
Insurance that pays hospital and treatment costs for the policyholder for injuries that are suffered in an accident
Personal Injury Protection
Covers additional medical expenses for the policyholder and other passengers in the policyholder’s vehicle
In some states it includes: lost wages, rehab, and home nursing

19. Types of Coverage – included in “Full Coverage” (continued)
Uninsured / Underinsured Motorist - (Bodily Injury)
Insurance that protects you and your family against uninsured and hit-and-run drivers
Uninsured / Underinsured Motorist - (Property
Damage) *Not included in Full Coverage*
Insurance that protects your property against uninsured and hit-and-run drivers

20. Types of Coverage – included in “Full Coverage” (continued)
Collision
Pays for the repair or replacement of your car after an accident that is your fault
Comprehensive Physical Damage
Protects your car-and your car only- against fire, theft, glass breakage, flood, falling objects, missiles, explosions, earthquake, windstorm, hail, water, vandalism or malicious mischief, riot, and collision with a bird or animal

21. Deductible
The amount you pay for a loss before your insurance company pays anything for a claim
Typically paid on claims for YOUR OWN losses
Collision, Comprehensive
Example: Collision Claim, $500 deductible
Total damage to your car: $1,500
You pay $500, Insurance pays $1,000

22. Other Types of Coverage – not part of “Full Coverage”
Emergency Road Service
Towing and Labor
Motorcycle Insurance
Assigned-Risk (Pool) – a group of drivers within a state who are unable to obtain auto insurance on their own
State Auto Insurance Plans
25 to 50 Percent above standard rates

23. Auto Insurance Rates Factors Affecting All Drivers 6. Policy Limits
1. Place of residence
2. Driving record
3. Vehicle Use
4. Value of Vehicle
Depreciation – the loss of value over time
5. Mileage
6. Policy Limits
7. Other Drivers
8. Amount of Deductible
9. Good-Student Discount
10. Multiple-Car Discount
11. Other
Antitheft devices
Nonsmokers
Loyalty discount

24. Filing a Claim
Exchange information with others involved in an accident – through police report or on your own
Name, Phone Number, Insurance information
Call the appropriate insurance company –
Claims Representative / Claims Adjustor
Seek appropriate medical care – documentation of injuries
Choose your own repair facility for damages
Get legal help if necessary

25. Pop Quiz
100/300/100
Which liability coverage do the first two numbers (100/300) represent?
Which liability coverage does the third number (/100) represent?
What is the most amount of money that this coverage will pay out per person injured in an accident?
Under what specific circumstance would a claim need to be filed under either of these coverages by a policyholder?