1. Home & Motor Vehicle Insurance
Chapter 13 *
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2. Insurance (7.1) Protection against possible financial loss
Policy – insurance company agrees to take on the risk of the policyholder
in return, the policyholder pays the insurance company a premium
Coverage- protection provided by the terms of the insurance policy
Insured- person protected by the policy *
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3. Types of risks Risk Chance of loss or injury Peril
Anything that may possibly cause a loss
Hazard
Anything that increases the likelihood of loss through peril
Negligence
Failure to take ordinary or reasonable care to prevent accidents from happening
Most common risks…personal, property, & liability
Personal – loss of income or life due to illness, disability, old age, or unemployment.
Property – losses of property caused by perils, such as fire or theft, & hazards.
Liability – involve losses causes by negligence that leads to injury or property damage. *
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4. Risk-Management Methods
Risk avoidance
Risk reduction
Risk assumption
Risk shifting
Deductible – set amount the policyholder must pay per loss on an insurance policy
First…risk management is an organized plan for protecting yourself, your family, & your property. It helps reduce financial losses caused by destructive events. If you understand how to manage risks, you can provide better protection for yourself and your family.
Last point before bullets…Most people think of risk management as buying insurance. However, it is not the only way of dealing with risk.
examples: you can avoid the risk of a traffic accident by not driving to work. Trade-off? Might have to give up your job
Ex: Reduce risk of injury in a car accident by wearing a seat belt…lower risk of illness by eating properly and exercising regularly
Taking on the responsibility for the negative results of a risk.
Transfer risk to insurance company…in exchange for the fee you pay, the insurance company agrees to pay for your losses.
Deductible is a combination of risk assumption and risk shifting. *
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5. Planning an Insurance Program
Set insurance goals
Develop a plan
Put your plan into action
Review your results
First…What factors will affect your insurance goals?
your personal insurance program should change along with your needs & goals.
1. main goal - minimize personal, property, & liability risks. Also decide how they will cover costs resulting from potential loss.
2. determine what risks they face & what risks they can afford to take. Find out what kind of insurance is available.
3. best risk-management plans are flexible enough to allow for changing life situations. Create an insurance program that can grow or shrink as your protection needs change.
4. review every 2-3 years or when family circumstances change. *
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6. Home & Property Insurance (13.2)
Homeowner’s – coverage that provides protection for your residence & its associated financial risks, such as damage to personal property & injuries to others
Provides coverage for the following:
Home, building, or other structures on the property
Additional living expenses
Personal property
Personal liability & related coverages
Specialized coverages
First…insuring your residence & its contents is absolutely necessary to protect your investment.
2b. Pays for you to stay somewhere else if your home is damaged.
2c. If something happens to your personal property, you must prove how much it was worth & that it belonged to you.
2d. Pays the cost of minor accidental injuries to visitors on your property. It also covers minor injuries caused by you, members of your family, or even your pets away from home.
2e. Flood insurance would be a special coverage not covered under your normal home insurance policy.
Last…The main purpose of homeowners insurance is to protect you against financial loss in case your home is damaged or destroyed…Other things that are covered ---detached structures (garage, shed), and even trees, shrubs, & other plants which are landscaping. *
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7. Renters Insurance Most important part:
Protection it provides for personal property
Only covered under landlords’ policy if landlord is liable for damage (ex. Bad wiring causes a fire & damages tenant’s property) *
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8. How Much Coverage Do You Need?
How to get the best insurance value:
Choosing the right amount of coverage
Knowing the factors that affect insurance costs.
Your insurance should be based on the amount of money you would need to rebuilt or repair your house, not the amount you paid for it.
As construction costs rise, you should increase the amount of coverage.
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9. Home Insurance Cost Factors
Amount of coverage & type of policy you choose will affect the cost of your home insurance
Different insurance companies offer different rates
Factors that affect cost of home insurance
Location of home
Type of structure
Price, coverage amount, & policy type
Home insurance discounts
Company differences
3a. Some insurance companies offer lower rates to people whose homes are close to a water supply or fire hydrant. Rates are higher in areas where crime is common. People living in regions that experience severe weather, such as tornados & hurricanes, may pay more for insurance.
3d. Most companies offer discounts if a homeowner takes action to reduce risks to a home. Your premium may be lower if you have smoke detectors or a fire extinguisher. If your home has dead-bolt locks and alarm systems which make it harder for thieves to get in, insurance costs may be lower.
3e. Shop around. A homeowner can save up to 25% on homeowners insurance by comparing rates from several companies.
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10. Motor Vehicle Insurance (13.3)
Bodily injury liability
Insurance that covers physical injuries caused by a vehicle accident for which you are responsible
Medical payments coverage
Insurance for medical expenses of anyone injured in your vehicle
Uninsured motorist’s protection
Insurance that covers you & your family members if you are involved in an accident with an uninsured or hit-and-run driver
1. If pedestrians, people in other vehicles, or passengers in your vehicle are injured or killed, bodily injury liability coverage pays for expenses related to the crash…the three amounts represent thousands of dollars of coverage. The first two numbers refer to bodily injury coverage. $100,000 is the maximum amount that the insurance company will pay for the injuries of any one person in any one accident. The second number $300,000 is the maximum amount the company will pay for all injured parties (two or more) in any one accident. The third number $50,000 indicates the limit for payment for damage to the property of others.
3. In most cases, it does not cover damage to the vehicle itself. *
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11. Motor Vehicle Property Damage Coverages
Property damage liability
Applies when you damage the property of others
Collision
Covers damage to your vehicle when it is involved in an accident
Comprehensive physical damage
Protects you if your vehicle is damaged in a non- accident situation
1. Applies when you damage the property of others…In addition, it protects you when you are driving another person’s vehicle with the owner’s permission.
3. ex. Fire, theft, falling objects, vandalism, hail, floods, tornadoes, earthquakes, & avalanches *
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12. No-Fault Insurance
Arrangement where drivers who are involved in accidents collect money from their own insurance companies
Doesn’t matter who caused the accident
Each company pays the insured up to the limits of his/her coverage
No-fault coverages vary by state
First…to reduce the time & cost of settling vehicle injury cases, some states are using the no-fault system. *
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13. Motor Vehicle Insurance Premium Factors
Vehicle type
The year, make, & model of a vehicle affect insurance costs
Rating territory
Owner’s place of residence can be used to determine the insurance premium
Driver classification
Based on age, gender, marital status, driving record, & driving habits
high-priced vehicles and vehicles that have expensive replacement parts & complicated repairs cost more to insure..premiums can be higher for those vehicle makes & models that are frequently stolen
Different locations have different costs
In general, young drivers (under 25) and elderly drivers (over 70) have more frequent & more serious accidents. As a result, they pay a higher premium. *
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14. Reducing vehicle insurance premiums
Comparing companies
Rates & services vary among motor vehicle companies
Premium discounts
Good grades in school
Security devices on vehicle
Being a non-smoker
Insuring two or more vehicles with same company
Increasing deductibles will also lower premium *
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