Presentation on theme: "Property and Liability Insurance"— Presentation transcript:
1 Property and Liability Insurance Chapter 10Property and Liability Insurance
2 Homeowner’s Insurance Policies Cover multiple perils (e.g., fire, theft, storms, faulty household systems or appliances, riot, volcanoes, vehicles, aircraft)Sold in six basic versions
3 Six Basic Packaged Homeowner's Policies HO-1: Basic form homeowner’s insuranceHO-2: Broad form homeowner’s insuranceHO-3: Special form homeowner’s insuranceHO-4: Renter’s or tenant’s insuranceHO-6: Condominium owner’s insuranceHO-8: Modified coverage – older homes homeowner’s insurance
4 HO-1: Basic Form Homeowner’s Insurance Provides the most limited coverageNot available in most states
5 HO-2: Broad Form Homeowner’s Insurance Covers only named perilsCosts about 5% to 10% more thanHO-1 coverage
6 HO-3: Special Form Homeowner’s Insurance Covers all direct physical losses to your home – open perils protectionExceptions include floods, wars, earthquakes, and nuclear accidentsCost approximately 10% to 15% more than HO-1 coverage
7 HO-4: Renter’s or Tenant’s Insurance Coverage is equivalent to HO-2 perils for personal propertyAvailable only to renters and tenantsCovers personal property rather than the dwellingProvides liability coverage in case an accident, causing damage to the structure, is your fault
8 HO-6: Condominium Owner’s Insurance Similar to HO-4 coverage, same perils for personal property as HO-2Available to co-op and condo ownersAlso covers improvements you’ve made to the dwelling unit
9 HO-8: Older Homes Homeowner’s Insurance Similar to HO-1 insurance, or named perilsInsures the dwelling for the repair cost or market value, instead of the replacement valueDesigned specifically for older homes
11 Section I: Property Coverage Coverage A: DwellingCoverage B: Other structuresCoverage C: Personal propertyCoverage D: Loss of use
12 Coverage A: Dwelling Protects the dwelling and any attachments Does not cover any damage to the land
13 Coverage B: Other Structures Protects other, unattached, dwellings on the propertyCovers landscaping as well as buildings, but not the landLimited to 10% of the home’s coverageDoes not cover other structures used for business purposes
14 Coverage C: Personal Property Covers all personal property owned or used by the policyholderCovers personal property regardless of locationCovers property of guests in your home
15 Coverage C: Personal Property Limits Limited to 50% of the home’s coverage$200 limit on cash, gold, and silver$1,000 limit on securities, tickets, and stamps$2,500 limit on silverwareAnimals, birds, and fish are excluded.
16 Coverage D: Loss of UseCovers losses incurred as a result of your home being uninhabitableLimited to 20% of the amount of coverage on the homeThree benefits of coverageadditional living expensesfair rental valueprohibited use
17 Section II: Personal Liability Coverage Protects the policyholder in case someone is injured on their propertyMinimum level of coverage is $100,000Medical payments to others covers small medical expenses up to $1,000 per personDoes not cover business or professional liability or negligence
19 Umbrella PoliciesCover liability costs after the underlying homeowner’s or auto policies have been exhaustedUp to $10 millionExclusions for business, aircraft, and watercraft activities.
20 Insurance Needs Co-insurance and the “80% rule” Coverage restrictionsAssessing your unique insurance needsKeeping insurance costs down
21 Coinsurance and the “80% Rule” Dwelling must be insured to within 80% of the replacement costCoinsurance requires you to pay for a portion of the loss if you don’t carry adequate insurance
22 If Not 80%, You Pay….In the event of the loss, you will receive the greater of:Actual cash value of the portion of the home lostInsurance Coverage x Value of Loss80% of Replacement Cost
23 Coverage Restrictions The amount paid by the insurance policy will not exceed the limit of your policy.You must rebuild on the same location.If you don’t rebuild the insurance company will only pay for the actual cash-value loss rather than the replacement value.
24 Consider Your Unique Insurance Needs Cover the full replacement value of your home in case of a complete loss.Protect yourself from inflation.Determine if other structures or landscaping on the property have adequate coverage.Purchase additional insurance if part of your home is used as an office.
25 Consider Your Unique Insurance Needs (cont’d) Purchase extra coverage for special situations like floods or earthquakes, if applicable.Cover the replacement value, not actual cash value, of your personal property.If renting, have adequate personal property coverage.
26 Consider Your Unique Insurance Needs (cont’d) Consider extra coverage, or a floater policy, for valuable property such as paintings, jewelry, or collections.If assets exceed liability coverage, purchase more.
27 Keeping Your Homeowner's Insurance Costs Down Three basic factors determine policy cost.Select a financially sound insurer with low comparative costs.Consider other potential discounts and savings method.
28 Three Basic Factors Determine Policy Cost LocationType of structureLevel of coverage
29 Potential Discounts and Savings Methods High deductiblesSecurity systems/smoke detectorsMultiple policy discountsPay premiums annually
30 Potential Discounts and Savings Methods (cont’d) Shop aroundAsk for any other discountsConsider a direct writerDouble check your policy
31 Making Your Coverage Work Keep an inventory establishing proof of ownership (preferably on videotape).Videotape the exterior of the home to value landscaping or condition.Keep records concerning the value of your assets.
32 Recovering on a Liability or Property Loss Report your loss immediatelyMake temporary repairs to protect your property.Make a detailed list of everything lost or damaged. Use your inventory.Maintain records of the insurance settlement process.Confirm the adjuster’s estimate.
33 The Personal Automobile Policy (PAP) 30 million accidents in the U.S. annually, or about 1 accident for every 5 licensed drivers. When will it be your turn?
34 The Personal Automobile Policy (PAP) PAP Part A: Liability CoveragePAP Part B: Medical Expense CoveragePAP Part C: Uninsured Motorist’s Protection CoveragePAP Part D: Coverage for Damage to Your CarStandard exclusionsNo-fault insurance
35 PAP Part A: Liability Coverage Covers bodily injury lossesCovers property damage lossesCan be a combined single limit or a split-limit coverageMost states require a minimum coverageCovers losses due to a lawsuitCovers defense cost in civil trials in addition to your policy limits
36 Auto Liability Split-Coverage Insurance Limits 100/300/50$100,000 of bodily injury liability coverage per person$300,000 of bodily injury liability coverage for each accident$50,000 of property damage liability coverage
37 Auto Liability Combined Single Limit Insurance $100,000Total liability insurance – both bodily injury liability losses and property damage liability losses – in an accident, regardless of the number of people involved.
38 PAP Part B: Medical Expenses Coverage Covers all reasonable medical costs and funeral expenses incurred, by the insured or the insured’s family members within 3 years of an accident.Recommended coverage of $50,000.Does not cover medical expenses if injured by a vehicle not designed for public streets, but does provide coverage when walking.
39 PAP Part C: Uninsured Motorist’s Protection Provides coverage if injured by an uninsured motorist or a hit-and-run driver.The other driver must be at fault to collect on this coverage.Also covers costs in excess of the other driver’s liability coverage, if inadequate to pay for your losses.
40 PAP Part D: Comprehensive Physical Damage Coverage CoversCollision lossOther than collision, or comprehensive physical damageCollision covers regardless of fault. If the other driver was at fault and has liability you should be able to recover losses without collision coverage.Recommended limit is the vehicle’s cash-value; deductibles apply.
43 Standard Exclusions Intentional injury or damage Use without permissionVehicle has less than four wheelsSomeone else’s vehicle provided on a regular basisOwn automobile, but not listed on your policyCarrying passengers for a feeDriving in a race or speed contest
44 No-Fault Insurance Only available in “no-fault” states. Your insurance pays for your losses and their insurance pays for their losses – no legal battles.Limits on claims, particularly medical, may not be adequate.You can still sue their insurance for “pain and suffering”.
45 Buying Automobile Insurance Determinants of the cost of automobile insuranceKeeping your costs for automobile insurance down
46 Determinants of the Cost of Automobile Insurance Type of automobileUse of automobileYour personal characteristicsYour driving recordWhere you liveDiscounts you qualify for
47 Keeping Your Costs for Automobile Insurance Down Shop comparativelyConsider only high-quality insurersUse discountsBuy vehicles that are relatively inexpensive to insureImprove your driving recordRaise your deductiblesKeep adequate liability insurance
48 Filing a Claim Using Your Automobile Policy Get help for the injuredMove vehicle or put up flaresGet the names of any witnessesCooperate with the policeInsist all drivers take an alcohol testRecord your recollection of the accidentDon’t sign anything or admit guilt
49 Filing a Claim Using Your Automobile Policy (cont’d) Obtain a copy of the police reportCall your insurance company as soon as possibleCooperate with your insurerKeep records of all accident expensesMeet with a lawyer if the accident was serious
50 Summary Six basic packaged homeowner's policies Two sections of the homeowner’s policy -- property and liabilityAdd supplemental coverage to better meet your needsCover the replacement value of your home and it’s contents
51 Summary (cont’d)Consider the “80% rule” and your unique insurance needsConsider strategies to reduce insurance costsDocument what you own, otherwise how will you verify your loss?Know the steps to follow in the event of a loss
52 Summary (cont’d) The four parts of an auto insurance policy Know and avoid common exclusionsUnderstand “no fault” coverageUnderstand the four major determinants of the cost of auto insurance and ways to reduce auto insurance costsFiling an auto claim