Protecting Your Property

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Protecting Your Property

#10


Learning Goals

Discuss the importance of and basic principles of property insurance, including exposure, indemnity, and co-insurance

Identify types of coverage provided by homeowner’s insurance

Select the right homeowner’s insurance for your needs

Analyze the coverage in a personal automobile policy and choose the most cost-effective policy

Describe the other types of property and liability insurance

Choose a property and liability insurance agent and company, and settle claims


Property Insurance Basics

• Property insurance– Protects real and

personal property from losses from various perils

• Liability insurance– Protects against

financial consequences from insured’s responsibility to others


Types of Exposure

• Property loss– Economic loss

due to property that is damaged, destroyed or stolen

• Inventory property• Identified potential

perils


Types of liability protection:

Liability - damage you cause others, either through actions or negligence

Types of Exposure

Homeowner’s policy

Automobile policy

Umbrella policy


Principle of Indemnity

Most property and liability insurance contracts are based on this principle

Insured may not be compensated by insurance company an amount

exceeding economic loss


Concepts Related to Indemnity

• Actual cash value– Value assigned to

insured property• Replacement cost

less depreciation

• Right of Subrogation– Insurer’s right to

request reimbursement from person who caused the loss or that person’s insurer


Insurance companies do not want you to profit from a loss

Concepts Related to Indemnity

Other insurance clause - When multiple companies insure a property, together

they will not pay more than the economic loss


Coinsurance

Provision requiring policyholder to buy insurance in an amount equal to a certain percentage of replacement value of property

Or, insurance company will not fully repay the loss

You bear part of the loss as “co-insurer”


Homeowner's Insurance

• Homeowners– HO-1—Basic Form– HO-2—Broad Form– HO-3—Special

Form– HO-8—Modified

Form

• Renters– HO-4—Renter’s

Form– HO-6—

Condominium Form


• Policy states conditions (perils) under which it will pay

• Stipulate property covered and extent of coverage

Peril—a cause of loss such as fire, lightning, windstorm

Homeowner's Insurance


Factors Affecting Home Insurance Costs

Type of structure

Construction materials, style, age

Location of home

Crime rates, weather, proximity to fire hydrant

Other factors

Pool, trampoline, large dog


Property Covered

• Section I-– Loss to property

conditions under which it will be covered, extent of coverage

• Perils rarely covered: flood, earthquake, acts of war

• Section II-– Liability which may

arise in connection to either property, either through your actions or negligence


Personal Property Floater

Provides blanket or scheduled coverage of

expensive personal property not adequately covered by standardized

homeowner’s policy


Renter’s Insurance

Personal furnishings and belongings are not covered although the building may be fully insured

Purchase a special type of homeowners policy


Types of Losses Covered by Homeowner’s Policies

Direct loss of property

Indirect loss occurring as a result of loss of use of damaged property

Additional expenses resulting from direct and indirect losses


Persons and Locations Covered

•Policy states who is covered•Coverage for guests and students at college may be limited.

•Most homeowner’s policies offer coverage worldwide•Second home may be an exception


Limitations on Payments

• Replacement cost– Amount necessary

to repair, replace, or rebuild an insured asset at today's prices

• Policy limits– Placed on covered

property and depend on amount of home coverage


Limitations on Payments

Actual Cash Value - what property is worth today (its depreciated value)

Replacement Cost – amount to repair, rebuild or replace at today’s price

Inflation Protection Rider - automatically adjusts for inflation

Internal Limits - apply to specific items such as jewelry, watercraft, or securities


Calculating Replacement Cost


Deductibles keep insurance costs down by eliminating frequent small loss claims that are proportionately more expensive to administer

Deductible - amount paid out of pocket on covered losses

Deductibles


Homeowner Premiums

Differ from company to company

Depend on structure type, property location, or property hazards

Discounts offered:

non-smokers

security systems


Types of Automobile Insurance Coverage

Part A – Liability coverage

Part B – Medical Payments coverage

Part C – Uninsured motorists coverage

Part D – Coverage for damage to your vehicle


Part A: Liability Coverage

Required in most states

Pays injury and property damages to others when you are responsible for the loss

Covers costs of settling or defending claims for damages


Part A: Policy Limits

Insurance company may limit total damages paid for any one accident

Typical limits are $50,000, $100,000, $300,000 and $500,000

Some insurers split the limits of liability coverage available


Part A: Persons Insured

• Insured Person– The named insured– Family members– Any person using

covered auto– Any person or

organization responsible for insured’s actions

• Covered Auto– Listed on declaration

page– Acquired during policy

period– Any vehicle temporarily

used while auto is being repaired


Part B: Medical Payments

Reimbursement for medical expenses resulting from an accident

Covers insured, family members, and passengers in covered autos

Covers injuries sustained as a pedestrian or while riding a bicycle


• Pays when other driver has no insurance or if hit-and-run

• Usually pays for bodily injuries, not property damage

• Additional coverage available to protect against underinsured motorists

Must meet criteria:• Another driver at

fault• Other motorist

uninsured• Damages were

incurred

Part C: Uninsured Motorists


Collision Pays the actual cash value of the damage minus deductibles

Pays no matter who is at fault

Required for financed cars to protect the investment

Part D: Physical Damage to a Vehicle


Comprehensive

Part D: Physical Damage to a Vehicle

Protects against loss to insured auto caused by perils other than collision:

hail fire theft falling objects


No-Fault Automobile Insurance

Reimburses parties involved in an accident without regard to negligence

Each party compensated by their own insurance company

Restricts remedies and payments for pain and suffering

State laws vary regarding amount of no-fault benefits and restrictions for legal actions


Factors Affecting Premiums

Rating territory

Use of automobile

Driver’s personal characteristics

Type of automobile

Driving record


Financial Responsibility Laws

Require motorists to buy a minimum amount of auto liability insurance

Compulsory auto insurance laws require proof of insurance when acquiring license plates

Others require proof of coverage after an accident


Supplemental Property Insurance Coverage

Personal liability umbrella - additional liability coverage for homeowner and auto insurance

Earthquake & flood - not included in standard homeowner's policies

Other forms of transportation - mobile homes, RVs, boats, etc.


Property and Liability Insurance Agents

• Captive agent– Represents one

insurance company

• Independent agent– Represents multiple

insurance companies

• Before selecting– Review total property

and liability exposures– Inventory property and

identify exposures– Determine appropriate

covered perils, limits, deductibles, and floater policies


Buying Insurance and Settling Claims

• After an accident be sure to get:– Names, addresses,

phone numbers– Driver’s license, auto

license, insurance policy numbers

– Vehicle description for all involved

• Remember to-– Get names, addresses,

phone number of witnesses

– Contact police and insurance agent

– Do NOT leave the scene of the accident


• Notice to insurance company

• Investigation• Proof of loss

• Claims adjuster will:– Evaluate claim– Recommend

• Settlement of amount requested

• Settlement of a lesser amount

• Denial of claim

Steps in Claim Settlement

Protecting Your Property

Documents

Transcript of Protecting Your Property