Home and Motor Vehicle Insurance

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Chapter 13

• Home and Motor Vehicle Insurance

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Here is what is in this chapter.

• We will discuss
• What insurance is
• Types of risk people take and why insurance is
  important.
• Types of Home and renter insurance.
• Types of Car insurance.

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Do you know that you can insure just about
anything..

• For a price that is..
• Marilyn Monroe had her legs insured.
• Gene Simmons had his tongue insured.
• Kicker for the Colts had his foot insured.
• Paris Hilton has her dog insured

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Insurance and Risk Management

• Section 13.1

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Do you remember the movie Along came Polly

• http//www.imdb.com/title/tt0343135/trailers-scree
  nplay-E18782-314

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What is Insurance?

• Is protection against possible financial loss.
• If your house burns down.
• If someone breaks into your car?
• If there is a flood, tornado, hurricane..
• If you have to go to the hospital, or family
  member has to go
• Are all types of insurance.

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Insurance company and how they work.

• An insurance company is a risk-sharing business.
• They agree to pay if something happens by the
  terms in a POLICY
• It is not free though..
• The company agrees to pay if something happens,
  but you pay money every month, or year called a
  premium.

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The policy

• The person who buys the policy is called the
  policyholder
• The protection that the policy provides is called
  COVERAGE.
• The person who is protected by the policy is
  called the insured.

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Types of Risk

• Risk Defined is the chance of loss or injury.
• Peril is anything that may possibly cause a
  loss.
• Many different types fire , wind, explosion,
  robbery, and accidents.

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Hazard is anything that increases the
likelihood of loss through peril.

• Types of Hazard
• Personal Risk involves loss of income or life
  due to illness, disability, old age or
  unemployment.
• Property Risk includes fire, theft
• Liability Risk losses by negligence that leads
  to injury or property damage.

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Negligence

• Failure to take ordinary or reasonable care to
  prevent accidents from happening.
• If a property owner does not clear ice from a
  side walk and someone falls, the owner is
  considered to be negligent.

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Pure Risk

• Personal, property, and liability are types of
  pure risk, or insurable. If something actually
  happens then they will pay.
• Pure risks are unintentional or accidental.

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Speculative Risk

• This is uninsurable risk.
• For example when we start a business and it goes
  under. An insurance company will not insure
  this.

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Types of Risk Management

• Risk Avoidance
• Installing a burglar system in house to prevent
  crime.
• Not driving a car, is a way to avoid risk but if
  you have a 20 minute car ride to work, it may not
  be practical.

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Risk Reduction

• Things that we do to make what we do a little
  safer
• Wearing a seat belt
• Having a fire extinguisher ready
• Eating properly

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Risk Assumption

• This means taking on a responsibility for the
  negative results of a risk. It makes sense to
  assume a risk if you know that the possible loss
  will be small.
• Self-insuring a car that is not worth much. If
  the car wrecks it is probably better to buy a
  new one, than trying to fix the old one.

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Risk Shifting

• Shifting risk means to move the responsibility of
  paying to someone else.
• The insurance company agrees to pay for your
  losses when you pay a fee.
• Usually the person who the policy falls under has
  to pay a little on what ever happened it is
  called a deductible.

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Property and Liability Insurance

• People spend large sums of money each year on
  homes, cars, and valuables.
• Others want to take it
• 3million burglaries a year
• 500,000 fires a year
• 200,000 cases from other types of peril.

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2 types of risk for property

• 1st is physical
• From peril wind, fire, flooding
• 2nd is criminal behavior

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Liability

• Is the legal responsibility for the financial
  cost of another persons losses or injuries.
• You can be found legally responsible even if the
  injury or damage was not your fault.
• You have a friend fall and hurt themselves in
  your backyard. They can sue you, even though you
  did nothing wrong, you can still be liable.

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Home and Property Insurance

• Section 13.2

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Homeowners Insurance

• Provides coverage for
• Home building or any other structures
• Detached buildings
• Trees, shrubs, and landscaping
• Additional Living Expenses
• Pay for you to live somewhere else if something
  happens to your home.
• Usually up to 20 percent of cost of home.

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Homeowners continued

• Personal Property
• Covers your goods if stolen or lost to a certain
  percentage of your home.
• Usually you can only claim certain amounts for
  certain things.
• 1000 for jewelry

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Things that homeowners dont cover.

• Animals or Fish
• Motorized vehicles not used on road or for
  maintenance of home maintenance.
• Radios or CD players in motor vehicles.
• Property belonging to renters
• Business property

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Additional Property Insurance

• Personal Property Floater
• A additional policy to cover extremely expensive
  items that my be covered partially by homeowners.

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• Most policies have basic personal liability
  coverage of 100,000, but is not usually enough.
• People may take out other types of policies that
  give additional coverage in dollar amount. These
  are called Umbrella Policies or personal
  catastrophe policy. These are pretty expensive
  and can cover you for more than 1 million
  dollars. (doctors malpractice insurance.)

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Renters Insurance

• When someone rents an apartment the person who
  is living there needs to have some sort of
  insurance to cover their goods.
• The landlords insurance does not cover unless
  they are responsible for loss.
• For example if they have bad wiring and the place
  catches on fire.

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How do you get your money from the insurance
company.

• The insurance company bases claims on two
  methods.
• Actual Cash Value
• Based on the replacement cost of an item minus
  depreciation.
• Depreciation is the value that you loose on an
  item that as it ages.
• Replacement value
• Based on the actual cost of the item and
  replacing it fully. Depreciation is not
  considered.
• Replacement is very expensive and can only cover
  to usually 400 of original value.

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What are things that would make you pay higher
fees for the same policy?

• Location of Home
• If you live close to a fire hydrant
• If you live in a low crime area
• Type of home
• If you live in a brick home
• Older home versus a newer home.
• Price of home
• Coverage and policy type if you pay a higher
  deductible you policy will be less

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Home insurance discounts

• If you have
• Smoke Detectors
• Fire extinguishers
• Dead Bolts, locks and alarms

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Motor Vehicle Insurance

• Section 13.3

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Motor Vehicle Insurance

• cost more than 150 billion in lost wages and
  medical bills every year.
• 45 of the 50 states require you to have motor
  vehicle insurance.

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Motor Vehicle Bodily Injuries Coverage's

• Three areas it covers
• Bodily injury liability
• Is insurance that covers physical injuries caused
  by a vehicle accident for which you are
  responsible.
• 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.

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• Bodily Injury
• Liability coverage's is usually expressed in
  three numbers.
• 100/300/50
• These amounts represent thousands of dollars of
  coverage.
• The first two numbers refer to bodily injury
  coverage.
• 100 is the maximum amount that the insurance
  company will pay for the injuries of any one
  person in any one accident.
• 300 is the maximum amount that the insurance
  company will pay for all injured parties in any
  one accident.
• 50 indicates the limit for payment for damages to
  the property of others.

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• Medical Payments Coverage
• Is insurance for medical expenses of anyone
  injured in your vehicle, including you.
• Also provides for insurance incase you get hurt
  in a car accident in another car.

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Motor Vehicle Property Damage Coverage's

• Property Damage Liability
• Is motor vehicle insurance that applies when you
  damage the property of others.
• In addition, it protects you when you are driving
  another persons vehicle with the owners
  permission.
• Also covers buildings and to equipment such as
  street signs.

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• Collision
• Is insurance that covers damage to your vehicle
  when it is involved in an accident. You collect
  money no mater who is at fault.
• Comprehensive Physical Damage
• Is insurance that protects you if your vehicle is
  damaged in a non-accident situation. It covers,
  your vehicle against risks such as fire, theft
  ,falling objects, vandalism, hail, floods,
  tornadoes, earthquakes and avalanches.

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No-Fault Insurance

• Is an arrangement where by drivers who are
  involved in accidents collect money from their
  own insurance companies.

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Other types of car insurance

• Rental reimbursement
• Wage-Loss reimbursement
• Emergency road service

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What affects the premium for car insurance?

• Vehicle Type
• The year, make and model definitely is important.
• Rating Territory
• Owners place of residence
• High theft, crime are different than in more
  rural areas.
• Drivers Classification
• Based on Age, Sex, marital status, driving record
  and driving habits.
• Assigned Risk Pool
• Is a group of people who cannot get motor vehicle
  insurance who are assigned to each insurance
  company
• Pay several times higher than the rate of the
  average car owner.

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What things lower premiums

• Good driving record
• Multiple cars
• Good grades

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• Uninsured motorists protection
• Even when you are suppose to have insurance
  occasionally when you get into an accident the
  other person does not have insurance.
• Uninsured motorists protection
• Is insurance that covers you and your family
  members if you are involved in an accident with
  an uninsured or hit-and-run driver.