pfin 4 protecting your property 10 copyright ©2016 cengage learning. all rights reserved. may not...

PFIN 4

Protecting Your Property

10

Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

GITMAN/ JOEHNK/ BILLINGSLEY

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2Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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

2 Identify types of coverage provided by home owner’s insurance

3 Select the right home owner’s insurance policy for your needs

4 Analyze the coverage in a personal automobile policy (PAP) and choose the most cost-effective policy

LEARNING OUTCOMES

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5 Describe the other types of property and liability insurance

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

LEARNING OUTCOMES (continued)

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Basic Principles of Property Insurance


• Property insurance• Protects real and personal property from losses

caused by various perils• Liability insurance• Protects against financial consequences from

the insured’s responsibility for property loss

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Types of Exposure


• Exposure to property loss• Property insurance contracts define:

• Property covered • Perils: Cause of loss

• Property inventory• Identifying perils• Liability

• Negligence: Failing to act in a reasonable manner

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Principle of Indemnity

6Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. PFIN4 | CH10

• States that an insured may not be compensated with an amount exceeding the insured’s economic laws• Actual cash value: Value assigned to an

insured property determined by subtracting the amount of physical depreciation from its replacement cost

• Right of Subrogation: Insurer’s right to request reimbursement from person who caused the loss or that person’s insurer

Principle of Indemnity


• Other insurance clause • States that if a person has more than one

insurance policy on a property, each company is liable for only a prorated amount of the loss

Exhibit 10.2

8Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. MKTG4 | CH10

A Guide to Home Owner’s Policies

Property and Liability Insurance Policies


Perils Covered


• Section I• Perils against which the home and its contents

are insured• Section II

• Includes a coverage called comprehensive personal liability • Offers protection against personal liability

resulting from negligence • Provides limited amount of medical coverage

Factors Affecting Home Insurance Costs


Property Covered


• Home owner’s policy offers property protection under Section I for:• Dwelling unit• Accompanying structures• Personal property of home owners and their

families

Personal Property Floater (PPF)


• Provides blanket or scheduled coverage of expensive personal property not adequately covered in a home owner’s policy

Renter’s Insurance


• Form HO-4• Covers contents of a house but not the

structure itself • Form HO-6

• Required by the owners of condominium units• Includes a minimum of $1000 in protection for

any building alterations paid for by the policy holder

Coverage


• Types of losses covered• Direct loss of property• Indirect loss occurring due to loss of damaged

property• Additional expenses resulting from direct and

indirect losses • Section I

• Damage of the house by an insured peril leads to the insurer paying reasonable living expenses

Coverage


• Section II• Home owner’s policy covers:

• Cost of defending the insured • Reasonable expenses incurred by an insured

in helping the insurance company’s defense• Payment of court costs

Coverage


• Persons covered• Persons named in the policy and members of

their families residing in the house• Guests of the insured with limited coverage

• Locations covered• Extended worldwide when off premises

temporarily

Factors Influencing Insurance Payment Amount for a Loss


• Replacement cost• Amount necessary to repair, rebuild or

replace an asset at current prices• Policy limits• Deductibles

Personal Automobile Policy (PAP)


• Designed to be easily understood by the typical insurance purchaser• Liability coverage

• Bodily injury liability losses: Protects the insured against claims made for bodily injury

• Property damage liability losses: Protects the insured against claims made for damage to property

• Medical payments coverage



• Uninsured motorists coverage: Serves the victims of accidents injured by uninsured, underinsured, or hit-and-run motorists• Underinsured motorists coverage: Covers

damages in accidents involving liable underinsured motorist



• Coverage for damage to the vehicle• Collision insurance: Pays for collision

damage to an insured automobile• Comprehensive automobile insurance:

Protects against loss to an insured automobile caused by any peril other than collision

Factors Affecting Automobile Insurance Premiums


• Rating territory• Amount of use the automobile receives • Personal characteristics of the driver• Type of automobile• Insured’s driving record

Financial Responsibility Laws


• Require motorists to:• Buy a specified minimum amount of

automobile liability insurance• Provide other proof of comparable financial

responsibility

Other Property and Liability Insurance


• Supplemental property insurance coverage• Earthquake insurance• Flood insurance• Other forms of transportation insurance

• Personal liability umbrella policy• Provides excess liability coverage and

additional coverage for home owner’s and automobile insurance

Property and Liability Insurance Agents


• Captive agent: Represents a single insurance company and is its employee

• Independent agent: Places coverage with any company with which he or she has an agency relationship

• Selecting an agent involves questions to be asked about the company’s:• Financial soundness• Claims-settlement practices• Geographic range of operations

First Steps Following an Accident


Steps in Claim Settlement


Claims Adjustment


• Insurance company will assign a claims adjustor if the loss is complex• Claims adjustor: Insurance specialist who

works for the insurance company or for an adjustment bureau


• Property insurance• Liability insurance• Peril• Negligence• Principle of indemnity• Actual cash value• Right of subrogation• Co-insurance• Comprehensive policy• Named peril policy

KEY TERMS

• Personal property floater (PPF)

• Replacement cost• Personal automobile

policy (PAP)• Bodily injury liability

losses• Property damage

liability losses• Uninsured motorists

coverage

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• Underinsured motorists coverage

• Collision insurance• Comprehensive

automobile insurance• No-fault automobile

insurance• Financial

responsibility laws• Personal liability

umbrella policy• Captive agent

KEY TERMS

• Independent agent• Claims adjustor

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SUMMARY

• Property insurance covers against losses of real and personal property caused by calamities

• Comprehensive policies cover all perils but only individual perils are covered in named peril policies• Home owners can choose HO-1, HO- 2, HO-3,

HO-5, or HO-8 to suit their needs• Types of automobile insurance

• Personal automobile policy, collision insurance, and comprehensive automobile insurance PFIN4 | CH10


SUMMARY

• Other property and liability insurance• Supplemental property insurance coverage• Personal liability umbrella policy

• Steps to claim settlement• Provide notice to the insurance company• Investigation by company personnel• Provide proof of loss

PFIN4 | CH10

pfin 4 protecting your property 10 copyright ©2016 cengage learning. all rights reserved. may not...

Documents

cengage learning

accessible website

types of property

personal property

insured property

types of exposure

liability insurance

home owners insuranceselect