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Topic 13: Insurance Terms Self-insurance: business creates fund to pay

own losses Toasters and cell phones Your credit score impacts your cost of insurance

Risk avoidance: don’t drive; pets; swimming pools

Risk diversification: hold harmless, shift risk to someone else

Risk reduction: lower chance of loss Take driver’s training

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Topic 14: Property Insurance

80% rule: required insurance (Amount Insured/Amount Should Have Insured x

Loss) – Deductible = Insurance Payment Deductible subtracted last

Amount Should Have Insured = Replacement Cost x 80% Home

$400,000 replacement cost $300,000 insurance $1,000 deductible Fire causes $20,000 damage Insurance reimbursement?

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Topic 14: Property Insurance Homeowners Insurance

HO 01: fire and named perils HO 02: broad form covers additional perils

Personal property covered up to 50% of dwelling insurance

HO 03: open perils (all risk) on dwelling; broad form on personal property Most common policy Excludes pets, property of boarders, separately

scheduled property Excludes flood, sewer backup, wet basement

Rising water versus falling water: Oakcrest

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Topic 14: Property Insurance

Homeowners Insurance HO 04: renters insurance

Broad form coverage for personal property HO 05: open perils for dwelling and open perils

for personal property HO 06: condo insurance

Dwelling covers interior walls Broad form on personal property

HO 08: older homes Replacement cost > FMV Insures them at a lower value

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Topic 14: Property Insurance Coverage A: dwelling and attachments Coverage B: structures separated from dwelling

Garages, pools, fences Generally 10% of Coverage A amount

Coverage C: personal property located anywhere Generally 50% of Coverage A amount Limits on high value items: jewelry, guns, etc.

Can be increased by endorsement

Exclusions: business property above $2,500, boarders property

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Topic 14: Property Insurance Coverage D:

Additional living expenses while home repaired Credit cards: up to $500, no deductible

Coverage E: Comprehensive personal liability for unintentional

bodily injury and property damage up to $100,000 Covers damages off premises by insured, pets

Not for insured Coverage F:

$1,000 per person per occurrence medical payments Covers damages off premises by insured, pets

Not for insured

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Topic 14: Property Insurance Exclusions

Earthquake Coverage has high deductible

Flood, rising water. (Falling water covered) FEMA

War, nuclear accidents Intentional loss

Endorsements Scheduled personal property

Jewelry, antiques, collectibles Earthquake Flood Personal property replacement cost

Versus actual cash value

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Topic 14: Property Insurance Miscellaneous

No coverage if conceal material info Insured can cancel at any time

Insurer must give advance notice of cancellation, nonrenewal

Only one year to sue insurer

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Topic 14: Personal Auto Policy Part A: liability: bodily injury and personal

property caused by insured’s negligence Also attorney fees to defend insurance Split limits: per person/per accident/property damage

$15,000/$30,000/$50,000 Required? Get minimum?

Covered individuals Named insured Spouse and family members Others using car with permission

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Topic 14: Personal Auto Policy Covered vehicles

All vehicles listed in policy declaration New vehicles

14 days to notify / ask about rates before you buy Trailers Loaner cars Rental cars???

Exclusions Intentional injury/damage Employees Motorcycles require separate coverage

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Topic 14: Personal Auto Policy Part B Medical Payments: $1,000 per person

Covers, no matter fault, Insured Insured family members

Even when pedestrians hit by car Others in car: flying turkeys

Part D: Physical Damage to Your Auto Collision Other than collision (comprehensive)

Hitting deer: not collision, covered under comprehensive

Older cars Deductibles

$250 - $1,000

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Topic 14: Personal Auto Policy Uninsured motorist

Coverage applies when accident fault of individual with No insurance Less insurance than required by law Hit and and run drivers

Lease coverage Covers fair market value of car – amount of lease

liability or car loan

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Topic 14: Umbrella Liability Insurance

Required underlying policies Auto, home, boat, motorcycle Must have required amounts of coverage

Provides additional liability coverage Up to $5 million; generally inexpensive

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Topic 14: Commercial Insurance Property

Homeowners coverage generally provides minimal coverage for business property in home Endorsement

Open perils or specified perils Actual cash value or replacement cost May have co-insurance (80%) requirement but not

mandatory Bars, restaurants, amusement parks not eligible for

this policy

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Topic 14: Commercial Insurance Business income coverage

Replaces income and covers expenses due to closure by covered peril: fire, wind, etc.

Crime insurance Police must be notified

Liability Occurrence basis

Covers claims from events during policy period Doesn’t matter when claim filed

Claims made Covers only claims made during policy period Will need tail coverage for claims after policy lapse

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Topic 14: Commercial

Liability Types

Same coverage as Personal Auto Policy Garage Coverage: for businesses storing; selling;

servicing; parking vehicles Umbrella

Self insure generally first $25,000 Occurrence basis

Professional liability Physicians, attorneys, etc. Fail to perform as promised

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Topic 14: Commercial Surety bonds

Insures party will fulfill obligations Insured is liable to issuing company if payment has to

be made on bond Directors and Officers

Covers wrongful acts Workers Comp

Provides benefits required under state law Payment for liability claims from employee injuries

Injured on the job