Objective 08.02Interpret the nature, theory, and

different types of insurance

PROPERTY AND CASUALTY

& OTHER INSURANCES

Property/Casualty Insurance

• Types of policies :– Fire policies– Renter’s policies– Homeowner’s policies– *Supplemental - marine insurance

Property and Casualty Insurance

• Covers both individual and business property such as:– Real Property: Houses, apartments, condos,

office buildings and other structures– Personal property: Jewelry, furniture, clothing,

equipment, artwork and other valuables

Fire Policy

• A very basic policy covering loss resulting directly or proximately from an unfriendly fire.– Unfriendly or hostile fire is uncontrollable or

has escaped from the place where it should be.

– A friendly fire is a bonfire, furnace fire, fire in a fireplace unless it gets out of control.

Fire Policy

• Owner of property rented to others protects investment in structure with a fire policy. Owner has insurable interest in the property, but not in tenant’s property.

• Examples:– Apartment– Condo– Office building

Renter’s Insurance

• Covered under Homeowner’s 4 Form• Person who rents real estate from another

but has personal contents on premise carries renter’s insurance to insure:– personal contents– against liability risk

• Insurable Interest law applies. A person can only insure his own property, not another’s property.

Renter’s Insurance

• Protection includes:– Personal contents of tenant in an apartment, condo,

mobile home or house– Personal liability if others sue tenant for injuries

• Examples:• Lightning strikes and damages TV owned by

tenant • Neighbor breaks leg when he steps on child’s

skate left on steps and sues tenant for negligence

Homeowner’s Policy

• Provides coverage for:– Home - Primary structure– Personal property - Contents– Related structures – Outbuildings, if any– Loss of Use - Living expenses if insured can

not live there due to covered damage– Premise personal liability – for injuries to

others who were on your property

Homeowner’s (HO) Policy

• Riders may extend policy for additional coverage for items such as:

• Boats• Jewelry• Furs• Artworks• Antiques• And other special collectibles owned by a

homeowner

Homeowner’s Insurance

• Must own home to carry policy forms:– HO-1 Basic - covers limited perils– HO-2 Broad – covers extended perils– HO-3 Special - covers most perils with

specified exclusions– HO-6 Condominium Owners – coverage like

an HO-3, but for homes with common walls

• Peril – a cause of loss

Co-insurance

• Homeowners policies require the insured to carry a minimum of 80% of the value of the home (called co-insurance) to get full reimbursement for a claim made.– Most claims are partial losses leading

policyholders to insure a home for less than value since risk of total loss is low.

Cost Factors of Property Insurance

• Limit of coverage for property

• Location of property – fire district, city, county, state

• Structural material - brick, block, frame

• Previous claims filed

• Company

FLOOD & EARTHQUAKE

• NOT COVERED UNDER HO POLICY– Must buy separate flood insurance coverage– Must buy separate earthquake coverage

Co-Insurance Clause* Supplemental*

• In property insurance, there is a high probability of a partial loss claim. The insurance policy requires actual value of property be insured.

• Co-insurance requires an insured to cover a minimum of 80% of the value of the property

• If less than 80%, the claim amount is reduced at the time of payment.

• Example: Insuring a $100,000 home for $50,000 because the premium is cheaper and chances are there will ever be a total loss.

Marine Insurance*Supplemental*

• Covers property exposed to perils of sea transport:– The vessel– The cargo– Other property– Liability for the vessel

• One of first types of insurance covering ancient traders in the Mediterranean Sea.

• The term “underwriter” coined from the process of insuring the ships and cargo.

Inland Marine*Supplemental*

• Covers personal property that is being transport over land

• Transportation methods include:– TRUCK– TRAIN– AIRPLANE

• Also covers property such as jewelry, furs, fine arts, musical instrument etc wherever located and during their transport.

Fidelity and Surety Bonds*Supplemental*

• An insurance policy against a financial loss due to dishonesty– Pays the employer money in the case of theft

by employees– Guarantees the honesty of employees who:

• Handle large sums of money• Have access to customers money or assets

– Example: A company that cleans offices after hours might have a fidelity bond.

Lloyd’s of London*Supplemental*

• An insurance company that covers unique property and liability risks that are difficult to insure.

• Examples: – An opera singer’s vocal chords– Life insurance on insured with extremely risky

occupations– Comprehensive and collision auto insurance

on drivers with numerous tickets and accidents.