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business.fullerton.edu

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business.fullerton.edu

  1. 1. Chapter 10 – Property and Casualty Insurance <ul><li>Allows pooling of financial risks of property loss </li></ul><ul><ul><li>Through diversification, everyone shares in everyone's loss by paying an average rate </li></ul></ul><ul><li>Purpose: guard against financial catastrophe </li></ul><ul><li>Know insurer’s credit rating (A. M. Best) </li></ul>
  2. 2. Homeowner's Insurance <ul><li>Six standard policies. Know #2, 3 and 4 </li></ul><ul><li>HO-2 – Broad form covering named perils </li></ul><ul><ul><li>Fire, lightening, windstorm, hail and explosions </li></ul></ul><ul><ul><li>Not named = not covered </li></ul></ul><ul><li>HO-3 - Special form. Covers perils not excluded; flood and earthquake are excluded </li></ul><ul><li>HO-4 – Renter's insurance covers possessions </li></ul>
  3. 3. Two Sections of Homeowner's <ul><li>Section 1 – protects property and possessions </li></ul><ul><li>Section 2 – provides personal liability insurance if you are sued for something you did or failed to do. </li></ul>
  4. 4. Property Coverage <ul><li>Dwelling – house and attachments </li></ul><ul><ul><li>Other - detached garage, landscaping </li></ul></ul><ul><ul><li>Personal property – wherever located </li></ul></ul><ul><ul><li>Loss of use </li></ul></ul><ul><li>Liability – protects if someone injured on property and sues or sues for other reasons. </li></ul>
  5. 5. Coverage Amounts <ul><li>Replacement cost = actual cost to replace </li></ul><ul><li>Actual Cash Value = depreciated value </li></ul><ul><li>Coinsurance requires insured to pay part of claim if have inadequate coverage </li></ul><ul><ul><li>80% rule – replacement cost paid only if amount insured is 80% of replacement value; otherwise, ACV </li></ul></ul><ul><li>Very serious mistake to underinsure </li></ul>
  6. 6. Supplemental Coverage <ul><li>Rider – adds or subtracts coverage </li></ul><ul><li>Personal articles floater </li></ul><ul><li>Earthquake and flood </li></ul><ul><li>Inflation guard </li></ul><ul><li>Personal umbrella </li></ul><ul><li>Replacement cost of personal property. </li></ul>
  7. 7. Indemnity Considerations <ul><li>Replacement cost and code changes </li></ul><ul><li>Inflation </li></ul><ul><li>Flood or earthquake area? </li></ul><ul><li>Special protection – jewelry, stamps, coins </li></ul><ul><li>If your assets are more than liability limit, may need more coverage </li></ul><ul><li>Need insurance even if rent </li></ul>
  8. 8. What Determines Cost? <ul><li>Location – California is high risk area </li></ul><ul><ul><li>Also Texas, Florida along Mississippi </li></ul></ul><ul><li>Type of structure </li></ul><ul><ul><li>Older structures – more expensive to insure </li></ul></ul><ul><li>Level of coverage and policy type </li></ul>
  9. 9. Ways to Reduce Premiums <ul><li>Higher deductible </li></ul><ul><li>Security system/smoke detector </li></ul><ul><li>Multiple policy discounts (include car) </li></ul><ul><li>Pay premium annually in advance </li></ul><ul><li>Other discounts – over 55 </li></ul><ul><li>Consider direct writers; shop around </li></ul>
  10. 10. If You Have a Loss…. <ul><li>Report immediately to insurer </li></ul><ul><li>Make temporary repairs </li></ul><ul><li>Detailed list of everything lost/damaged </li></ul><ul><li>File claim </li></ul><ul><li>Maintain record of settlement process </li></ul><ul><li>Confirm adjuster's estimate </li></ul>
  11. 11. Automobile Insurance <ul><li>Two broad parts with subparts: </li></ul><ul><li>Bodily injury including </li></ul><ul><ul><li>Bodily injury liability (Part A), medical expenses (B) and uninsured motorists (C) </li></ul></ul><ul><li>Property damage </li></ul><ul><ul><li>Liability coverage (A), Collision (D), comprehensive physical damage (D) </li></ul></ul>
  12. 12. Split Limits <ul><li>Example: $200,000/600,000/100,000 </li></ul><ul><ul><li>$200,000 for bodily injury to each person </li></ul></ul><ul><ul><li>600,000 limit for each accident </li></ul></ul><ul><ul><li>100,000 property damage liability </li></ul></ul><ul><li>Recommendation: at least 100/300/100 </li></ul><ul><li>Or combined with single limit for injury and property, usually $500,000. </li></ul>
  13. 13. Who’s Covered? <ul><li>Damage and liability –generally anyone operating with permission. </li></ul><ul><li>Children – included if declared </li></ul><ul><li>Medical – policyholder and passengers </li></ul><ul><li>Loss from uninsured motorists – </li></ul>
  14. 14. Medical Coverage <ul><li>Reasonable medical/funeral expenses </li></ul><ul><li>Uninsured motorist – covers injuries caused by uninsured motorists </li></ul><ul><ul><li>To collect, other driver must not have insurance but must be at fault </li></ul></ul><ul><ul><li>15% of motorists estimated to be uninsured so important </li></ul></ul>
  15. 15. Damage to Your Vehicle <ul><li>Collision loss – damage from colliding with another vehicle or object </li></ul><ul><li>Comprehensive – other losses such as fire, theft, windstorm, falling objects, earthquake </li></ul><ul><li>Amount - actual cash value (depreciated value) less deductible </li></ul><ul><li>Premiums decline sharply as deductible increases </li></ul>
  16. 16. Cost Determinants <ul><li>Your driving record </li></ul><ul><li>Deductible </li></ul><ul><li>Personal characteristics </li></ul><ul><ul><li>Age, sex and marital status </li></ul></ul><ul><li>Type of vehicle and how used </li></ul><ul><li>Discounts </li></ul><ul><li>Where you live </li></ul>
  17. 18. Keeping Costs Down <ul><li>Improve driving record – three year limit </li></ul><ul><li>Increase the deductible </li></ul><ul><li>Shop competitively </li></ul><ul><ul><li>Multiple policy discounts </li></ul></ul><ul><li>Buy car that is inexpensive to insure </li></ul><ul><li>But keep adequate liability insurance </li></ul>

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