Chapter 10

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Chapter 10 Property and Casualty Insurance

• Allows pooling of financial risks of property
  loss
• Through diversification, everyone shares in
  everyone's loss by paying an average rate
• Purpose guard against financial catastrophe
• Know insurers credit rating (A. M. Best)

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Homeowner's Insurance

• Six standard policies. Know 2, 3 and 4
• HO-2 Broad form covering named perils
• Fire, lightening, windstorm, hail and explosions
• Not named not covered
• HO-3 - Special form. Covers perils not excluded
  flood and earthquake are excluded
• HO-4 Renter's insurance covers possessions

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Two Sections of Homeowner's

• Section 1 protects property and possessions
• Section 2 provides personal liability insurance
  if you are sued for something you did or failed
  to do.

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Property Coverage

• Dwelling house and attachments
• Other - detached garage, landscaping
• Personal property wherever located
• Loss of use
• Liability protects if someone injured on
  property and sues or sues for other reasons.

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Coverage Amounts

• Replacement cost actual cost to replace
• Actual Cash Value depreciated value
• Coinsurance requires insured to pay part of claim
  if have inadequate coverage
• 80 rule replacement cost paid only if
  amount insured is 80 of replacement value
  otherwise, ACV
• Very serious mistake to underinsure

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Supplemental Coverage

• Rider adds or subtracts coverage
• Personal articles floater
• Earthquake and flood
• Inflation guard
• Personal umbrella
• Replacement cost of personal property.

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Indemnity Considerations

• Replacement cost and code changes
• Inflation
• Flood or earthquake area?
• Special protection jewelry, stamps, coins
• If your assets are more than liability limit, may
  need more coverage
• Need insurance even if rent

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What Determines Cost?

• Location California is high risk area
• Also Texas, Florida along Mississippi
• Type of structure
• Older structures more expensive to insure
• Level of coverage and policy type

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Ways to Reduce Premiums

• Higher deductible
• Security system/smoke detector
• Multiple policy discounts (include car)
• Pay premium annually in advance
• Other discounts over 55
• Consider direct writers shop around

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If You Have a Loss.

• Report immediately to insurer
• Make temporary repairs
• Detailed list of everything lost/damaged
• File claim
• Maintain record of settlement process
• Confirm adjuster's estimate

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Automobile Insurance

• Two broad parts with subparts
• Bodily injury including
• Bodily injury liability (Part A), medical
  expenses (B) and uninsured motorists (C)
• Property damage
• Liability coverage (A), Collision (D),
  comprehensive physical damage (D)

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Split Limits

• Example 200,000/600,000/100,000
• 200,000 for bodily injury to each person
• 600,000 limit for each accident
• 100,000 property damage liability
• Recommendation at least 100/300/100
• Or combined with single limit for injury and
  property, usually 500,000.

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Whos Covered?

• Damage and liability generally anyone operating
  with permission.
• Children included if declared
• Medical policyholder and passengers
• Loss from uninsured motorists

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Medical Coverage

• Reasonable medical/funeral expenses
• Uninsured motorist covers injuries caused by
  uninsured motorists
• To collect, other driver must not have insurance
  but must be at fault
• 15 of motorists estimated to be uninsured so
  important

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Damage to Your Vehicle

• Collision loss damage from colliding with
  another vehicle or object
• Comprehensive other losses such as fire, theft,
  windstorm, falling objects, earthquake
• Amount - actual cash value (depreciated value)
  less deductible
• Premiums decline sharply as deductible increases

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Cost Determinants

• Your driving record
• Deductible
• Personal characteristics
• Age, sex and marital status
• Type of vehicle and how used
• Discounts
• Where you live

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Keeping Costs Down

• Improve driving record three year limit
• Increase the deductible
• Shop competitively
• Multiple policy discounts
• Buy car that is inexpensive to insure
• But keep adequate liability insurance