Property and Liability Insurance

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Chapter 10

• Property and Liability Insurance

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Six Basic Packaged Homeowner's Policies

• HO-1 Basic form homeowners insurance
• HO-2 Broad form homeowners insurance
• HO-3 Special form homeowners insurance
• HO-4 Renters or tenants insurance
• HO-6 Condominium owners insurance
• HO-8 Modified coverage older homes
  homeowners insurance

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HO-1 Basic Form Homeowners Insurance

• Provides the most limited coverage
• Not available in most states

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HO-2 Broad Form Homeowners Insurance

• Covers only named perils
• Costs about 5 to 10 more than HO-1 coverage

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HO-3 Special Form Homeowners Insurance

• Covers all direct physical losses to your home
  open perils protection
• Exceptions include floods, wars, earthquakes, and
  nuclear accidents
• Costs approximately 10 to 15 more than HO-1
  coverage

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HO-4 Renters or Tenants Insurance

• Coverage is equivalent to HO-2 perils for
  personal property
• Available only to renters and tenants
• Covers personal property rather than the dwelling
• Provides liability coverage in case an accident,
  causing damage to the structure, is your fault

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HO-6 Condominium Owners Insurance

• Similar to HO-4 coverage, same perils for
  personal property as HO-2
• Available to co-op and condo owners
• Also covers improvements youve made to the
  dwelling unit

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HO-8 Older Homes Homeowners Insurance

• Similar to HO-1 insurance, or named perils
• Insures the dwelling for the repair cost or
  market value, instead of the replacement value
• Designed specifically for older homes

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Section I Coverage A Dwelling

• Protects the dwelling and any attachments
• Does not cover any damage to the land

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Section I Coverage B Other Structures

• Protects other, unattached, dwellings on the
  property
• Covers landscaping as well as buildings, but not
  the land
• Limited to 10 of the homes coverage
• Does not cover other structures used for business
  purposes

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Section I Coverage C Personal Property

• Covers all personal property owned or used by the
  policyholder
• Covers personal property regardless of location
• Covers property of guests in your home

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Section I Coverage C Personal Property Limits

• Limited to 50 of the homes coverage
• 200 limit on cash, gold, and silver
• 1,000 limit on securities, tickets, and stamps
• 2,500 limit on silverware
• Animals, birds, and fish are excluded

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Section I Coverage D Loss of Use

• Covers losses incurred as a result of your home
  being uninhabitable
• Limited to 20 of the amount of coverage on the
  home
• Three benefits of coverage
• Additional living expenses
• Fair rental value
• Prohibited use

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Section II Personal Liability Coverage

• Protects the policyholder in case someone is
  injured on their property
• Minimum level of coverage is 100,000
• Medical payments to others covers small medical
  expenses up to 1,000 per person
• Does not cover business or professional liability
  or negligence

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Supplemental Coverage (Endorsements)

• Personal article floaters
• Earthquake coverage
• Flood protection
• Inflation guard
• Personal property replacement cost coverage

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Umbrella Policies

• Cover liability costs after the underlying
  homeowners or auto policies have been exhausted
• Up to 10 million
• Exclusions for business, aircraft, and watercraft
  activities

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Coinsurance and the 80 Rule

• Dwelling must be insured to within 80 of the
  replacement cost
• Coinsurance requires you to pay for a portion of
  the loss if you dont carry adequate insurance

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If Not 80, You Pay

• In the event of the loss, you will receive the
  greater of
• Actual cash value of the portion of the home
  lost
• OR
• Insurance Coverage x Value of Loss
• 80 of Replacement Cost

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Consider Your Unique Insurance Needs

• Cover the full replacement value of your home in
  case of a complete loss
• Protect yourself from inflation
• Determine if other structures or landscaping on
  the property have adequate coverage
• Purchase additional insurance if part of your
  home is used as an office

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Consider Your Unique Insurance Needs (contd)

• Purchase extra coverage for special situations
  like floods or earthquakes, if applicable
• Cover the replacement value, not actual cash
  value, of your personal property
• If renting, have adequate personal property
  coverage

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Consider Your Unique Insurance Needs (contd)

• Consider extra coverage, or a floater policy, for
  valuable property such as paintings, jewelry, or
  collections
• If assets exceed liability coverage, purchase more

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Potential Discounts and Savings Methods

• High deductibles
• Security systems/smoke detectors
• Multiple policy discounts
• Pay premiums annually

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Potential Discounts and Savings Methods (contd)

• Shop around
• Ask for any other discounts
• Consider a direct writer
• Double check your policy

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Making Your Coverage Work

• Keep an inventory establishing proof of ownership
  (preferably on videotape)
• Videotape the exterior of the home to value
  landscaping or condition
• Keep records concerning the value of your assets

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The Personal Automobile Policy (PAP)

• PAP Part A Liability Coverage
• PAP Part B Medical Expense Coverage
• PAP Part C Uninsured Motorists Protection
  Coverage
• PAP Part D Coverage for Damage to Your Car
• Standard exclusions
• No-fault insurance

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PAP Part ALiability Coverage

• Covers bodily injury losses
• Covers property damage losses
• Can be a combined single limit or a split-limit
  coverage
• Most states require a minimum coverage
• Covers losses due to a lawsuit
• Covers defense costs in civil trials in addition
  to your policy limits

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Auto Liability Split-Coverage Insurance Limits

• 100/300/50
• 100,000 of bodily injury liability coverage per
  person
• 300,000 of bodily injury liability coverage for
  each accident
• 50,000 of property damage liability coverage

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PAP Part BMedical Expenses Coverage

• Covers all reasonable medical costs and funeral
  expenses incurred, by the insured or the
  insureds family members within 3 years of an
  accident
• Recommended coverage of 50,000
• Does not cover medical expenses if injured by a
  vehicle not designed for public streets, but does
  provide coverage when walking

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PAP Part C Uninsured Motorists Protection

• Provides coverage if injured by an uninsured
  motorist or a hit-and-run driver
• The other driver must be at fault to collect on
  this coverage
• Also covers costs in excess of the other drivers
  liability coverage, if inadequate to pay for your
  losses

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PAP Part D Comprehensive Physical Damage
Coverage

• Covers
• Collision loss
• Other than collision, or comprehensive physical
  damage
• Collision covers regardless of fault
• Recommended limit is the vehicles cash-value
  deductibles apply

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Personal Auto Insurance Coverage
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Personal Auto Insurance Coverage (contd)
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Keeping Your Costs for Automobile Insurance Down

• Shop comparatively
• Consider only high-quality insurers
• Use discounts
• Buy vehicles that are relatively inexpensive to
  insure
• Improve your driving record
• Raise your deductibles
• Keep adequate liability insurance