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Home Insurance

Learn about key terms and coverage options in home insurance, including risk, peril, hazard, negligence, and different risk management methods. Understand the importance of property and liability insurance, as well as the coverage provided by homeowners and renters insurance policies.

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Home Insurance

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  1. Home Insurance

  2. Important Insurance Terms • Risk – Chance of loss or injury • Peril – Anything that may cause a loss • Hazard – Anything that increases the likelihood of loss through peril • Negligence – Failure to take ordinary or reasonable care to prevent accidents

  3. Risk Management Methods • Risk Avoidance • Avoid risks, but may have serious trade-offs • Can avoid traffic accident by not driving, but may not be able to get to work • Risk Reduction • Decrease the likelihood of harm or risk • Can reduce accident injury by wearing a seatbelt

  4. Risk Management Methods • Risk Assumption • Taking responsibility for negative results of a risk • Makes sense to assume risk when the possible loss is small like not fully insuring an old car • Self-insurance is another option; set up a savings acct. to cover loss • Risk Shifting • Use an insurance company • May have a deductible, a combination of risk assumption and shifting, which is a set amount the policyholder must pay on a loss

  5. Property and Liability Insurance • Natural disasters as well as injuries and property damage cost billions of dollars a year • Two types of risk related to home • 1) Risk of damage to or loss of property • 2) Risk of responsibility for injuries to other people or damage to their property

  6. Property and Liability Insurance • Property Damage or Loss • Two basic types of risks for property owners • Physical damage such as wind, fire, flooding • Loss or damage caused by criminal behavior such as robbery, burglary, vandalism, and arson • Liability • Legal responsibility for the financial cost of another person’s losses or injuries, even is it is not your fault • Usually found responsible because negligence on your part helped cause the mishap

  7. Homeowners Insurance • A binding, legal contract between the insured and the insurer to protect their home and belongings if they are damaged or destroyed • Provides against losses caused by fire, water damage, storms, theft, and other perils • Provides against monetary losses as a result of negligence for medical bills, legal fees, death benefits

  8. Who/What Do HO Policies Protect? • Anyone named in the policy • Spouse • Children • Other residents • Guests • Also covers garages, sheds, pools, landscaping

  9. What isn’t Protected • Cars, boats, ATVs – things that would have its own insurance • One of a kind items like jewelry, art, and collections – must purchase additional coverage for these items • In areas prone to natural disasters, additional coverage is needed

  10. Renter’s Insurance • Protects those who live in a “home” owned by someone else • Inexpensive to purchase • Covers your belongings which are not covered under the owners insurance • Protects against theft, loss of personal property, and loss of use

  11. What Renters Insurance Covers • Covers • Personal possessions • Loss of use (pays for you to live elsewhere) • Medical payments for those injured there • Doesn’t Cover • Structural damage caused by carelessness

  12. Homeowners Policies • Most homeowners insurance are package policies with the following coverages • Property/Structure • Property/Personal belongings • Liability protection • Loss of use

  13. Property/Structure Coverage • Repair or rebuild your home if damaged or destroyed by fire, hurricane, hail, lightning or other disasters listed in your policy • Will not pay for damage caused by a flood, earthquake or routine wear and tear • Always purchase enough coverage to rebuild your home

  14. Property/Personal Belongings Coverage • Furniture, clothes, and personal items stolen or destroyed by insured disasters • Most cover 50-70% of the cost of your dwelling limit, so if your house is insured at $200,000, and they pay 50%, the payout limit would be $100,000 • Covers items you take on vacation or use at school

  15. How Much Will You Get? • Actual Cash Value vs Replacement Cost • Actual cash value only pay for what the property was worth at the time of the loss (depreciated value) • Replacement cost coverage will pay what it actually costs to replace the items you lost • Both involve paying a deductible first

  16. Liability Insurance • Protects you when you are at fault or sued • Covers bodily injury for those hurt at your home • Covers property damage liability for damage done to building or belongings • Most policies cover behavior of household pets

  17. Loss of Use Insurance • Pays for you to stay somewhere else while home is being rebuilt or repaired • May limit coverage to 10 to 20% of home’s total coverage • May limit the payment period to 6 to 9 months

  18. Personal Property Floaters • Extra coverage for valuable items • Jewelry • Furs • Fine arts • Musical instruments • Collections • Guns

  19. Household Inventories • Documentation of personal belongings with purchase dates and cost information • Should keep receipts, serial numbers, brand names, proof of value • Video of home including closets and storage areas • Photographs with dates and values on back • Keep in fireproof box or safe deposit box and update regularly

  20. Personal Liability and Related Coverages • Amounts of coverages • Most policies cover liability up to $100,000 • Supplement with an umbrella policy to add protection for all kinds of personal injury claims – if someone sues you for slander (writing or saying something untrue) • More expensive policies are available for the wealthy • Medical payments coverage pays cost of minor accidental injuries to visitors on your property • Supplemental coverage could cover damage you do to other people’s property

  21. What Isn’t Covered • Jewelry, furs, boats, electronics • Animals and fish • Motorized vehicles not licensed for road use, except those used for home maintenance • Sound devices in motor vehicles • Aircraft parts • Property belonging to tenants • Property in rentals • Business property

  22. Other Coverages • Credit card fraud, check forgery, counterfeit money • Removal of damaged property • Emergency removal of property to protect it from damage • Temporary repairs after a loss to prevents further damage • Fire department user fees

  23. How much coverage do you need? • 80% to full coverage for homes • Must have coverage if borrowing money from bank • Coverage for personal belongings is usually 55 to 75% of insurance you have on your home • Claim settlements • Actual cash value – receive replacement cost minus depreciation • Replacement value – receive full cost of repairing or replacing item

  24. Home Insurance Cost Factors • Location – water supply, fire hydrant, crime, weather • Type of Structure – wood, brick • Price, Coverage Amount, Policy Type – higher deductible means lower premiums • Home Insurance Discounts – smoke detectors, fire extinguisher, dead bolts • Company Differences – compare companies

  25. Location • Those close to water supply or hydrant get discount • Those near high crime, severe weather pay more

  26. Condition, Materials, and Age • Newer houses have lower premiums • Higher premiums for an older home or one that is not well maintained

  27. Policy Type • More coverage, more costly • Get auto and home insurance from the same place to get a discount • Floaters or special coverage cost more

  28. Lower Deductibles • Decreases cost because insurance company pays less out because you are assuming more financial reasonability

  29. Discounts • Smoke detectors • Fire extinguisher • Sprinkler system • Deadbolts • Alarm system

  30. Selecting Insurance Companies • Consider prices, but also service and coverage • Not all settle claims in the same way

  31. Credit Score • Better credit score means lower premiums

  32. Attractive Nuisances • An attractive nuisance is an object, structure or condition that is both dangerous and irresistibly inviting or intriguing to children. • Name some attractive nuisances

  33. What is an Attractive Nuisance • Unenclosed swimming pool, goldfish pool, idling lawnmower, paint sprayer, table saw, construction sites, and equipment • Most natural conditions are not considered attractive nuisances • To be liable for injury, an owner must create or maintain the harmful object • Attractive nuisance doctrine arises when the child doesn’t realize the extent of the danger

  34. Typical Local Laws • Pools – fences and locks • Discard Refrigerators – removal of doors • Fences – barbed wire below a certain height • Old Cars and Other Junk – must be fenced in • Chemicals – discard of pesticides, paints, etc. • Dangerous Dogs

  35. Landowner can be held responsible if a child is injured by an "artificial condition" and all five of the following criteria are met: • 1) Landowner knows (or should know) that children are likely to trespass on the property • 2) The condition has the potential to cause death or serious bodily harm to children • 3) The children involved are too young or inexperienced to understand the risk presented by the condition

  36. Landowner can be held responsible if a child is injured by an "artificial condition" and all five of the following criteria are met: • 4)The benefit of maintaining the condition or the cost required to remedy the condition is minimal compared with the risk to children. • 5)The landowner fails to take reasonable measures to eliminate the danger posed by the condition.

  37. Who is Protected • Example 1 – 12 year old child climbed onto the roof of building and fell 3 stories to the ground. • Owner was liable because • 1. Children were known to play in area • 2. Roof had an area that was sloped and slippery – something a child might not notice • 3. Owner could’ve locked door to the roof

  38. Who is Protected • Example 2 – A 10 year old fell 3 stories from a roof after climbing up and playing on it. • Owner was not liable because • 1. This owner had no reason to know that children would play on the roof • 2. No hidden danger on the roof itself caused the all

  39. Who Is Protected • Example 3: During construction of a house, a contractor left sheetrock propped against a wall and unattended. An 11 year old girl investigating the building site was injured when the sheetrock tumbled down on her. • Owner was liable because: • 1. Children were likely to come onto the building site • 2. The sheetrock was left unattended for days • 3. It could have easily been stacked in a safer manner

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