Objective 08.02 Interpret the nature, theory, and different types of insurance

1. Objective 08.02Interpret the nature, theory, and different types of insurance PROPERTY AND CASUALTY & OTHER INSURANCES

2. Property/Casualty Insurance • Types of policies : • Fire policies • Renter’s policies • Homeowner’s policies • *Supplemental - marine insurance

3. 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

4. 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.

5. 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

6. 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.

7. 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

8. 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

9. 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

10. 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

11. 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.

12. 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

13. FLOOD & EARTHQUAKE • NOT COVERED UNDER HO POLICY • Must buy separate flood insurance coverage • Must buy separate earthquake coverage

14. 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.

15. 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.

16. 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.

17. 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.

18. 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.