Chapter 10: Property and Motor Vehicle Insurance

peril

The cause of a possible loss.

hazard

A factor that increases the likelihood of loss through some peril.

pure risk

A risk in which there is only a chance of loss; also called insurable risk.

speculative risk

A risk in which there is a chance of either loss or gain.

Step 1 to your personal insurance program

Insurance goals

Step 2 to your personal insurance program

Develop a plan to reach goals

Step 3 to your personal insurance program

Put into action

Step 4 to your personal insurance program

Check results

strict liability

A situation in which a person is held responsible for intentional or unintentional actions.

vicarious liability

A situation in which a person is held legally responsible for the actions of another person.

personal property floater

Additional property insurance to cover the damage or loss of a specific item of high value.

umbrella policy

Supplementary personal liability coverage; also called a personal catastrophe policy.

Renters insurance

Only about 4 out of 10 renters are covered

coinsurance clause

A policy provision that requires a homeowner to pay for part of the losses if the property is not insured for the specified percentage of the replacement value.

actual cash value (ACV)

A claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation.

financial responsibility law

State legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident.

bodily injury liability

Coverage for the risk of financial loss due to legal expenses, medical costs, lost wages, and other expenses associated with injuries caused by an automobile accident for which the insured was responsible.

uninsured motorist protection

Automobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver with inadequate insurance or by a hit-and-run driver.

no-fault system

An automobile insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

property damage liability

Automobile insurance coverage that protects a person against financial loss when that person damages the property of others.

comprehensive physical damage

Automobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collision, such as fire, theft, glass breakage, hail, or vandalism.

rating territory

The place of residence used to determine a person’s automobile insurance premium.

driver classification

A category based on the driver’s age, sex, marital status, driving record, and driving habits; used to determine automobile insurance rates.

the following risks are covered by homeowner's insurance

• Coverage for the financial risks of damage to personal property

• Coverage for your place of residence

• Coverage for the financial risks associated with injuries to others

The goals of insurance include:

• minimizing personal risks.

• minimizing liability risks.

• minimizing property risks.

The main types of risks related to a home and an automobile are

• damage or loss to your property

• your responsibility for injuries to others

• your responsibility for damage to the property of others

what best defines homeowner's insurance?

coverage for your residence and its financial risks

The main bodily injury coverages are

• uninsured motorist's protection.

• medical payments coverage.

• bodily injury liability.

Most of the money automobile insurance companies pay in claims goes for

• medical expenses

• legal expenses

• other costs that arise when someone is injured

the following are covered by renter's insurance

• personal property

• personal liability

• additional living expenses

What are some ways of reducing premiums on automobile insurance?

• Comparison shopping for automobile insurance

• Maintaining a safe driving record

• Completing driver training

• Installing security devices

The main bodily injury coverages are:

• medical payments coverage.

• uninsured motorist's protection.

• bodily injury liability.

Most of the money automobile insurance companies pay in claims goes for

• legal expenses

• medical expenses

• other costs that arise when someone is injured