Property and Motor Vehicle Insurance Overview

Insurance

Protection against possible financial loss.

Insurer

A firm assuming financial responsibility for losses.

Premium

Fee paid periodically for insurance coverage.

Risk

Uncertainty or unpredictability of potential loss.

Peril

Cause of a possible financial loss.

Hazard

Condition increasing likelihood of a loss.

Pure Risk

Insurable risk with potential for loss only.

Speculative Risk

Uninsurable risk with potential for loss or gain.

Risk Management

Strategy for protecting assets and individuals.

Risk Avoidance

Eliminating risk by avoiding risky activities.

Risk Reduction

Minimizing risk through safety measures.

Risk Assumption

Accepting risk, often through self-insurance.

Risk Shifting

Transferring risk to an insurance company.

Deductible

Set amount paid per loss before insurance coverage.

Liability

Legal responsibility for another's losses or injuries.

Negligence

Failure to exercise reasonable care.

Strict Liability

Responsibility for actions regardless of intent.

Vicarious Liability

Responsibility for another's actions, like a parent.

Property Damage

Physical harm to personal belongings.

Loss of Use

Inability to use property due to damage.

Homeowners Insurance

Coverage for home and personal property.

Renters Insurance

Protection for personal belongings in rented property.

Liability Insurance

Coverage for legal responsibilities to others.

House and Other Structures

Damage to or destruction of your house and garage, tool shed, gazebo, trees, shrubs, and plants

Additional living expenses

Costs incurred for living expenses when your home is uninhabitable due to damage

Personal property floater

Coverage for high value items while at home or traveling

Household inventory with documentation

A detailed list of personal property with proof of ownership

Basic Personal Liability coverage

Most homeowner's policies provide coverage of $100,000 or more for personal liability

Umbrella policy

Also called a personal catastrophe policy, it supplements basic personal liability coverage with $1,000,000 or more in liability coverage

Specialized coverage

Coverage that typically does not include losses from floods and earthquakes

National Flood Insurance Program

Makes flood insurance available to homeowners

Earthquake insurance

Can be obtained as an endorsement, addition of coverage to the homeowner's policy

Anti-Concurrent Causation Clause

Gives insurer the right to reject claims if damage is caused by multiple factors simultaneously

Renter's Insurance

Protection against financial loss due to damage or loss of personal property for renters

Home Insurance Policy Forms

Includes Special form (HO-3), Tenant's form (HO-4), Comprehensive form (HO-5), Condominium form (HO-6), and Country Home form (HO-7)

Claim Settlement Method - Actual cash value

Payment based on the current replacement cost of the damaged or lost item less depreciation

Claim Settlement Method - Replacement value

You receive the full cost to repair or replace the damaged or lost item; depreciation is not considered

Factors affecting home insurance costs

Includes location of home, type of structure, coverage amount, and policy type

Common deductibles

Typically $500 or $1,000, which can affect the cost of insurance

Home Insurance Discounts

Discounts available for alarm systems, smoke detectors, fire extinguishers, and nonsmokers

Financial responsibility law

State legislation requiring drivers to prove their ability to cover costs of damage or injury from automobile accidents

Bodily Injury Liability

Covers financial loss due to legal expenses, medical expenses, lost wages, and other expenses from injuries caused by an automobile accident

Medical Payments Coverage

Covers health care costs for persons injured in your automobile, including yourself

Uninsured Motorist Protection

Covers injuries to you and your family if your vehicle is hit by an uninsured driver

No-Fault Insurance

Allows drivers to collect damages from their own insurance companies without determining fault

Property Damage Liability

Covers damage to another person's car when you are at fault, including damage to street signs and buildings

Collision coverage

Pays for damage to your automobile regardless of who is at fault in an accident

Comprehensive Physical Damage

Covers damage to your vehicle not caused by a collision, such as fire, theft, or vandalism

Deductible example

If a broken windshield costs $250 to replace and you have a $100 deductible, the insurance company pays $150

Wage Loss Insurance

Reimburses you for salary or income lost due to injury in an automobile accident

Towing and Emergency Road Service

Covers costs for breakdowns and mechanical assistance

Amount of Coverage - Legal Concerns

Recommended coverage of $100,000/$300,000 for bodily injury liability and an additional $1,000,000 umbrella policy

Property Values

Cost of vehicles has increased; $50,000-$100,000 is suggested for property damage liability

Automobile Insurance Premium Factors

Includes automobile type, rating territory, and driver classification

Reducing Automobile Insurance Premiums

Strategies include comparing companies, maintaining a safe driving record, and increasing deductibles