1.
Chapter 10
Property and
Liability
Insurance

2.
Learning Objectives
1. Understand, buy, and maintain homeowner’s
insurance in a cost-effective way.
2. Recover on a liability or a loss to your property.
3. Buy the automobile insurance policy that’s right for
you.
4. File a claim on your automobile insurance.

3.
Introduction
 Need to prepare for unlikely, unlucky events.
 Property insurance allows individuals to pool the
financial risks associated with property losses—a fire,
burglary, or auto accident—to eliminate catastrophic
losses.
 Deciding how much and exactly what kind of insurance
to buy is a challenge.

4.
Protecting Your Home
 The first type of homeowner’s insurance, fire
insurance.
 The first modern homeowner’s policy was sold in
1958.
 Before, separate policies were needed for every peril.
 Peril—an event or happening, whether natural or
man-made, that causes a financial loss.

5.
Packaged Policies: HO’s
 HO’s- Home Owners
 Cover more than the home, also liability insurance
and renters.
 HO-1, HO-2, HO-3- basic policies for homeowners
 HO-4- renter’s insurance
 HO-6- condominium owners
 HO-8- older homes

6.
Packaged Policies: HO’s
 Names perils- a type of insurance that covers a
specific set of perils. Perils not named are not
covered.
 Open perils- a type of insurance that covers all perils
except those specifically noted as excluded.
 Section I- Property Insurance
 Section II- Personal liability insurance

7.
Section I: Property Coverage
 Coverage A: Dwelling
 Coverage B: Other structures
 Coverage C: Personal property
 Coverage D: Loss of use

8.
Section II: Personal Liability
Coverage
 Protects policyholder and family from financial loss if
someone is injured on their property or as a result of
their actions.
 Protects against liability suits
 Also covers medical expenses of anyone hurt by
policyholder, their family, or pet

9.
Supplemental Coverage
 Endorsement- written attachment to an insurance
policy to add or delete coverage
 Personal articles floaters
 Earthquake coverage
 Flood protection

10.
Supplemental Coverage
 Inflation Guard
 Personal Property Replacement Cost Coverage
 Added Liability Insurance- personal umbrella policy

11.
Your Insurance Needs
 How much insurance do you need?
 Need for inflation guard coverage and need for
replacement cost coverage on possessions
 Need enough insurance for full replacement in the
event of a total loss

12.
Coinsurance and the
“80-Percent Rule”
 Coinsurance provision- requirement of homeowner’s
insurance that the insured pay a portion of the claim
if he or she purchased in inadequate amount of
insurance (less than 80% of replacement cost).
 80-percent rule- homeowner’s insurance rule that the
replacement cost coverage is in effect only if the
home is insured for at least 80% of its replacement
cost.

13.
The Bottom Line
 How much homeowner’s insurance do you need?
 Needs some thought and foresight
 Assets and possessions are always changing so are
your insurance needs
 Revisit your insurance needs from time to time

14.
Keeping Your Costs Down –
Insurance Credit Scoring
 Insurance credit score- based on the same
information as your traditional credit score, used in
determining what your home and auto insurance rates
will be
 The lower your insurance credit score, the higher
your rates will be.
 Manage your insurance credit score to keep your
costs of insurance down.

15.
Keeping Your Costs Down –
Discounts and Savings
 Location of your home
 Type of structure
 Level of coverage and policy type
 Keep costs down by selecting a financially sound
insurer with low comparative rates.

16.
Keeping Your Costs Down –
Discounts and Savings
 High deductible discounts
 Security system/smoke detector discounts
 Multiple policy discounts
 Pay your insurance premiums annually
 Other discounts
 Consider a direct writer
 Shop around
 Double-check your policy

17.
Making Your Coverage Work
 Establish proof of ownership and value assets in
detailed inventory or videotape.
 Insurance companies have inventory worksheets.
 Include date of purchase, cost, model, brand, and
serial number for each item.
 Follow basic steps to collect on a loss.

18.
Automobile Insurance
 Personal Automobile Policy (PAP)- standardized policy
for an individual or family
 Part A: Liability Coverage
 Part B: Medical Expenses Coverage
 Part C: Uninsured Motorist’s Protection Coverage
 Part D: Damage to Your Automobile Coverage

19.
Personal Automobile Policy
(PAP)
 PAP Part A: Liability Coverage
 Combined single limit
 Split-limit coverage
 PAP Part B: Medical Expenses Coverage
 PAP Part C: Uninsured Motorist’s Protection Coverage
 PAP Part D: Damage to Your Automobile Coverage
 Collision loss
 Other than collision loss or comprehensive physical
damage coverage

20.
Personal Automobile Policy
(PAP)
Standard exclusions- not covered:
 intentional injury or damage
 using a vehicle without owner’s consent
 using vehicle with fewer than four wheels
 using another person’s vehicle regularly
 using own vehicle but not listed on policy
 carrying passengers for a fee
 driving in a race or speed contest

21.
No-Fault Insurance
 Type of auto insurance in which your insurance
company protects you in the case of an accident
regardless of who is at fault.
 Over half the states have no-fault system.
 Imposes limits on medical expenses and other claims
which may not be enough to cover all medical
expenses.

22.
Determinants of the Cost of
Automobile Insurance
 Type of automobile
 Use of automobile
 Driver’s personal characteristics
 Driver’s driving record
 Where you live
 Discounts that you qualify for
 Insurance credit score

23.
Keeping Your Costs Down
 Shop comparatively
 Consider only high quality insurers
 Take advantage of discounts
 Buy a car that is relatively inexpensive to insure
 Improve your driving record
 Raise your deductibles
 Keep adequate liability insurance

24.
Filing a Claim
1. Get help for the injured.
2. Move car to a safe place.
3. Get identification of witnesses.
4. Cooperate with police.
5. Take a test for alcohol if you believe the other
driver is under the influence.
6. Write down your recollection of accident.

25.
Filing a Claim
7. Don’t sign anything or admit guilt.
8. Get a copy of the police report and make sure it is
accurate.
9. Call your insurance agent as soon as possible.
10. Cooperate with your insurer.
11. Keep records of all expenditures associated with the
accident.
12. If a serious accident, then meet with a lawyer to
know your rights.

26.
Summary
 There are six standardized HO’s with different types
and level of insurance for homeowners and renters
 HO’s have property insurance (Section I) and liability
coverage (Section II)
 Have enough homeowner’s insurance for full
replacement in complete loss

27.
Summary
 Have an detailed asset inventory to provide effective
protection
 With an automobile insurance policy, there’s
protection against bodily injury and against property
damage all divided up in four parts
 Age, sex, driving record, and the insurance credit
score affect the cost of automobile insurance so do
deductibles, and discounts