2004 mcgraw-hill ryerson ltd. kapoor dlabay hughes ahmad prepared by cyndi hornby, fanshawe college...
TRANSCRIPT
2004 McGraw-Hill Ryerson Ltd.
Kapoor Dlabay Hughes Ahmad
Prepared by Cyndi Hornby, Fanshawe College
Chapter 8Home and
Automobile Insurance
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Learning Objectives - Chapter 81. Develop a risk management plan using
insurance.2. Discuss the importance of property and
liability insurance.3. Explain the insurance coverage and policy
types available to homeowners and tenants.
4. Analyze factors that influence the amount of coverage and cost of home insurance.
5. Identify the important types of automobile insurance coverage.
6. Evaluate factors that affect the cost of automobile insurance.
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Learning Objective # 1
Develop a risk management plan using insurance.
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Insurance and Risk Management
Insurance is protection against possible financial loss.An insurance company, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk.People purchase a policy and the firm assumes a risk for a fee called the premium which the insured policyholder pays periodically. 8-4
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Types of Risk
Risk is change or uncertainty of loss.Peril is the causes of a possible loss, such as fire, windstorms, robbery, disease or death.Hazard is something that increases the likelihood of a loss, such as driving drunk, smoking in bed, or defective house wiring.Most common risks are classified as personal risks (loss of income, premature death), property risks (direct damage to assets), and liability risks (loss due to injury or harm to others) 8-5
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Risk Management Methods
Risk management is a long range, organized, planned strategy to protect your assets and familyCan reduce financial loss and improve your chances for economic, social, physical and emotional well beingPure Risk is insurable, accidental, unintentional; nature of risk can be predictedSpeculative Risk is the chance of loss or gain and is uninsurable, such as starting a small business or gambling
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RiskAvoidance
RiskShifting
RiskAssumption
RiskReductionWays to
ManageRisk
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Planning an Insurance Program
Set your insurance goals and prioritize them.Develop a plan to reach your goals.Put your plan into action.Review your results.To put your risk management plan to work ask yourself…
What should be insured?For how much?What kind of insurance?From whom?
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Learning Objective # 2
Discuss the importance of property and liability insurance.
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Potential Property LossesHomes, automobiles and other personal belonging represent a substantial financial commitmentRisk of physical damage caused by perils such as fire, wind, water or smokeRisk of loss of use of your property
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Liability Protection
Liability is legal responsibility for the financial cost of another person’s losses or injuryNegligence is the failure to do what a reasonable and prudent person would do in a given situationVicarious liability is when you are held responsible for the actions of another person.Strict liability is present when a person is held responsible for intentional or unintentional actions
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Learning Objective # 3
Explain the insurance coverage and policy types available to homeowners and tenants.
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Homeowner’s Insurance Coverage
Homeowners insurance is coverage for a place of residence and its associated financial risks.
Includes physical damage to property and the loss of use of the propertyBuildings and other structuresAdditional living expenses.Personal property.•Personal property floater.•Household inventory.
Endorsement for specialized coverages. Personal liability. 8-13
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Homeowner’s Insurance CoverageReplacement value of your home
limit of insurance purchased should reflect the cost to rebuild your home, not its current market valueappraisal, inspection by company
Homeowner’s Liability coverageprotects you and your family from financial losses resulting from legal actions against you due to damage to others and their propertyincludes the cost of legal defenseVoluntary Medical PaymentsVoluntary Property Damage 8-14
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Umbrella PolicyAlso called a personal catastrophe policy.Supplements basic personal liability coverage.$1,000,000 or more in liability coverage.
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Tenant’s Insurance
Personal property loss or damage.Personal liability.Additional livingexpenses.Landlord’s insurance usually won’t cover personal belongings. Tenant’s Legal Liability covers loss or damage to property in your care or control caused by fire, smoke, explosion or water damage. 8-16
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Home Insurance Policy Forms
Named Perilsonly those perils specifically listed in the policy are covered if a loss occurs
All Riskany event that causes loss or damage is covered unless it is specifically excluded
Different coverage types are combined in package formExtensions of coverage are available for other losses 8-17
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Learning Objective # 4
Analyze factors that influence the amount of coverage and cost of home insurance.
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DeductiblesDeductible is your share of any claim
Is a fixed amount indicated on your policy
The higher your deductible the lower your premium since insurance company is responsible for less of your lossPeople are generally more careful if the cost of being careless if higherFewer small claims means less administrative costs for insurer
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How Much Coverage Do You Need?
Determine what it would it cost to replace or rebuild your home and purchase an limit of insurance equal to this amountHave sufficient liability coverage.Include protection for specific items such as collections, cameras, and jewelry.Determine the value of the contents of your home.
Actual cash value - cost less depreciation.Replacement cost - repair or replace with new item.
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Factors That Affect Home Insurance Costs
Location of residence.Type and age of the structure.Amount of coverage and deductibles.Discounts - alarm system, smoke detector, if you insure your car with the same company.Company differences.
Compare costs and coverageCustomer satisfaction is important
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Learning Objective # 5
Identify the important types of automobile insurance coverage.
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Automobile Insurance Coverages
All provinces and territories require mandatory automobile insuranceCovers risks associated with owing, operating or using a vehicle
Liability to others for injury, death or property damageInjury, death to yourself or your passengersdamage to your vehicle
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Automobile Insurance Coverage
Bodily Injury coveragesThird Party Liability covers the risk of financial loss due to legal expenses, medical expenses, lost wages and other expenses associated with injuries, as well as property damage, caused by an accident for which you were responsible.Accident Benefits covers the cost of health care for persons injured in your automobile, including yourself.
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Automobile Insurance Coverage
Uninsured Motorist ProtectionPays for the cost of injuries if your vehicle is hit by an unidentified (unknown) or uninsured personCovers damage to your vehicle if the other driver is identified but uninsured
(
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No-Fault InsuranceFault is determined in every incident for the purpose of premium calculationEach driver collects from their own insurance company.
Medical expenses, lost wages and related injury costsDamage to your vehicle to extent you were not at fault
Intended to provide faster settlement of claims and reduce costsSystems vary from province to province 8-26
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Collision Coverage
When your car is in an accident, collision insurance pays for damage to your automobileAmount collected is limited to the actual cash value of the car at the time of the loss
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Comprehensive Physical Damage
Covers damage to your vehicle that is not caused by a collision, such as...
Fire.Theft.Vandalism.Glass breakage.Hail, or wind storm.
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Learning Objective # 6
Evaluate factors that affect the cost of automobile insurance.
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Auto Insurance Premium FactorsAutomobile type.Cost to repair or replace, safety record
Use of VehiclePleasure, business or farming
Rating territory.Accident, theft, and vandalism rates in the area where you live.
Driver classification.Age, gender, marital status, driving record, and driving habits.
Assigned risk pool for people who are considered high risk drivers 8-30
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Reducing Automobile Insurance Premiums
Find out how much it will cost to insure a car before you buy it.Compare companies Increase your deductibles.Look for discounts.
Establish and maintain a good driving record.Install security devices such as a car alarm.If you have more than one vehicle insure them both with the same company. 8-31