Professional Documents
Culture Documents
McGraw-Hill/Irwin
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Chapter 10
Learning Objectives
1. 2. Develop a risk management plan using insurance Discuss the importance of property and liability insurance
3.
Explain insurance coverages and policy types available to homeowners and renters
Analyze factors that influence amount of coverage and cost of home insurance Evaluate factors that affect the cost of auto insurance
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4.
5.
An insurance company, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk
People purchase a policy. The firm assumes a risk for a fee called the premium, which the insured policyholder pays periodically
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Pure Risk
Personal risks, property risks, and liability risks are types of pure risk Insurable, chance of loss, not gain Accidental, unintentional Nature and financial loss of the risk can be predicted
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Risk Avoidance
Risk Shifting
Risk Reduction
Risk Assumption
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LIABILITY PROTECTION Liability: legal responsibility for cost of another persons losses or injuries Negligence
Failure to take ordinary, reasonable care, such as failure to supervise children in a pool
Vicarious Liability
When you are held responsible for the actions of another person, such as your child throwing a ball through a neighbors window
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Damage to or destruction of your house and other structures, plus trees, shrubs and plants Additional living expenses Personal property in or away from home Personal property floater - high value items
Medical payments coverage for minor injuries caused by you, your family members, or pets, occurring on your property or away from home Personal liability- $100,000 or more
Umbrella policy - also called a personal catastrophe policy-supplements basic personal liability coverage
$1,000,000 or more in liability coverage
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SPECIALIZED COVERAGE
Endorsements add coverage for things such as earthquake damage, or damage from floods
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RENTERS INSURANCE
Personal property loss or damage Additional living expenses Personal liability A building owners insurance usually wont cover renters personal property Many renters do not have insurance
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Replacement value Cost to repair or replace the damaged or lost item, without considering depreciation of the item May limit replacement cost to 400% of actual cash value of item Costs 10-20% more than actual cash value coverage
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see Exhibit 10-8 to see the minimum limits for financial responsibility (liability) in your state
Requires drivers to prove their ability to cover the cost of damage or injury caused by them in an automobile accident
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No-Fault Insurance
System is intended to provide fast, smooth methods of paying for damages without taking the legal action frequently necessary to determine fault
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Collision
When your car is in an accident, collision coverage pays for damage to your automobile, regardless of who is at fault If you are not at fault, your insurer will try and collect from the other drivers property damage liability first Coverage is limited to the retail value of your vehicle
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Comprehensive Physical Damage Covers damage to your vehicle that is not caused by a collision, such as...
Fire, theft or vandalism Glass breakage Hail, sand, or wind storm Falling objects or hitting an animal Some things in your car, like some radios and stereo equipment are not covered
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Driver classification Age, sex, marital status, credit history, driving record, and driving habits
Assigned risk pool for people who are unable to obtain insurance
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Premium discounts
Establish and maintain a good driving record Non-smoker Install security devices such as a car alarm If you have more than one vehicle, insure them both with the same company
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