Chapter 8 Assignmet

Fin 604 OL1

8/14/2018

Multiple Choice:
1. A
2. C
3. D
4. A
5. D

Discussion Questions:
1. Explain the need for property insurance.
-Property insurance includes homeowner’s insurance, renter’s insurance, automobile
insurance, and insurance on boats and other assets. The home is one of the largest
single purchases that a person makes during their lifetime, and it is often one of the
largest component’s of their net worth. Although the frequency of perils causing
financial losses to the home is small, the severity of loss is potentially large. The
automobile policy is a device used to mitigate against the risk of loss to the auto-mobile
and those involved in an automobile accident. It may be among the most expensive
aspects of owning a car for the client.

2. What are the basic, broad, and open-perils coverages provided by a homeowners policy?
- Basic-named perils: Fire, Smoke, Explosions, Lighting, Hail, Windstorm, Theft,
Vandalism, Damage from vehicles, Damage from aircraft, Riots and civil commotion,
Volcanic eruption.
- Broad named perils: Falling objects, Weight of ice, snow, or sleet; Sudden and
accidental tearing apart, cracking, burning, or bilging of a steam, hot water, air
conditioning, or automatic fire protective sprinkler system, or from within a household
appliance; Freezing of a household system, such as plumbing, heating, air conditioning,
or automatic fire sprinkler system, or of a household appliance; Accidental discharge or
overflow of water or steam; Sudden and accidental damage from artificially-generated
electrical current.
- Open perils: open perils means the insurance covers any risks that is not specifically
excluded in the policy.

5. What is a named-perils policy?

-A named-perils policy is a policy that specifically lists the covered perils in the insurance
policy.

13. What is the need for a personal umbrella policy, and what are the umbrella’s
distinguishing characteristics?
 - The personal umbrella policy is designed to provide a catastrophic layer of liability
coverage on top often individual’s homeowners and automobile insurance policies. The
need for the PUP are the insured’s earning power, and net worth. The PUP provides the
insured with a large amount of coverage at an affordable price. The coverage provided
is generally quite broad, and may even provide coverages in addition to those provided
by the under-lying policies. A PUP pays the costs, up to the face of the policy, that result
in liability. It usually provides legal defense for the insured in the event of a law suit.
And a PUP requires higher liability limits on underlying auto and homeowner
policies.

14. What are three types of property and liability loss exposures facing families and
businesses?
- Property loss exposures, which include losses to either real or personal property;
- Liability loss exposures;
- Consequential or indirect loss exposures that arise as a result of property or liability
losses.