HACE 3200 1nd Edition Lecture 21Outline of Last Lecture I. Practice ProblemsOutline of Current LectureI. Property insuranceII. Liability InsuranceCurrent Lectureo Chapter 10: Property and Liability Insurance Property insurance: coverage that protects real and personal property from catastrophic losses Liability insurance: protects against the financial consequences from the insured’s responsibility for property losses or injuries to others Peril: The cause of the “loss”- Tornado- Fire- Negligenceo Failure to act in a reasonable manner or to take necessary steps to protect others from harm Deductibles: limit what a company must pay for small losses Replacement cost: the amount necessary to repair, rebuild, or replace an asset at today’s prices Premiums: the monthly payment you must pay for your insurance coverage o Homeowner’s Insurance Policies Cover multiple perils( fire, theft, storms, faulty household systems or appliances, riot, volcanoes) Sold in six basic versions o Six Basic Packaged Homeowner’s Policies HO-1: Basic from homeowner’s insurance HO-2: Broad form homeowner’s insurance HO-3: Special form homeowner’s insurance HO-4: Renter’s or tenant’s insurance Ho_6: condominium owner’s insuranceThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. HO-8: modified coverage- older homes homeowner’s insuranceo HO-1 Basic Form Homeowner’s Insuranceo Provides the most limited coverage  $15,000 minimum coverage Covers: fire, lighting, tornadoeso HO-2: Broad form Homeowner’s Insurance Covers only named perils- Weight of snow- Freezing- Falling objects Costs about 5% to 10% more than HO-1 coverage o HO-3: Special Form Homeowner’s Insurance Covers all direct physical losses to your home- open perils protection Exceptions include floods, wars, earthquakes, and nuclear accidents Cost approximately 10% to 15% more than HO-1 coverageo HO-4 Renter’s or Tenant’s Insurance Coverage is equivalent to HO-2 perils for personal property Available only to renters and tenants Covers personal property rather than the dwelling Provides liability coverage in case an accident, causing damage to the structure, is your faulto HO-6: Condominium Owner’s Insurance Similar to HO-4 coverage, same perils for personal property as HO-2 Available to co-op and condo owners Also covers improvements you’ve made to the dwelling unito HO-8: older homes Homeowner’s Insurance Similar to HO-1 insurance, or named perils Insurances the dwelling for the repair cost or market value, instead of thereplacement value Designed specifically for older homeso Policy Coverage Sections Section I: property coverage- The loss of property Section II: Personal liability coverage- Your attorney during the law suito Section I: Property Coverage Coverage A:dwelling  Coverage B: other structures Coverage c: personal property Coverage D: loss of useo Coverage A: Dwelling Protects the dwelling and any attachments Does not cover any damager to the lando Coverage B: Other Structures Protects other, unattached, dwellings on the property Covers landscaping as well as buildings, but not the land Does not cover other structures used for business purposeso Coverage C: Personal Property Covers all personal property owned or used by the policy holder Covers personal property regardless of location( students away at college) Covers property of guests in your homeo Coverage D: Loss of Use Covers losses incurred as a result of your home being uninhabitableo Section II: Personal Liability Coverage Protects the policyholder in case someone is injured on their property Minimum level of coverage is $100,000 Medical payments to others covers small medical expenses up to $1,000 per person Does not cover business or professional liability or negligence o Auto Terms- Liability insurance: protects against the financial consequences from the insured’s responsibility for property losses r injuries ti others- Comprehensive (full overage): this term applies when your vehicle is encumbered by a loan. You must insure against liability and for the value of the vehicle itself The Personal Automobile Policy( PAP)- PAP Part A: Liability coverage- PAP Part B: Medical Expenses coverage- PAP Part C: Uninsured Motorist’s protection coverage- PAP Part D: coverage for Damage to your car- Standard exclusions- No-fault insurance PAP Part A: Liability Coverage- Covers bodily injury losses- Covers property damager losses- Can be a combined single limit or a split limit coverage- Most states require a minimum coverage- Covers losses due to a lawsuit Auto Liability Split- Coverage Insurance Limits- 100/300/50o $100,000 of bodily injury liability coverage per persono $300,000 of bodily injury liability coverage for each accidento $50,000 of property damage liability coverage  Auto-Liability Combined Single Limit Insurance- $100,000o total liability insurance- both bodily injury liability losses and property damage liability losses- in an accident, regardless of the number of people involved PAP Part B: Medical Expenses Coverage- Covers all reasonable medical costs and funeral expenses incurred, by the insured or the insured’s family members within 3 years of an accident- Recommended coverage of $50,000. o Do you think this is too low? PAP Part C: Uninsured Motorist’s Protection- Provides coverage if injured by an uninsured motorist or a hit-and-run driver- The other driver must be at fault to collect on this coverage- Also covers costs in excess of the other driver’s liability coverage, if inadequate to pay for your losses PAP Part D: Comprehensive Physical Damage Coverage- Coverso Collision losso Other than collision, or comprehensive physical damage- Collision covers regardless of fault. If the other driver was at fault and has liability you should be able to recover losses without collision coverage No-Fault Insurance- Only available in “no-fault” states- Your insurance pays for your losses and their insurance pays for their losses- no legal battles Gap Insurance Coverage that pays for the difference between the vehicle’s value and what you may still owe on the