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UIUC FIN 230 - Lecture #20 Homeowners Insurance

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Today’s Lecture #20 Homeowners InsuranceDeductibleExampleDefinitionsInsuring ClauseSection I Loss Settlement (Page 676)Slide 7Homeowners Example - 1AnswersExamples of Coverage A and B ExclusionsHomeowners Example - 2Coverage C - Personal PropertyCoverage C Covered Perils ContinuedHomeowners Example - 3Special Limits on Personal Property (Page 668)Special Limits - ContinuedHomeowners Example - 4Examples of Property Not Covered Under Section C (Page 669)Homeowners Example - 5Coverage D - Loss of UseExamples of Additional Coverages (Pages 670-672)Additional Section I Exclusions (Pages 674-675)Today’s Lecture #20Homeowners InsuranceSection I - Property Coverages LimitCoverage A - Dwelling $100,000Coverage B - Other Structures 10,000Coverage C - Personal Property 50,000Coverage D - Loss of Use Actual LossSection II - Liability CoveragesCoverage E - Personal Liability 100,000Coverage F - Medical Payments 1,000to OthersDeductiblePolicy Deductible for Section I $250This deductible applies only once to each loss.Apply deductible first, then policy limits.ExampleIf $60,000 of your personal property is stolen, calculate the loss as follows:Loss 60,000Deductible 250Loss less deductible 59,750Policy limit 50,000Covered loss 50,000DefinitionsInsured means you and residents of your household who are:1. Your relatives2. Other persons under the age of 21 and in the care of any personnamed aboveInsuring ClauseCoverages A and B - Open perils - Covers all risks subject to limitations and exclusionsCoverage C - Named perilsSection I Loss Settlement(Page 676)Actual cash value, not to exceed cost of repairor replacement:Personal PropertyAwnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildingsStructures that are not buildingsSection I Loss Settlement(Page 676)Replacement Cost subject to 80% coinsuranceclause:Buildings under coverages A and BHomeowners Example - 1A fire causes damage to your house and your furniture. The amount of damages are:Replacement Cost ACVHouse 20,000 15,000Furniture 6,000 3,000How much will your Homeowners Policy pay? Assume the replacement cost of the entire house is less than $125,000.AnswersA) 18,000B) 21,000C) 23,000D) 26,000E) None of the aboveExamples of Coverage A and B Exclusions•Freezing of plumbing while dwelling is unoccupied unless you have used reasonable care to maintain heat•Vandalism and malicious mischief to dwelling vacant more than 30 days•Smog, rust or other corrosion, mold, wet or dry rot•Birds, vermin, rodents or insects•Animals owned or kept by an insuredHomeowners Example - 2You travel to China for six weeks. When you return you find that your home has been vandalized by spray paint on the walls. It costs $20,000 to repair the damage. How much will your policy pay? A) 0B) $19,750C) $20,000D) None of the aboveCoverage C - Personal Property16 Named Perils (Pages 673-674) plus Collapse (Page 671)Examples of Covered PerilsFireWindstorm or hailVehiclesVandalism and malicious mischiefCoverage C Covered PerilsContinuedTheft, unlessCommitted by an insuredIf in dwelling under constructionFrom area rented to othersProperty at other residence if not currently living there, except for a student as long as the student has been there any time within the 45 days prior to the lossHomeowners Example - 3While your son is home for Thanksgiving break, someone steals his laptop computer from his dorm room. The computer costs $2000 to replace. It had an Actual Cash Value of $750. How much will your policy pay? A) 0B) $500C) $750D) $1750E) None of the aboveSpecial Limits on Personal Property (Page 668)10% ($5000) on property usually located at an insured’s residence, other than residence premises$200 on money, gold, silver, etc.$1000 on securities, tickets, stamps$1000 on watercraft$1000 on loss by theft of jewelry, watches, furs, precious and semi-precious stones$2000 on loss by theft of firearmsSpecial Limits - Continued$2500 on silverware$2500 on property used in business while on residence premises$250 on property used in business while away from the residence premisesHomeowners Example - 4Your fishing boat is destroyed in a fire. The boat costs $5000 to replace. It had an Actual Cash Value of $2000. How much will your policy pay? A) 0B) $750C) $1000D) $1750E) None of the aboveExamples of Property Not Covered Under Section C (Page 669)•Animals, birds, fish•Motor vehicles•AircraftHomeowners Example - 5Someone steals your prize rare breed rabbit. It costs $1500 to replace your rabbit. The rabbit had an Actual Cash Value of $500. How much will your policy pay? A) 0B) $250C) $500D) $1250E) None of the aboveCoverage D - Loss of UseIf a covered loss renders the residence premises unfit to live in, policy coversAdditional living expenses orFair rental valueThis is paid for the shortest time necessary to repair of replace damage or until permanent relocation.Examples of Additional Coverages(Pages 670-672)Debris removal (could increase limit of liability by 5%)Trees, Shrubs, Plants and Lawns - Covered only for:Fire or lightning ExplosionRiot or civil commotion AircraftVehicles not owned or operated by residentVandalism or malicious mischief Theft 5% limit in total, no more than $500 per itemCredit Card, Fund Transfer Card, Forgery and Counterfeit Money$500 Limit - No DeductibleAdditional Section I Exclusions(Pages 674-675)Ordinance or lawEarth movementWater DamagePower failureNeglectWarNuclear hazardIntentional


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UIUC FIN 230 - Lecture #20 Homeowners Insurance

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