Eucon international university

6th Edition Insurance Planning James F. Dalton | Michael A. Dalton | Thomas P. Langdon | Joseph M. Gillice CHAPTER 8: PROPERTY AND LIABILITY INSURANCE Chapter 8 © 2018 Money Education Insurance Planning LEARNING OBJECTIVES 1. Identify personal property and liability insurance risks. 2. Differentiate among the basic homeowners insurance (HO) forms and features and explain how to evaluate and compare policies.* 3. List the general exclusions to homeowners policies. 4. List the common provisions in homeowners insurance policies. 5. Describe the automobile insurance legal environment. 6. Identify the primary components of automobile insurance and assess any potential property damage or liability exposures.* 7. Understand personal automobile policy limits. 8. Explain the role of personal and business liability insurance in comprehensive financial planning and how a personal liability umbrella policy (PLUP) and business liability insurance interacts with other property and liability insurance products.* 9. Describe the defenses to liability. 10. Identify the various business and professional property and liability insurance policies and compare them to individual policies. * CFP Board Resource Document - Student-Centered Learning Objectives based upon CFP Board Principal Topics. © 2018 Money Education Chapter 8 Insurance Planning INTRODUCTION TO PROPERTY & LIABILITY INSURANCE • This chapter introduces the three policies most commonly used to protect against personal property and liability risks. The three policies are: The homeowners insurance policy (HO) The automobile insurance policy (PAP) The personal umbrella liability insurance policy (PLUP) Chapter 8 © 2018 Money Education Insurance Planning 3 The Homeowner’s Insurance Policy Chapter 8 © 2018 Money Education Insurance Planning PERSONAL PROPERTY & LIABILITY INSURANCE (1 OF 2) • Coverage to property is on a basic, broad or open perils basis. • “Basic” Named Perils: Fire Vehicles Lightning Smoke Windstorm Vandalism Hail Explosion Riot Theft Aircraft Volcano Chapter 8 © 2018 Money Education Insurance Planning 5 PERSONAL PROPERTY & LIABILITY INSURANCE (2 OF 2) • Broad Named Perils  “Basic” Named Perils (previous slide), plus: Falling Objects Weight of ice, snow, sleet Accidental overflow of water Sudden bursting of appliances Freezing of system or appliance Damage from electrical current Chapter 8 © 2018 Money Education Insurance Planning 6 OPEN PERILS POLICY • All perils are covered except those specifically excluded. • Typical exclusions include neglect (termite damage), flood, war, etc. Chapter 8 © 2018 Money Education Insurance Planning 7 GENERAL EXCLUSIONS FOR ALL HO POLICIES • Movement of ground – Includes earthquake or landslide • Ordinance or law – Loss resulting from regulations regarding construction or demolition • Damage from water – Floods, water from underground and sewer backup • War or nuclear hazard – Including nuclear power plant • Power failure – Such as a power plant failure that causes a loss • Intentional act – Burning down your own house • Neglect – Must take reasonable means to save property and mitigate loss Chapter 8 © 2018 Money Education Insurance Planning 8 FLOOD INSURANCE • The National Flood Insurance Program provides subsidized flood insurance to property owners in qualified areas. • The coverage uses two forms: Coverage on dwellings and contents. Coverage on other types are ACV basis but replacement cost is available. • A flood policy is enforceable immediately during the first 30 days that coverage is available in a community. Chapter 8 © 2018 Money Education Insurance Planning 9 PERSONAL PROPERTY & LIABILITY INSURANCE Homeowners (HO) insurance: basic coverages • Section I Coverages: Coverage A: Dwelling Coverage B: Other structures Coverage C: Personal property Coverage D: Loss of use • Section II Coverages: Coverage E: Personal Liability Coverage F: Medical Payments to Others Chapter 8 © 2018 Money Education Insurance Planning 10 SECTION I COVERAGES: COVERAGE A • Coverage A: Dwelling Covers repair or replacement of the house, attached structures and building materials on premises. Purchase an amount equal to replacement cost (cost to rebuild) of the building. Insured must carry at least 80% of replacement cost of the building (coinsurance). Chapter 8 © 2018 Money Education Insurance Planning 11 COINSURANCE • Actual Cash Value (ACV) Represents depreciated value of the property.