COMMERCE 4FP3 Lecture Notes - Subrogation

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22 Oct 2013
Property Insurance pp 315
Property Insurance is what covers the catastrophes that happens to your home (burglary, fire)
Peril : risk/loss
Liability Insurance is insurance that covers you in case something happens on your property ( someone
falls on ice)
You should have a picture record/ or plain record of what you have in case of vandalism and theft.
Negligence: If you don’t protect others from harm, you are negligent (not salting)
Indemnity ( You can not claim for more than your loss, than what you actually lost). If you lost 10 000 in
a fire, you can’t claim 20 000. If they catch you, you get charged with fraud because you are lying*****
(This why they like to see pictures of inventories that you have)
Actual vs replacement:
Most policies nowadays use a replacement cost. You would want to be able to replace your asset. If they
reimburse you for the actual, you’re going to get 5000. If they have a replacement cost, they buy you a
new car( or a replace it ).
Subrogation (pp 318): It’s asking for the person who caused you harm, to pay for damages. Make your
insurance company, to go make a claim to their insurance company to get the money back.
Co-Insurance: It requires you to a buy a replacement of the value of what damage you have caused. (A
really good example is on page 319- at the top)
John and Mary have a 200 000 house. If they have an 80% coefficient policy. If they have paid 120 000
and the cost for 80% is is 160 000… you are UNDER insured. If you do incur a loss, you are only getting
30 000.
120 000/160 000 = 75%
40 000 x 75% = 30 000
On page 342 #2 --- there is a good problem for the above.
Section 2 Perils are from negligence--- liability coverage
Perils means risk***
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