FIN 2081 Chapter Notes - Chapter 8: Home Insurance, Vehicle Insurance, Property Insurance
Chapter 8 - Home and Automobile Insurance
What is Insurance?
Insurance is protection againsta possible financial loss.
It provides protection against many risks, such as unexpected property loss, illness, and injury.
Types of Risks
Peril is anything that may possibly cause a loss.
People buy policies for protection against a wide range of perils, including fire, windstorms, explosions, robbery,
and accidents.
Hazard is anything that increases the likelihood of loss through some peril.
For example, defective house wiring is a hazard that increases the chance that a fire will start.
Negligence is the failure to take ordinary or reasonable care to prevent accidents from happening.
Risk Shifting
The most common method of dealing with risk is ot shift it.
That means to transfer it to an insurance companyin exchange for the fee you pay, the insurance company agrees to
pay for your losses.
Property and Liability Insurance in Your Financial Planning
Think of the price you pay for home and motor vehicle insurance as an investment in protecting your most valuable
possessions.
The cost of such insurance may be high but the financial losses from the events it protects from are much higher.
Two main types of risk are related to your home and your car or other vehicle.
One is the risk of damage to or loss of your property.
The second type involves your responsibility for injuries to other people or damage to their property.
Potential Property Losses
The first is physical damage caused by perils such as fire, wind, water and smoke. These perils can damage
or destroy property.
For example, a windstorm might cause a large tree branch to smash the windshield of your car. You would have
to find another way to get around while it is being repaired.
The second type of risks is loss or damage caused by criminal behaviour such as robbery, burglary,
vandalism, and arson.
Liability Protection
Liability is legal responsibility for the financial cost of another person's losses or injuries.
Home and Property Insurance
Homeowner's insurance is coverage for your place of residence and its associated financial risks, such as damage
to personal property and injuries to others.
Homeowner's Insurance Coverages
The building in which you live and any other structures on the property.
Detached structures on your property, such as a garage or toolshed, are also covered. Homeowner's coverage
even includes trees, shrubs, and plants.
Additional living expense.
If a fire or other even damages your home, additional living expensee coverage pays for you to stay somewhere
else.
Personal Property.
Household inventory is a list or other documentation of personal belongings, with purchase dates and cost
information.
A personal property floater is additional property insurance that covers the damage or loss of a specific item of
high value.
The insurance company will require a detailed description of the item and its worth. You'll also need to have
the item appraise, or evaluated by an expert, from time to time to make sure that its value hasn't changed.
Personal liability and related coverage.
An umbrella policy, also called personal catastrophe policy, supplements your basic personal liability coverage.
Document Summary
It provides protection against many risks, such as unexpected property loss, illness, and injury. Peril is anything that may possibly cause a loss. People buy policies for protection against a wide range of perils, including re, windstorms, explosions, robbery, and accidents. Hazard is anything that increases the likelihood of loss through some peril. For example, defective house wiring is a hazard that increases the chance that a re will start. Negligence is the failure to take ordinary or reasonable care to prevent accidents from happening. The most common method of dealing with risk is ot shift it. That means to transfer it to an insurance companyin exchange for the fee you pay, the insurance company agrees to pay for your losses. Property and liability insurance in your financial planning. Think of the price you pay for home and motor vehicle insurance as an investment in protecting your most valuable possessions.
