Insurance Essay

2060 words - 9 pages

Lecture 2
PROPERTY INSURANCE
1. IDENTIFYING HOME AND PROPERTY PROTECTION
2. UNDERSTANDING PROPERTY INSURANCE POLICIES
3. PURCHASING PROPERTY INSURANCE

1. IDENTIFYING HOME AND PROPERTY PROTECTION
A large portion of people's earnings is spent acquiring various kinds of property. People buy clothes, dishes, toys, and other inexpensive items. These items are sometimes stolen, broken, or misplaced, usually with relatively minor economic consequences. However, people also spend money to buy expensive jewelry, furniture, sound equipment, cameras, and houses. If something happens to one of these things the economic loss could be very large.
Property insurance is designed to ...view middle of the document...

You may have to move into a hotel, motel, or furnished apartment while your home is being repaired. Insurance for additional living expenses will help to pay for the expenses you would incur if something happened to your home.
Liability Protection
The third kind of loss, liability loss, is protected by personal liability coverage. Personal liability coverage protects you from claims arising from injuries to other people or damage to other people's property caused by you, your family, or your pets. If a neighbor trips on your sidewalk and you are shown to be at fault, personal liability coverage will pay for any medical and legal costs up to a stated limit. If a child damages a car in an adjacent driveway with her tricycle, claims will be paid through the provisions in the policy of the child's family that covers liability for physical damage to the property of others.
These kinds of events may seem remote and rather trivial but often court awards to those who suffer the damage or injury are neither remote nor trivial. In fact, these awards (and consequently premiums) are increasing so quickly that the insurance industry often refers to it as the insurance liability crisis. Awards to injured people for millions of dollars are not uncommon. It is vitally important that everyone have some form of liability protection from economic loss.
2. UNDERSTANDING PROPERTY INSURANCE POLICIES
When considering the purchase of property insurance, you must first decide what should be insured and against what perils it should be insured. Perils are the causes of loss, such as fire, wind, or theft. Property permanently attached to land, such as a house or garage, is known as real property. Property not attached to the land, such as furniture or clothing, is known as personal property. Real and personal property may be protected by individual policies or by a combination homeowners policy. If you are a renter, there are also special policies that will cover your property.
Individual Policies
A property owner can buy separate policies that insure against certain perils. For example, a standard fire policy insures against losses caused by fire or lightning. Extended coverage can be included in a standard fire policy. This expands the coverage to include damage caused by perils such as wind, hail, smoke, and falling aircraft, among other things.
Policies also may be purchased separately for damage caused by flood in a flood-prone area. It is also possible to purchase insurance against economic losses caused by earthquakes. Neither of these two perils is typically covered in other policies. The advantage of purchasing separate policies is that the combination of policies purchased can be fitted to individual needs.
Homeowners Policies
The most common form of home and property insurance policy sold today is a homeowners policy. The homeowners policy is a very convenient package-type insurance policy designed to fit the needs of most homeowners wishing to insure...

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