Chapter 22 Homeowners and Auto Insurance. Risk-Management Methods Section 1Insurance and Risk Management Chapter 22 Home and Motor Vehicle Insurance Methods.

Chapter 22

Homeowners and Auto Insurance

Risk-Management Methods

Section 1 Insurance and Risk Management

Chapter

22

Home and Motor Vehicle Insurance

Methods of Risk-Management

RiskAvoidance

RiskReduction

RiskAssumption

RiskShifting

Types of Risk

Section 1 Insurance and Risk Management

Chapter

22

Home and Motor Vehicle Insurance

Personal risks, property risks,and liability risks

are insurable.

Speculative risks are not insurable.

Planning an Insurance Program

Section 1 Insurance and Risk Management

Chapter

22

Home and Motor Vehicle Insurance

1

2

3

4

Set Insurance Goals

Develop a Plan

Put Your Plan into Action

Review Your Results

Steps to Planning an Insurance Program

Chapter

22

Home and Motor Vehicle Insurance

Homeowners Policy Coverage

Property and Liability Insurance

Section 1 Insurance and Risk Management

Chapter

22

Home and Motor Vehicle Insurance

Two Types of Risks for Property Owners

Physical Damage Caused by Perils

Loss or Damage Caused by Criminal Behavior

Renters Insurance

Section 2 Home and Property Insurance

Chapter

22

Home and Motor Vehicle Insurance

Renters Insurance

Does not provide coverage on the building or other structures

Protects personal property

No coverage under the landlords policy unless the landlord is liable for damage

Inexpensive

Home Insurance Policy Forms

Section 2 Home and Property Insurance

Chapter

22

Home and Motor Vehicle Insurance

Home Insurance Cost Factors

Section 2 Home and Property Insurance

Chapter

22

Home and Motor Vehicle Insurance

Factors Affecting the Cost of Home

Insurance

Location ofHome

Type ofStructure

Price, CoverageAmount, Policy

Type

Home InsuranceDiscounts

CompanyDifferences

Many insurance companies will not want to sell homeowners insurance policies to everyone in the same neighborhood. Infer why this might be the case.

Responses might include that if a natural disaster were to occur it would be too expensive for one company to cover all the repairs and living expenses necessary for an entire neighborhood.

Section 2 Home and Property Insurance

Chapter

22

Home and Motor Vehicle Insurance

The Need for Auto Insurance

Chapter

22

Home and Motor Vehicle Insurance

Section 3 Motor Vehicle Insurance

Every state in the United States has a

financial responsibility law.

Liability

• covers you for injury to others or damage to their property

• Most states (including Michigan) require you to buy liability to legally drive

• Liability includes coverage for:– Bodily injury of another person– Damage to another persons property

The Need for Auto Insurance

Chapter

22

Home and Motor Vehicle Insurance

Section 3 Motor Vehicle Insurance

Motor Vehicle Bodily Injury Coverage

Chapter

22

Home and Motor Vehicle Insurance

Section 3 Motor Vehicle Insurance

Premiums• Your yearly premium is the amount you pay per year.• depends on coverage (bodily + property)• What is your yearly premium if you buy 100/300/50

liability coverage?

$176.80 + 89.90 = $266.70

Collision and Comprehensive Insurance

• Collision – coverage for damage to your car by an accident

• Comprehensive – coverage for fire, theft, vandalism, and weather

• Deductibles – amount you pay before the insurance company pays

• Your premium depends on your deductible (higher deductible = lower premium)

Collision and Comprehensive Insurance

Example:You buy $200-deductiable collision insurance

and $100-deductible comprehensive insurance. What is the total yearly premium?

$56.90 + $141.71 = $198.61

Premium Ratings

• Insurance premiums depend on ratings.• Your rating depends on your age, gender,

record, vehicle and the purpose for driving.• Total premium = base rating ∙

Premium Ratings

Other Motor Vehicle Insurance Coverages

Chapter

22

Home and Motor Vehicle Insurance

Section 3 Motor Vehicle Insurance

RentalReimbursement

Coverage

Wage-LossInsurance

Towing andEmergency RoadService Coverage

Motor Vehicle Insurance Costs

Chapter

22

Home and Motor Vehicle Insurance

Section 3 Motor Vehicle Insurance

Amount of Coverage

Legal Concerns

Property Values