Intro To Insurance - Property and Casualty Insurance PDF

Intro To Insurance: Property And Casualty Insurance
By Cathy Pareto
Property and casualty insurance is insurance that protects against property
losses to your business, home or car and/or against legal liability that may result
from injury or damage to the property of others. This type of insurance can
protect a person or a business with an interest in the insured physical property
against losses. Let's examine some of the things to look for in the different types
of property/casualty insurance. (For background reading, see Do You Need
Casualty Insurance?)
Auto Insurance
Coverage: An auto insurance policy typically covers you and your

spouse, relatives who live in your home and other licensed drivers to
whom you give permission to drive your car. The policy is "package
protection", which provides coverage for both bodily injury and property
damage liability as well as physical damage to your vehicle. This damage
can include both that caused by the collision and damage cause by
things "other than collision", such as flood, fire, wind, hail, etc. (For more
insight, read Shopping For Car Insurance.)
Common Types of Coverage: Auto insurance typically covers personal

injury (PIP), medical payments, uninsured motorist, underinsured
motorist, auto rental, emergency road assistance and other damages to
your car not caused by a collision such as flood, fire and vandalism.
Other coverage is available, too.
Deductible: The deductible is the amount that you will pay out of pocket
when you file a claim. Typically, the higher the deductible, the lower your
premiums.
Insurance Rates: How much you pay will depends on many factors,
including your driving record, the value of your vehicle, where you drive,
how much you drive, your marital status, your desired coverage, your
age, sex and even your credit history. (For tips on reducing your rates,
see 12 Car Insurance Cost Cutters.)
Homeowners Insurance
Our homes and their contents are our greatest assets. That is why it is so
imperative that we protect their value. Homeowners insurance helps us achieve
that goal. Let's break down the different concepts that encompass this area.
(For background reading, see Beginners' Guide To Homeowners Insurance.)
Coverage: Homeowners insurance typically covers the dwelling (the

structure), personal property and contents, and some forms of personal
liability. The policy may cover direct and consequential loss resulting
from damage to the property itself, loss or damage to personal property,
and liability for unintentional acts arising out of the non-business, nonautomobile activities of the insured and members of that insured's
household.
Types of Insurance: Are you ready to decipher the codes? There are
six standard forms of homeowners insurance containing personal
property coverage. (For more insight, see 9 Things You Need To Know
About Homeowners Insurance.)
1. HO 00 02 (Homeowners 2, Broad Form)

: This form of insurance provides broad form coverage on your dwelling and
other structures and insures against loss of use. To be specific, the broad form
of coverage insures against windstorm, hail, aircraft, riot, vandalism, vehicles,
volcanic, explosion, smoke, fire, lightening and theft , plus rupture of a system,
artificially generated electricity, falling objects and freezing of plumbing.
HO 00 03 (Homeowners 3, Special Form): This "special form" insurance

offers coverage for more causes of loss than the HO 00 02.
HO 00 04 (Homewoners 4, Contents Broad Form): This is a renter's policy.

Even if you don't own your home, you should consider having this type of
insurance. Your landlord's insurance will not cover damage to your personal
property or liability against you. Think about how much it will cost to replace all
of your furniture, clothing etc. If you feel this isn't a loss you could bear, consider
buying this type of insurance. (To learn more, readInsurance 101 For Renters.)
HO 00 05 (Homeowners 5, Comprehensive Form): This type of policy

essentially combines the HO 00 03 form with the HO 00 05 endorsementinto
one comprehensive form to provide open perils coverage on personal property
in addition to the dwelling, other structures and loss of use. The HO 00 05 rider
can only be combined with an HO 00 03 policy.
HO 00 06 (Homeowners 6, Unit Owners Form) : This is a condominium

policy. This type of policy is different from a homeowners insurance policy in
that it is designed for individuals who live in a unit structure owned and insured
by a condo association, townhouse association cooperative, homeowner's
association, planned community or other similar type of organization. The
insurance the association provides only covers the outside dwelling, not the
contents of your unit, so it's important to consider purchasing this type of
insurance to protect against personal property losses and liability. (For more on
condos, read Does Condo Life Suit You?)
HO 00 08 (Homeowners 8, Modified Coverage Form): This form of insurance

settles losses on an actual cash value basis and is usually only used to cover
older structures where the cost of replacement far exceeds the value of the
structure. This type of insurance is offered when insurers are not willing to offer
HO 00 02, 03 or 05 coverage because there may be an incentive to intentionally
destroy the structure.Now let's take a look at what is usually not covered under
these types of insurance. These are known as "exclusions", but you may be
able to get coverage in these areas with a rider or umbrella policy. Your
individual policy may exclude more items than listed below, so consult with your
agent.
1. Ordinance or Law: If the dwelling does not comply with local building
codes, the insurer will not be liable for the cost of construction to bring
the structure up to code.
2. Earth Movements: This includes two distinct types of earth movements,

including shifting earth (landslides) in the foundation of a home and
earthquakes. These may be considered two separate coverage areas, so
being covered for one may not mean being covered for the other.
3. Water Damage: This includes flood, water backing up in sewers or

drains, water seeping through basement walls etc.
4. Neglect: This excludes losses resulting from direct or indirect neglect and
failure to use reasonable means to protect property.
5. War: Damage caused by any type of war or nuclear weapons attack.
6. Nuclear Hazard: This defined as any nuclear reaction, radiation, or

radioactive contamination, (whether controlled or uncontrolled). Any loss
caused by nuclear hazard as it is defined will not be considered loss
caused by fire, explosion, or smoke, even if these perils are specifically
named in your policy.
7. Intentional Loss: Any damage intentionally done to one's own property is

excluded for obvious reasons.
As with any type of insurance, it is critical that you read the insurance policy so
that you know exactly what it will cover. The amount of coverage you should
consider should be based on the replacement cost value of your home or
property. Replacement costs on one's dwelling provides that if, at the time of
loss, the amount of insurance covers at least 80% of the replacement cost of
the dwelling, the loss will be paid on a replacement cost basis. Keep in mind
that this still leaves the homeowner on the hook for the remaining 20% in the
event of a total loss.
Oftentimes, the bank or institution holding your mortgage will require that you
maintain a specific amount of coverage. However, even if your home is paid off,
you should still consider having the appropriate amount of insurance protection,
which might include coverage for physical damage as well as liability protection
for the owners.
Other Considerations
Depending on where you live and given the unpredictability of nature,
specifically the weather, you should consider other types of insurance to protect
your property. For example:
Flood Insurance
Flood insurance is becoming more and more popular as places that normally
would not experience floods are suddenly finding themselves suffering losses
as a result of extreme weather. To the surprise of many of these homeowners,
their regular homeowners insurance policy did not cover against flood. This is a
separate type of coverage that you will have to purchase if you consider flood to
be a risk for your business or property.
If you live in a flood-prone area and you have a mortgage, the lender will require
you to purchase adequate coverage to insure the property. If you own the
property, you can elect to self-insure and not buy insurance, but you have to
remember that any damage caused as a result of flooding will be your financial
responsibility. The cost of this kind of damage can run from the hundreds to
thousands of dollars, so it's worth considering purchasing the insurance to

transfer this risk, especially, if you live in a flood zone. If you don't live in a floodprone area, you may qualify for a discounted rate, which means a lower
premium for you.
Windstorm Insurance
Like flood insurance, windstorm insurance is a separate type of coverage that
protects your home or business against wind damage. Wind damage may result
from items flying and destroying your property as a result of a hurricane, hail,
snow, sand or dust.Coverage for windstorm may be limited in states prone to
hurricane and tornadoes. If you live in a state like Florida, Louisiana, Texas or
the Carolinas, which are frequently barraged by tropical storms or hurricanes,
this should be an integral part of your asset protection planning. Consult with
your agent or broker for more details on this type of coverage.
Umbrella Liability Policies
Umbrella insurance helps you protect your assets if you are sued. If you are
worried that the liability insurance coverage you have through your auto or
property policies is still not enough, you can consider adding an umbrella policy.
An umbrella policy is basically an additional policy that kicks in when your other
insurance policies have reached their limits. The amount of coverage and types
of coverage offered by these policies varies, as will their premiums. You can tag
on an umbrella policy to your homeowners or auto insurance policy to protect
your assets against liability or lawsuits. (For background reading, see Cover
Your Company With Liability Insurance and Filling The Gaps In General Liability
Insurance.)
Certain exclusions apply, including:
Owned or leased aircraft or watercraft
Business pursuits
Professional services
Any act committed by the insured with the intent to cause personal injury
or property damage
Umbrella policies are fairly inexpensive to acquire, and coverage ranges from
$1 million to $ 5 million or more. You might expect to pay between $200 to $500
for $1 million in coverage. There is no specific "umbrella deductible". Because

an umbrella policy is written on top of any auto or personal property coverage
you have, the benefit does not kick in until you satisfy the deductible on those
policies and have used up the coverage from either the auto or property policy.
Homeowners Tips
Homeowners insurance is a critical component of anyone's risk management
planning. There may always be a threat of property loss from fire, theft or bad
weather. Having an accurate home inventory of your possessions can make
settlement claims a lot easier and faster. Insurance agents suggest that all
homeowners keep receipts, descriptions, photos or video of the items they own.
Once your list and evidence of ownership is itemized, store this in a safety
deposit box or other safe location outside of your home, along with a copy of
your policy.

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Intro To Insurance: Property And Casualty Insurance

Coverage: An auto insurance policy typically covers you and your

Common Types of Coverage: Auto insurance typically covers personal

Coverage: Homeowners insurance typically covers the dwelling (the

1. HO 00 02 (Homeowners 2, Broad Form)

HO 00 03 (Homeowners 3, Special Form): This "special form" insurance

HO 00 04 (Homewoners 4, Contents Broad Form): This is a renter's policy.

HO 00 05 (Homeowners 5, Comprehensive Form): This type of policy

HO 00 06 (Homeowners 6, Unit Owners Form) : This is a condominium

HO 00 08 (Homeowners 8, Modified Coverage Form): This form of insurance

2. Earth Movements: This includes two distinct types of earth movements,

3. Water Damage: This includes flood, water backing up in sewers or

5. War: Damage caused by any type of war or nuclear weapons attack.

6. Nuclear Hazard: This defined as any nuclear reaction, radiation, or

7. Intentional Loss: Any damage intentionally done to one's own property is

thousands of dollars, so it's worth considering purchasing the insurance to

Owned or leased aircraft or watercraft

for $1 million in coverage. There is no specific "umbrella deductible". Because

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