Personal Finance Chapter 10&11
Terms in this set (16)
What does a personal umbrella policy protect you from? What is the purpose of an umbrella policy?
A personal umbrella policy protects you excessively from lawsuits and judgements generally ranging from 1-10 million dollars. a personal umbrella policy backs you up when you need a homeowner's policy greater than the standard due to possible lawsuits or judgements. It only takes into effect when you've exhausted your homeowners liability coverage or your automobile liability insurance.
Know all four basic coverages of Section I: Property Coverage and what each one of them cover.
a. Coverage A: Dwelling:
Protects the house and any attachments to it (an attached garage)
b. Coverage B: Other Structures
Other structures that aren't attached to the home (landscaping, detached garage)
c. Coverage C: Personal Property
Any personal property that's owned or used by the policyholder, regardless of the location of the property (if on vacation and something of yours is stolen)
d. Coverage D: Loss of Use
Provides benefits if your home can't be used because of an insured loss. The amount of loss of use coverage is limited to 20% of the amount of insurance on the house.
Explain what Section II: Personal Liability Coverage is and what it covers.
a. What is the minimum level of liability coverage per accident?
b. Who is covered under this type of policy?
b. Policyholder and their family members. Also covers medical expenses of anyone injured by the policyholders, their family, or by any animal they own .
What are the things that determine the cost of your homeowner's insurance?
Your insurance credit score, age, gender, and if you are married. Income
List the eight ways to keep your costs down when purchasing a homeowner's policy. Also briefly explain each one.
● high deductible discounts: the larger deductible you are willing to accept, the less you pay for insurance coverage
● security system/smoke detector discount: if you have these in your house your discounts will be from 2-5%.
● pay your insurance premiums annually: lump sum payments will also get you discounts
● Multiple Policy Discounts: If you have more than one policy with the same insurance company, some companies provide discounts (MR. ARGENTA HAS THIS)
● other discounts: fire resistant materials, homeowners over the age of 55, if you've been with a single company for an extended period of time
● consider a direct writer: a direct writer is an insurance company that distributes its products to customers without the use of agents.
● shop around: compare costs
● double-check your policy: make sure the policy you receive is the policy you ordered
The amount that you are responsible for paying before insurance coverage kicks in
What does a high insurance credit score do to your homeowner's insurance rate?
the higher the score the lower the rate of payment for your insurance
In the event of a loss or robbery, what should you do? Look on page 349 at checklist 10.3, there are five things you should do in a box at the top of the page
In the event of a loss or robbery you should
● report the loss immediately (police or credit card company),
● make temporary repairs to protect your property
● make a detailed list of everything lost or damaged
● maintain records of the insurance settlement process (all your expenses)
● and confirm the adjuster's estimate (dollar amount of the settlement)
What factors are considered when insurance companies decide on what rates to charge you for HO policies?
location of your home, type of structure, level of coverage and policy type -- also depends on your insurance credit score
Know and list all the determinants of cost for car insurance, p.354.
1. The type of automobile-more sporty or high-powered the more expensive
2. the use of your automobile-less use of car=less expensive premium
3. the driver's personal characteristics-age,sex,and marital status
4. the driver's driving record-tickets, or accidents
5. where you live-urban vs rural
6. discounts that you qualify for-for safe drivers
7. insurance credit score-use score to set rates
On page 352 there is a box: Facts of Life. In this box, a graph has the most dangerous distractions for drivers. Make sure to know these distractions.
● reading a newspaper or book
● writing a text message
● driving with no hands
● applying makeup or shaving
● talking on a cell phone
● eating a meal
On page 355 there is a box: Common Automobile Insurance Discounts. In this box, there is a list of discounts that will lower your auto insurance premiums dramatically. Make sure to be familiar with these
● Accident Free;
● Multiple Automobiles;
● Low annual mileage;
● automobile and homeowner's together;
● Low "Damageability";
● good student;
● over 50;
● defensive driving course;
● passive restraints;
● noncommuter or carpooler;
● antitheft devices
Know what age, sex, credit score would pay the least for auto insurance
Young, unmarried males pay the most for automobile insurance, because they have a higher chance of accident. 92 out of the 100 largest personal automobile insurers use some kind of credit scoring. They found that drivers with poorer insurance credit scores incurred much higher losses than were nearly twice as large for property damage. Women generally pay less than men, so logically older women over the age of 55 would pay the least amount for their car insurance because teen's rates are high due to higher chance of accident.
What is uninsured and underinsured motorist coverage? Why should you buy this form of coverage
An uninsured motorist's protection coverage is coverage against injuries caused by a hit-and-run driver or by an uninsured motorist or a negligent driver whose insurance company is insolvent. It is important to have because roughly as many as 15% of all drivers don't carry any insurance at all, and you never know when one might slam into your car. Underinsured motorist coverage, by book definition, is coverage to protect you from "negligent drivers who don't carry adequate liability insurance." so yes... logan was right.
What are the areas covered in the different parts of your Personal Automobile Policy (PAP):
a. Part A: Liability coverage- protects against loss resulting from lawsuits that might arise because of an auto accident
-can be combined single limit, where coverage applies to bodily injury and property damage liability without a separate limit for each person
- can be split-limit coverage which allows for either separately
b. Part B: Medical Expenses coverage- pays all reasonable medical and funeral expenses incurred within 3 years of an accident by policyholder, his or her family members, and other persons injured in an accident involving a covered automobile
-covers the policyholder and family regardless of whether they are in an automobile or walking on the street
-does not specify fault
c. Part C: Uninsured Motorist's Protection coverage- coverage for injuries caused by uninsured motorists, a negligent driver whose insurance company is insolvent, or a hit and run driver (15% of people have no auto insurance)
d. Part D: Damage to your automobile coverage- includes collision cost and other than collision cost or comprehensive physical damage coverage
-collision cost- portion of auto insurance covering damage resulting from accident with another vehicle or object
-other than collision loss- auto insurance coverage for non collision losses ex. car is hit in a parking lot.
-covers damage if car is hit in the parking lot or hit outside a collision
-losses are covered regardless of whose fault it is
-recommended limit is the cash value of your automobile
-premiums decline sharply as deductibles are raised
What does No-Fault Insurance pay for.
No-Fault Insurance pays is based on the idea that your insurance company should pay for your losses, regardless of who's at fault. Under no-fault insurance, if you were in an accident, your insurance company would pay for your losses and the losses suffered by your passengers, and the other driver's insurance company would pay for his or her losses. No-Fault Insurance imposes limits on medical expenses and other claims. No fault insurance is also generally less costly.