Chapter 8: Home and Automobile Insurance Flashcards
What is insurance?
Insurance is protection against possible financial loss. It involves purchasing a policy and paying a premium to an insurer (insurance company). The insured is the person covered.
What are the three main types of risk?
1) Personal risk
2) Property risk
3) Liability risk
What’s the difference between pure and speculative risk?
Pure risk = only chance of loss (insurable)
Speculative risk = chance of loss or gain (not insurable)
What are common property risks?
- Damage to property (fire, wind, theft, etc.)
- Loss of use
- Liability for injuries/damages to others
What is liability and how does it relate to insurance?
Liability is your legal responsibility for another person’s loss or injury. Insurance helps cover these costs. Negligence, strict liability, and vicarious liability are all relevant terms.
What does homeowner’s insurance typically cover?
- Buildings and structures
- Additional living expenses
- Personal property
- Personal liability
- Endorsements for specific items
- Household inventory
Replacement value vs. depreciated value – what’s the difference?
Replacement value = cost to rebuild/replace with new
Depreciated value = reduced value due to age/wear
What is an umbrella policy?
Extra liability coverage that supplements basic insurance, often with limits of $1,000,000 or more.
What is tenant’s insurance?
Protects renters against:
- Personal property loss
- Liability
- Additional living expenses
- Landlord’s insurance doesn’t cover tenant belongings.
What’s the difference between Named Perils and All Risk policies?
Named Perils: Only listed risks are covered
All Risk: Everything covered unless specifically excluded
What factors influence home insurance costs?
- Location, age, and type of home
- Replacement value
- Deductibles and coverage amount
- Security features (alarms, etc.)
- Discounts and insurer differences
What is a deductible in insurance?
Your share of the claim amount. Higher deductibles usually mean lower premiums.
What types of automobile insurance coverage are there?
- Third-party liability
- Accident benefits
- Uninsured motorist protection
- Collision
- Comprehensive
- Optional coverages: towing, road service, waiver of depreciation
What does “no fault” insurance mean?
You deal with your own insurer regardless of who caused the accident (for faster settlement). Fault is still determined for premium purposes.
What does bodily injury liability cover?
Legal/medical expenses if you’re responsible for someone’s injury or death.
What is accident benefits coverage?
Covers medical expenses for you and passengers after an accident.
What is uninsured motorist protection?
Covers you if you’re injured by a driver who is uninsured or unidentified (up to $200,000).
What is the difference between collision and comprehensive insurance?
Collision: Covers your car after an accident
Comprehensive: Covers non-collision events like fire, theft, vandalism, weather
What factors affect automobile insurance costs?
- Type of car
- Where you live
- Use of vehicle
- Driving record
- Coverage limits and deductibles
- Discounts (multi-car, alarms, etc.)
