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INS – 22 Personal Insurance
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Chapter 01 – Overview of Personal Insurance
Personal Insurance covers losses to individuals and
families due to death, illness, injury, disability and
unemployment.
Loss exposure presents the possibility of financial
loss, whether or not loss occurs.
Cause of loss: Means by which property is damaged
or destroyed (fire, windstorm etc). This is also called
as Peril
.
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Chapter 01 – Overview of Personal Insurance
Elements of Property loss exposures
Property exposed to loss
Real property – land, building and other structures embedded in
it or attached to it. E.g.: Underground pipes, foundations, storage
shed, and detached garage.
Personal Property – tangible / intangible property that is not real
property. E.g. Patent, Copyright, Coins
Possible causes of loss – means by which property is
damaged/destroyed (perils)
Financial consequences of loss
Reduction in value of property: preloss value – postloss value
Increased expenses – in addition to normal living expenses
Lost income
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Chapter 01 – Overview of Personal Insurance
Classification of personal property (Tangible
and Intangible) Dwelling contents:
Broadest category of personal property
Common to the use of dwelling as a home
Items generally insured as a group
High-value personal property:
Silverware, jewellery, furs and firearms
Can be partially covered under dwelling contents, however might
require separate category because of limitations on coverageamount.
To keep premium reasonable for the average customer, might have
to pay additional premium to insure such property
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Chapter 01 – Overview of Personal Insurance
Classification of personal property Property with unusual or intrinsic value:
Value comes from its unique characteristics
Antiques, work of art, coin or stamp collections
Value is established by appraisal at the time of purchase of insurance
Business personal property
Office furniture, computer equipment for business purpose.
Additional coverage might be necessary for this exposure
Motor vehicles, trailers, watercraft and aircraft Present unique loss exposures – should be separately insured.
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Chapter 01 – Overview of Personal Insurance
Liability Loss Exposures
Elements of Liability loss exposures
Liability loss is a claim for money damages because of injury to another
party or its property.
Claims are governed by civil law – the legal foundation of insurance. Financial consequences that might occur
Cost of investigation and defense
Money damages awarded if defense is unsuccessful
Civil law deals with rights and duties of citizens regarding one another.
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Chapter 01 – Overview of Personal Insurance
Types of claims
Tort L iabi l i ty
Con tractual Liabi l ity
Statuto ry Liabi l ity
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Chapter 01 – Overview of Personal Insurance
Types of claims Tort Liability:
Tort – a wrongful act other than a crime or breach of
contract. Negligence – failure to act in a reasonably prudent manner
A duty to act
Breach of duty
Injury or damage
Breach of duty – the direct cause of injury/damage
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Chapter 01 – Overview of Personal Insurance
Types of claims Tort Liability:
Tort – a wrongful act other than a crime or breach of
contract. Intentional torts – regardless of whether harm is intended –
deliberate act
Libel – written or printed untrue statement
Slander – oral untrue statement
Assault – intentional and unlawful threat of bodily harm Battery – unlawful physical contact
Trespass – unauthorized possession or use of land.
Nuisance – violation of a person’s right to enjoy use of property
without disruption from outside sources
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Chapter 01 – Overview of Personal Insurance
Types of claims Tort Liability:
Tort – a wrongful act other than a crime or breach of
contract. Absolute liability- dangerous activities/defective products, regardless
of degree of care, it does not require proof of negligence.
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Chapter 01 – Overview of Personal Insurance
Types of claims
Contractual Liability
Liability assumed under any contract
Breach of warranty
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Chapter 01 – Overview of Personal Insurance
Types of claims
Statutory Liability
No- fault auto laws
Workers compensation laws
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Chapter 01 – Overview of Personal Insurance
Risk Management
Carrying out decisions that will decrease the adverse
effects of potential losses is risk management.
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Chapter 01 – Overview of Personal Insurance
Basics of Personal Risk Management (risk
management applied to loss exposures of individuals
and families)It involves the following steps:
Identifying loss exposures
Analyzing loss exposures
Examining various techniques
Choosing the appropriate technique
Implementing the chosen technique
Monitoring and revising the plan.
Errors and omissions: Negligent act (error) or failure to act (omission) while
conducting insurance business. – Can lead to legal liability of damages
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Chapter 01 – Overview of Personal Insurance
Techniques to treat loss exposures Loss Control
Loss prevention: control frequency of loss
Loss reduction: controls severity of loss
Avoidance: by choosing not to own a particular property or engage in
particular activity
Noninsurance Transfer: transfers loss from one party to another party
that is not an insurer.
Retention: no transfer of loss exposures to insurance company or
anyone else.
Intentional Unintentional.
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Chapter 01 – Overview of Personal Insurance
Types of Personal Insurance Policies
Package policy includes two or more lines
of insurance.
Examples: Homeowners, Personal Auto
Policy, Life and Health