Madisen Norton 2nd Period

Chapter 10 Review Questions

1. Itemize and describe the differences among the six basic types of standardized homeowner's policies. Which of the first three policy types is the most comprehensive? HO-1 provides such very narrow coverage that is isnt available in most states. HO-2 a named perils form of insurance. It covers a set of named perils, such as fire, lightning, windstorm, and so on, If a peril isnt specifically named in this policy, it isnt covered. Typically costs 5 to 10 percent more than HO-1 coverage. HO-3 Covers all direct physical losses to your home. It offers open perils protection, meaning it covers all perils except those specifically excluded. Excluded perils might include flood, earthquake, war and nuclear accident. Typically costs 10 to 15 percent more than an HO-1 policy. HO-4 Aimed at renters or tenants and covers personal belongings, but does not include liability insurance. HO-6 provides personal property and liability insurance for co-op or condominium owners. HO-8 designed for older homes, insuring them for repair costs or actual cash value rather than replacement cost. The most comprehensive is HO2 because it goes by the list exactly. 5. Should homeowners consider purchasing an umbrella policy? Why or why not? What exclusions apply? Homeowners should consider purchasing an umbrella policy because it is a homeowners policy that provides excess liability insurance with protection against lawsuits and judgments generally ranging from $1 million to $10 million 6. What is meant by the 80 percent rule as it applies to the purchase of homeowner's insurance to protect the dwelling? The 80 percent rule is a homeowners insurance rule stating that the replacement cost coverage is in effect only if the home is insured for at least 80 percent of its replacement cost. This rule is intended to discourage homeowners from insuring for less than the replacement cost of their homes. 8. Explain why insurance companies use a customer's insurance credit score when calculating insurance premiums. What are the five steps you can take to improve your score and keep premiums down? They do this to help them identify customers who are most likely to make claims. To improve your score and keep premiums down you can first start by selecting a financially sound insurers with low comparative costs. Then take advantage of as many discounts as possible.

9. Describe the four parts of a standardized personal auto policy (PAP). Part A: Liability Coverage. This coverage provides protection for you if youre legally liable for bodily injury and property damage caused by your automobile. It includes payment for any judgment awarded, court costs, and legal defense fees. Part B: Medical Expense Coverage. This coverage pays medical bills and funderal expenses, with limits per person for you and your passengers. Part C: Uninsured Motorists Protection Coverage. This coverage is required in many states and protects you by covering bodily injury (and property damage in a few states) caused by drivers without liability insurance. Part D: Damage To Your Automobile Cover. This coverage is also known as collision or comprehensive insurance, and provides coverage for theft of your auto or for damage from almost any peril other than collision. 15. What is the difference between uninsured motorists coverage and underinsured motorists coverage? Uninsured motorists covers against injuries caused by a hit and run driver or by an uninsured motorist or negligent driver who insurance companys insolvent. Underinsured motorists coverage protects against negligent drivers who dont carry adequate liability insurance. 16, What is the difference between collision loss and comprehensive physical damage coverage? Collision loss is the portion of auto insurance coverage that provides benefits to cover damages resulting from an accident with another vehicle or object. Comprehensive physical damage coverage is auto insurance coverage for non collision losses. For example, it would cover damage if the car were hit in a parking lot or if the door wre damaged as a result of banging it into a parked car next to it. 17. Explain the fundamental concept of no-fault auto insurance. What problems exist with this system? Can you sue for damages? No-fault insurance is a type of auto insurance in which your insurance company protects you in the case of an accident regardless of who is at fault. The biggest problem is that the no-fault insurance imposes limits on medical expenses and other claims. You may still sue, but only if the other driver was at fault. 19. Describe the factors that are major determinants of the cost of auto insurance. The type of automobile The use of your automobile The drivers personal characteristics The drivers driving record Where you live

 Discounts that you qualify for your insurance credit score 21. List and briefly describe the ways a consumer can reduce the cost of auto insurance premiums. Shop comparatively Consider only high-quality insurers Take advantage of discounts Buy a car thats relatively inexpensive to insure Improve your driving record Raise your deductibles Keep adequate liability insurance 22. If involved in an accident, what should you do at the scene and after the accident? 1. 2. 3. 4. 5. Get help for anyone injured Move your car to a safe place or put up flares to prevent further accidents Get the names and addresses of any witnesses Cooperate with the police If you think the other driver may have been driving under the influence, insist that you both take a test for alcohol 6. Write down your recollection of what happened 7. Dont sign anything, dont admit guilt, and dont comment on how much insurance you have