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1. Apply What You've Learned-Managing Property and LiabilityRisk Scenario: You own a home with a market value of $245,000. Of this amount, $330,000 is apportioned to the land and $215,000 is apportioned to the house, It is estimated that the house would cost $190,000 to rebuld. The personal property in your home is worth $70,000, including a $2,000 diamond ring and a $3,000 computer system. You also own a car worth $20,000, You live in a state where there is a high risk for earthquakes. You have $100,000 in savings and investments that could be drawn on in case of emergency. You currently have a standard HO- 3 homeowner's policy with a $500 deductible, which insures vour house for $245,000 and your personal belongings for $130,000, and you carry the rninimum requirements of vour state for car insurance. You have been advised to adjust your insurance coverage based on the large-loss principle. According to the large-loss prinopal, you should: Insure only those nisks that you cannot afford to cover using your own financial resources. Insure your property for the moximum amount ava table. Transfer all risks possible to insurance. Insure your property for minimum amounts only. Based on the large-loss prinople and your particular situation, a Given your current insurance coverage, in the event of a fire, y is most appropriate for your homeowner's policy. If vou were to reduce the coverage on your home to its replace to . This is because the minimum personal cove belongings are over insured by then your personal property coverage could also be reduced I policy is of the home coverage. According to the large-less principal, you should: Insure only those risks that you cannot afford to cover using your own financial resources. Insure your property for the maximum amount avaltable: Transfer all risks pessible to insurance: Insure your property for minimum amounts only. Based on the large-loss principle and your particular situation, a is most appropriate for your homeowner's policy. Given your current insurance coverage, in the event of a fire, your house and housebold belongings are over-insured by If you were to reduce the coverage on your home to its replacement value of $190,000, then your personal property cov so be reduced to . This is because the minimum personal coverage available on a HO-3 policy is of the home cow In what area is the coverage on the horne itself severely lacking? The deductible should be reduced. Fire damage, which is not included in a standard horneowner's policy. Earthquake darnage, which is not included in a standard homeowner's policy. Volcand damage, which is not inctuded in a standard homcowner's policy. In what area is the coverage of your personal property particularly inadequate? According to the large-loss principal, you should: Insure only those risks that you cannot afford to cover using your own financial resources: Insure your property for the maximum amount available. Transfer all risks possible to insurance. Insure your property for minimum amounts only. Based on the large-lass principle and your particular situation, a is most appropriate for your homeowner's policy. Given your current insurance coverage, in the event of a fire, your house and household belongings are over-insured by If you were to reduce the covernge on your home to its replacement value of $190,000, then your personal property coverage could also be reduced to This is because the minimum personal coverage avalable on a HO-3 policy is of the home coverage. In \begin{tabular}{|l|} $112,500 \\ $67,500 \\ $95,000 \\ $76,000 \end{tabular} the coverage on the home itself severely lacking? eductible should be reduced. tamage, which is not included in a standard homeowner's policy. quake damage, which is not included in a standard homeowner's policy, Volcano damage, which is not included in a standard homeowner's policy. In what area is the coverage of your personal property particularly inadequate? According to the large-loss principal, you should: Insure only those risks that you cannot afford to cover using your own financial resources. Insure your property for the maximum amount avalable. Transfer all risks possible to insurance. Insure your property for minimum amounts only. Based on the large-loss principle and your particular situation, a is most appropriate for your homeowner's policy. Given your current insurance coverage, in the event of a fire, your house and houschold belongings are over-insured by If you were to reduce the coverage on your home to its replacement value of $190,000, then your personal property coverage could also be reduced to - This is because the minimum personal coverage available on a HO3 policy is of the home coverage. In what area is the coverage on the home itself severely lacking? The deductible should be reduced. Fire damage, which is not included in a standard homeowner's policy. Earthquake damage, which is not included in a standard homeowner's policy. Volcano damage, which is not included in a standard homeowner's policy. In what area is the coverage of your personal property particularly inadequate? In what area is the coverage on the home itself severely lacking? The deductible should be reduced. Fire damage, which is not included in a standard homeowner's policy. Earthquake damage, which is not included in a standard homeowner's policy. Volcano damage, which is not induded in a standard homeowner's policy. In what area is the coverage of your personal property particularly inadequate? Your personal property coverage is not inadequate; your HO-J policy fully protects both your diamond ring and your computer system. You need a specal rider on the computer system, since the standard muximum is $2,000 per occurrence. Your policy can be improved by adding additional riders for both your ring and your computer system. You need a specint rider to protect your diamond ring, since the standard maximum coverage is $1,000 per occurrence. If your personat belongings are all reduced to ashes in a fire, what is the best way to docurnent your loss? Show pictures of the ashes from the fire and request the full amount of coverage. Provide from your memory a list of your betongings and their wonth. Prepare and safeguard a visual (video or photographic) inventory that is kept in a safe deposit box. Provide the report from the fire department: In addition to coverage for your house and personal property, the standard Ho-3 homeowner's policy also covers: Check all that apply. Comprehensive personal liability coverage up to $300,000 per occurrence. No-fautt property damage coverage up to $10,000 per occurrence. Loss of use and/or additional fiving expense coverage up to 20% of the value of your horne. Money, coins, currency, and precious metals are covered up to $20, 000 for a calendar year. If you have a small loss, why might you decide to not report it to your insurance? Because ... Check all that apply. You don't have the necessary documentation to prove the loss. You wouldn't foit to report a chaim to your insurance company. Your insurance premium may increase for the next several years, which may, in the long run, cost you more than the amount of the loss. Think about the liability coverage provided by your homeowner and automobile policies, If you ascribe to the large-loss principal, then you should: Signaficantly increase your liability coverage berond the minimum lamis that you currently carry, Plead with your agent to increase your coverage even though insurance companies don't provide additional coverage beyond the standard limit: Keep your coverage at the minimum levels that you cutrently carry. Hire an insurance consultant to help identify ways to reduce your fiability exposure. should remember that: If you report the dog ownership, your insurer may immediately drop you. There is a special discount for dog owners. You are not required to report the dog ownership to your insurance, but an agent or company representative may ask if you have a dog the next time you renew your coverage or initiate a new policy. Approximately one third of homeowner's insurance liability claims are associated with dog bites. If you were to total your car in an accident at which you are at fault, your insurance company is likely to pay to repair your car. This is because Assume your state's minumum liability limits for an automobile policy are 25/50/25. Next assume that you ci ent that involves multiple injuries to three people, each with medical expenses of $200,000. The maximum bodily injury payout that 0 on your behalf by your insurance company for thes accident is Based on the large-loss principle, should you modify your existing automobile insurance coverage? Yes, increasing both the amount of liability coverage cirried and the comprehensive and collision coverages added to the policy. Yes, but only increase the amount of liability coverage to the exieting policy. No, don't change your existing policy. Yes, but onfy add comprehensive and collision coverages to the exasting policy. If you were to total your car in an accident at which you are at fault, your insurance company is likely to pay to repair your car, This is Bused on the large-loss principle, should you modify your exasting automobule insurance coverage? Yes, increasing both the amount of tability coverage carried and the comprehensive and colision coverages added to the policy. Yes, but onfy increase the amount of tiabifity coverage to the existing poticy: No, don't change your existing policy. Yes, but only add comprehenswe and collision coverages to thet existing policy, should remember that: If you report the dog ownership, your insurer may immediately drop you. There is a special discount fo $600,000,rship to your insurance, but an agent or company representative may ask if you have a dog You are not required to repo nitiate a new policy. the next time you renew you $50,000 furance liability claims are associated with dog bites. If you were to total your car in an acci because Approximately one-third of K $1,000,000 $500,000 fou are at fault, your insurance company is likely to pay to repair your car. This is: Assume your state's minimum liability injuries to three people, each with med $75,000 $25,000 $150,000 tomobile policy are 25/50/25. Next assume that you cause an accident that involves multiple of $200,000. The maximum bodily injury payout that could be made on your behalf by your insurance company for this accident is Based on the farge-loss prinople, should you madify your existing autemobile insurance coverage? Yes, increasing both the amount of tiability coverage carried and the comprehensive and collision coverages added to the policy. Yes, but only increase the amount of liability coverage to the existing policy. No, don't change your existing policy. Yes, but only add comprehensive and collision coverages to the existing policy