Topic 8 Homeowners Insurance

BUS 200 Introduction to Risk Management and Insurance Fall 2008 Jin Park

Overview
Risks faced by homeowners Types of Homeowners Policy Structure of Homeowners Policy Coverage

Property Coverage Liability Coverage Medical Coverage

Risks Faced by Homeowners

Damage to or destruction of the home Damage to or loss of personal property Loss of use of the home Liability

Injury to others Damage to property of others

Defective title

Types of Homeowners Policy

Homeowners

policy is a package policy!

Property coverage Liability coverage Limited health coverage

Homeowners

Insurance policies are

For Owner-Occupant For Tenants For Condominium unit owners

cf: condominium commercial-unit owners.

Structure of Homeowners Policy

Section I Property Coverages

Coverage A Dwelling Coverage B Other Structures Coverage C Personal Property

Anywhere in the world Personal property at other residences

Coverage D Loss of Use

Special limits on certain types of personal property Additional living expenses, Fair rental value Debris Removal Reasonable Repairs Trees, Shrubs, and Other Plants And more

10% of the limit of insurance on Coverage C or $1,000, whichever is greater

Coverage E Additional Coverages

Section II Liability Coverages

Coverage E Personal Liability

Legal (defense) costs Bodily injury, Property damage of others Medical expenses No-Fault basis

Coverage F Medical Payments to Others

Factors Affecting HO Premium

Property characteristics Property location HO policy type Deductible Insurance score Claim history

Where the Revenue Dollar Goes

Premium Earned Property Damage Liability Costs to Settle Expenses Commissions Others S. Taxes, Fees Total Paid Investment Gain Federal Taxes Net Income
Source: iii.org

$100 $ 47 $ 3 $ 8 $ 22 $ 6 $ 3 $ 89 7 $ 6 $ 12

Average Premiums for HO & Renter

Year 1998 1999 2000 2001 2002 2003 2004 HO $481 488 508 536 593 668 729 % Change 5.7% 1.5 4.1 5.5 10.6 12.6 9.1 Renter $170 171 175 178 186 192 195 % Change 0.6% 0.6 2.3 1.7 4.5 3.2 1.6

2005
Source: NAIC

764

4.8

913

-1.0

Some Stats

In 2005, The most expensive states for

In 2005, The least expensive states for

HO: ___ ($1,372), ___ ($1,114), ___ ($1,083), OK, DC, Renter: TX (269), CA (257), MS (253), LO, OK, HO: DE, WI, ___ (491), ___ (477), ___ (457) Renter: UT, IA, ND (128), WI (126), SD (124) Average HOs & Renters Premium for IL is $660 (30), $174 (26), respectively.

In 2006, 96% of homeowners had HOs insurance while 43% of renters had renters insurance. (Insurance Research Council) The percentage of homes that are underinsured ranges from 73% in 2002 to 66% in 2007. (Marshall & Swift/Boechk) About 5% of insured homes had a claim in 2006. (ISO)

HO Insurance Losses

Source: iii.org

Source: iii.org

Leading Writers of HO Insurance,

by DPW 2007 ($000)

Source: iii.org

Insurance-to-Value

source: iii.org