estate planning chapter 15: wills & insurance. understanding business and personal law estate...

Estate Planning Estate Planning Chapter 15: Wills & InsuranceChapter 15: Wills & Insurance

Understanding Business and Personal Law

Estate Planning Estate Planning Section 36.2Section 36.2

Retirement and Wills

What You’ll Learn

How to describe what happens when How to describe what happens when someone dies with and without a will someone dies with and without a will (p 783)(p 783)

How to outline the legal procedures that How to outline the legal procedures that apply when someone dies owning apply when someone dies owning property (p. 785)property (p. 785)




Why It’s Important

Knowledge of wills and estates will help you Knowledge of wills and estates will help you when the time comes in your life.when the time comes in your life.




Making a Will Section OutlineSection Outline

Who May Make a WillFormal Requirements of a Will

Revoking or Changing a Will




Family Protection Section OutlineSection Outline

Protection of SpousesProtection of Children

Dying Without a Will Settling an Estate




Pre-Learning Question Pre-Learning Question

What is a will?




Making a Will Making a Will

A A willwill is a document that is signed is a document that is signed during your lifetime that provides for during your lifetime that provides for the distribution of your property upon the distribution of your property upon death. Each state has it own death. Each state has it own requirements for making a will.requirements for making a will.





A person who dies with a will is said to A person who dies with a will is said to die die testatetestate and is called a testator and is called a testator (male) or testatrix (female). (male) or testatrix (female).





A gift of personal property that is A gift of personal property that is made by will is called a made by will is called a bequestbequest, or , or legacy.legacy.A gift of real property that is made A gift of real property that is made by will is called a by will is called a devisedevise in most in most states.states.





Those who receive property by will Those who receive property by will are referred to as beneficiaries.are referred to as beneficiaries.The term The term heirheir refers to one who refers to one who inherits property under a will or from inherits property under a will or from someone dying without a will. someone dying without a will.




Who May Make a Will Who May Make a Will

Any person of sound mind who has Any person of sound mind who has reached the age of adulthood reached the age of adulthood (eighteen years) may make a will.(eighteen years) may make a will.




Formal Requirements of a Will Formal Requirements of a Will

To be valid, a will must conform To be valid, a will must conform exactly to the law of the state where it exactly to the law of the state where it is made. is made.

A will that is legally made in one state A will that is legally made in one state will be recognized as valid in every will be recognized as valid in every state.state.




Formal Requirements of a Will Formal Requirements of a Will

With some exceptions, a will must With some exceptions, a will must be in writing.be in writing.It must be signed and witnessed by It must be signed and witnessed by the number of witnesses required the number of witnesses required by state law.by state law.





What do you think it means to revoke a will?




In some states, a will may be revoked In some states, a will may be revoked by by

Revoking or Changing a Will Revoking or Changing a Will

Burning, tearing, canceling, or Burning, tearing, canceling, or obliterating the will with intent to obliterating the will with intent to revoke itrevoke itExecuting a new oneExecuting a new oneMarrying after the will was created Marrying after the will was created





How are families protected when someone dies?




State laws contain provisions State laws contain provisions designed to protect surviving family designed to protect surviving family members when a spouse dies.members when a spouse dies.

Family Protection Family Protection




Some states provide for a family Some states provide for a family allowance, or money taken from the allowance, or money taken from the decedent’s estate to meet the family’s decedent’s estate to meet the family’s needs while the estate is being needs while the estate is being settled.settled.





Another family protection is the Another family protection is the homestead exemption, which puts the homestead exemption, which puts the family home beyond the reach of family home beyond the reach of creditors up to a certain limit.creditors up to a certain limit.





A surviving spouse who doesn’t like A surviving spouse who doesn’t like the provisions of a deceased spouse’s the provisions of a deceased spouse’s will may choose to take a different will may choose to take a different portion of the estate set by state portion of the estate set by state statute. statute.

Protection of Spouses Protection of Spouses




Children who can prove that they were Children who can prove that they were mistakenly left out of a parent’s will mistakenly left out of a parent’s will are protected by the laws of most are protected by the laws of most states. states.

Children who are intentionally left out Children who are intentionally left out do not have this protection.do not have this protection.

Protection of Children Protection of Children




Adopted children are treated, in most Adopted children are treated, in most states, as though they were the states, as though they were the naturally born children of their naturally born children of their adoptive parents. adoptive parents.

They inherit from the adoptive parents They inherit from the adoptive parents rather than from their natural parents.rather than from their natural parents.

Protection of Children Protection of Children





What happens if you die without a will?




A person who dies without a will is A person who dies without a will is said to have died said to have died intestateintestate. The . The deceased’s personal property is deceased’s personal property is distributed according to the laws of distributed according to the laws of intestate succession of the state in intestate succession of the state in which the deceased was domiciled.which the deceased was domiciled.

Dying Without a Will Dying Without a Will




In contrast, the real property passes In contrast, the real property passes according to the law where the according to the law where the property is located.property is located.





In general, the surviving spouse is In general, the surviving spouse is entitled to one-third or one-half of the entitled to one-third or one-half of the estate. estate.

The balance of the estate is usually The balance of the estate is usually divided equally among the deceased’s divided equally among the deceased’s children.children.





If any of the deceased’s children are If any of the deceased’s children are deceased, the estate is distributed in deceased, the estate is distributed in the following order.the following order.


1.1. Decedent’s grandchildrenDecedent’s grandchildren2.2. Decedent’s parentsDecedent’s parents




3.3. Decedent’s brothers and sistersDecedent’s brothers and sisters4.4. Children of decedent’s brothers and Children of decedent’s brothers and

sisterssisters5.5. Decedent’s aunts and unclesDecedent’s aunts and uncles6.6. Decedent’s cousinsDecedent’s cousins






What legal procedure takes place to distribute assets when a person dies?




When people die owning assets, their When people die owning assets, their estate must be probated; that is, it estate must be probated; that is, it must be settled under the supervision must be settled under the supervision of the probate court. of the probate court.

Settling an Estate Settling an Estate




First, the probate court establishes the First, the probate court establishes the validity of the will. A will usually names validity of the will. A will usually names a personal representative called an a personal representative called an executorexecutor (male) or (male) or executrixexecutrix (female) (female) to carry out the terms of the will. to carry out the terms of the will.





If there is no will, or if the executor or If there is no will, or if the executor or executrix named in the will fails to executrix named in the will fails to perform, someone must petition the perform, someone must petition the court to settle the estate. That person court to settle the estate. That person is called an administrator or is called an administrator or administratrix.administratrix.





The executor or administrator gathers The executor or administrator gathers the estate assets, pays the debts and the estate assets, pays the debts and taxes, and distributes the remainder of taxes, and distributes the remainder of the assets according to the terms of the assets according to the terms of the will or state law. the will or state law.





Read the following scenario and answer the questions below.

Petunia Appleby died without a will. Her husband, Clark, had preceded her in death, and they had no children.




Petunia had a sister, Daisy, and a brother, Duke. Daisy was still living, but Duke was dead. He had three children, all of whom were still living.




Both of Petunia’s parents were dead, but she had one living uncle, Trey. Trey had two sons, both living. After Petunia’s debts and taxes are paid there is $1,000,000.




1. Who inherits from Petunia, if you follow the general guidelines from the text?




ANSWERANSWER

Daisy and Duke’s three children.




2. How much does the heir or heirs inherit?




ANSWERANSWER

Daisy inherits $500,000, and Duke’s three children divide the other $500,000 ($166,667 each).




3. Who is the executor of the estate? How do you know?




ANSWERANSWER

There is no executor because there was no will naming an executor.




Reviewing What You Learned

2. What are the formal requirements of a will?

Section 36.2 Assessment





Must conform exactly to the law of the state where it is made to be valid (in writing, signed, and witnessed).


Answer





3. How can a will be changed or revoked?






(1) Burning, tearing, canceling or obliterating the will with intent to revoke; (2) executing a new one; and (3) subsequent marriage. A codicil is a formal document used to supplement or change an existing will.


Answer





4. Explain how surviving families are protected legally when a spouse dies.






Some states provide for a family allowance (money taken from the decedent’s estate for the family to meet its needs while the estate is being settled).


Answer





The homestead exemption puts the family home beyond the reach of creditors up to a certain limit.


Answer





5. What happens when a person dies without a will?






The deceased’s personal property is distributed according to the laws of intestate succession of the state where the deceased was domiciled. The real property passes according to the law where the property is located.


Answer





6. Discuss the legal procedure that must be followed when someone dies owning property.






The estate must be probated. If a will exists, an executor/executrix carries out the terms.


Answer





If there is no will, an administrator/administratrix is appointed. The executor or administrator gathers the estate assets, pays the debts and taxes, and distributes the remainder according to the terms of will or state law.


Answer

Estate Planning Estate Planning End of Section 36.2End of Section 36.2

Estate Planning Estate Planning Section 16.2 Motor InsuranceSection 16.2 Motor Insurance




Financial Responsibility

Types of Motor Vehicle Insurance Bodily Injury CoverageProperty Damage CoverageNo-Fault Insurance

Section OutlineSection Outline





What are the different types of motor vehicle insurance?




16.216.2

Types of Motor Vehicle Insurance Types of Motor Vehicle Insurance




The main types of bodily injury The main types of bodily injury coverage are coverage are

Bodily Injury Coverage Bodily Injury Coverage

Bodily injury liability insuranceBodily injury liability insuranceMedical payments insuranceMedical payments insuranceUninsured motorist insuranceUninsured motorist insuranceUnderinsured motorist insuranceUnderinsured motorist insurance




Bodily injury liability insurance Bodily injury liability insurance protects the insured against claims or protects the insured against claims or lawsuits for injuries or death caused lawsuits for injuries or death caused by negligence.by negligence.





Medical payments insuranceMedical payments insurance pays pays for medical, and sometimes funeral, for medical, and sometimes funeral, expenses resulting from bodily injuries expenses resulting from bodily injuries to anyone occupying the to anyone occupying the policyholder’s car in an accident. policyholder’s car in an accident.





Uninsured motorist insuranceUninsured motorist insurance provides protection when the insured provides protection when the insured is injured in an automobile accident is injured in an automobile accident that is caused by a driver who has no that is caused by a driver who has no insurance. insurance. It also protects parties who are injured It also protects parties who are injured by a hit-and-run driver.by a hit-and-run driver.





Underinsured motorist insurance Underinsured motorist insurance protects you when another driver has protects you when another driver has insurance, but not enough to pay for insurance, but not enough to pay for any injuries.any injuries.





Collision insuranceCollision insurance covers damage covers damage to your vehicle when it is in an to your vehicle when it is in an accident and pays for vehicle repairs, accident and pays for vehicle repairs, regardless of who was at fault. regardless of who was at fault.

Property Damage Coverage Property Damage Coverage




Comprehensive insuranceComprehensive insurance covers covers damage to your vehicle from sources damage to your vehicle from sources other than collision, including fire, other than collision, including fire, theft, lightning, flood, hail, windstorm, theft, lightning, flood, hail, windstorm, riot, and vandalism.riot, and vandalism.

Property Damage Coverage Property Damage Coverage




Under Under no-fault insuranceno-fault insurance, regardless , regardless of who caused the accident, all drivers of who caused the accident, all drivers involved collect money from their own involved collect money from their own insurance companies. insurance companies.

No-Fault Insurance No-Fault Insurance




Because no-fault systems vary by Because no-fault systems vary by state, you should investigate the state, you should investigate the coverage provided by no-fault coverage provided by no-fault insurance in your state.insurance in your state.

No-Fault Insurance No-Fault Insurance





Understanding how insurance works and Understanding how insurance works and knowing key insurance terms will help you knowing key insurance terms will help you choose good policies throughout your life.choose good policies throughout your life.




What is Insurance? Section OutlineSection Outline

Insurance Terms





What is insurance?




What Is Insurance? What Is Insurance?

Our lives are filled with risks, including Our lives are filled with risks, including the loss of:the loss of:

PropertyPropertyHealthHealthIncomeIncomeLifeLife





Insurance can protect you against Insurance can protect you against such losses. such losses.





The basic purpose of insurance is to The basic purpose of insurance is to spread the losses among a greater spread the losses among a greater number of people.number of people.





InsuranceInsurance is a contract under which, is a contract under which, for consideration, the for consideration, the insurerinsurer, or the , or the insurance company, agrees to insurance company, agrees to compensate you for a specific loss.compensate you for a specific loss.




Insurance Terms Insurance Terms

The The policypolicy is the written contract is the written contract between a person buying insurance between a person buying insurance and the insurance company that sells and the insurance company that sells it. it.

When you buy the policy, you are the When you buy the policy, you are the policyholder.policyholder.





The The insuredinsured is the person whose life is the person whose life or property is insured.or property is insured.

The The beneficiarybeneficiary is the person named is the person named in the policy to receive benefits paid in the policy to receive benefits paid by the insurer in the event of a loss.by the insurer in the event of a loss.





A A riderrider is an attachment to an is an attachment to an insurance policy that modifies the insurance policy that modifies the policy’s terms.policy’s terms.





You can’t take out insurance unless You can’t take out insurance unless you have an you have an insurable interestinsurable interest in the in the person or property you want to insure. person or property you want to insure.





Consequently, you can only take out Consequently, you can only take out insurance on a person or property if insurance on a person or property if the loss of that person or property the loss of that person or property would pose a financial burden to you.would pose a financial burden to you.





The The premiumpremium is the amount of money is the amount of money you pay to the insurance company for you pay to the insurance company for insurance coverage. Proceeds are insurance coverage. Proceeds are payments by insurance companies to payments by insurance companies to beneficiaries for losses covered by the beneficiaries for losses covered by the policy.policy.





The The face valueface value is the amount of is the amount of protection stated in a life insurance protection stated in a life insurance policy, meaning the amount of money policy, meaning the amount of money a beneficiary would receive if the a beneficiary would receive if the insured died.insured died.





1. What is the purpose of insurance?






To spread losses among a greater number of people.


Answer





2. Explain why insurance is a contract.






Insurance is a contract under which, for consideration, the insurer (the insurance company) agrees to compensate you for a specific loss.


Answer





Knowing how to determine your life and Knowing how to determine your life and health insurance needs will help you handle health insurance needs will help you handle your finances when dealing with unexpected your finances when dealing with unexpected events.events.




Life Insurance Section OutlineSection Outline

Straight Life InsuranceLimited-Payment Life InsuranceEndowment InsuranceAnnuity




Life Insurance, continued Section OutlineSection Outline

Accidental Death and Dismemberment Insurance

Term InsuranceExemptions from Risk




Health Insurance Section OutlineSection Outline

Insurance PlansHMOs and PPOsGovernment Health Care PlansDisability Insurance





What is life insurance?




Life Insurance Life Insurance

Life insuranceLife insurance is an insurance is an insurance contract that provides monetary contract that provides monetary compensation for losses suffered as a compensation for losses suffered as a result of someone’s death. result of someone’s death.




Life Insurance Life Insurance

Premiums for life insurance are based Premiums for life insurance are based on several factors.on several factors.

Age and health of insuredAge and health of insuredCoverageCoverageType of policyType of policy




Straight Life Insurance Straight Life Insurance

Straight life insuranceStraight life insurance, also called , also called ordinary life insurance and whole life ordinary life insurance and whole life insurance, requires the payment of insurance, requires the payment of premiums throughout the insured’s premiums throughout the insured’s life. The premiums remain constant life. The premiums remain constant throughout the policy.throughout the policy.





Upon the insured’s death, the Upon the insured’s death, the beneficiary is paid the face value of beneficiary is paid the face value of the policy. Because straight life the policy. Because straight life insurance builds up a cash and loan insurance builds up a cash and loan value, it provides savings as well as value, it provides savings as well as protection.protection.





Universal life insuranceUniversal life insurance, a form of , a form of straight life insurance, allows straight life insurance, allows policyholders to change the terms of policyholders to change the terms of the policy as their needs change.the policy as their needs change.




Limited-Payment Life Insurance Limited-Payment Life Insurance

Limited-payment life insuranceLimited-payment life insurance allows you to stop paying premiums allows you to stop paying premiums after a stated length of time—usually after a stated length of time—usually 10, 20, or 30 years. 10, 20, or 30 years.




Limited-Payment Life Insurance Limited-Payment Life Insurance

The beneficiary will receive the The beneficiary will receive the amount of the policy upon the death of amount of the policy upon the death of the insured, whether it occurs during the insured, whether it occurs during the payment period or after.the payment period or after.




Endowment Insurance Endowment Insurance

Endowment insuranceEndowment insurance provides provides protection for a stated time, generally protection for a stated time, generally 20 to 30 years. The face value of the 20 to 30 years. The face value of the policy is paid to the insured at the end policy is paid to the insured at the end of the agreed period.of the agreed period.




Endowment Insurance Endowment Insurance

If the insured dies before the end of If the insured dies before the end of the agreed period, the full amount is the agreed period, the full amount is paid to the beneficiary at the time of paid to the beneficiary at the time of death.death.




Accidental Death and Accidental Death and Dismemberment Insurance Dismemberment Insurance

Accidental death and dismemberment Accidental death and dismemberment insurance provides benefits only when insurance provides benefits only when the insured is killed in an accident, the insured is killed in an accident, loses the use of one or more limbs, or loses the use of one or more limbs, or loses sight in one or both eyes.loses sight in one or both eyes.




Term Insurance Term Insurance

Term insuranceTerm insurance is issued for a is issued for a particular period, usually five or ten particular period, usually five or ten years. years.

It is the least expensive kind of life It is the least expensive kind of life insurance because it has no cash or insurance because it has no cash or loan value.loan value.




Term Insurance Term Insurance

Premiums for term insurance increase Premiums for term insurance increase at the end of each term because the at the end of each term because the insured is older and is considered a insured is older and is considered a greater risk.greater risk.




Exemptions from Risk Exemptions from Risk

Some states do not allow beneficiaries Some states do not allow beneficiaries to receive life insurance proceeds if to receive life insurance proceeds if the insured is legally executed or if the the insured is legally executed or if the insured is killed by the police while insured is killed by the police while trying to avoid capture.trying to avoid capture.




Exemptions from Risk Exemptions from Risk

In most cases, the courts allow a In most cases, the courts allow a beneficiary to receive benefits under a beneficiary to receive benefits under a life insurance policy when the insured life insurance policy when the insured is murdered, except when the is murdered, except when the murderer is the beneficiary.murderer is the beneficiary.




Name the type of insurance described below.

Renée Morris, who is a firefighter in New York City, purchased insurance that pays her a benefit if she loses a limb or her eyesight.





What benefits does health insurance include?




Basic health insurance often includes Basic health insurance often includes the following benefits: the following benefits:

Health Insurance Health Insurance

Inpatient and outpatient hospital Inpatient and outpatient hospital carecarePhysician carePhysician care




SurgerySurgeryPrescription drugsPrescription drugsDental and vision care Dental and vision care





Major medical coverage pays for Major medical coverage pays for expenses beyond those covered by a expenses beyond those covered by a basic plan, including long-term basic plan, including long-term hospitalization and the cost of hospitalization and the cost of catastrophic illness.catastrophic illness.





Health insurance companies offer a Health insurance companies offer a variety of health insurance plans to variety of health insurance plans to make some degree of health make some degree of health insurance coverage available to most insurance coverage available to most people. The type of coverage people people. The type of coverage people carry depends on their individual carry depends on their individual situations.situations.

Insurance Plans Insurance Plans




35.235.2

Health Insurance Must HavesHealth Insurance Must Haves A health insurance plan should:

Offer basic coverage for hospital and doctor bills.

Provide at least 120 days’ hospital room and board in full.

Provide at least $1 million lifetime maximum for each family member.

Pay at least 80 percent for out-of-hospital expenses after a yearly

deductible of $500 per person or $1,000 per family.

Impose no unreasonable exclusions.

Limit your out-of-pocket expenses to no more than $3,000 to $5,000 a year,

excluding dental, vision care, and prescription costs.




Many people get their health Many people get their health insurance through a group insurance insurance through a group insurance plan where they work. Insurance plan where they work. Insurance companies can offer lower premiums companies can offer lower premiums to large groups, and many employers to large groups, and many employers pay part of the premium for each pay part of the premium for each employee.employee.

Group Plans Group Plans




People who work for a company that People who work for a company that does not offer health insurance or who does not offer health insurance or who are self-employed can buy individual are self-employed can buy individual health insurance. health insurance.

Individual Plans Individual Plans




This insurance is more expensive than This insurance is more expensive than group insurance because the cost group insurance because the cost cannot be spread among a large cannot be spread among a large group of people.group of people.

Individual Plans Individual Plans




HMOs and PPOs are other types of HMOs and PPOs are other types of health insurance plans.health insurance plans.

HMOs and PPOs HMOs and PPOs




Health Maintenance Organizations Health Maintenance Organizations (HMOs) contract with doctors and (HMOs) contract with doctors and other healthcare professionals to other healthcare professionals to provide healthcare services for their provide healthcare services for their members.members.

Health Maintenance Organizations Health Maintenance Organizations




Members pay monthly premiums and Members pay monthly premiums and must choose from a list of doctors must choose from a list of doctors provided by the HMO.provided by the HMO.

Health Maintenance Organizations Health Maintenance Organizations




A Preferred Provider Organization A Preferred Provider Organization (PPO) is a group of healthcare (PPO) is a group of healthcare providers, such as doctors or providers, such as doctors or hospitals, who provide care for groups hospitals, who provide care for groups of employees at reduced rates.of employees at reduced rates.

Preferred Provider Organizations Preferred Provider Organizations




People over 65 who are covered by People over 65 who are covered by social security are eligible for social security are eligible for MedicareMedicare, a federally funded health , a federally funded health insurance program.insurance program.

Government Health Care PlansGovernment Health Care Plans




MedicaidMedicaid is a healthcare plan for low- is a healthcare plan for low-income people. State governments income people. State governments administer Medicaid, which is funded administer Medicaid, which is funded by both state and federal funds.by both state and federal funds.

Government Health Care PlansGovernment Health Care Plans




Disability insurance pays you benefits Disability insurance pays you benefits when you can’t work because of a when you can’t work because of a disability.disability.

Disability InsuranceDisability Insurance





1. What are the principal types of life insurance? Briefly describe each one in your own words.






(1) Straight life—requires payment of premiums through the insured’s life. The premiums remain constant.


Answer





(2) Universal life—a form of straight life insurance but it allows policyholders to change the terms of the policy as their needs change. Premiums fluctuate according to the changes.


Answer





(3) Limited-payment life—provides that the payment of premiums will stop after a stated length of time. (4) Endowment—provides protection for a stated time.


Answer





(5) Term—issued for a particular period. It has no cash or loan value. (Answers may vary but should closely parallel the descriptions in the chapter.)


Answer





2. What risks are generally not covered by insurance?






Some states do not allow beneficiaries to receive life insurance proceeds when an insured is legally executed or killed by the police to avoid capture. When the beneficiary is the murderer of the insured, no proceeds are allowed.


Answer





3. What benefits are provided by basic health insurance? Major medical?






Basic—inpatient and outpatient hospital care, physician care, surgery, prescription drugs, and dental and vision care.


Answer





Major medical—covers expenses beyond those covered by a basic plan, including long-term hospitalization and catastrophic illness.


Answer





Understanding property insurance will help Understanding property insurance will help you protect your property at the lowest cost.you protect your property at the lowest cost.




Property Insurance Homeowner’s and Renter’s Insurance Fire Insurance

Section OutlineSection Outline





What is property insurance?




Property Insurance Property Insurance

Property insuranceProperty insurance is a contract in is a contract in which the insurer promises, for a which the insurer promises, for a stated premium, to pay you a sum of stated premium, to pay you a sum of money if a particular piece of real or money if a particular piece of real or personal property is damaged or personal property is damaged or destroyed.destroyed.





The policy becomes effective as soon The policy becomes effective as soon as the insurer accepts your as the insurer accepts your application, or even sooner if a binder application, or even sooner if a binder is issued. A is issued. A binderbinder gives you gives you temporary protection until a policy is temporary protection until a policy is issued.issued.





A A floater policyfloater policy is one that insures is one that insures property that cannot be covered by property that cannot be covered by specific insurance because it is specific insurance because it is constantly changing in value or constantly changing in value or location. location.





A personal property floater, for A personal property floater, for example, can cover a bicycle or laptop example, can cover a bicycle or laptop computer, no matter where the items computer, no matter where the items are located.are located.





What does homeowner’s and renter’s insurance cover?




Homeowner’s and Renter’s Homeowner’s and Renter’s Insurance Insurance

Homeowner’s insuranceHomeowner’s insurance protects protects against most types of losses and against most types of losses and liabilities related to home ownership.liabilities related to home ownership.




Homeowner’s Insurance Covers Homeowner’s Insurance Covers

FireFireWindstormWindstormVandalismVandalismBurglaryBurglaryInjuries suffered by other persons Injuries suffered by other persons while on the property while on the property




Homeowner’s Insurance Covers Homeowner’s Insurance Covers

With certain limitations, homeowner’s With certain limitations, homeowner’s policies cover your personal property policies cover your personal property anywhere in the world.anywhere in the world.




Homeowner’s and Renter’s Homeowner’s and Renter’s Insurance Insurance

Renter’s insuranceRenter’s insurance protects you protects you against loss of personal property, against loss of personal property, liability for a visitor’s personal injury, liability for a visitor’s personal injury, and liability for negligent destruction of and liability for negligent destruction of the rented premises.the rented premises.





What does fire insurance cover?




Fire Insurance Fire Insurance

Fire insuranceFire insurance covers loss resulting covers loss resulting directly from an unfriendly or hostile directly from an unfriendly or hostile fire. fire.




Fire Insurance Fire Insurance

Damages that result from trying to put Damages that result from trying to put out a fire, or from theft or breakage out a fire, or from theft or breakage while attempting to remove insured while attempting to remove insured goods to a safe location are goods to a safe location are considered directly related to the fire considered directly related to the fire and are usually covered.and are usually covered.





What is coinsurance?




Coinsurance Clauses Coinsurance Clauses

CoinsuranceCoinsurance is a provision in an is a provision in an insurance policy that limits your insurance policy that limits your liability for a loss if the property is not liability for a loss if the property is not insured for its full replacement value.insured for its full replacement value.





For example, if your insurance policy For example, if your insurance policy has an 80 percent coinsurance has an 80 percent coinsurance clause, your house must be insured clause, your house must be insured for 80 percent of its replacement value for 80 percent of its replacement value to receive full reimbursement for a to receive full reimbursement for a loss.loss.




35.335.3


COINSURANCE CLAUSECOINSURANCE CLAUSE

““The insurance company will pay that part of a loss that the insurance The insurance company will pay that part of a loss that the insurance

carrier bears to 80 percent of the replacement cost of the building.”carrier bears to 80 percent of the replacement cost of the building.”

It would cost $100,000 to replace Zelia’s house. If she insured it for $60,000, the It would cost $100,000 to replace Zelia’s house. If she insured it for $60,000, the

insurance company would pay only three-fourths of any loss, computed as follows:insurance company would pay only three-fourths of any loss, computed as follows:

$60,000$60,000 $60,000$60,000 33

80% of $100,00080% of $100,000 $80,000$80,000 44

A fire partially destroys the building, causing $40,000 worth of damage. Because A fire partially destroys the building, causing $40,000 worth of damage. Because

of the coinsurance clause, Zelia would recover $30,000 (3/4 of the loss) from the of the coinsurance clause, Zelia would recover $30,000 (3/4 of the loss) from the

insurance company.insurance company.





What does marine insurance cover?




Marine Insurance Marine Insurance

Marine insurance is one of the oldest Marine insurance is one of the oldest kinds of insurance coverage, dating kinds of insurance coverage, dating back to Venetian traders who sailed back to Venetian traders who sailed the Mediterranean Sea. the Mediterranean Sea.




Marine Insurance Marine Insurance

Ocean marine insuranceOcean marine insurance covers covers ships at sea.ships at sea.Inland marine insuranceInland marine insurance covers covers goods that are moved by land goods that are moved by land carriers such as trains, trucks, and carriers such as trains, trucks, and airplanes.airplanes.





1. What types of losses are covered by homeowner’s insurance? Fire insurance?






Homeowner’s insurance covers losses from fire, windstorm, vandalism, burglary, and injuries suffered by other persons while on the property.


Answer





With certain limitations, homeowner’s policies cover personal property owned by the insured anywhere in the world. Fire insurance covers loss resulting directly from an unfriendly or hostile fire.


Answer





2. What is a coinsurance clause? What does it mean if your policy has an 80 percent coinsurance clause?






Coinsurance is a provision in an insurance policy that limits the insurer’s liability for a loss if the property is not insured for its full replacement value.


Answer





If your policy has an 80 percent coinsurance clause, your house must be insured for 80 percent of its replacement value to receive full reimbursement for a loss.


Answer





3. Explain marine insurance coverage.






Ocean marine insurance covers ships at sea. Inland marine insurance covers goods that are moved by land carriers such as rail, truck, and airplane.


Answer

Estate Planning Estate Planning End of Section 35.3End of Section 35.3

estate planning chapter 15: wills & insurance. understanding business and personal law estate...

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