Insurance Coverage Types

• Insurance is a system of risk transfer from individuals/entities to an insurance company in exchange for premiums.
• Understanding insurance is critical for making informed decisions and grasping industry intricacies.

Types of Insurance Coverage

• Property Insurance covers losses from fire, lightning, windstorm, tornado, or earthquake.
• Property Insurance protects property, accounts, documents, and money.
• Marine Insurance covers losses involving vessels, aircraft, cars, goods, freights, merchandise, accounts, documents, and money.
• Marine Insurance includes transit insurance forms to protect transported goods.
• Surety Insurance guarantees performance of hired contracts and certain behavior.
• Disability Insurance provides financial assistance if the insured is disabled or killed due to an accident or sickness.
• Plate Glass Insurance protects against the breaking of valuable glass.
• Liability Insurance assists in paying for third-party bodily injuries or property damage caused by the insured.
• Workmen’s Compensation covers employee injuries on the job and the legal liabilities of employers.
• Common Carrier Liability insures truckers for injuries or property damage to third parties.
• Boiler and Machinery Insurance covers losses from explosions or accidents involving boilers, tanks, pipes, pressure vessels, engines, wheels, electrical machinery, etc.
• Burglary Insurance insures against losses from burglary and theft.
• Credit Insurance protects the insured if a business or individual extending credit cannot fulfill financial obligations.
• Sprinkler Insurance covers loss through water damage from a sprinkler system or pump failure.
• Team and Vehicle Insurance protects against damages or liability caused by teams or vehicles.
• Automobile Insurance covers anyone who owns, uses, or sells automobiles.
• Mortgage Insurance guarantees payment of principal, interest, and other expenses under a note or contract.
• Aircraft Insurance insures anyone who owns, uses, or sells aircraft.
• Mortgage Guaranty Insurance protects against financial losses due to nonpayment of principal, interest and other fees under a note or contract.
• Miscellaneous Insurance covers direct/indirect damages from lightning, windstorm, tornado, and earthquake.
• Miscellaneous Insurance protects movie producers from delays, sicknesses, death, or cancellation.

Key Insurance Concepts

• Indemnity restores an individual to their financial position before a loss.
• The insured cannot collect more than the actual loss when dealing with Indemnity, preventing double recovery.
• Risk is the chance of loss on any insured property or item.
  • Pure Risk involves uncertainty about possible losses.
  • Speculative Risks involves predictable losses, often in gambling or business ventures; insurance covers only pure risk.

Risk Management Methods

• Avoidance means deciding not to expose oneself to particular risks.
• Retention means paying for any losses out-of-pocket without purchasing insurance.
• Sharing means distributing losses among individuals or organizations.
• Reduction involves taking measures to lower the frequency and severity of losses.
• Transfer means shifting potential losses to another party through insurance.

Insurable Events

• Insurable Events includes any circumstance that does not involve speculative risk, including accidents, natural disasters, etc.
• Exposure constitutes the potential for loss due to perils like hail, tornadoes, or fires.
• Peril is the specific cause of a loss, such as fire, windstorm, or collision.

Hazard Definitions

• Hazard refers to factors increasing the chance of loss.
  • Physical Hazard is related to the property's condition or use.
  • Moral Hazard involves dishonest behavior by the insured.
  • Morale Hazard involves careless or indifferent behavior by the insured.
  • Legal Hazard refers to court decisions or actions that could lead to expensive lawsuits.
• Occurrence indicates gradual or accumulative damage without regard to the exact time or place.
• Accident refers to a sudden, unforeseen, and unintentional act identifiable in time and place.
• Insurable Interest must exist at the time of loss.
• Insurable Interest ensures that the insured has a legitimate interest in the property or life insured.

Insurance Policy Components

• All insurance policies must contain information about the involved parties, the property/life insured, the insured’s insurable interest, details of the risks covered, the policy period, and premium rates.

Insurance Companies and Their Types

• Mutual Insurance Companies are owned by policyholders.
• Stock Insurance Companies are owned by shareholders who may not be policyholders; examples include publicly traded firms.
• Reciprocal Insurance Exchanges are unincorporated, where subscribers exchange policies through an Attorney in Fact; examples include USAA, Farmers Insurance Group.
• Fraternal Organizations are benefit societies offering insurance solely for their members, typically based on ethnicity, religion, or profession; examples include Knights of Columbus, Modern Woodmen of America.