Liability Insurance

Study Notes

Replaces income-earning potential lost through death and helps pay expenses related to an insured's death.
Types of personal insurance include:
- Homeowners
- Personal auto
- Personal watercraft
- Personal umbrella
- Life insurance
- Health insurance
- Annuities
Disability insurance is a form of health insurance that replaces an insured's income if they are unable to work due to illness or injury.

Homeowners policy provides property and liability coverage for individuals and families.
Property coverage protects an insured's home and its contents for damage caused by fire, wind, and other causes of loss.
Liability coverage protects an insured for injury to others or damage to others' property for which they are legally responsible.

Pays the cost of medical care, lost wages, and other state-mandated benefits when employees are injured on the job or acquire a job-related illness.
Employers are required by law to pay certain benefits to injured or ill employees, regardless of who caused the injury or illness.

Private insurers can be classified based on factors such as their form of ownership.
Insurance policies have certain special characteristics, including:
- Utmost good faith: Both parties to an insurance contract are expected to be ethical in their dealings with each other and disclose all relevant facts.
- Contract of adhesion: The insurer wrote or chose the policy, and the insured generally has no say, so if the policy wording is ambiguous, a court will generally apply the interpretation that favors the insured.
- Contract of indemnity: Insurance does not necessarily pay the full amount necessary to restore an insured who has suffered a covered loss to the same financial position, but the amount the insurer pays is directly related to the amount of the insured's loss.

Insurers use one of two approaches: self-contained or modular.
Self-contained policies usually include both property and liability coverages in a single document.
Modular policies combine coverage forms and other documents to tailor a policy to the insured's needs.
Examples of modular policies include commercial package policies and businessowners policies.