Business and Personal Finance © 2007

Chapter 13: Home and Motor Vehicle Insurance

Chapter Summaries

• Risk is the probability of loss or injury; peril is something that may cause a loss; hazards increase the probability of loss; and negligence is failing to take reasonable care to prevent accidents. Risk avoidance, risk reduction, risk assumption, and risk shifting are ways of managing risk.
• Insurance involves the risk management method of shifting risk: In exchange for fees, the insurance pays for losses.
• Property insurance protects from losses resulting from natural causes, fire, and criminal activity. Liability insurance covers legal responsibility for the cost of losses to others.
• Homeowners insurance covers the building, living expenses, personal property, and personal liability. Renters insurance covers personal possessions, living expenses, and personal liability.
• Factors affecting the cost of homeowners insurance are home location, structural type, coverage amount and policy type, discounts, and differences among insurance companies.
• The types of motor vehicle insurance include bodily injury liability, medical payments coverage, uninsured motorist's protection, property damage liability, collision, and comprehensive physical damage coverage.
• Factors affecting the cost of motor vehicle insurance include the amount of coverage, type of vehicle, rating territory, and driver classification.