New York Real Estate for Salespersons, 5 th e

© 2013 All rights reserved.Chapter 14 Property Insurance 1

New York Real Estate for Salespersons, 5th e

By Marcia Darvin SpadaCengage Learning


Chapter 14

Property Insurance


Chapter 14 Key Terms

Actual cash value

Deductible

Liability insurance

Package policy

Property insurance

Replacement cost

Umbrella policy

© 2013 All rights reserved.

The Purpose of Property InsuranceProtects home or income/business against damage or loss in case of fire, theft or vandalism

Two types of property insuranceSection I covers property

Section II covers liability

Chapter 14 Property Insurance 4


Choices in Purchasing Property InsuranceIndependent Agents-

may represent one or more licensed insurance companies

Insurance Brokers- represent the property owner, not the insurance company



Types of PoliciesMonoline- one type

of coverage, such as liability insurance

Package- includes several different types of coverage, such as property insurance and liability insurance

Liability- coverage to protect against claims alleging that one’s negligence resulted in injury or property damage



Property Insurance CoveragePrevents financial loss from

Fire, winds,hail, tornado,

vandalism.

Theft of personal property

Someone injured onproperty

from negligence

Damage by insured to

someone elsessproperty dueto negligence



Standard Homeowner’s Policies Homeowners-1 (HO-1) insures home

and contents Homeowners-2 (HO-2) insures home

and contents from additional perils Homeowners-3 (HO-3) covers home

for most risk of physical loss Homeowners-5 (HO-5) same as HO-3,

plus personal possessions covered for most losses



Standard Homeowner’s Policies Homeowners-8 (HO-8) provides actual cash

value coverage in place of replacement cost coverage for a building

Tenants or Coop Owners (HO-4) reimburse tenants for increases in living expenses if home becomes inhabitable

Condo Unit Owners (HO-6) insure against damage to contents of apartment plus liability



Actual Cash Value or Replacement CostActual Cash Value

The insured is reimbursed for the replacement cost minus the physical depreciation of the lost or damaged property

Replacement Cost

The insured is covered and reimbursed for the actual cost of replacing the damaged property



Basic Amounts of Coverage

$0

$100,000

$200,000

$300,000

$400,000

$500,000

Standard Coverage

Advised coveragemin

Advised coveragemax



Problems in Obtaining InsuranceNew York Property Insurance Underwriting Association

Offers fire insurance if you cannot purchase from individual company

Rates are higher



Problems in Obtaining InsuranceNational Flood Insurance Policy

Administered by FEMACan purchase insurance if residing in special flood hazard areas

Coastal Residence AssistanceNYS Dept. of Financial Services helps consumers find coverage



Cancellation and Nonrenewals of a PolicyNonpayment of a premiumConviction of a crimeDiscovery of fraud or material

misrepresentationDiscover of willful or reckless acts of

omissionsPhysical changes in the property insuredThe policy’s continuation violates insurance

law



Other Types of Property Insurance Commercial Policies

Commercial General Liability: covers four forms of injury

A Business Owner’s Policy: bundles property and liability insurance under one premium

Umbrella Policies An excess liability

policy that provides additional coverage above that offered by primary policies



Professional Liability InsuranceProfessional liability Insurance

Covers individuals and business from claims by third parties

Errors and omissions insurance

Professional liability insurance covers claims of negligence against a professional business



Real Estate Agent’s Role Explaining the purpose

and costs of property insurance

Explaining the lender’s interest in property insurance

Explaining why the lender may escrow the

property insurance

Explaining when to obtain property insurancewhen there is a cash sale


Documents

New York Real Estate for Salespersons, 5 th e