Ch 9 & 10 Review
Wednesday, April 15, 2026 3:21 PM
Housing Alternatives
Your Choice of Housing
- Opportunity Costs of Housing Choices, what are the trade offs:
○ Lost interest earned from the down payment of a home or the security deposit of an
apartment
○ Time & cost of commuting to work when living in an area w/ less expensive house
and/or living space
○ Loss of buying a home-tax advantages & equity growth when you rent
Different Housing Life Situations
- Young Single Person
○ Rental housing has limited maintenance & offers mobility
- Young Couple no kids
○ Rental housing offers convenience & flexibility of lifestyle
○ Purchase housing for financial benefits & long term security
- Couple w/ young kids
○ Rental housing can provide facilities for kids in a family orientated area
○ Purchase a home that meets financial & family needs
- Single Parent
○ Rental housing suitable for kids & a degree of home security
○ Low maintence to meet both family & financial needs
- Couple, kids no longer home
○ Rental housing is convenient, flexible for changing as needs change & financial
situation
○ Purchase housing that requires minimal maintenance & meets lifestyle needs
○ Retired Person
§ Rental meets financial, social & physical needs
§ Requires minimal maintenance, is convenient & has personal services
Renting vs Buying Housing
- People who are financially able to buy a home may also choose to rent instead choosing to
save and invest to buy a home in the future
○ Renting is less costly in the long run but, home ownership has financial advantages in
the long run
Renting Your Residence
- Selecting a rental unit
○ Apartments are the most common forms of rentals, others can include a condo or a
home
Advantages of Renting
- Mobility
○ Renting offers a location change as needed
§ A new job, rent increase, the need for more space, or to live in a diff community
- Fewer responsibilities
○ Less financial, maintence & repair responsibilities compared to home owners
- Lower Initial costs
○ A security deposit is usually thousands of dollars cheaper than a down payment
Disadvantage of Renting
- Can’t make tax deductions for mortgages interest & increased property value
- Must pay the rent every time it increases
- Restricted lifestyle
○ Noise complaints and/or set quiet hours
○ Restrictions can be placed regarding pets, decorations, entertainment systems etc
- Legal Details
○ When you sign the apartment lease you are agreeing to a rental agreement that may
include:
§ A description of the unit & address
§ Name & address of owner/landlord (The lessor)
§ Name of tenant (lessee)
§ Effective date of lease & length
§ Amount of security & pet deposit
§ Rent amount & due date
§ Where payment will be sent
§ Late fee repayment
§ A list of utilities, appliances, furniture & facilities included
§ Restrictions (No pets, remodeling etc) & subletting
□ Subletting - Allows you to have another person take over rent & live in the
unit
§ Charges for damages done, moving out later/earlier than agreed to
§ Agreements of when/how the landlord may enter the property/apartment
○ A lease for renting should be in writing, it protects both you & the landlord
Cost of Renting
- A security deposit
○ Money held by the landlord to cover the costs of any damages done to the rental unit
during the lease
- Having first & last months rent ready before you move in
- In some cases if you need to leave because of eviction/moving you must do so in 30 days &
your safety deposit will be returned
○ Most states require that your safety deposit be returned in 30 days
- Living expenses that will also incur while renting
○ Utilities, heat, water (in some cases), WiFi
The Home Buying Process
Step 1: Determine Home Ownership needs
- Evaluate owning your place of residence
- Asses types of housing units
- Calculate what you can afford
- Know the Pro’s & Cons
- What are the benefits of ownership?
○ Financial benefits & flexibility
- What are the possible drawbacks?
○ Financial uncertainty
§ Qualifying for a mortgage, financing & investments
○ Limited Mobility
§ Unlike renting this cant be done in a spam on of months
○ Higher Living Costs
§ Owning can be expensive, you are solely responsible for maintenance, repairs &
improvements
- Assess the type of Housing
1. Singe family home
○ AKA detached housing and the most common type of home
2. Multi unit
○ Duplex
§ A duplex is a building that contain two units owned by separate parties
○ Town Houses
§ Homes that have single family unit setup but are owned by separate parties
○ Planned Unit Developments
§ Communities w/ various types of housing, other use of the land, recreational
space, for some commercial use, shopping and/or parks
3. Condominiums
○ Individually owned housing units w/ several units in the building, have a monthly fee
for maintenance, repairs, maintaining the building & common areas
4. Cooperative Housing
○ When units in a building are owned by a nonprofit organization, shareholders pay for
the space, occupants do not own but have the legal right to stay as long as they have
stock in the non profit
- Housing Construction
○ AKA Factory-Built housing that are living units that are either fully or partially
assembled in a factory and then moved to a living site
- Building a home
○ Before beginning your project be sure to have the necessary knowledge & funding.
Before choosing a contractor find out:
§ Does the contractor have the experience for the project?
§ Do they have a good working relationship w/ architects, contractors & others in
their field?
§ What assurance do you have about the quality of their materials?
§ What arrangements were made for payment before construction?
§ What delays will be considered legitimate?
§ Does your contractor have his licensing & insurance?
§ Do they offer contact info such as names, address, phone numbers & email?
- Determine how much you can afford
○ Price & down payment
§ What you can afford based on your income & current living expenses?
§ Other factors to keep in mind are:
□ Current mortgage rates
□ Potential future property value
□ Your ability to make the monthly payments
□ Tax & insurance
○ Size & Quality
§ You might not get the size you want immediately but that will come w/ time
§ You want a home in good condition
□ If it needs work it might lower the property value if not looked at
Step 2: Find & evaluate a property to purchase
- Select a location
○ 3 to keep in mind - rural, urban & suburban
○ Zoning Laws
§ Restrictions on how a property can be used
□ Will this area be used for business, residential or commercial use
- Consider using a real estate agent
○ There main services include:
1. Showing you homes in your area based on a pre-approved mortgage
2. Presenting an offer based on current market analysis
3. Negotiating a purchase price
4. Assisting you in obtaining financing
5. Representing you at the closing of the purchase
- Be sure you have already been pre approved for a loan
- Conduct a home/pest/rodent test
Step 3: Price the Property
- Determine an appropriate market price
○ Factors to consider
1. Recent selling prices
2. Current housing demand
3. How long the house has been on the market
4. The owners need to sell
5. Financing options
6. Features & conditions of the home
- Negotiate an agreement price
○ A purchase of agreement
§ A legal document offering the home in the form of a sale, your first offer to
purchase will not always be accepted
○ A Counter Offer
§ When the seller indicates willingness to negotiate price
○ A Sellers Market
§ When a home owner who is selling has several offers for the property
○ A Buyers Market
§ When sales are low and so is the price of the property
○ Earnest Money
§ A portion of the purchase is deposited as good faith to show the purchase offer is
serious
○ A Contingency Clause
§ A contract that states the agreement is binding only if certain actions occur
Step 4: Obtain Financing
- Determine the amount of down payment
○ 20% of the down payment is required & later makes it easier to acquire a mortgage
○ Private Mortgage Insurance (PMI) is required if the down payment is less than 20%
- Qualifying & Applying for a mortgage
○ A mortgage is a long term loan on a specific piece property or estate
○ Payments on a mortgage are usually made over the course of 10-30 years
§ Mortgage Brokers - Help home buyers obtain financing
- Applying for a Mortgage
1. Pre-qualifications
• The application, proof of employment, proof of income, assets ownership &
existing debt amounts
2. The lender must obtain a credit report & verify the borrowers financial status, a max
amount is requested, pending approval you will be given a loan estimate
• The form can be found at www.consumerfinance.gov & is required by the
Consumer Financial Protection Bureau
3. Lenders will likely charge a fee that can be as high as $500, this is pledged to purchase
a home which leads to a legally binding contract
• The borrower can decide if they want to stay at this set interest rate for 30-90
days or meet an expected deadline
• If rates are expected to decline the borrower may float & lock in the rate at a
later date
*Float - To leave the transaction pending
- (ATR) Ability to Repay & (QM) Qualified Mortgage
○ This rule requires lenders to carefully consider a borrowers financials
• ATR expects a borrowers repayment abilities based on their DTI, liabilities &
credit history
- Based on your personal financing there are 3 things to keep in mind
○ The monthly mortgage payment you can afford
○ The mortgage amount you can afford
○ The home purchase within you price range
- How to calculate your DTI when purchasing a home
1. Your income ➗ 12 months (i.e 48,000 ➗ 12 = 4,000)
2. A down payment of 5% but lenders recommend 38% for PTI
• Principle, Taxes & Insurance
3. Subtract any debts you have like property taxes or homeowners insurance
Evaluating Points
- Points
○ Prepaid interest that is charged by the lender, each discounted point is equal to 1% of
your loan amount & a premium is then paid for obtaining a lower mortgage rate
- Consider the following guidelines:
○ If you plan to live in a home for 5+ yrs a lower mortgage rate is highly recommended
○ If you plan to sell in a few years, a higher mortgage is recommended
Fixed Rate, Fixed Payment Mortgages
- The three main types of mortgage lenders
○ Banks
○ Independent Banks aka correspondence lenders
• i.e. SoFi & Loan Depot
○ Mortgage wholesalers & Brokers
- Conventional Mortgages
○ Has equal payments of over 15, 20 or 30 yrs on a fixed interest rate
○ Set levels or Amortization
• The balance that is owed is reduced w/ each payment
- Govt Financing Problems
○ Government financed programs include:
• (FHA) Federal Housing Authority for loans
• (VA) Veterans Administrations also have loans
□ This loan can be obtained w/o a down payment
○ Neither of these programs provide money for a mortgage
○ How to qualify:
• You must be considered either lower or middle income
• Minimum percent for down payment is 3.5%
○ Both FHA & VA loans can be good alternatives when also deciding to sell a home
• Approval requires inspection & appraisal to sell the home
- United States Dept of Agriculture (USDA)
○ This program finances housing & community facilities in rural areas
○ USDA loans & grants are available to both single & multi family housing to buy and/or
improve land
Adjustable-Rate Mortgage & Variable Payment Mortgages
- Adjustable-rate mortgage (ARM)
○ AKA Flexible rate mortgage, variable rate mortgage
• Have an interest rate that can increase or decrease during the time of the loan,
but the borrower risks the changes of interest rates in the future
- A rate cap
○ Restricts the amount an interest rate can go up or down during the term
- A payment cap
○ Keeps the payments on adjustable rate mortgage set w/ limits so your payments can
rise
- Negative Amortization
○ A decreasing loan balance meaning the amount of the home equity
- Some ARM’s last about 40 years, there are some factors:
1. Determine how often & the restrictions for interest rates
2. Consider the frequency & restrictions for payments
3. Investigate if the loan will be extended due to negative Amoritization
4. Know what the lending institutions use to set the mortgage
- (LIBOR) The London Interbank Offered Rate
○ The most common base index for setting rates of adjustable rate mortgages
Interest-Only Mortgage
- Allow home buyers to have a lower payment for the first few years of the loan
○ These first payments don’t go to the loan
○ After initial payment periods end the mortgage adjusts
○ Payments will be based on the amount of the original loan when no principal has been
paid
Other Financing Approaches
- Buy Downs
○ An interest rate subsidy from a home builder or real estate developer that reduces the
rate in the first few years & is intended to encourage sales for those who wouldn’t
normally be able to afford a home
○ However sales price & down payments maybe higher than normal
- Second Mortgages
○ AKA a home equity loan, allows the homeowner to borrow on the already paid
(equity) of the property
- (HELOC) Home Equity Line Of Credit
○ A line of equity from a lender that gives borrowers additional funds as needed at a
variable interest rate
- Reverse Mortgages
○ Provide elderly home owners w/ tax free income in the form of a loan that is paid back
w/ interest when the when the home is sold or in the event of the homeowners death
○ You must be 62 yrs old to qualify
- Home Equity Conversion Mortgages
○ Allow someone to access their funds in various ways
• A lump sum, a monthly payment, a line of credit or in a combination of credit w/
regular payments
- Refinancing
○ Obtaining a new mortgage at a lower rate & payment
• Sometimes a lower rate is possible, divide the cost of refinancing by the amount
saved each month to determine how many months can cover your costs
Step 5: Close the Purchase Transaction
- Do a walk through before finalizing your purchase
○ A walk through is to inspect the condition of the home you plan to buy, take pictures
of any last minute things you might dispute
- The Closing
○ A meeting between the buyer, seller, the lender of funds and/or representatives of
each party
- The Closing Costs
○ AKA the settlement costs, are fees & charges paid when a real estate transaction is
complete
- Title Insurance
○ A closing cost that covers two items:
• The boundaries of the property being purchased & conduct a search to see if the
property is available for claim like unpaid real estate taxes
• During the mortgage term, the title company protects both owner & lender
against possible financial losses from defects in title and/or other unpredictable
claims against the title
- The Deed
○ A document transferring ownership of property from on person to the next
• A Warranty Deed - when the seller assures you the title is good, their documents
certify they are the true owner & seller of property w/ no claims against them
- (RESPA) The Real Estate Settlement Procedures Act
○ Helps buyers understand the process of closing & the costs
• This law requires loan applicants be given all info necessary regarding costs 3
days prior to closing known as the “Know before you owe” rule
- Escrow
○ Money deposited w/ a lending institution for property payments on taxes & insurance
of a home
• This protects lender from a loss due to unpaid taxes in real estate
Preparing a home for selling
- The house must be show ready when in the process of selling
○ Repairs done, clean windows, painting the interior & exterior
- The address visible
- The garage must be neat, clean & all repairs taken care of
- Avoid odors from trash, pets & neglected pipping issues
- Dispose of any unneeded/used items so that the home appears clean & larger for sale
- Open drapes & have the lighting on for a better showcase
○ Also keep in mind in any appliances & tech use in the house should be eco friendly
décor & an appealing presentation of your home
Determining the selling price
- An Appraisal
○ An estimate of the current value on a property, this can help show what the price of
the property should be set to
○ An appraisal can cost between $300-$400
○ Home improvements before sale can improve the value of the home & possibly raise
the sales price
• Most desired improvements include a remodeled kitchen, an additional bed
and/or bathroom, additional storage space, a separate office, basement, fireplace
and/or a outdoor patio/deck space
Sale by Owner
- Every year 10% of homes are sold directly from the home owner
○ It’s done w/o a real estate agents
○ Ads are done in newspapers, detailed info sheets and/or online ads
• Online listing may include better detailed info of the homes details like:
□ Prof photos
□ 3D visuals for a virtual tour
□ Drone videos for larger properties
○ Be sure to have info readily available regarding financing & financing requirements,
this info will help a buyer determine if a sale is possible:
• Use the services of a lawyer and/or contractor
• Have the buyers names, addresses, phone number & background info
• Show the home by appointment only w/ more than one person present for safety
reasons
Listing w/ a Real Estate Agent
- Be sure to consider the persons knowledge of the community & efforts to sell your home
○ The real estate agent will:
• Suggest a listing price
• Provide advice on which features of the home to highlight
• Hosting an open house
• Setting up a showing for potential buyers
• Have promotional items
□ Brochures, flyers, for sale sign, digital ads, social media etc
○ Discount agents sell homes at a lower rate
• They charge a 1-2% flat fee instead of the usual 6%
• You will likely pay the agents fee of 2-3%
Ch 10
Insurance & Risk Management: An intro
- What is insurance
○ Insurance is a protection against possible financial loss, its there to give you peace of
mind when life happens, you will have money available to meet any needs for:
§ Accidents, medical expenses, to protect you home & belongings, to cover
personal damage to properties caused by a driving accident
○ Life Insurance
§ Replaces income that could be lost if the policy holder dies
○ Car Insurance
§ Helps cover both property & personal damage done caused by the policyholders
vehicle (the person who caused the accident)
○ Home Insurance
§ Secures damages done to a place of residence & its associated financial risks
- Insurance is all based on the principal of pooling risks
○ This is when policy holders pay thousands as a group
- An insurance company
○ AKA the “Insurer”, is a risk sharing company that agrees to take the financial
responsibility of losses that may happen from a risk
- A policy
○ When the insurer joins risk sharing group, they agree to assume the risk at a fee
- The premium
○ They agreed upon fee they have to pay
- Insured
○ The person who is covered by an insurance policy
Types of Risks
- Risk
○ The uncertainty and/or possibility of something happening
- Peril
○ The cause/reason of a possible loss
- Hazard
○ A factor that can increase the likelihood of something happening from peril
- Personal Risk
○ What can happen during the loss of income or a life due to unforeseen events
§ I.E. a death, disability, old age and/or unemployment
- Property Risks
○ Uncertainties of in/direct losses to personal and/or real property from a fire,
windstorm, accident, theft and/or other type of hazard
- Liability Risks
○ Possible losses from injury or harm done to others, i.e. car accident, work place
misconduct and/or injury on someone else’s property
- Pure Risk
○ Aka insurance risk, is the chance that a loss should occur only under specified
circumstances
- A Speculative Risk
○ Risks that carry the chance of either loss or gain
§ I.E. starting a small business
Risk Management Methods
- Risk Management
○ A strategy to protect assets & people from financial loss caused by destructive events
- Types of Risk management
1. Risk Avoidance
a. You can avoid a car accident by being the passenger, risk avoidance just requires
practical choices
2. Risk Reduction
a. You can avoid risks by being aware & taking precautions as needed
3. Risk Assumption
a. Taking responsibility for the loss or injury that may result from a risk
- Self Assurance
§ The process of establishing monetary value to cover the costs of a loss
4. Risk Shifting
a. Transferring it to an insurance company and/or another type of financial organization
- A deductible
§ A set amount a policy holder must pay per loss on an insurance policy
Planning an Insurance program
- This type of program can be changed for the individuals needs
-
Your Personal Insurance Program
1. Set Insurance goals
a. Your goal is to minimize personal, property & liability risks
i. Being prepared in the event of a death, having insurance for a car vs paying out of
pocket, disability, loss of a job etc
2. Develop a plan to reach your goals
a. Be aware of risks you might run into & what you can handle w/o a big loss
b. What resources will help you reach your goals?
i. Public programs, personal assets, family/church support, reliability of various
insurers and/or private risk sharing programs
3. Put your plan into action
a. Budget as you go to attain your goal, purchase additional coverage if needed
b. The best plan allows for flexibility, financially, in contracts allowing for changes &
knowing what will work best at your price range
i.e. think of a car, for your first car it might be simple w/ basic insurance but the
financial loss will be easier to manage vs a new car & a high insurance policy, be
sure its something you can afford
4. Review your results
a. Evaluate your plan periodically, ask your self if this works? Be aware of any change
you might need to make to protect your assets
b. What major life changes need to be looked at? I.e. A couple having a baby
c. The needs of a single person vs a family vs a couple are all very different
i. In each case you will have to ask yourself if you have provided yourself w/
enough resources to care for basic needs & responsibility for your own well being
& that of others
Property & Liability Insurance
- The main types of risks related to homes & cars are:
○ Property damages & loss
§ Physical damages
□ Damage caused by fire, wind, water and/or smoke that are temporary
§ Loss of Use
□ This is when an item of value has been stolen, vandalized or arson (lost to a
fire beyond repair)
○ Liability protection
§ Liability
□ A legal responsibility for the financial costs of another persons losses/injuries
§ Negligence
□ A failure to responsible action in a situation
§ Vicarious Liability
□ When someone is responsible for the actions of another person
Home & Property Insurance
- Homeowners Insurance
○ Coverage to protect your place of residence & its associated financial risks such as
damage to the property or the injury of others
- Homeowners Insurance Coverages
○ Houses & other structures
§ A dwelling or other attached structures are covered under insurance & protected
from any damages
○ Additional Living Expenses
§ Pays for the cost of living temporarily in a separate location while your home is
being repaired
§ Some policies are limited time wise and/or add an additional 10-20% cover
charge, while others may cover costs up to a year
○ Personal Property
§ Household belongings like clothes, furniture & appliances can be insured up to
75%
§ Other common types of property w/ a coverage limit include jewelry valuing
$1,000, firearms valuing $2,000 & silverware valuing $2,500
○ Personal Property Floater
§ Covers damages/losses of a specific high value item
§ Requires a detailed description of the item & appraisal history to verify current
value
○ Household Inventory
§ A documented list of personal belongings, purchase dates & cost information
which can all be retrieved from either an insurance agent or online
□ Items of special value should have receipts, serial numbers, model names &
written appraisals of value
Personal Liabilities & Related Coverages
- The Risks of financial losses
○ A neighbors/guest being injured on your property leading to disability for life
○ A spark starting a fire on your property & damages your neighbors roof
○ Family accidentally damaging property value while visiting someone else’s home
- In each situation you are held responsible for the costs in legal action and/or claims
- An Umbrella Policy
○ AKA Personal Catastrophe Policy, replaces your basic needs under a liability coverage
○ This also protect you in the event of slander (someone trying to discredit your name),
defamation of character (spreading rumors about you) & invasion of property
§ Liability policies are sold for $1 million & useful to those of substantial net worth
□ I.E. a business owner and/or public figure
- Medical Payments Coverage (The Homeowner)
○ Pays the costs of accidents on your property & minor injuries caused by family or pets
- Supplemental Coverage
○ An insurance that pays for minor inconveniences, this protection is limited to
$500-$1,000
- Specialized Coverages
○ Homeowners insurance doesn’t usually cover natural disasters, The National Food
Insurance Program offers this service, an agent from FEMA can provide additional info
§ FEMA (Federal Emergency Management Agency)
- Endorsement
○ An additional coverage to the homeowners policy that can be added to specialized
coverages
Beware: When Home insurance coverages collide
- Do you need the flood insurance?
○ Be sure that your property is covered by any additional insurances being sold or you
might need a separate insurance
- The Risk
○ Is your home located in a flood zone? Look for a map of ask you city hall what
precautions you can take
○ Keep up to date w/ flood risks in your area
- Flood insurance
§ If your insurance doesn’t have flood coverage call 1(800)225-3566 or visit CA
Flood Insurance for more info
- What is costs
○ The average policy starts at $700/yr, can vary on coverage based on location risks &
your deductible
- What is covered?
○ The policy can cover your home up to $250,000, a separate policy will be needed for
lost belongings that can cover up to $100,000
- There’s a wait
○ Most policies have a 30 day waiting period to access benefits - don’t wait until the last
minute
- Resources
○ Use FEMA’s Historical Flood Risk & Cost data evaluate the flood risks in your area
FEMA - Flood Maps
Renters Insurance
- Only 4 out of 10 people have renters insurance
○ Renters insurance covers
§ Financial losses/damage against personal property
○ Tenants who pay rent are not covered by renters insurance & can be charged for:
§ Faulty wiring
§ Damages done to the building near their unit
○ Personal belongings are usually covered in student housing under their parents
§ Unless you live off campus - you should considered adding a separate policy
○ Renters insurance is usually affordable & has the same protections as homeowners
insurance
Home Insurance Policy Forms
- Until the mid 1950’s all types of insurances for the home were all separate policies and
were later sold as a package
○ Be aware that some of these assurances don’t always apply to a mobile home
Home Insurance Cost Factors
- How much coverage is needed?
○ Your insurance protection should be based on the amount needed to rebuild/repair
your home
- Coinsurance Clause
○ The homeowner must pay for part of the losses if the property was not insured for
that specified amount of replacement value
- Insurance companies base claim settlements on two methods to finance a home
○ Actual Cash Value (ACV)
§ A claim settlement method that insures payment based on the cost of an item
and/or replacement
○ Replacement Value
§ A payment given to you based on the price of the original item replaced and/or if
the items can depreciate less than the original
- Factors that affect home insurance costs
○ Location
§ What is the usual weather like in this area?
○ Type of Structure
§ Construction materials used to build the home influence what type of coverage is
needed
○ Coverage amount & policy type
§ The policy you pick w/ its limits affect the minimum that you pay
Reducing Home Insurance Costs
- Home Insurance Discounts
○ Most companies offer discounts towards your premium if:
§ You install a smoke detector
§ Add a fire extinguisher
§ Have a dead-bolt lock on the doors
§ Add an alarm system to the home
- Company Differences
○ You can save 30% on homeowners insurance by comparison shopping before deciding
who to use as your insurer
§ Consider services & coverages offered
§ Not all companies will cover claims the same way
§ Use Consumer Reports website to comparison shop
Automobile Insurance Coverages
- On average cars cost $250 billion in accidents, lost wages & medical costs
- The National Traffic Safety Administration states the following as factors:
○ Alcohol, texting & prohibited cell use are half of these costing $30 billion
- A Financial Responsibility Law
○ A state legislation requiring drivers to prove their ability to cover costs of damages
incurred and/or injuries from the accident
- Motor Vehicle Bodily Injury Coverages
○ Bodily Injury Liability
§ Covers financial risks lost to legal & medical expenses, lost wages and/or other
expenses that were lost from a car accident
§ Uninsured and/or under insured motorist protections
○ Medical Payments Coverage
§ Cover the costs of healthcare for those who were injured in the accident
including your self
□ This includes friends, carpool riders and anyone else in the vehicle
○ Uninsured Motorist Protections
§ Covers injuries that occurs to you & family, in most states this wont cover
property damages
- No Fault Insurance
○ When drivers involved in an accident collect medical expenses, lose their wages &
related injury costs from their insurance - they don’t have to pay out of pocket
§ The reality is that it varies from state to state, some have set limits on the costs of
medical assistance, lost claims & settlements
§ Other states will assist 100% but only in certain circumstances
□ i.e. permanent damages leading to paralysis or the death of a loved one
§ Some states include property damage in no fault insurance
- Motor Vehicle Property Damages Covered
○ There are 3 types of coverages to protect you from financial loss to property damages
& other damages done to your car
1. Property damage liability
- This coverage mainly applies to cars, but it also includes street signs, lamp
posts & other public street property
2. Collision
- Pays for damages done to the car regardless of who is at fault HOWEVER if
the person who caused the accident is identified, it will come out of their
insurance and the other persons
- Subrogation
® The insurance company’s right to recover the amount its pays for from
the loss from the person responsible
3. Comprehensive physical damage
- Covers the risks involving fire, theft, broken glass, falling objects, vandalism
& accidents caused by nature and/or animals
® Wind, hail, flood, tornado, lightening, earthquakes etc
- Other Automobile Insurance Coverages
○ Wages lost insurance
§ This will reimburse you for any for any salary/income lost due to a car accident
○ Towing & Emergency Road Service
§ Covers the cost of breakdowns & mechanical assistance
- This can be very helpful for those long road trips
§ This also covers getting the car to a service station & roadside assistance but not
the actual repair of your vehicle
- Think AAA
○ Amount of Coverage
§ Legal Concerns
- Most people can’t afford expensive court settlements so they opt for
automobile liability insurance
- In the past 10/20 coverage was considered adequate repayment in injury
related accidents, now that has risen 100/300 meaning a lawyer can sue for
1 million instead of 100 dollars in the event of an accident
** Keep in mind some people might have a 25/50/10 type of coverage
- This means $25,000 to cover an injured person
$50,000 to cover injuries per accident
$10,000 to cover property damages
§ Property Values
- Most policies can go as a high as $50,000 to $100,000
- Automobile Insurance
○ Car type
§ The year, make & model influence costs
- Expensive parts that need to be replaced, complications to the car because
of the style and/or insurance raises in costs because of amount of times the
car may have been stolen
○ Rating Territory
§ In some states this is where you live & is used to determine car insurance
premiums
○ Driver Classification
§ A category based on the drivers:
- sexual orientation, age, marital status, driving record & driving habits
§ These are all used to determine insurance rates
- Poor driving history leads to higher rates
○ Assigned Risk Pool
§ A group of people who are unable to get car insurance because of poor driving
history (aka lots of accidents) & must obtain coverage w/ high rates
- Reducing Automobile Insurance premiums
○ Comparing Companies
§ Net Quotes & look for your local consumer reports
○ Premium Discounts
§ Try to avoid accidents & traffic tickets/violations, most insurance companies will
owner your rates and/or offer discounts over time
Wednesday, April 15, 2026 3:21 PM
Housing Alternatives
Your Choice of Housing
- Opportunity Costs of Housing Choices, what are the trade offs:
○ Lost interest earned from the down payment of a home or the security deposit of an
apartment
○ Time & cost of commuting to work when living in an area w/ less expensive house
and/or living space
○ Loss of buying a home-tax advantages & equity growth when you rent
Different Housing Life Situations
- Young Single Person
○ Rental housing has limited maintenance & offers mobility
- Young Couple no kids
○ Rental housing offers convenience & flexibility of lifestyle
○ Purchase housing for financial benefits & long term security
- Couple w/ young kids
○ Rental housing can provide facilities for kids in a family orientated area
○ Purchase a home that meets financial & family needs
- Single Parent
○ Rental housing suitable for kids & a degree of home security
○ Low maintence to meet both family & financial needs
- Couple, kids no longer home
○ Rental housing is convenient, flexible for changing as needs change & financial
situation
○ Purchase housing that requires minimal maintenance & meets lifestyle needs
○ Retired Person
§ Rental meets financial, social & physical needs
§ Requires minimal maintenance, is convenient & has personal services
Renting vs Buying Housing
- People who are financially able to buy a home may also choose to rent instead choosing to
save and invest to buy a home in the future
○ Renting is less costly in the long run but, home ownership has financial advantages in
the long run
Renting Your Residence
- Selecting a rental unit
○ Apartments are the most common forms of rentals, others can include a condo or a
home
Advantages of Renting
- Mobility
○ Renting offers a location change as needed
§ A new job, rent increase, the need for more space, or to live in a diff community
- Fewer responsibilities
○ Less financial, maintence & repair responsibilities compared to home owners
- Lower Initial costs
○ A security deposit is usually thousands of dollars cheaper than a down payment
Disadvantage of Renting
- Can’t make tax deductions for mortgages interest & increased property value
- Must pay the rent every time it increases
- Restricted lifestyle
○ Noise complaints and/or set quiet hours
○ Restrictions can be placed regarding pets, decorations, entertainment systems etc
- Legal Details
○ When you sign the apartment lease you are agreeing to a rental agreement that may
include:
§ A description of the unit & address
§ Name & address of owner/landlord (The lessor)
§ Name of tenant (lessee)
§ Effective date of lease & length
§ Amount of security & pet deposit
§ Rent amount & due date
§ Where payment will be sent
§ Late fee repayment
§ A list of utilities, appliances, furniture & facilities included
§ Restrictions (No pets, remodeling etc) & subletting
□ Subletting - Allows you to have another person take over rent & live in the
unit
§ Charges for damages done, moving out later/earlier than agreed to
§ Agreements of when/how the landlord may enter the property/apartment
○ A lease for renting should be in writing, it protects both you & the landlord
Cost of Renting
- A security deposit
○ Money held by the landlord to cover the costs of any damages done to the rental unit
during the lease
- Having first & last months rent ready before you move in
- In some cases if you need to leave because of eviction/moving you must do so in 30 days &
your safety deposit will be returned
○ Most states require that your safety deposit be returned in 30 days
- Living expenses that will also incur while renting
○ Utilities, heat, water (in some cases), WiFi
The Home Buying Process
Step 1: Determine Home Ownership needs
- Evaluate owning your place of residence
- Asses types of housing units
- Calculate what you can afford
- Know the Pro’s & Cons
- What are the benefits of ownership?
○ Financial benefits & flexibility
- What are the possible drawbacks?
○ Financial uncertainty
§ Qualifying for a mortgage, financing & investments
○ Limited Mobility
§ Unlike renting this cant be done in a spam on of months
○ Higher Living Costs
§ Owning can be expensive, you are solely responsible for maintenance, repairs &
improvements
- Assess the type of Housing
1. Singe family home
○ AKA detached housing and the most common type of home
2. Multi unit
○ Duplex
§ A duplex is a building that contain two units owned by separate parties
○ Town Houses
§ Homes that have single family unit setup but are owned by separate parties
○ Planned Unit Developments
§ Communities w/ various types of housing, other use of the land, recreational
space, for some commercial use, shopping and/or parks
3. Condominiums
○ Individually owned housing units w/ several units in the building, have a monthly fee
for maintenance, repairs, maintaining the building & common areas
4. Cooperative Housing
○ When units in a building are owned by a nonprofit organization, shareholders pay for
the space, occupants do not own but have the legal right to stay as long as they have
stock in the non profit
- Housing Construction
○ AKA Factory-Built housing that are living units that are either fully or partially
assembled in a factory and then moved to a living site
- Building a home
○ Before beginning your project be sure to have the necessary knowledge & funding.
Before choosing a contractor find out:
§ Does the contractor have the experience for the project?
§ Do they have a good working relationship w/ architects, contractors & others in
their field?
§ What assurance do you have about the quality of their materials?
§ What arrangements were made for payment before construction?
§ What delays will be considered legitimate?
§ Does your contractor have his licensing & insurance?
§ Do they offer contact info such as names, address, phone numbers & email?
- Determine how much you can afford
○ Price & down payment
§ What you can afford based on your income & current living expenses?
§ Other factors to keep in mind are:
□ Current mortgage rates
□ Potential future property value
□ Your ability to make the monthly payments
□ Tax & insurance
○ Size & Quality
§ You might not get the size you want immediately but that will come w/ time
§ You want a home in good condition
□ If it needs work it might lower the property value if not looked at
Step 2: Find & evaluate a property to purchase
- Select a location
○ 3 to keep in mind - rural, urban & suburban
○ Zoning Laws
§ Restrictions on how a property can be used
□ Will this area be used for business, residential or commercial use
- Consider using a real estate agent
○ There main services include:
1. Showing you homes in your area based on a pre-approved mortgage
2. Presenting an offer based on current market analysis
3. Negotiating a purchase price
4. Assisting you in obtaining financing
5. Representing you at the closing of the purchase
- Be sure you have already been pre approved for a loan
- Conduct a home/pest/rodent test
Step 3: Price the Property
- Determine an appropriate market price
○ Factors to consider
1. Recent selling prices
2. Current housing demand
3. How long the house has been on the market
4. The owners need to sell
5. Financing options
6. Features & conditions of the home
- Negotiate an agreement price
○ A purchase of agreement
§ A legal document offering the home in the form of a sale, your first offer to
purchase will not always be accepted
○ A Counter Offer
§ When the seller indicates willingness to negotiate price
○ A Sellers Market
§ When a home owner who is selling has several offers for the property
○ A Buyers Market
§ When sales are low and so is the price of the property
○ Earnest Money
§ A portion of the purchase is deposited as good faith to show the purchase offer is
serious
○ A Contingency Clause
§ A contract that states the agreement is binding only if certain actions occur
Step 4: Obtain Financing
- Determine the amount of down payment
○ 20% of the down payment is required & later makes it easier to acquire a mortgage
○ Private Mortgage Insurance (PMI) is required if the down payment is less than 20%
- Qualifying & Applying for a mortgage
○ A mortgage is a long term loan on a specific piece property or estate
○ Payments on a mortgage are usually made over the course of 10-30 years
§ Mortgage Brokers - Help home buyers obtain financing
- Applying for a Mortgage
1. Pre-qualifications
• The application, proof of employment, proof of income, assets ownership &
existing debt amounts
2. The lender must obtain a credit report & verify the borrowers financial status, a max
amount is requested, pending approval you will be given a loan estimate
• The form can be found at www.consumerfinance.gov & is required by the
Consumer Financial Protection Bureau
3. Lenders will likely charge a fee that can be as high as $500, this is pledged to purchase
a home which leads to a legally binding contract
• The borrower can decide if they want to stay at this set interest rate for 30-90
days or meet an expected deadline
• If rates are expected to decline the borrower may float & lock in the rate at a
later date
*Float - To leave the transaction pending
- (ATR) Ability to Repay & (QM) Qualified Mortgage
○ This rule requires lenders to carefully consider a borrowers financials
• ATR expects a borrowers repayment abilities based on their DTI, liabilities &
credit history
- Based on your personal financing there are 3 things to keep in mind
○ The monthly mortgage payment you can afford
○ The mortgage amount you can afford
○ The home purchase within you price range
- How to calculate your DTI when purchasing a home
1. Your income ➗ 12 months (i.e 48,000 ➗ 12 = 4,000)
2. A down payment of 5% but lenders recommend 38% for PTI
• Principle, Taxes & Insurance
3. Subtract any debts you have like property taxes or homeowners insurance
Evaluating Points
- Points
○ Prepaid interest that is charged by the lender, each discounted point is equal to 1% of
your loan amount & a premium is then paid for obtaining a lower mortgage rate
- Consider the following guidelines:
○ If you plan to live in a home for 5+ yrs a lower mortgage rate is highly recommended
○ If you plan to sell in a few years, a higher mortgage is recommended
Fixed Rate, Fixed Payment Mortgages
- The three main types of mortgage lenders
○ Banks
○ Independent Banks aka correspondence lenders
• i.e. SoFi & Loan Depot
○ Mortgage wholesalers & Brokers
- Conventional Mortgages
○ Has equal payments of over 15, 20 or 30 yrs on a fixed interest rate
○ Set levels or Amortization
• The balance that is owed is reduced w/ each payment
- Govt Financing Problems
○ Government financed programs include:
• (FHA) Federal Housing Authority for loans
• (VA) Veterans Administrations also have loans
□ This loan can be obtained w/o a down payment
○ Neither of these programs provide money for a mortgage
○ How to qualify:
• You must be considered either lower or middle income
• Minimum percent for down payment is 3.5%
○ Both FHA & VA loans can be good alternatives when also deciding to sell a home
• Approval requires inspection & appraisal to sell the home
- United States Dept of Agriculture (USDA)
○ This program finances housing & community facilities in rural areas
○ USDA loans & grants are available to both single & multi family housing to buy and/or
improve land
Adjustable-Rate Mortgage & Variable Payment Mortgages
- Adjustable-rate mortgage (ARM)
○ AKA Flexible rate mortgage, variable rate mortgage
• Have an interest rate that can increase or decrease during the time of the loan,
but the borrower risks the changes of interest rates in the future
- A rate cap
○ Restricts the amount an interest rate can go up or down during the term
- A payment cap
○ Keeps the payments on adjustable rate mortgage set w/ limits so your payments can
rise
- Negative Amortization
○ A decreasing loan balance meaning the amount of the home equity
- Some ARM’s last about 40 years, there are some factors:
1. Determine how often & the restrictions for interest rates
2. Consider the frequency & restrictions for payments
3. Investigate if the loan will be extended due to negative Amoritization
4. Know what the lending institutions use to set the mortgage
- (LIBOR) The London Interbank Offered Rate
○ The most common base index for setting rates of adjustable rate mortgages
Interest-Only Mortgage
- Allow home buyers to have a lower payment for the first few years of the loan
○ These first payments don’t go to the loan
○ After initial payment periods end the mortgage adjusts
○ Payments will be based on the amount of the original loan when no principal has been
paid
Other Financing Approaches
- Buy Downs
○ An interest rate subsidy from a home builder or real estate developer that reduces the
rate in the first few years & is intended to encourage sales for those who wouldn’t
normally be able to afford a home
○ However sales price & down payments maybe higher than normal
- Second Mortgages
○ AKA a home equity loan, allows the homeowner to borrow on the already paid
(equity) of the property
- (HELOC) Home Equity Line Of Credit
○ A line of equity from a lender that gives borrowers additional funds as needed at a
variable interest rate
- Reverse Mortgages
○ Provide elderly home owners w/ tax free income in the form of a loan that is paid back
w/ interest when the when the home is sold or in the event of the homeowners death
○ You must be 62 yrs old to qualify
- Home Equity Conversion Mortgages
○ Allow someone to access their funds in various ways
• A lump sum, a monthly payment, a line of credit or in a combination of credit w/
regular payments
- Refinancing
○ Obtaining a new mortgage at a lower rate & payment
• Sometimes a lower rate is possible, divide the cost of refinancing by the amount
saved each month to determine how many months can cover your costs
Step 5: Close the Purchase Transaction
- Do a walk through before finalizing your purchase
○ A walk through is to inspect the condition of the home you plan to buy, take pictures
of any last minute things you might dispute
- The Closing
○ A meeting between the buyer, seller, the lender of funds and/or representatives of
each party
- The Closing Costs
○ AKA the settlement costs, are fees & charges paid when a real estate transaction is
complete
- Title Insurance
○ A closing cost that covers two items:
• The boundaries of the property being purchased & conduct a search to see if the
property is available for claim like unpaid real estate taxes
• During the mortgage term, the title company protects both owner & lender
against possible financial losses from defects in title and/or other unpredictable
claims against the title
- The Deed
○ A document transferring ownership of property from on person to the next
• A Warranty Deed - when the seller assures you the title is good, their documents
certify they are the true owner & seller of property w/ no claims against them
- (RESPA) The Real Estate Settlement Procedures Act
○ Helps buyers understand the process of closing & the costs
• This law requires loan applicants be given all info necessary regarding costs 3
days prior to closing known as the “Know before you owe” rule
- Escrow
○ Money deposited w/ a lending institution for property payments on taxes & insurance
of a home
• This protects lender from a loss due to unpaid taxes in real estate
Preparing a home for selling
- The house must be show ready when in the process of selling
○ Repairs done, clean windows, painting the interior & exterior
- The address visible
- The garage must be neat, clean & all repairs taken care of
- Avoid odors from trash, pets & neglected pipping issues
- Dispose of any unneeded/used items so that the home appears clean & larger for sale
- Open drapes & have the lighting on for a better showcase
○ Also keep in mind in any appliances & tech use in the house should be eco friendly
décor & an appealing presentation of your home
Determining the selling price
- An Appraisal
○ An estimate of the current value on a property, this can help show what the price of
the property should be set to
○ An appraisal can cost between $300-$400
○ Home improvements before sale can improve the value of the home & possibly raise
the sales price
• Most desired improvements include a remodeled kitchen, an additional bed
and/or bathroom, additional storage space, a separate office, basement, fireplace
and/or a outdoor patio/deck space
Sale by Owner
- Every year 10% of homes are sold directly from the home owner
○ It’s done w/o a real estate agents
○ Ads are done in newspapers, detailed info sheets and/or online ads
• Online listing may include better detailed info of the homes details like:
□ Prof photos
□ 3D visuals for a virtual tour
□ Drone videos for larger properties
○ Be sure to have info readily available regarding financing & financing requirements,
this info will help a buyer determine if a sale is possible:
• Use the services of a lawyer and/or contractor
• Have the buyers names, addresses, phone number & background info
• Show the home by appointment only w/ more than one person present for safety
reasons
Listing w/ a Real Estate Agent
- Be sure to consider the persons knowledge of the community & efforts to sell your home
○ The real estate agent will:
• Suggest a listing price
• Provide advice on which features of the home to highlight
• Hosting an open house
• Setting up a showing for potential buyers
• Have promotional items
□ Brochures, flyers, for sale sign, digital ads, social media etc
○ Discount agents sell homes at a lower rate
• They charge a 1-2% flat fee instead of the usual 6%
• You will likely pay the agents fee of 2-3%
Ch 10
Insurance & Risk Management: An intro
- What is insurance
○ Insurance is a protection against possible financial loss, its there to give you peace of
mind when life happens, you will have money available to meet any needs for:
§ Accidents, medical expenses, to protect you home & belongings, to cover
personal damage to properties caused by a driving accident
○ Life Insurance
§ Replaces income that could be lost if the policy holder dies
○ Car Insurance
§ Helps cover both property & personal damage done caused by the policyholders
vehicle (the person who caused the accident)
○ Home Insurance
§ Secures damages done to a place of residence & its associated financial risks
- Insurance is all based on the principal of pooling risks
○ This is when policy holders pay thousands as a group
- An insurance company
○ AKA the “Insurer”, is a risk sharing company that agrees to take the financial
responsibility of losses that may happen from a risk
- A policy
○ When the insurer joins risk sharing group, they agree to assume the risk at a fee
- The premium
○ They agreed upon fee they have to pay
- Insured
○ The person who is covered by an insurance policy
Types of Risks
- Risk
○ The uncertainty and/or possibility of something happening
- Peril
○ The cause/reason of a possible loss
- Hazard
○ A factor that can increase the likelihood of something happening from peril
- Personal Risk
○ What can happen during the loss of income or a life due to unforeseen events
§ I.E. a death, disability, old age and/or unemployment
- Property Risks
○ Uncertainties of in/direct losses to personal and/or real property from a fire,
windstorm, accident, theft and/or other type of hazard
- Liability Risks
○ Possible losses from injury or harm done to others, i.e. car accident, work place
misconduct and/or injury on someone else’s property
- Pure Risk
○ Aka insurance risk, is the chance that a loss should occur only under specified
circumstances
- A Speculative Risk
○ Risks that carry the chance of either loss or gain
§ I.E. starting a small business
Risk Management Methods
- Risk Management
○ A strategy to protect assets & people from financial loss caused by destructive events
- Types of Risk management
1. Risk Avoidance
a. You can avoid a car accident by being the passenger, risk avoidance just requires
practical choices
2. Risk Reduction
a. You can avoid risks by being aware & taking precautions as needed
3. Risk Assumption
a. Taking responsibility for the loss or injury that may result from a risk
- Self Assurance
§ The process of establishing monetary value to cover the costs of a loss
4. Risk Shifting
a. Transferring it to an insurance company and/or another type of financial organization
- A deductible
§ A set amount a policy holder must pay per loss on an insurance policy
Planning an Insurance program
- This type of program can be changed for the individuals needs
-
Your Personal Insurance Program
1. Set Insurance goals
a. Your goal is to minimize personal, property & liability risks
i. Being prepared in the event of a death, having insurance for a car vs paying out of
pocket, disability, loss of a job etc
2. Develop a plan to reach your goals
a. Be aware of risks you might run into & what you can handle w/o a big loss
b. What resources will help you reach your goals?
i. Public programs, personal assets, family/church support, reliability of various
insurers and/or private risk sharing programs
3. Put your plan into action
a. Budget as you go to attain your goal, purchase additional coverage if needed
b. The best plan allows for flexibility, financially, in contracts allowing for changes &
knowing what will work best at your price range
i.e. think of a car, for your first car it might be simple w/ basic insurance but the
financial loss will be easier to manage vs a new car & a high insurance policy, be
sure its something you can afford
4. Review your results
a. Evaluate your plan periodically, ask your self if this works? Be aware of any change
you might need to make to protect your assets
b. What major life changes need to be looked at? I.e. A couple having a baby
c. The needs of a single person vs a family vs a couple are all very different
i. In each case you will have to ask yourself if you have provided yourself w/
enough resources to care for basic needs & responsibility for your own well being
& that of others
Property & Liability Insurance
- The main types of risks related to homes & cars are:
○ Property damages & loss
§ Physical damages
□ Damage caused by fire, wind, water and/or smoke that are temporary
§ Loss of Use
□ This is when an item of value has been stolen, vandalized or arson (lost to a
fire beyond repair)
○ Liability protection
§ Liability
□ A legal responsibility for the financial costs of another persons losses/injuries
§ Negligence
□ A failure to responsible action in a situation
§ Vicarious Liability
□ When someone is responsible for the actions of another person
Home & Property Insurance
- Homeowners Insurance
○ Coverage to protect your place of residence & its associated financial risks such as
damage to the property or the injury of others
- Homeowners Insurance Coverages
○ Houses & other structures
§ A dwelling or other attached structures are covered under insurance & protected
from any damages
○ Additional Living Expenses
§ Pays for the cost of living temporarily in a separate location while your home is
being repaired
§ Some policies are limited time wise and/or add an additional 10-20% cover
charge, while others may cover costs up to a year
○ Personal Property
§ Household belongings like clothes, furniture & appliances can be insured up to
75%
§ Other common types of property w/ a coverage limit include jewelry valuing
$1,000, firearms valuing $2,000 & silverware valuing $2,500
○ Personal Property Floater
§ Covers damages/losses of a specific high value item
§ Requires a detailed description of the item & appraisal history to verify current
value
○ Household Inventory
§ A documented list of personal belongings, purchase dates & cost information
which can all be retrieved from either an insurance agent or online
□ Items of special value should have receipts, serial numbers, model names &
written appraisals of value
Personal Liabilities & Related Coverages
- The Risks of financial losses
○ A neighbors/guest being injured on your property leading to disability for life
○ A spark starting a fire on your property & damages your neighbors roof
○ Family accidentally damaging property value while visiting someone else’s home
- In each situation you are held responsible for the costs in legal action and/or claims
- An Umbrella Policy
○ AKA Personal Catastrophe Policy, replaces your basic needs under a liability coverage
○ This also protect you in the event of slander (someone trying to discredit your name),
defamation of character (spreading rumors about you) & invasion of property
§ Liability policies are sold for $1 million & useful to those of substantial net worth
□ I.E. a business owner and/or public figure
- Medical Payments Coverage (The Homeowner)
○ Pays the costs of accidents on your property & minor injuries caused by family or pets
- Supplemental Coverage
○ An insurance that pays for minor inconveniences, this protection is limited to
$500-$1,000
- Specialized Coverages
○ Homeowners insurance doesn’t usually cover natural disasters, The National Food
Insurance Program offers this service, an agent from FEMA can provide additional info
§ FEMA (Federal Emergency Management Agency)
- Endorsement
○ An additional coverage to the homeowners policy that can be added to specialized
coverages
Beware: When Home insurance coverages collide
- Do you need the flood insurance?
○ Be sure that your property is covered by any additional insurances being sold or you
might need a separate insurance
- The Risk
○ Is your home located in a flood zone? Look for a map of ask you city hall what
precautions you can take
○ Keep up to date w/ flood risks in your area
- Flood insurance
§ If your insurance doesn’t have flood coverage call 1(800)225-3566 or visit CA
Flood Insurance for more info
- What is costs
○ The average policy starts at $700/yr, can vary on coverage based on location risks &
your deductible
- What is covered?
○ The policy can cover your home up to $250,000, a separate policy will be needed for
lost belongings that can cover up to $100,000
- There’s a wait
○ Most policies have a 30 day waiting period to access benefits - don’t wait until the last
minute
- Resources
○ Use FEMA’s Historical Flood Risk & Cost data evaluate the flood risks in your area
FEMA - Flood Maps
Renters Insurance
- Only 4 out of 10 people have renters insurance
○ Renters insurance covers
§ Financial losses/damage against personal property
○ Tenants who pay rent are not covered by renters insurance & can be charged for:
§ Faulty wiring
§ Damages done to the building near their unit
○ Personal belongings are usually covered in student housing under their parents
§ Unless you live off campus - you should considered adding a separate policy
○ Renters insurance is usually affordable & has the same protections as homeowners
insurance
Home Insurance Policy Forms
- Until the mid 1950’s all types of insurances for the home were all separate policies and
were later sold as a package
○ Be aware that some of these assurances don’t always apply to a mobile home
Home Insurance Cost Factors
- How much coverage is needed?
○ Your insurance protection should be based on the amount needed to rebuild/repair
your home
- Coinsurance Clause
○ The homeowner must pay for part of the losses if the property was not insured for
that specified amount of replacement value
- Insurance companies base claim settlements on two methods to finance a home
○ Actual Cash Value (ACV)
§ A claim settlement method that insures payment based on the cost of an item
and/or replacement
○ Replacement Value
§ A payment given to you based on the price of the original item replaced and/or if
the items can depreciate less than the original
- Factors that affect home insurance costs
○ Location
§ What is the usual weather like in this area?
○ Type of Structure
§ Construction materials used to build the home influence what type of coverage is
needed
○ Coverage amount & policy type
§ The policy you pick w/ its limits affect the minimum that you pay
Reducing Home Insurance Costs
- Home Insurance Discounts
○ Most companies offer discounts towards your premium if:
§ You install a smoke detector
§ Add a fire extinguisher
§ Have a dead-bolt lock on the doors
§ Add an alarm system to the home
- Company Differences
○ You can save 30% on homeowners insurance by comparison shopping before deciding
who to use as your insurer
§ Consider services & coverages offered
§ Not all companies will cover claims the same way
§ Use Consumer Reports website to comparison shop
Automobile Insurance Coverages
- On average cars cost $250 billion in accidents, lost wages & medical costs
- The National Traffic Safety Administration states the following as factors:
○ Alcohol, texting & prohibited cell use are half of these costing $30 billion
- A Financial Responsibility Law
○ A state legislation requiring drivers to prove their ability to cover costs of damages
incurred and/or injuries from the accident
- Motor Vehicle Bodily Injury Coverages
○ Bodily Injury Liability
§ Covers financial risks lost to legal & medical expenses, lost wages and/or other
expenses that were lost from a car accident
§ Uninsured and/or under insured motorist protections
○ Medical Payments Coverage
§ Cover the costs of healthcare for those who were injured in the accident
including your self
□ This includes friends, carpool riders and anyone else in the vehicle
○ Uninsured Motorist Protections
§ Covers injuries that occurs to you & family, in most states this wont cover
property damages
- No Fault Insurance
○ When drivers involved in an accident collect medical expenses, lose their wages &
related injury costs from their insurance - they don’t have to pay out of pocket
§ The reality is that it varies from state to state, some have set limits on the costs of
medical assistance, lost claims & settlements
§ Other states will assist 100% but only in certain circumstances
□ i.e. permanent damages leading to paralysis or the death of a loved one
§ Some states include property damage in no fault insurance
- Motor Vehicle Property Damages Covered
○ There are 3 types of coverages to protect you from financial loss to property damages
& other damages done to your car
1. Property damage liability
- This coverage mainly applies to cars, but it also includes street signs, lamp
posts & other public street property
2. Collision
- Pays for damages done to the car regardless of who is at fault HOWEVER if
the person who caused the accident is identified, it will come out of their
insurance and the other persons
- Subrogation
® The insurance company’s right to recover the amount its pays for from
the loss from the person responsible
3. Comprehensive physical damage
- Covers the risks involving fire, theft, broken glass, falling objects, vandalism
& accidents caused by nature and/or animals
® Wind, hail, flood, tornado, lightening, earthquakes etc
- Other Automobile Insurance Coverages
○ Wages lost insurance
§ This will reimburse you for any for any salary/income lost due to a car accident
○ Towing & Emergency Road Service
§ Covers the cost of breakdowns & mechanical assistance
- This can be very helpful for those long road trips
§ This also covers getting the car to a service station & roadside assistance but not
the actual repair of your vehicle
- Think AAA
○ Amount of Coverage
§ Legal Concerns
- Most people can’t afford expensive court settlements so they opt for
automobile liability insurance
- In the past 10/20 coverage was considered adequate repayment in injury
related accidents, now that has risen 100/300 meaning a lawyer can sue for
1 million instead of 100 dollars in the event of an accident
** Keep in mind some people might have a 25/50/10 type of coverage
- This means $25,000 to cover an injured person
$50,000 to cover injuries per accident
$10,000 to cover property damages
§ Property Values
- Most policies can go as a high as $50,000 to $100,000
- Automobile Insurance
○ Car type
§ The year, make & model influence costs
- Expensive parts that need to be replaced, complications to the car because
of the style and/or insurance raises in costs because of amount of times the
car may have been stolen
○ Rating Territory
§ In some states this is where you live & is used to determine car insurance
premiums
○ Driver Classification
§ A category based on the drivers:
- sexual orientation, age, marital status, driving record & driving habits
§ These are all used to determine insurance rates
- Poor driving history leads to higher rates
○ Assigned Risk Pool
§ A group of people who are unable to get car insurance because of poor driving
history (aka lots of accidents) & must obtain coverage w/ high rates
- Reducing Automobile Insurance premiums
○ Comparing Companies
§ Net Quotes & look for your local consumer reports
○ Premium Discounts
§ Try to avoid accidents & traffic tickets/violations, most insurance companies will
owner your rates and/or offer discounts over time
