Draw with Me! Indemnity!

[00:00:02]All right, hello, hello, hello. Melissa May Dylan, your insurance exam queen. And I'm going to make sure we're showing up live where we need to be.

[00:00:15]Just double-checking on the face All right, showing up on the Facebook, I think.

[00:00:23]Okay, hang on. It's not quite It's showing live, but I'm not seeing it yet.

[00:00:28]Oh, that's because I'm in the Okay, wait, hang on. Okay, okay.

[00:00:34]>> [clears throat] >> All right, and Yep, sounds good on the Facebooks and on the YouTubies.

[00:00:45]Let's see how you guys are doing over there.

[00:00:52]And Uh oh, I have to not be on a different app. Different YouTube app to see it.

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[00:01:09]And we'll give people a minute um to come on.

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[00:01:20]All right, yay, it sounds working. All right, if you guys want to say hello, let me know where you're at, where you're coming from. That would be amazing.

[00:01:27]And we're going to have a little lesson today. Again, I'm just trying out markers and writing and like what which is happening there.

[00:01:36]Let's go this way. There we go. All right, we're trying out new markers and all the fun stuff, and so I'm just teaching some live lessons. I'm prepping to uh create some new videos, and so I'm just tech checking out my materials.

[00:01:50]Um okay, so what I want to talk about today is what is indemnity.

[00:02:01]Indemnity, okay? So, what is indemnity?

[00:02:06]When we're thinking and this this came up um as a question in the platinum chat group. So, uh we offer, you know, on our on our website insuranceexamqueen.com, which uh is under maintenance right now.

[00:02:19]So, if you need help purchasing anything, just uh insuranceexamqueen.myshopify.com is where you can go or you can just email us [email protected].

[00:02:29]Um it's undergoing some maintenance today. So, if you're trying to get on there and it's a struggle, just email us [email protected] and and we'll get you taken care of.

[00:02:38]But, anyway, um this is uh this is how I I I teach.

[00:02:43]So, I recommend that everybody always get the gold class series package because how I'm about to teach right now is how I teach inside of gold. And one of the things we also offer is the Telegram support chat. So, if you're studying and you're feeling all alone, you're by yourself, you're like, "I really want to be able to ask questions, get support, get feedback, have a tutor in my pocket." That's the platinum class uh series package. And so, we actually have a um I wonder if I can if you guys can really Oh, you guys should be able to really see it. So, we have a Telegram um support group. And uh let's see, where did that question come from? I saw it somewhere. There was a I literally just looked at Oh, here it is, yeah. So, there was this question in there that says, "I'm uh I'm going over some of my incorrect questions from Kaplan. Can you please help me understand the question below?"

[00:03:31]And it said, "Bruce owns a $50,000 uh lake house that he has insured for 40,000. He sustains a $5,000 covered loss. According to the principle of indemnity, how much will the insurer pay?" And it's 5,040, 50, uh 4,000. And he said, "I picked 40,000." So, then a person who's studying with us was like uh the answer is 5,000 because that only is what he lost. The insurance company is not going to pay you more than what the amount of the loss is.

[00:04:04]So, [snorts] that was the correct answer. So, this is another student who's studying with us gave him the gave Monica the correct answer. And then Monica Monica says, "Thank you. Is it not also because he had 80%?" So, this question said nothing about coinsurance.

[00:04:19]But, she's pulling in the coinsurance information because that's part of that's part of it, right? So, then I sent her a voice message. So, this is the power of the Telegram group is I'm you ask a question and I respond back to you with an answer explaining it to you in my own voice. And so, like So, as long as you're within 80%, which he is. So, 40,000 is exactly 80%. I got it on two speed, but so I answered their question um and then I you know, I could spell it out. And then she goes, "Hi Melissa, that does make sense. Thank you. Thank you, Lukita." This is an example of our Telegram um chat. So, it's like if you really want the help and you want the support and you want to be able to ask questions, that's what the Telegram is for. And it is way cheaper than tutoring. Like, if you wanted to get tutoring, you're looking at you know, if you can find a low price tutor somewhere between 40, which is like really magical to find somebody at a 40, but most tutors are now at like a 70-100 dollar an hour pass or uh amount. And you can get the platinum for $2.99. It is literally the best thing you can get to have a person who is actually helping you as you're studying. So, people in the platinum chat will literally take screenshots of test questions that they have, put it in the chat, and I'll explain it. I'll break it down. I'll help them understand why why it makes sense, why it doesn't make sense, what they're missing, what they're not understanding. So, in her mind she saw that question as a coinsurance question because it said, I'm going to cover my marker here because So, the question had said he it's supposed to be covered at 50. That's the amount it's covered instead at 40.

[00:06:01]And he had a $5,000 loss. She got lost.

[00:06:04]She got focused in on the 50 to the 40 and her mind went to coinsurance. And then went to 80 She's like, "Oh, well, he is within 80%." And she totally bypassed the $5,000 claim loss. So, she's like, "Okay, he carried 40 or sorry, it's supposed to be covered at 50. He carried 40. That's within 80%.

[00:06:23]So, they will pay the full amount." And that's where her brain went. But, she forgot that little the claim was only 5,000.

[00:06:31]So, then I got to break that down. I got to explain that to her and I'm like, "I validate you're not wrong to be thinking about the 80%. It's important that you keep that in mind. It is incredibly important because if he was carrying less than the 80% of whatever 50,000 is, which happens to be exactly 40,000 by the way. Uh I even did the math on my uh I did the math on my phone to make sure like I was like, "Okay, what is 80% of 50,000, right?" It was exactly 40,000.

[00:07:05]So, I was like, "You're right. You do And this is this is where we struggle sometimes because if if you're just taking a practice exam and you get that wrong, you're like, "Oh, but like Oh, like why why did I choose that answer?

[00:07:17]And how did I get it wrong? And what what am I missing?" And this is where it's so powerful to have an actual teacher, an actual tutor explain to you what it is that you're missing and honor she was correct in thinking about the coinsurance. Like that was a very a good good great job for thinking about the coinsurance. She just missed the part about the a loss. So, being able to explain that with her, highlight for that for her, validate that she was correct in thinking about the coinsurance, find where she was missing what Where was she missing that she ended up choosing the wrong answer? And how can I, you know, instill in her mind the things that she needs to think about. One, you do need to think about coinsurance. So, coinsurance says, especially for property and casualty, whatever the value of the house is, in fact, [clears throat] let's just talk about it right now. I kind of skip indemnity here for a minute. Let me just talk about insurance to value. Let's do that.

[00:08:15]Insurance, since I decided to kind of go off on a tangent. Insurance to value.

[00:08:22]What does insurance to value mean? So, let's say that I have I have a house.

[00:08:29]And this house is going to cost a certain amount. It's going to cost money to build it.

[00:08:37]And every house can be a little bit unique, right? So, we're going to ask, what is the number of of bedrooms?

[00:08:45]Right? How many bedrooms? What is the number of bathrooms?

[00:08:50]Right? We might ask, uh, you know, like, what kind of flooring do you have? What what kind of roof do you have? You know, is it a asphalt, uh, shingle roof? Is it a Is it a metal roof? All of these questions about the house is going to spit out a number.

[00:09:08]And so, let's say, just to keep things really simple, really easy, let's say this number is a hundred thousand.

[00:09:14]Okay? So, we're saying that the cost to build this house with as many bedrooms as it has, with as many bathrooms as it has, with the flooring, with the roof, with the every feature about this home, it would cost us a hundred thousand dollars to rebuild that home. So, insurance to value is saying, "Look, your house is going to cost $100,000 to build it."

[00:09:41]Okay? That is the value of the house. So, insurance to value is saying, "Your insurance policy, your homeowner's policy, should be to value." So, that means if I were to buy a homeowner's So, if I were to buy my my homeowner's insurance, I buy a homeowner's, if I am insurance to value, that means my homeowner's policy should be for $100,000. That is insurance to value.

[00:10:14]Insurance to value says, "If the house is $100,000 to build it, you need to have your homeowner's insurance at 100,000."

[00:10:22]That is insurance to value. Now, not everybody likes to carry $100,000 on their house, and there's a few reasons for that. The biggest reason is that most homeowner's claims will not be the entire house burning down. Cuz this number, this 100,000 here, is based on the idea, "If this whole house burns down, how much would it cost to build it?" $100,000.

[00:10:45]But, it's very rare that your whole house burns down. Okay? It's not often that you actually have the entire structure destroyed by a peril like fire, lightning, wind, or hail. In fact, the majority of homeowner's claims are $25,000 or less.

[00:11:04]$25,000 or less.

[00:11:06]So, when I buy a homeowner's insurance, I'm buying $100,000 of coverage, but it's very, very, very, very rare I will ever actually need that. When you need it, you need it. Man, I I live in an area where there were tornadoes just went through. I just saw a video of a man whose whose house was complete like In 1 second, he was in the video walking in his living room. The next second, black screen.

[00:11:32]And then he's standing there. He walks in and he just moves and the entire house is torn down around him. And he's got like fuzz in his hair from like the stuffing of the house. And he's totally fine.

[00:11:42]It was insane, but the house was completely torn apart. Right? That is actually extremely rare that your whole house burns down. But insurance to value says if the whole house burns down, we need as much money as we need to build it.

[00:11:57]So you should be carrying an insurance policy to value. The value is 100,000 to build it, your insurance policy should be 100,000.

[00:12:06]However, most claims will not be the full amount. So people being people, wanting to save money, not wanting to buy something they don't need, they will attempt to get a homeowner's policies for less than insurance to value. Now they can, and that's okay. However, insurance companies are going to do something where they say, "Look, we want you to carry insurance to value."

[00:12:30]Because it it it is possible that your whole house burns down and that's ultimately what we're covering. So that if the whole house burns down, we are there to rebuild it. But people being people, they want to be cheap. They don't want to buy the full amount that they need. They know that the majority of claims are not going to be the whole house burning down. It's pretty rare for your whole house to to be burned down and to need to build it. So So what people do is they will say "Well, I want to carry I want to carry less than less than the full amount to rebuild."

[00:13:05]They want to carry less than that. And people can do this. And again, they do this for many reasons. Again, there's um you know, it it's it's rare uh to have the whole house destroyed.

[00:13:22]It's rare to have that happen.

[00:13:25]And most claims, most claims are 25k or under, okay? So, it makes sense. It makes sense as to why people don't want to neces- care necessarily do an insurance to value at at whatever the 100,000 is. And this 100,000 is our easy example. A house could be 50,000 to rebuild. It could be a million to rebuild. It's whatever the house is, it's based on the house unique specific features of the house, okay? Again, we're asking how many bedrooms, how many bathrooms, what type of flooring, what kind of roof do you have, among a bunch of other questions that we ask about the house, okay? So, um people want to carry less than that.

[00:14:06]Well, insurance companies like it would not be fair to let's say this homeowner is like, "You know what? Since most homeowners claims are 25,000, I want to buy an insurance policy for only 25,000.

[00:14:19]And then, if I have a $25,000 claim, they'll pay me 25,000, and it'll be great, right? And then I'll save so much money, because instead of paying for $100,000 of coverage, I only paid for 25." The insurance will not do that.

[00:14:33]They will not allow you to buy a really, really cheap policy when you should like insurance to value means it doesn't just mean it means like you have to do this, okay?

[00:14:45]Insurance to value is not saying this is the this is what you should do. It's saying this is what you have to do. That you have to carry the amount on your house that it costs to rebuild. But, there's a little what they will allow you to do is they'll say insurance to value they'll set at 80%.

[00:15:05]80% is okay. So, what that means is if the house value to rebuild is 100,000, they will let you do 80,000 instead, okay? That puts you in insurance to value, okay?

[00:15:20]So, as long as you're within 80% of the rebuild, 80% of what it would cost to build this house from the ground up, you're going to be okay.

[00:15:30]This So 80 So in this example, if the rebuild is a hundred thousand, 80,000 would be adequate. 80,000 fits 80% fits insurance to value.

[00:15:42]So the rule, insurance to value says you must carry enough to rebuild your house within 80%.

[00:15:50]So as long as this homeowner is carrying at least 80,000, and he has a claim, even a $25,000 claim, they'll pay the full amount because he's fitting the insurance to value rule.

[00:16:02]Carry enough insurance on your house to the value that the house is to rebuild it, okay? Now, let's look at a specific example.

[00:16:11]So this is Again, this is insurance to value. And now and I know that the thing said indemnity, but we went full-blown coinsurance on this on this guy, okay?

[00:16:20]All right. So, let's take another example. So again, let's say we have our house.

[00:16:27]We have our house.

[00:16:28]And this house to is a is a hundred thousand dollars to rebuild, okay? A hundred thousand dollars to rebuild this house.

[00:16:39]And the insurance to value, so insurance to value, insurance to value would say he needs to carry at least 80,000 at this point. Cuz again, insurance to value is 80%.

[00:16:59]I'm keeping very round even numbers. A hundred thousand, 80% of a hundred thousand is 80,000, okay?

[00:17:06]So insurance to value is 80,000. Let's take an example and let's say that we have a and I'm not These markers are nice, but they're they're a little like broad strokey, I don't know. Let me try it one more time. Let me try a the purple one, okay? So, let's say we have this scenario. Let's say we have a test question, okay? So, this is a question we have on the exam, okay? Um and actually let's say So, let's say Bob had a house with a uh 100 K rebuild value.

[00:17:48]He insured the house for 70,000.

[00:17:59]There was a 4 thousand dollar claim.

[00:18:07]How much did the insurer pay?

[00:18:16]Okay? This it could be a legit test question. And you're going to have multiple different choices. You're going to have A like this literally but this person pulled it up from Kaplan, right?

[00:18:26]So, A, B, C, D, right? You're going to have You're going to have 100 K cuz one of the things they'll do on the test is they'll put in every number that you see in the question, right? So, they'll put in 100 K, they'll put in, you know, 70 K, they'll put in 4,000, and then they'll put in the real answer, which I don't actually know what the real answer is yet because I know for sure it's not 4,000.

[00:18:51]The reason I know for sure that they won't point pay 4,000 is cuz I know he is not within insurance to value.

[00:18:58]And this is this has become a co-insurance question.

[00:19:02]So, one, it's a co-insurance question, which is double-checking if the house is at 100 K, he has to be within 80%. The question doesn't tell you that. It's not It's not saying, "Hey, this is a coinsurance question where he's got to be within 80%." This is like what you need to be knowing, what you need to be paying attention to, what you need to be watching out for.

[00:19:26]So, you need to know when you read this that when they say the rebuild is one thing, but what he carried was another thing, ding ding ding ding ding, coinsurance coin This is a coinsurance question. I need to check if he's 80%.

[00:19:40]That needs to be happening. That needs to be happening in your head when you're taking the test. When I see the rebuild amount is different from the amount that he insured it for. So, it was a 100K rebuilt, but he insured it for 70, I need to be thinking, uh my gosh, this is a coinsurance question, okay? Now, uh he is not within 80%. Insurance to value says he needs to be carrying this at 80,000, which means at since he is less than 70,000, they we need to know that they will not be paying the 4,000.

[00:20:19]Cuz coinsurance says if you do not carry at least 80%, we will pay less than the claim amount.

[00:20:28]We will pay less than the amount because insurance to value is like in order for us to cover the full claim amount, you've got to carry at least 80. He's not carrying at least 80.

[00:20:38]So, now we have to actually do the coinsurance equation on this. So, I'm going to I'm going to get a new piece of paper.

[00:20:45]We're going to have to do the coinsurance equation.

[00:20:49]So, the coinsurance equation, let me do this with a marker. Let me try these ones out. I think I I think I like my classic Crayola, but we'll see. Okay.

[00:20:58]So, this is the coinsurance equation.

[00:21:01]Coinsurance.

[00:21:03]Coinsurance says, again, you have to be within that 80% insurance to value. But the coinsurance equation is what did What did they carry?

[00:21:14]And when I say carry, I mean this this carry is the wrong color. Let me grab.

[00:21:22]When we say carry, this is like how much What what was their insurance at? What amount of insurance You can come on in. I'm recording. Come check out me live how I do it. What amount of insurance did he have?

[00:21:41]Okay? What amount of insurance did he have? That's what we're asking when we say what did they carry? Then we're going to divide it by what he should have carried.

[00:21:52]What he should carry.

[00:21:55]And this is that 80% insurance to value, okay? This is where it should be the 80% number. Then we're going to divide that by the loss.

[00:22:07]We're going to divide that by the loss, and that's going to equal the claim payout.

[00:22:14]Okay?

[00:22:16]All right. [clears throat] So, we actually have to do the math on this one.

[00:22:20]So, in our example, what did he carry?

[00:22:23]He did carry 70,000.

[00:22:26]He should have carried 80,000. Some people will put 100,000 down here because that's the full replacement cost of the house. But we didn't need the full replacement cost, we needed the 80 80% which in our example would be $80,000.

[00:22:43]Then we're going to multiply or times that Uh no, sorry. We're already dividing. That should be multiplication, sorry. I think I said multiplication, but then I wrote division. We're going to times that.

[00:22:55]We're going to multiply that by the loss. In this example, our loss was What did we say? 4,000?

[00:23:01]4,000. And that will equal the claim payout. So, you can literally just do this in your calculator. And normally on the exam, you're going to get a little calculator. So, we're going to do 70,000 divided by 80,000. What he did carry divided by what he should have carried.

[00:23:17]We're going to hit the equal sign. Then we're going to multiply that times the loss, which was 4,000. So, our answer would be 3,500.

[00:23:25]3,500. 3,500. And that needs to be our final answer. Okay. All right. I would say a little bit more, but I'm going to let you go cuz I'm working on um getting new videos created. So, I'm going to go talk to the videographer. So, I love you all so much. I'm going to send you guys all the loves, all the vibes to pass your exam. You have an amazing day. Again, if you're struggling today on our website, we are in the middle of transitioning.

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[00:23:55]We'll take care of you. We love you all so much. Oh, thank you so much, Jeffrey.

[00:24:00]He says, "I passed on my first try. I'm still following your lives."

[00:24:03]>> [laughter] >> I love you all so much. Okay. All the loves, all the vibes to pass your exam.

[00:24:07]Have an amazing day. Bye.