Chapter 12Chapter 12

Personal Risk Management Personal Risk Management

InsuranceInsurance

InsuranceInsurance is a way of protecting oneself is a way of protecting oneself and others against money losses by and others against money losses by sharing risks.sharing risks.

Insurance can help in facing the financial Insurance can help in facing the financial burdens that result from such occurrences as:burdens that result from such occurrences as: Fire destroying a homeFire destroying a home Loss of a lifeLoss of a life Medical injuries that require surgery Medical injuries that require surgery

Property InsuranceProperty Insurance

Property InsuranceProperty Insurance is insurance that is insurance that provides financial protection against loss or provides financial protection against loss or damage to an insured persondamage to an insured person’’s propertys property

Property is something one might own such as Property is something one might own such as jewelry, video camera, a car, etc:jewelry, video camera, a car, etc: Fire destroying a homeFire destroying a home Stolen car or car accident Stolen car or car accident Fire in an apartment that you rent Fire in an apartment that you rent

Liability InsuranceLiability Insurance

Liability InsuranceLiability Insurance is insurance that is insurance that provides financial protection to the insured provides financial protection to the insured for damages or injuries to other persons on for damages or injuries to other persons on their property their property

Liability is a big part of automobile insurance:Liability is a big part of automobile insurance: It covers injury to a passenger/ passengersIt covers injury to a passenger/ passengers Stolen car or car accident Stolen car or car accident Fire in an apartment that you rent Fire in an apartment that you rent

Motor Vehicle InsuranceMotor Vehicle Insurance

Motor Vehicle Insurance Motor Vehicle Insurance is insurance that is insurance that provides financial protection to the insured provides financial protection to the insured for damages or injuries to other persons for for damages or injuries to other persons for use in a motor vehicle or by a motor vehicleuse in a motor vehicle or by a motor vehicle

NOTE: ADDITIONAL INSURANCE NOTE: ADDITIONAL INSURANCE BEYOND STANDARD PLAN INCURES BEYOND STANDARD PLAN INCURES MUCH MORE COST MUCH MORE COST SEEEEEEEEE

Motor Vehicle InsuranceMotor Vehicle Insurance

Motor Vehicle Insurance provides the Motor Vehicle Insurance provides the following coverage: following coverage: Bodily Injury LiabilityBodily Injury Liability Collision InsuranceCollision Insurance Property Damage LiabilityProperty Damage Liability Medical InsuranceMedical Insurance Uninsured MotoristsUninsured Motorists Comprehensive CoverageComprehensive Coverage No Fault Insurance No Fault Insurance

Motor Vehicle InsuranceMotor Vehicle Insurance

Bodily Injury Liability InsuranceBodily Injury Liability Insurance pays the pays the financial costs resulting from injuries or financial costs resulting from injuries or deaths sustained to an individual or deaths sustained to an individual or individuals as a result of an accident individuals as a result of an accident involving the insuredinvolving the insured’’s automobile.s automobile.

Collision InsuranceCollision Insurance pays for damage pays for damage caused to the vehicle of the insured. It also caused to the vehicle of the insured. It also covers damages caused by accidents that covers damages caused by accidents that do not involve other vehicles (such as deer)do not involve other vehicles (such as deer)

STUPIDDDDDDDDDDDDSTUPIDDDDDDDDDDDD

Motor Vehicle InsuranceMotor Vehicle Insurance

Property Damage Liability InsuranceProperty Damage Liability Insurance is is coverage that applies to any damage by coverage that applies to any damage by the person whose insuredthe person whose insured’’s vehicle s vehicle damages another vehicle or other property damages another vehicle or other property of another personof another person

Medical Insurance Medical Insurance pays for the medical pays for the medical costs of anyone riding within the insuredcosts of anyone riding within the insured’’s s car as well as the insured if they are hurt in car as well as the insured if they are hurt in another's car. another's car.

Motor Vehicle InsuranceMotor Vehicle Insurance

Uninsured Motorists Insurance Uninsured Motorists Insurance pays for pays for injuries to the insured and the insuredinjuries to the insured and the insured’’s s family in cases where an uninsured family in cases where an uninsured motorist or a hit-and-run driver is legally motorist or a hit-and-run driver is legally responsible for the damages incurred. responsible for the damages incurred.

Comprehensive Coverage Insurance Comprehensive Coverage Insurance is a is a policy that protects against financial losses policy that protects against financial losses from damages to a motor vehicle as a from damages to a motor vehicle as a result of:result of:

Comprehensive Insurance Comprehensive Insurance Prevents $$$ Damage Prevents $$$ Damage FromFrom

Motor Vehicle InsuranceMotor Vehicle Insurance

No Fault Insurance No Fault Insurance is a policy where most is a policy where most states have both sides of an automobile states have both sides of an automobile accidentaccident’’s insurance companies cover the s insurance companies cover the person they have insured for any injuries or person they have insured for any injuries or damage that occurred during the accidentdamage that occurred during the accident

ONE LAST THINGONE LAST THINGA DeductibleA Deductible is when a car accident occurs, is when a car accident occurs,

this is the term for when one has to pay the this is the term for when one has to pay the damage at intervals of $250, $500, or $1000damage at intervals of $250, $500, or $1000

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance HomeownerHomeowner’’s or Renters or Renter’’s Insurance s Insurance is a risk is a risk

prevention insurance where either a homeowner or prevention insurance where either a homeowner or renter can insure their property in a wide variety of renter can insure their property in a wide variety of perils including fire, theft, and personal liabilityperils including fire, theft, and personal liability

For the homeowner, it includes the home and the For the homeowner, it includes the home and the property in itproperty in it

For the renter, it is for the property in the rented For the renter, it is for the property in the rented homehome

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance

Fire Insurance Fire Insurance is a standard insurance policy for is a standard insurance policy for the damages to the home and its contents the damages to the home and its contents resulting from fire and lightningresulting from fire and lightning

This is the baseline of homeownerThis is the baseline of homeowner’’s or renters or renter’’s s insurance, ANYTHING ELSE…insurance, ANYTHING ELSE…

COSTS MORE!!!COSTS MORE!!!

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance

Extended Coverage Extended Coverage provisions broaden the provisions broaden the homeownerhomeowner’’s/ renters/ renter’’s coverage to include s coverage to include damages from…damages from…

Natural Disaster Insured Natural Disaster Insured Loss versus Economic LossLoss versus Economic Loss

This includes…This includes…

For certain areas/ regions, there are known For certain areas/ regions, there are known risks involvedrisks involved For example- San Francisco has EarthquakesFor example- San Francisco has Earthquakes

Separate Flood Insurance Separate Flood Insurance is different in the is different in the sense that almost all flood insurance is sense that almost all flood insurance is never in a standard policy and MUST BE never in a standard policy and MUST BE purchased separately…purchased separately…

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance Theft InsuranceTheft Insurance is usually covered by standard is usually covered by standard

homeownerhomeowner’’s/ renters/ renter’’s insurances insurance The coverage is limited and separate insurance The coverage is limited and separate insurance

might have to be purchased for expensive items such might have to be purchased for expensive items such as furs, jewelry, art works, musical instruments, etc. as furs, jewelry, art works, musical instruments, etc.

Identity Theft Identity Theft has surfaced as a new theft crime has surfaced as a new theft crime which one may need insurance for as regular which one may need insurance for as regular property theft has gone down in recent yearsproperty theft has gone down in recent years

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance Identity Theft Identity Theft has surfaced as a new theft has surfaced as a new theft

crime which one may need insurance for as crime which one may need insurance for as regular property theft has gone down in regular property theft has gone down in recent yearsrecent years

Items an identity thief looks forItems an identity thief looks for Credit CardCredit Card DriverDriver’’s Licenses License Social Security CardSocial Security Card

HomeownerHomeowner’’s or Renters or Renter’’s s InsuranceInsurance Personal Liability InsurancePersonal Liability Insurance is in addition to is in addition to

standard and extended coverage.standard and extended coverage.

Personal Liability Insurance Personal Liability Insurance protects the insured protects the insured against a visitor or a worker in the insuredagainst a visitor or a worker in the insured’’s s residence has an accident/ injury, personal residence has an accident/ injury, personal liability coverage pays the legal costs and liability coverage pays the legal costs and damages assessed against them set to the limit damages assessed against them set to the limit of their policy. of their policy.

Weird and WeirdoosWeird and Weirdoos

Check out this creepy listCheck out this creepy list

So with that said…So with that said…

What kind of personal liability insurance do What kind of personal liability insurance do these guys have and who the hell would these guys have and who the hell would insure them?!?!?!?!insure them?!?!?!?!

Crazy Job #1Crazy Job #1

Crazy Job #2 Crazy Job #2

Health InsuranceHealth Insurance Health InsuranceHealth Insurance is is aa type of insurance coverage that pays

for medical and surgical expenses that are incurred by the insured.

Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly.

Health insurance is often included in employer benefit packages as a means of enticing quality employees.

Health InsuranceHealth Insurance

Private Health Insurance is nongovernmental and is typically paid for individuals by their employers

Most Americans are covered by private health insurance…

Stats on Health InsuranceStats on Health Insurance

70% of Americans have PRIVATE health insurance

15% of Americans are covered by government health insurance programs.

15% of Americans HAVE NO health care insurance programs

Who wouldnWho wouldn’’t have t have Health Insurance?!?!?!Health Insurance?!?!?!

Young professionals

Healthy Individuals

Members of Religious Groups

WELL HOW ABOUT WHEN SOMETHING LIKE THIS HAPPENS? HMMMMMMMMMM?

Who wouldnWho wouldn’’t have t have Health Insurance?!?!?!Health Insurance?!?!?!

Young professionals

Healthy Individuals

Members of Religious Groups

WELL HOW ABOUT WHEN SOMETHING LIKE THIS HAPPENS? HMMMMMMMMMM?

Government Health Government Health InsuranceInsurance Medicare is a government provided health

care for US Citizens aged 65 and over

Who wouldnWho wouldn’’t have t have Health Insurance?!?!?!Health Insurance?!?!?!

Medicaid is government provided health care for the Poor and low-income, hardworking individuals in society such as: Taxi Drivers Waiters Gas Station Attendants Retail Workers Construction Workers, Like this crazy guys Or these REALLY CRAZY GUYS!!! Many other groups.

Health InsuranceHealth Insurance Health Maintenance Organization (HMO) A form

of health insurance combining a range of coverages in a group basis.

A group of doctors and other medical professionals offer care through the HMO for a flat monthly rate with no deductibles.

Health InsuranceHealth Insurance Only visits to professionals within the HMO network are

covered by the policy.

All visits, prescriptions and other care must be cleared by the HMO in order to be covered.

A primary physician within the HMO handles referrals.

Health InsuranceHealth Insurance Regardless of any of these plans that cover most health care

expenses, additional coverage in the following ways can also help out with major medical expenses

Surgical Insurance is added to a health insurance policy to cover all or part of a surgeon’s fee for necessary operations.

Health InsuranceHealth Insurance Medical Insurance is added to a policy that will pay for the services of a doctor,

OTHER than surgery, in the hospital, at home, or in the doctor’s office. Hospital Insurance will pay all or part of the costs incurred when confined to a

hospital, other than then doctor’s and surgeon’s fees These Include:

Room and Board Nursing Care Food and DrinkDrugs Administration of Drugs Lab TestsMedication Use of Operating Room Blood Tests

Disability Income Disability Income InsuranceInsurance Disability Income Insurance is closely related to health insurance and

provides for loss of income or other earnings because of extended illness or disabilty

According to the US Census Bureau, nearly 1 in 5 Americans will become disabled for one year or more before they are 65 years old

Nearly half of all home foreclosures in the US are because of

Disability Income Disability Income InsuranceInsurance

Nearly half of all home foreclosures in the US are because of “Unforeseen Disabilities”

There is “Social Security Disability”, but that is a government program dedicated to people that are completely disabled and are permanently unable to do any job

Disability Income Disability Income InsuranceInsurance

Disability Income Insurance MUST BE PURCHASED BEFORE THE INCIDENT OR INJURY OCCURS

How much money you get depends on: How long you won’t be able to work If you receive government benefits The type of coverage you have The period of time you have had that coverage

Disability Income Disability Income InsuranceInsurance

While this is scary to think about, you still should NEVER buy any insurance coverage that you can’t reasonably afford to

You cannot predict everything in life, but again you can MINIMIZE RISK OF LIFE!

Speaking of which… LIFE INSURANCE!!!

Life Insurance Life Insurance

Life InsuranceLife Insurance Life InsuranceLife Insurance is an insurance policy that is an insurance policy that

offers some financial protection to the offers some financial protection to the policyholderpolicyholder’’s beneficiary or beneficiariess beneficiary or beneficiaries

BeneficiaryBeneficiary is an individual named in the is an individual named in the insurance policy to receive some or all of the insurance policy to receive some or all of the proceeds of an insurance policyproceeds of an insurance policy

For example: A husband leaves his wife, the For example: A husband leaves his wife, the beneficiary, $100,000 in a life insurance policybeneficiary, $100,000 in a life insurance policy

Life InsuranceLife Insurance There are two basic forms of life insurance:There are two basic forms of life insurance:

Term Life InsuranceTerm Life Insurance is strictly insurance. is strictly insurance. There is NO SAVINGS factor to itThere is NO SAVINGS factor to it It is in an effect for a specific number of years It is in an effect for a specific number of years The term is usually 5 yearsThe term is usually 5 years It raises in price after that first termIt raises in price after that first term Ideal plan for someone who wants the max Ideal plan for someone who wants the max

amount of life insurance at minimum cost over a amount of life insurance at minimum cost over a limited period of timelimited period of time

Life InsuranceLife Insurance There are two basic forms of life insurance:There are two basic forms of life insurance:

Straight Life InsuranceStraight Life Insurance is more costly: is more costly: There IS A SAVINGS factor to it AND an There IS A SAVINGS factor to it AND an

insurance factorinsurance factor Each year the more money paid into the policy Each year the more money paid into the policy

increases its increases its cash valuecash value Cash ValueCash Value of a straight life policy can be of a straight life policy can be

borrowed or taken back after a period of time if borrowed or taken back after a period of time if the policy is never paid out. the policy is never paid out.

Life InsuranceLife Insurance There are two basic forms of life insurance:There are two basic forms of life insurance: Straight Life InsuranceStraight Life Insurance is more costly: is more costly:

There IS A SAVINGS factor to it AND an There IS A SAVINGS factor to it AND an insurance factorinsurance factor

Each year the more money paid into the policy Each year the more money paid into the policy increases its increases its cash valuecash value

Cash ValueCash Value of a straight life policy can be of a straight life policy can be borrowed or taken back after a period of time if borrowed or taken back after a period of time if the policy is never paid out. the policy is never paid out.

Life InsuranceLife Insurance General statements about life insuranceGeneral statements about life insurance

Rates are lower for non smokers vs. smokersRates are lower for non smokers vs. smokers

Females die at a higher age then males, therefore Females die at a higher age then males, therefore females can get a better ratefemales can get a better rate

Term life is better for some individualsTerm life is better for some individuals

Straight life is better for othersStraight life is better for others

Life InsuranceLife Insurance How much life insurance should you buy?How much life insurance should you buy?

How much you should buy depends on:How much you should buy depends on:

1.1. How much you can affordHow much you can afford

2.2. How much you need How much you need

Life InsuranceLife Insurance How much life insurance should you buy?How much life insurance should you buy?

How much you should buy depends on:How much you should buy depends on:

1.1. How much you can afford aka How much you can afford aka ““AffordabilityAffordability””

2.2. How much you need aka How much you need aka ““The need for life The need for life insuranceinsurance””

Life InsuranceLife Insurance AffordabilityAffordability with Life Insurance with Life Insurance

Needs such as : income, spending habits, Needs such as : income, spending habits, attitude, and motivation are taken into effectattitude, and motivation are taken into effect

People with lower incomes cannot afford as much People with lower incomes cannot afford as much life insurance as people with higher incomeslife insurance as people with higher incomes

Some people believe nothing will happen to them, Some people believe nothing will happen to them, while others worry about their family if they diewhile others worry about their family if they die

Life InsuranceLife Insurance The Need for Life InsuranceThe Need for Life Insurance

The need for it ranges: right now you probabaly donThe need for it ranges: right now you probabaly don’’t need life insurance but someone with younger t need life insurance but someone with younger children obviously does children obviously does

Older people may need to get it if they pass on and Older people may need to get it if they pass on and a wife/husband/kids/ grandkids survive thema wife/husband/kids/ grandkids survive them

Financial planning should always be a part of Financial planning should always be a part of purchasing life insurance purchasing life insurance

Estate Planning Estate Planning Estate Planning Estate Planning is the sum of all the actions is the sum of all the actions

one takes to accumulate wealthto leave to one takes to accumulate wealthto leave to oneone’’s heir and determine how to divide the s heir and determine how to divide the estate among the heirsestate among the heirs

Life insurance is a part of estate planning as Life insurance is a part of estate planning as is is ““Where does my jewelry go to?Where does my jewelry go to?””

Estate Planning Estate Planning Estate Planning Estate Planning is very difficult, complicated, is very difficult, complicated,

and often requires the assistance of and often requires the assistance of professionals such as lawyers and professionals such as lawyers and accountantsaccountants

The reason for the need of lawyers and The reason for the need of lawyers and accountants is because tax and estate laws accountants is because tax and estate laws change constantly, distributing assets to change constantly, distributing assets to different people, and having a will prepared different people, and having a will prepared are all difficult to do by oneself are all difficult to do by oneself

Estate Planning among Estate Planning among Social Classes Social Classes

Estate Planning Estate Planning is perhaps more important for is perhaps more important for the rich rather then any other group because the rich rather then any other group because of the Estate Tax and large wealth being split of the Estate Tax and large wealth being split upup

Often times, situations like this come up with Often times, situations like this come up with a rich relative and wills. a rich relative and wills.

Estate PlanningEstate Planning

The Will The Will is a legal document that specifies is a legal document that specifies how onehow one’’s assets are to be distributed on s assets are to be distributed on oneone’’s death s death

An individual may legally prepare oneAn individual may legally prepare one’’s will, s will, but it is advisable to have a lawyer prepare but it is advisable to have a lawyer prepare one for youone for you

Estate PlanningEstate Planning

After the individual is dead, the lawyer is After the individual is dead, the lawyer is familiar with how that individualfamiliar with how that individual’’s assets will s assets will be distributedbe distributed

A lawyer will know all about if this individual is A lawyer will know all about if this individual is married, has any children, does all their estate married, has any children, does all their estate go to them, or if it is going to charity go to them, or if it is going to charity

Estate TaxesEstate Taxes

Estate TaxesEstate Taxes are taxes on the asset value of are taxes on the asset value of an estate. Both federal and state an estate. Both federal and state governments may impose a tax on the estate governments may impose a tax on the estate of a deceasedof a deceased

Currently, estate taxes range from 37%-55%.Currently, estate taxes range from 37%-55%.

However, unless you are However, unless you are ““wealthywealthy”” you need you need not worrynot worry

Estate TaxesEstate Taxes

If you are If you are ““wealthywealthy”” you need to worry you need to worry However there are ways around thisHowever there are ways around this

LawyersLawyers

AccountantsAccountants

Early planning of estates is crucialEarly planning of estates is crucial

Saving and investing could also help estates growSaving and investing could also help estates grow

Estate TaxesEstate Taxes Why do Estate Planning? Why do Estate Planning?

To offset taxes a surviving family paysTo offset taxes a surviving family pays

To prevent family conflict from happening after a To prevent family conflict from happening after a deathdeath

To pass on exactly whatever one wants to pass To pass on exactly whatever one wants to pass on to a surviving relative on to a surviving relative