INSURANCE

Preparing for Life’s Unexpected Events

How It Works

• You pay an agreed-upon amount of money to an insurance company

• The company pays for losses caused by accidents, theft, or injuries

http://www.youtube.com/watch?v=6HNKqffU3Cc

Insurance Terms

• Insurance Policy –– legal contract between a person buying

insurance (a policyholder) and the insurance company

• Who is covered• Types of losses the company will pay• Amounts the company will pay• The cost of the insurance

Insurance Terms

• Agent~– The representative of an

insurance company who sells policies

• Insurance Coverage –– losses that an insurance

company agrees to cover • (this is an actual dollar amount)

• Deductibles –– the portion of a loss that

you pay before the insurance company pays the remainder

Insurance Terms

Premium –the amount a policyholder pays an insurance company

(can pay in installments)

Insurance Terms

• Claim –– an oral or written notice to the insurance

company

Automobile Insurance

http://www.youtube.com/watch?v=2Mjaj_3UEl4&feature=related

Auto Insurance-Types of Coverage

• Standard automobile insurance policy = several different kinds of coverage

• Each type covers a different kind of loss, damage, or injury

Males Ages 16 – 25 have the highest car insurance

rates!

Liability Insurance

• Damage or injury for which YOU are responsible– Driver and passengers in the other car– Passengers in your car

• Does not cover your injuries or property damage to your car

• Shown as 250/500/50– $250,000 for any one person– $500,000 for all injuries to other people– $50,000 for damage to another person’s

property

Medical Payments Insurance• Covers medical and funeral expenses for you, your family

members, and other passengers in your car

• Does not matter who caused the accident

• Most cover up to $5,000/person

• Jamal breaks his arm in a car accident and has to go to the emergency room. His total bill is $740.37. His insurance pays 85% of the bill. How much is Jamal responsible for paying? – $111.06

Collision Insurance

• Covers the cost of repairs to your car if the accident is YOUR fault

• Covers damage to your car if you’re in an accident caused by a driver who is not insured

Comprehensive Insurance

• Covers your car for reasons other than a collision– Theft, fire, vandalism, wind, hail, floods

• May exclude some items that are easy to steal (cell phone)

Uninsured/Underinsured Coverage

• Pays medical and damage expenses for you and your passengers caused by a driver without insurance or too little to cover loss.

• Does not cover the other driver

Buying Auto Insurance

• Shop Around

• Drive carefully-Safe Driver Discounts

• Buy only the coverage you need

• Raise your deductibles

• Take advantage of insurance discounts

Health & Life Insurance

Major Medical Coverage• It covers:

– Hospital and surgical expenses– Doctor visits– Prescription drugs– Medical tests

• Requires deductible and coinsurance

• You choose any hospital and physician you prefer

• Tim recently stayed in the hospital. His health insurance policy pays 70% of his hospital bills after a $700.00 deductible is met. The total of the hospital costs were $21,500.00. What were Tim’s total payments after the deductible? – $6,240.00

Health Maintenance Organization (HMO)

• No deductibles

• Small co-payment

• Check-ups and well-baby care are covered

• Choice of physicians is limited

Preferred Provider Organization (PPO)

• More freedom of choice of doctors

• Higher premiums

• Higher co-payments than with an HMO

Types of Plans

• Group Plans– Offered through employers– Keep premium costs down (spreading risk

over large number of people)– Have deductible, coinsurance, major

medical coverage

• Individual Plans– Students, self-employed, retirees– Can be expensive!

Disability Coverage• Pays you a percentage of your salary if you can not work

• Short-term disability=few months

• Long-term disability can pay for a lifetime of missed work

Types of Life Insurance

• Term Life Insurance– Protects your dependents if you die– No cash value– Provide coverage for a set number of

years– The beneficiary receives the face value

of the policy if you die

Buying Life Insurance

• You purchase a policy and pay premiums

• The company pays a benefit to your beneficiary if you die

• Should you buy life insurance?

• How much life insurance do you need?

• What are some tips on buying life insurance?

Home Insurance

• Renter’s Insurance– Protects your

belongings to a set amount

• Homeowner’s Insurance– Protects your house

and it’s contents

• The Centrino’s have homeowner’s insurance that pays 60% after a $600 deductible is met. After a recent storm, the Centrino’s filed a claim to replace their roof. The roof costs $2,000.00 to replace. What was the insurance company’s payment in this case?– $840.00