© Family Economics & Financial Education – Updated April 2008 – Insurance Unit – Types of Insurance Funded by a grant from Take Charge America, Inc. to

© Family Economics & Financial Education – Updated April 2008 – Insurance Unit – Types of InsuranceFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the

University of Arizona

1.10.1.G1

Types of Insurance Auto Health Life Disability

• Homeowner’s/Renters

http://www.lifehappens.org/insurance-101-in-a-flash/

http://www.lifehappens.org/insurance-101-in-a-flash/



1.10.1.G1

Risk, Responsibility, Reality This video clip gives an overview of

insurance policies Risk, Responsibility, Reality Video

Clip http://www.theiei.org/edu/materials/rr

r/classroom.wmv

http://www.theiei.org/edu/materials/rrr/classroom.wmv

http://www.theiei.org/edu/materials/rrr/classroom.wmv



1.10.1.G1

Risk

Risk is the uncertainty about a situation’s outcome This can be unpredictable events

which lead to loss or damage

Exposure Risk Potential Loss

Accident or Illness

PropertyOwnership

Liability

Loss of income from inability to work; uninsured medical bills; death

Your property is damaged, destroyed, lost, or stolen

You are found liable for injuries to other people or damages to their property

UNLIMITED

UNLIMITED

Amount needed to replace your property

Common Exposures to Loss

6-A



1.10.1.G1

Avoid it

Share it

Alternatives for Managing the Possibility of Loss

Accept it6-B

Reduce it

Share it



1.10.1.G1

Insurance Terminology

Insurance is an arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk

A policy is a contract between the individual and the insurer specifying the terms of the insurance arrangements



1.10.1.G1

Insurance Terminology

A policyholder is a consumer who purchases the policy

A premium is a fee paid to the insurer to be covered under specified terms

A deductible is the amount paid out of pocket by the policy holder for the initial portion of a loss before the insurance coverage begins



1.10.1.G1

Types of Insurance

Types of insurance can include: Automobile Health Life Disability Homeowners/Renters



1.10.1.G1

Automobile Insurance

Automobile Insurance is an arrangement between an individual (consumer) and insurer (insurance company) to protect the individual against risk from automobile accidents

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6-C



1.10.1.G1

Automobile Insurance Types There are four types of coverage

for Automobile Insurance: Liability insurance Medical payment insurance Uninsured or underinsured motorists

insurance Physical damage insurance

Collision Comprehensive



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Liability Insurance

Liability Insurance covers the insured if injuries or damages are caused to other people or their property. It is the minimum amount of

insurance required by law for automobiles



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Medical Payment insurance Medical Payment Insurance

covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault It also covers family members

injured as passengers or if injured as a pedestrian



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Uninsured motorists insurance Uninsured or Underinsured

Motorists Insurance covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insurance



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Physical damage insurance Physical Damage Insurance

covers damages caused to the vehicle Collision – covers a collision with

another object, car, or from a rollover

Comprehensive – covers all physical damage losses except collision and other specified losses



1.10.1.G1

Auto Insurance Coverage Suggested Minimums

Coverage Type Suggested Minimum Coverage

Liability

Medical Payments

Uninsured / Underinsured

Motorist

$100,000 per person $300,000 per accident

$100,000 per person $300,000 per accident

$10,000 per person

6-G



1.10.1.G1

Factors Affecting Automobile Insurance Costs

Your age

Make of car

Marital status

Do you take the car to work?

If you’re a good student

GenderWhere you live

How much you use the

car

Credit ratingDriver’s education

Driving recordType of car

6-F



1.10.1.G1 How to Save Money on Insurance Shop at least three places; compare

rates and policies; ask about discounts and special rates.

Read sources of information such as Consumer Reports®.

Purchase more than one type of insurance from the same company; insure all cars with the same company.

6-J-1

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1.10.1.G1 How to Save Money on Insurance Choose the right car. Don’t smoke. Select a higher deductible. Carefully consider before adding

riders or floaters. Have a good driving record & good

grades (“B” or better).

6-J-2

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1.10.1.G1 How to Save Money on Insurance Ask about discounts. Eliminate collision and

comprehensive coverage if car is older.

Reduce your daily driving. Drive defensively. Avoid theft and vandalism. Avoid filing excessive claims. Keep tabs on credit.6-J-3

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1.10.1.G1

Health Insurance In 2005 there were nearly 47 million

Americans or 16 percent of the population without health insurance (http://www.nchc.org/facts/coverage.shtml )

Health insurance provides protection against financial losses resulting from injury, illness, and disability Health insurance may cover hospital,

surgical, dental, vision, long-term care, prescription, or other major expenditures

Health insurance may be purchased by the individual or through their employer

http://www.nchc.org/facts/coverage.shtml



1.10.1.G1

Life Insurance Life insurance is a contract

between an insurer and policyholder specifying a sum to be paid to a beneficiary upon the insured’s death

The contract is a policy which states the amount to be paid to the beneficiary upon the insured person’s death



1.10.1.G1

Life Insurance A beneficiary is the recipient of

any policy proceeds if the insured person dies

A dependent is a person who relies on someone else financially



1.10.1.G1

Disability Insurance Disability Insurance replaces a

portion of one’s income if they become unable to work due to illness or injury



1.10.1.G1

Homeowner’s/Renter’s Insurance Homeowner’s Insurance

combines property and liability insurance into one policy to protect a home from damage costs due to perils.

A peril is an event which can cause a financial loss like fire, falling trees, lightning and others



1.10.1.G1

Property Insurance Property Insurance protects the

insured from financial losses due to destruction or damage to property or possessions

Liability Insurance protects the insured party from being held liable for other’s financial losses

Homeowner’s insurance should cover the replacement cost which will pay to rebuild the home if it is completely destroyed



1.10.1.G1

Renter’s Insurance Renter’s Insurance protects the

insured from loss of the contents of the dwelling rather than the dwelling itself

Renter’s insurance may be provided by a parent or guardian while an individual is still a full time student or under the age of 18 However, each policy is different and

should be inspected by the policy holder



1.10.1.G1

What Covers This Risk? You apartment is broken into and

your computer is stolen

Renters!



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What Covers This Risk? You are injured in an automobile

accident and are unable to work for 2 months

Disability!



1.10.1.G1

What Covers This Risk? Your garage was destroyed by a

fire which started by a lightning bolt hitting your home

Homeowners!



1.10.1.G1

What Covers This Risk? You hit and injure a pedestrian in a

crosswalk

Automobile!



1.10.1.G1

What Covers This Risk? After losing her husband to a heart

attack, the wife is left alone to care for 2 children

Life!



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What Covers This Risk? You need a cast after breaking an

ankle while roller-blading

Health!



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What Covers This Risk? Sick at home from food

poisoning after eating a carnival corndog

Nothing!



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What Covers This Risk? You have brake failure. You hit a

telephone pole and cause damage to the front of the car

AUTOMOBILE



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What Covers This Risk? You get pulled over and receive a

speeding ticket on your way to the mall

Nothing!



1.10.1.G1

What Covers This Risk? A daughter, who is financially

responsible for her mother’s nursing home bills, dies from an undetected heart defect

Life!



1.10.1.G1

What Covers This Risk? A doctor diagnoses a child with

tonsillitis during a visit to a clinic

Health!



1.10.1.G1

Conclusion Review the following terms and

concepts: Risk Insurance Policy Policyholder Premium Deductible Types of Insurance

Documents

© Family Economics & Financial Education – Updated April 2008 – Insurance Unit – Types of Insurance Funded by a grant from Take Charge America, Inc. to