Personal Finance

Insurance Unit

Personal Finance

Agenda• Missing Assignments• Insurance Vocab Story

Illustrate your vocabulary!!

Personal Finance

Insurance 101 Notes

Insurance 101Personal FinanceMr. Lovekamp

Learning Goal...

To be able to define terms relating to insurance.

What is Insurance??• Insurance:

an arrangement between an individual and an insurance company to protect the individual from risk.

•We buy insurance to help limit the financial losses when accidents occur.

Insurance Vocabulary•Policy:

a contract between the individual and the insurer specifying the terms of the insurance arrangement.

•Premium: The fee paid to the insurer to

guarantee coverage.

Insurance Vocabulary•Deductible:

The amount paid out of pocket by the policy holder for the initial portion of a loss before the insurance coverage begins.

Example...•You pay money to have car

insurance (Premium)•When you get into an

accident that is your fault, you must pay a certain amount before the insurance company picks up the rest (Deductible)

•The higher the deductible, the lower the premium

Learning Goal...

To be able to identify and explain the

importance of the 5 necessary types

of insurance.

Types of Insurance1. Automobile2. Health3. Life4. Disability5. Homeowner’s / Renter’s

Automobile Insurance•4 Different types:1.Liability (Required by law)

Pays for bodily injury to other people, damage to property, court fees

2.Medical Payments Pays for hospital bills for you and

anyone riding in your car

Automobile Insurance•4 Different types:3.Uninsured Motorist (Required by

law)

Helps pay your medical bills if hit by someone without insurance

Automobile Insurance•4 Different types:4.Collision/Comprehensive

Pays to repair your car if it was your fault or no other car was involved.

Collision – deer, fence post, etc Comprehensive is for non-driving

risks such as hail, theft, flood, vandalism, etc.

Health Insurance• Health insurance

provides payments to people who suffer a financial loss as a result of illness or injury

• People covered by health insurance limit their potential liabilities

• It ensures that they receive adequate medical care

• Medical care can be very expensive

• Adequate health insurance is an important component of your financial plan

• People covered by health insurance limit their potential liabilities

• It ensures that they receive adequate medical care

• Medical care can be very expensive

• Adequate health insurance is an important component of your financial plan

Health Insurance•Covers medical costs if you

are injured or become ill•Each policy is different•Most people receive health

insurance from their employer

•Children are covered up to the age of 19; unless they are attending college full time (23)

Health Insurance• Medicare is a

government-sponsored health insurance plan that is funded largely by taxes that most working people pay.

• Medicaid is a government-sponsored program that provides health insurance for low-income individuals

• The federal government has two health care plans that are available to some individuals:

-Medicare-Medicaid

• The federal government has two health care plans that are available to some individuals:

-Medicare-Medicaid

Health Care Cost• A policyholder is

a person who buys a health insurance policy or subscribes to it through an employer.

• Many health insurance plans provide coverage for immediate family members

• Children may become ineligible for coverage once they reach a certain age or status

• Many health insurance plans provide coverage for immediate family members

• Children may become ineligible for coverage once they reach a certain age or status

Health Care Cost• Groups plans are

insurance plans that cover a large group of individuals

• An individual’s high risk or loss is spread across the entire pool of group members

• Each group member has the same access to health care

• Each member also pays the same coverage even if some have more health problems than others

• An individual’s high risk or loss is spread across the entire pool of group members

• Each group member has the same access to health care

• Each member also pays the same coverage even if some have more health problems than others

Health Care Cost• Preexisting

conditions are health conditions that existed before your policy was granted

• Insurance policies may exclude coverage for preexisting conditions

• Some health insurance plans allow the insurance company to cancel the policy at any time

• Others guarantee coverage as long as you pay your insurance premiums on time

• Insurance policies may exclude coverage for preexisting conditions

• Some health insurance plans allow the insurance company to cancel the policy at any time

• Others guarantee coverage as long as you pay your insurance premiums on time

Health Care Cost• A deductible is the amount the

policyholder has to pay before insurance policies begin paying claims.

• Coinsurance (copay 80/20) is the term used for the share of costs for covered services that the insured person is required to pay out of his or her pocket

Health Care Rights• The Health Insurance

Portability and Accounting Act (HIPAA) ensures that workers can continue their health insurance coverage even if they switch jobs

• Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue health insurance coverage for up to 18 months after your employment ends

• HIPAA prohibits insurance companies from denying new employees access to coverage based on their health or preexisting conditions

• With COBRA you are required to pay the premiums that your previous employer was paying for your coverage

• HIPAA prohibits insurance companies from denying new employees access to coverage based on their health or preexisting conditions

• With COBRA you are required to pay the premiums that your previous employer was paying for your coverage

Life Insurance•Pays people who are dependent

on someone else if that person dies

•Usually offered from an employer, but can (and should) purchase independently.

•Life insurance is usually very low in price compared to the coverage you receive

• When should you get life insurance??

Life Insurance•2 Types of Life Insurance1.Whole Life

Coverage for life Includes a savings plan

2.Term Life Coverage for a specific period of time. MUCH cheaper than Whole Life

ALWAYS GO WITH TERM LIFE!!!

Disability Insurance•Will pay a percentage of

your income from a job if you are sick or unable to work for long periods of time Usually will pay between 60% and

70%

•Also is a common insurance offered by an employer

Homeowner’s / Renter’s

• Protects your home and possessions within the home from damage Includes Fire, Storm, etc. Natural Disasters require a special

insurance Theft

• Also covers liability if someone else is injured on your property and they sue

Learning Goal...

To be able to identify and explain the

importance of the 5 necessary types

of insurance.

Insurance 101Personal FinanceMr. Lovekamp

Auto Insurance

Why should I have auto insurance?

Car insurance coverage is designed to help financially cover potential auto-related damages, loss or injuries. It helps protect you, your passengers, your fellow drivers, pedestrians, other people's property and your vehicle. It can also help protect you in the event of an automobile-related lawsuit.

Liability

Auto liability insurance coverage pays for the damage if you are legally responsible for accidentally injuring someone, or for damaging another vehicle or other property in an auto accident.

Auto liability coverage falls into two categories:

Bodily Injury Liability - which covers medical expenses, pain and suffering, lost wages, and other special damages.

Property Damage Liability -- which covers damaged property, and may include loss of use.

Liability car insurance also pays legal defense and court costs.

State laws usually dictate the minimum amounts of auto liability insurance required, but higher amounts are available.

Liability

State law - minimum requirements

25/50/10

25/50 - B.I. (Bodily Injury) $25,000 per person, $50,000 aggregate

10 - P.D. (Property Damage) $10,000

Per Accident

Personal injury protection (PIP)

This auto insurance coverage pays the reasonable and necessary medical expenses for covered persons for treatment due to an auto accident.

It may also pay for:

Rehabilitation

Lost earnings

Replacement of services (For example, child care if a parent is disabled.)

Funeral expenses

Medical payments

This auto insurance coverage is available in most states.

It pays reasonable and necessary medical and funeral expenses for covered persons when those expenses are related to an auto accident.

Pays Medical Payments for individuals in your vehicle.

Collision

Collision

This auto insurance coverage helps pay for damage to a covered vehicle caused by:

Collision with another vehicle

Collision with an object

A vehicle rollover

A deductible is required.

Auto Insurance DeductibleWhat is an auto insurance deductible?An auto insurance deductible is the part of a covered loss that you have agreed to pay with your own money.If you file a claim against your insurance, you will pay only the amount of the deductible. Your insurance company will pay the rest - up to your coverage limit.When choosing a deductible, you must decide how much you would be willing and able to pay out-of-pocket, if you ever had to file a claim.Typically, higher deductibles mean lower auto insurance policy premiums.

Comprehensive

ComprehensiveThis auto insurance coverage helps pay for loss of or damage to an insured vehicle, not caused by a collision or vehicle rollover.

Examples of this type of damage or loss include:

Fire, Wind, Hail, Flood

Vandalism or Theft

Hitting an animal

A deductible may apply.

Uninsured Motorist

Also required by Law

Bodily Injury

25/50

$25,000 per person, $50,000 aggregate

Uninsured MotoristThis auto insurance coverage pays for damages when a covered person is injured in an auto accident caused by a driver who does not have Liability Insurance

In some states this auto insurance coverage may also pay for property damage.

This type of car insurance coverage varies by state and depends upon policy provisions.

Underinsured Motorist

Underinsured Motorist

This auto insurance coverage pays for damages when a covered person is injured in an auto accident caused by another driver who has insufficient Liability Insurance.

Application of this type of auto insurance varies by state and depends upon policy provisions.

Penalty

Under Missouri law, if you are caught driving without insurance your license may be suspended for up to one year. You will also have to pay a reinstatement fee and provide proof insurance for three years after your license has been suspended. 

Rental Reimbursement

This coverage pays for renting a car when your auto is disabled due to an auto accident.

Daily allowances or limits vary by state or auto insurance policy provisions.

Emergency Road Service

• This auto insurance coverage pays for having your auto towed due to a breakdown.

• Locksmith due to locking keys in your car, flat tire, or run out of gas.

• Towing limits vary by state or policy provisions.

Who does my auto insurance cover?

• An auto insurance policy typically covers:

• You and your spouse

• Relatives who live in your home

• Other licensed drivers who have permission to drive your insured vehicle.