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PROTECTING YOUR WEALTH

PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

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Page 1: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

PROTECTING YOUR WEALTH

Page 2: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

PROTECTING YOUR WEALTH

Auto and Homeowner’s Insurance

Health and Disability Insurance

Life Insurance

Page 3: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

AUTO AND HOMEOWNER’S INSURANCE I can… Explain the role of risk management Outline provisions of auto insurance Describe financial coverage provided by homeowners insurance

Page 4: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

BACKGROUND ON INSURANCE Property Insurance ensures that damages to home and auto are covered and personal assets are protected from liability Liability- you are required to pay someone for damages that you caused

Primary function of insurance- maintain existing level of wealth

Benefit of insurance is peace of mind knowing your assets are protected

Page 5: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

MANAGING RISK

In the context of insurance, Risk- exposure to events or perils that can cause financial loss

Risk management are decisions about whether and how to protect against risk, alternatives include: Avoid risk reduce risk insurance against risk

Page 6: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

AVOID RISK

Avoid risk of property damage if you don’t own property

If you lease a car you are still expose to liability and financial loss if an accident

Exposed to financial loss if you require medical attention or become disabled

Page 7: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

REDUCE RISK

Purchase a small home rather than a large home in order to reduce the maximum possible financial loss

Purchase an inexpensive car to limit possible financial loss due to property damage

Getting periodic health check ups

Page 8: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

INSURE AGAINST RISK

If you cannot avoid or reduce risk and you do not want to be exposed to a financial loss

Premium is the cost of obtaining insurance

Page 9: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

WHAT IMPACT DOES THE ECONOMY HAVE ON THE DECISION TO INSURE AGAINST RISK? Give one, get one.

Think about this question and develop an answer. Then, turn to your partner and discuss both of your answers.

Page 10: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

ROLE OF INSURANCE COMPANIES Offer insurance policies that can protect you against financial loss.

Many different types of insurance

Insurance companies generate revenue from receiving payments for policies

Insurance underwriters are hired to calculate the risk of specific insurance policies, decide what policies to offer, and what premiums to charge.

Page 11: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

Event Financial Loss Protection

You have a car accident and damage your car

Car repairs Auto Insurance

You have a car accident in which another person in your car is injured

Medical bills and liability Auto Insurance

You have a car accident in which another person in the other driver’s car is injured

Medical bills and liability Auto Insurance

Your home is damaged by a fire

Home repairs Homeowner’s Insurance

Your neighbor is injured while in your home

Medical bills and liability Homeowner’s Insurance

You become ill and need medical attention

Medical bills Health Insurance

You develop an illness that requires long-term car

Medical bills Long-term care Insurance

You become disabled Loss of income Disability insurance

You die while family members rely on your income

Loss of income Life Insurance

Page 12: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

ROLE OF INSURANCE AGENTS Insurance agent recommends insurance policies for customers

Captive (exclusive) agent works for one particular company ex. State Farm insurance agents

Independent agent represents many different insurance companies

Page 13: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

AUTOMOBILE INSURANCE

Insures damage to an automobile and expenses associated with accidents Protects your car and limits your potential liabilities (expenses due to an accident)

Prices vary between states Much larger in highly populated states

Insurance policy is a contract between an insurance company and policyholder

Auto insurance policy specifies the coverage provided by the insurance company for a particular individual and vehicle

Bodily insurance liability coverage protects against liability associated with injuries caused by the policyholder

Page 14: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

BASIC TYPES OF AUTO INSURANCE Liability Bodily injury liability Property damage liability

Uninsured Motorists

Underinsured Motorists

Collision

Comprehensive

Page 15: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HOW MUCH DOES AUTO INSURANCE COST? Factors that affect your auto insurance premium… Value of a car Repair record of the car Your age Your mileage Your driving record Your location Your driver training Your school performance

Page 16: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HOW CAN YOU LOWER YOUR INSURANCE Get good grades

Choose your wheels carefully

Consider the age and condition of your vehicle

Consider letting your parents insure you on their policy

Ms. Vandiver says…Don’t text and drive

Page 17: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

COVERAGE LIMITS ON YOUR POLICY Policy may show 50/100/25

That means… $50,000 of bodily injury liability if one person is injured $100,000 total for all bodily injury liabilities for all injured $25,000 of property damage coverage

Page 18: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HOMEOWNER’S INSURANCE

Provides insurance in the event of property damage, theft, or personal liability

Protects most valuable assets but limits potential expenses associated with a home

Provides a certain amount of liability coverage, which pays for injury or death of others caused by you on your property

Page 19: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

WHAT ELSE DOES HOME INSURANCE COVER? The building/residence

Home furnishings

Most personal belongings

Lawn, trees, and shrubs in limited cases

Garage

Some external structures, like sheds

Fence

Swimming pool

Page 20: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

WHAT ARE PERILS?

Things or events that can damage or destroy a home or its contents, a homeowners policy may cover these perils: Fire Lightening Wind Hail Theft Explosion Smoke Glass breakage Vandalism Riot Falling aircraft DOES NOT COVER FLOOD!

Page 21: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

PROPERTY DAMAGE

Cash-value policy pays you for the value of the damaged property after considering its depreciation (wear and tear)

Replacement cost policy pays you for the actual cost of replacing the damaged property

Page 22: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

ADDITIONAL COVERAGE: PERSONAL PROPERTY Normally covers furniture, computers, clothing up to a specified amount

Home inventory includes detailed information about your personal property that can be used when filing a claim Create a list of personal assets and estimate the market value of each, take pictures or video of items

Personal property floater (personal articles floater) is an extension of the homeowner’s policy that allows you to itemize your valuables, if assets are very valuable and are not fully covered by your policy

Page 23: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HOW MUCH DOES HOMEOWNER’S INSURANCE COST? Factors that affect the premium of homeowner’s insurance policy: Value of insured home Deductible Location Degree of protection Discounts

Page 24: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HOW CAN YOU LOWER THE COST OF HOMEOWNER’S INSURANCE? Improve protection

Use one insurer for all types of insurance Bundling discounts

Stay with the same insurance company

Shop around

Page 25: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

WHAT DOES RENTER’S INSURANCE COVER? Renters insurance is a policy that protects your possessions within a house, condo, or apartment that you are renting

Does not insure the structure itself because the insurance is for the renter only, not the property owner

Covers personal assets such as furniture, television, computer equipment, and stereo equipment

Page 26: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

ETHICAL DILEMMA

You teach Personal Finance at a local community college. The state in which you teach requires proof of liability insurance in order to renew your license plates.

During the discussion of this topic in class, several students admit that they obtain a liability policy just prior to the renewal of their license plates and then cancel it immediately thereafter. They do this because they know that the state has no system for following up on the cancellation of the liability policies once the license plates are issued. These students, who are out of work as a result of a local plant shutdown, indicate that they cannot afford to maintain the insurance, but they must have access to cars for transportation oWrite a paragraph discussing whether you consider the conduct of the students to be unethical.

oHow does the conduct of these students potentially impact other members of the class who maintain liability insurance on their vehicles?

Page 27: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

QUIZ OVER HOME AND AUTO 3/28 Includes the slides above and the vocabulary

Page 28: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

HEALTH AND DISABILITY INSURANCE I can… Identify and compare the types of private health care plans Explain the use of government health care plans Describe long-term care insurance Explain the benefits of disability insurance

Page 29: PROTECTING YOUR WEALTH. Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

LIFE INSURANCE

I can… Describe the types of life insurance that are available Identify the factors that influence insurance needs Review the factors that affect life insurance premiums Examine the decision of whether to purchase life insurance Explain settlement options available to a beneficiary