1. How do you protect yourself from loss? 2. What factors impact the cost of insurance? Types of insurance (renters, homeowners, auto, health, life, disability) policy, premium, deductible, claim, beneficiary, liability
Overview of Insurance Risk: The probability that injury, damage, or loss will occur. Peril: Event which can cause financial loss (fire, falling trees, lightning and others)
Risk Management: The process of dealing with the chance of a potential personal or financial loss. 1. Avoid Risk: Avoid situations that involve risk 2. Reduce Risk: Lessen frequency or severity of losses Wear seat belts, don t drive fast 3. Assume/Accept Risk: Pay for losses personally requires large savings 4. Transfer/Share Risk: Purchase insurance for possible losses
Insurance Basics Insurance: A way to guarantee your financial protection against various risks Insurance Policy: Contract detailing premium, deductible, and coverage limits in the event of a loss. Policy Holder: A consumer who purchases the policy Beneficiary: A person eligible to receive benefits under an insurance policy
Key Terms Loss: an accident or illness which causes a financial setback. - Must provide proof of loss Proof of Loss: When making a claim you must prove loss. - Photograph or videotape each room - Keep documentation in a place other than your home Claim: A notice of a loss to the insurance company - When you have a car accident, you file a claim to collect Coverage Limit: The max. amount an insurance company will cover
Premium: Fee paid to be covered under specified terms Deductible: The portion of the loss you pay before insurance company pays remaining cost Law of Large Numbers: Insurance companies protect themselves against financial loss by spreading the risk of costly claims among many customers over many years
Types of Insurance Property: Provides protection against most risks to property, such as fire, theft and some weather damage Liability: Provides protection from claims arising from injuries or damage to other people or property. Auto: Protects against loss in event of an incident involving a vehicle they own. Covering property, liability, and medical. Health: Protection that eases financial burden experienced as a result of illness or injury. Life: Provides monetary benefit to designated beneficiary in lump sum or annuity (regular payments) Disability: Provides income when employee is unable to work due to non-work-related accident/illness. Homeowner s : Combines property and liability insurance to protect home. (Typically covers: Burglary, fire, wind, smoke, water, vandalism) Renter s: Protects insured from loss of contents of dwelling rather than the dwelling itself
Teen crash rates drop 40% 6 months after getting license 70% chance of an individual getting in an accident in first 3 years of driving- (Insurance Education Foundation) Automobile Insurance: Arrangement between individual and insurer to protect against risk from auto accidents
Factors of Insurance Rates Age: (Younger =expensive) Gender: Males under 25 Good student discount Multiple car/drivers policies Cost of repairs Vehicle Use/mileage Place of Residence/cities Marital status Type/Age of car (theft) Driving Record Long-time customers Credit Score
Types of Auto Insurance (ALL MO DRIVERS MUST HAVE) 1. Liability Coverage: Pays for bodily injury to other people & damage to property when you are responsible (legal min.) a. Bodily injury: driver is held legally responsible for injuries suffered by another b. Property damage: driver is held responsible for damage done to other s property Policy limits for liability are usually quoted with three figures such as 25/50/10 (thousands) 25 = $25,000--Per-person bodily injury limit 50 = $50,000--Per-accident bodily injury limit 10 = $10,000--Per-accident property damage liability limit
2. Medical Payment insurance Medical Payment Insurance covers injuries to the driver of the insured vehicle or any passenger regardless of fault 3. Uninsured/Underinsured motorist Uninsured or Underinsured Motorists Insurance covers injury or damage to the driver, passengers, *(or the vehicle) caused by a driver with insufficient insurance or hit-and-run *In many states including MO uninsured only cover medial related injuries, not property damage
4. Physical damage insurance (damages to vehicle) A. Collision: covers collision w/ object, car, or rollover (Drop Collision? Is deductible higher than car value?) B. Comprehensive: physical damage losses except collision Theft, vandalism, fire, ice, windstorm, or hail Glass breakage, contact with animal Optional Protection Towing Coverage Rental Reimbursement
Right kind, Right Time Important to have right kind of insurance at the right time Beware of over-insured or under- insured Over-insured is a waste of money Under-insured can also be costly Should change with time Life insurance for married spouse & kids Disability if head of household Liability on 1 st car (used)
What you should know Does your friend drive your car Did you know that if your friend wrecks your car, the accident is on you? If you do not pay your premium before the due date you have no insurance. An auto insurer can place you in a high risk policy! Current Missouri law does not prevent an insurer from putting you into a high risk policy if you have not been insured in the last 30 days. This situation can be avoided by paying your premiums on time and not letting your policy lapse.
What do I do if I get into an accident? 1. Make sure that everyone in your car is not hurt 2. Check the other car to see if they are OK 3. Call the police 4. Get the following information from the other driver: name, address, telephone number, license plate number, drivers license number, insurance information. 5. Give the same information to the other driver. 6. Get the name and phone number of any witnesses 7. Keep a disposable camera in your car and take accident pictures 8. Call your insurance agent as soon as possible
What is Health Insurance? Health Insurance: The Basics (Form of protection that eases the financial burden people may experience as a result of illness or injury.) Things you should know about Health Insurance 1. Insurance costs a lot, not having it costs more 2. If your employer offers insurance, get it 3. Health insurance plans include premiums, deductibles, and co-pays 4. Co-payment is the portion of a claim that must be paid out-of-pocket. (Usually $5,$10, or $15 for each visit.) 5. 46 million Americans do not have health insurance (22-30) Pre-existing Conditions: Health problem that existed before you apply for a health insurance policy
Rising Costs Service Average Cost Chest X-Ray -------------------- $ 53 Patient Visit -------------------- $ 158 Hospital MRI -------------------- $ 1,383 Birth -------------------- $ 9,261 Birth (caesarean) ---------------- $12,027 http://www.fchp.org/employers/resources/~/media/files/fchp/imported/typicalcostcommedexpense.pdf.ashx Time Magazine 31 July 2006 Procedure : United States India Thailand Singapore Coronary Angioplasty Heart Bypass Hip Replacement Gastric Bypass $31,000- $70,000 $66,000- $150,000 $22,000- $53,000 $33,000- $58,000 $11,000 $13,000 $13,000 $10,000 $12,000 $20,000 $9,000 $12,000 $12,000 $11,000 $13,000 $13,000
Types of Health Insurance Fee for service Go to Dr. Pay deductible 1 st Insurance pays their portion (80%) You pay coinsurance (20%) File claims Managed Care Use Dr. s in network to limit costs Pay co-pay per visit May/may not have deductible Preventative care included Don t have to file claims MEDICARE: Federally funded health care program for 65+ & disabled MEDICAID: State funded health care provided based on need Medical assistance for eligible individuals/ families w/ low incomes & disabilities Nation s largest health insurance program (39 million Americans)
Group Plan Health Insurance: The Basics A group buys insurance for everyone Most Americans (80%) fall into some type of group Often provided by an employer as a benefit Advantages: Can be less expensive May enroll many times w/ pre-existing conditions Disadvantages: Options limited to company plan Sponsor may discontinue/change plan Individual Plans People who are self-employed, or whose company does not offer health insurance as a benefit, can buy health insurance directly from an insurance company Advantages: Personalized/customized policy Discounts for healthier people Disadvantages: Can be denied coverage Pre-existing conditions = expensive
Life Insurance Insurance that pays out a sum of money either on the death of the insured person or after a set period Term Life insurance Protection against loss of life for a specified term Could be for 1,5,10, or 20 years (renewable term) If you stop paying your coverage stops Whole Life Insurance Permanent policy w/ a specified premium Insurance company pays a set amount after you die
Disability Insurance Provides regular income when an employee is unable to work due to pregnancy, a non-work-related accident or an illness. Single greatest asset is potential earning power Pays income if policy holder gets sick and can t work Limited to 2/3 gross income. Why? Worker s Compensation: If your disability is a result of an accident or illness on the job.
Homeowners Insurance: The Basics Legal contract to protect the insured, their home, and belongings if they are damaged or destroyed (May also cover garages, sheds, & pools) Protection is provided against losses caused by fire, water damage, storm, theft, and other perils Homeowner s Insurance is comprised of property & liability insurance House Apartment Condominium Mobile Home
Renters Insurance Protects individuals who live in a house, mobile home, condominium, or apartment that is owned by another person Protects against: Theft Loss of personal property If you re headed to college If you re living in a dorm, check your parent s policy. Most homeowner s policies will cover items away from the home, up to a certain dollar amount.
Your policy covers: Personal Items your stuff at home is covered in case of fire or theft. Estimate and itemize the dollar value of the things you own, once a year. Put that information in a safe place away from your home, like at your parent s house or in a safety deposit box in a bank. Unintentional damage: Fire cooking Liability: Fall on ice Additional living expenses (hotel) * Check the limits on your policy.