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INSURANCE
CHAPTER 9
SECTION 1-PROTECTING YOUR WEALTH
BEFORE YOU BEGIN
Protecting your Wealth
• Understand Why insurance is an important part of a healthy
financial plan.
• Identify ways to lower the cost of insurance premiums.
• Identify insurance for the type of risk that young adults might
face.
Basic Types of Coverage
• Identify common types of risks.
• Distinguish between necessary and unnecessary types of
coverage.
• Understand the importance of identity theft protection.
• Understand the importance of property and liability protection.
BEFORE YOU BEGIN
The Importance of Life Insurance
• Differentiate between term and cash value life insurance.
• Understand how one becomes self insured.
• Examine the importance and purpose of a will.
Insurance to Avoid
• Know hat type of insurance to avoid and why.
AGREE OR DISAGREE
Insurance rates can vary depending on the company, and I
can save money if I shop around.
I must always have collision insurance on my automobile,
even if its an old car that is not worth much.
If an employer offers me health insurance but requires me to
pay part of the premium, it is not a good deal and I should
not get it.
I only need to have renters insurance if I have a lot of
valuable items.
Everyone should have life insurance.
KEY TERMS
• Beneficiary-recipient of assets passed on from the death of a
friend or relative.
• Claim-Paperwork filed with an insurance company in order to
get them to cover a loss for someone they insure.
• Coverage-Applies to the amount of protection you have
through an insurance company in the event of a loss.
• Deductible-Amount you must pay before you begin receiving
any benefits from your insurance company.
• Liability-The state or quality of being obligated according to
law or equity.
• Out-of-Pocket Expenses-Specific amount of money that you
pay when insurance only covers a portion of costs.
KEY TERMS
• Policy-Describes the type of coverage in an insurance
agreement.
• Premium-Amount you pay monthly, quarterly, semiannually
or annually to purchase different types of insurance.
• Will-A legally enforceable declaration of how a person
wishes his or her property to be distributed after death.
WHY INSURANCE
We have talked a bunch in this course about building wealth,
Chapter 9 and insurance is all about protecting that wealth.
What is the purpose of insurance?
Explain the role of insurance in your financial plan?
Why is it important to understand that insurance is a
financial product?
PROTECTING YOUR
WEALTH
Insurance transfers the financial risk of major catastrophes
thereby protecting your wealth.
The Seven Basic Types of Coverage Needed:
• Homeowners or Renters Insurance
• Auto Insurance
• Health Insurance
• Disability Insurance
• Long-term Care insurance
• Identity Theft Protection
• Life Insurance
INSURANCE
CHAPTER 9
SECTION 2-BASIC TYPES OF COVERAGE
BASIC TYPES OF
COVERAGE
Car insurance
• Liability-covers medical costs and property damage of the other driver if you get in a wreck and it is your fault. Least expensive form of insurance.
• Full Coverage-covers medical costs and property damage of the both drivers if you get in a wreck regardless of fault. If you do not own your car you must carry full coverage.
• Medical Payment Coverage-pays for all accident related medical costs incurred by you or your family members within three years of an accident.
• Collision Insurance-Covers damage to your car if it is hit by another car or object. If you do not own your car you must carry collision coverage as part of your insurance policy.
• Comprehensive-Coverage takes care of damage to your car not caused by a collision. Car is stolen, damaged by hail, fire, flood etc.
• Uninsured motorist protection-Covers your car if you is hit by an uninsured motorist.
Another important type of
coverage.
• Gap Insurance
BASIC TYPES OF
COVERAGE
TOP THINGS TO KNOW
ABOUT AUTO INSURERS
1. You are a statistic (a risk not a person)
2. Insurers differ-prices vary as well as service and reliability.
3. Don’t just look at price-you pay for what you get.
4. Go beyond the basics-liability isn’t enough.
5. Demand discounts-do your research and know what's out there.
6. At claim time your insurer isn’t necessarily your friend-What’s fair to you may not match your insurer. Remember this is a 400 plus billion dollar a year industry.
7. Prepare before you make a claim-Know what's on your policy and keep it updated.
BASIC TYPES OF
COVERAGE
Homeowners and Renters Insurance
• Homeowners insurance will cover the cost of repairing or
replacing your home in the event that it is damaged or
destroyed in a fire, storm, theft or any other type of crisis.
• Renters insurance covers the contents or belongings of your
home up to a certain monetary amount in the event that your
belongings are damaged or destroyed in a fire, storm, theft or
any other type of crisis.
BASIC TYPES OF
COVERAGE
Complete Critical Thinking Question
• Choose a state and research online the legal minimum
amounts of auto insurance coverage required in that state.
Compare to Texas.
• Answer the following questions:
• Do you believe the legal requirement limits for the states are
sufficient?
• What changes would you make? Explain your answer.
• Please email the following to:
BASIC TYPES OF
COVERAGE
Health Insurance transfers the financial risk of major
catastrophes to your health.
• Two types of plans-Group and Individual Health Plans
• Group plans are normally offered as an employee benefit or
organization and maintained by that employer. The two main
advantages of group plans are that they spread the risk over
the entire group to keep premiums down and the cannot deny
you coverage based on health issues.
• Individual plans are purchased in the open market which
means that they are not provided by a group or an employer.
Self employed or retirees normally use this type of coverage.
These plans are normally more expensive and can deny
coverage if you have a history of poor health.
BASIC TYPES OF
COVERAGE
• Basic Health Insurance-policies cover hospital, surgical and physician expenses.
• Major medical expense insurance-covers medical costs that are in excess of those covered by basic health insurance.
• Dental and eye insurance plans-cover only expenses for dental work and expenses related to eye care.(Doesn’t include braces or eye surgeries)
• A copayment-is an amount of money you pay to help cover a portion of your medical costs. Copayments may be a set amount or a percentage of the total cost, depending or your insurance policy.
• A deductible-is the amount you must pay before you begin receiving any benefits from your insurance company.
BASIC TYPES OF
COVERAGE
Long-term Care insurance
• Long-term care is care that you need if you no longer can
perform everyday tasks by yourself. Normally this type of
care helps with the cost of nursing homes, assisted living
homes and in-home care.
• You should not buy long-term care until you are at least 60
• 69% of people 65 or alder will require long-term care at some
point.
BASIC TYPES OF
COVERAGE
Disability Insurance-Long term solution designed to replace income lost due to a short term or permanent disability.
• Short-term Disability Insurance-designed to cover any disability that is less than five years.
• Long-term Disability Insurance-designed to cover disability that will cover more than five year.
• Elimination Period-The time between the disabling period and when the payments actually begin.
The most affordable way to get disability insurance is through your employer.
Identity Theft Protection-Covered in Chapter4
INSURANCE
CHAPTER 9
SECTION 3-THE IMPORTANCE OF LIFE
INSURANCE
THE IMPORTANCE OF
LIFE INSURANCE
Life insurance is intended to replace income in the case of
someone’s death. The income replacement is necessary for
anyone that was a dependent (child/spouse) of the deceased
persons income.
Types of Life Insurance:
• Term Life Insurance-For specified period, is substantially
cheaper.
• Whole Life Insurance-Usually for life and is more
expensive because it funds some sort of savings plan.
• What is a beneficiary?
In groups of two complete
the chart.
CHAPTER SUMMARY
