Grade: 7 Lesson # 8

Why do insurance companies charge higher premiums for higher-risk individuals or events?

SS.8.FL.6.5 Discuss that insurance companies charge higher premiums to cover higher-risk individuals and events because the risk of monetary loss is greater for these individuals and events.

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Correlated Literacy Standards:LAFS.7.W.3.7 Conduct short research projects to answer a question, drawing on several sources and generating additional related, focused questions for further research and investigation.

LAFS.7.W.3.8 Gather relevant information from multiple print and digital sources, using search terms effectively; assess the credibility and accuracy of each source; and quote or paraphrase the data and conclusions of others while avoiding plagiarism and following a standard format for citation

SS.8.FL.6.5 Discuss that insurance companies charge higher premiums to cover higher-risk individuals and events because the risk of monetary loss is greater for these individuals and events.

Factors the Affect Insurance Premiums

Lesson Number (1-15): 8

Correlated Florida Standards (See Full Text on Cover Page)LAFS.7.W.3.7, LAFS.7.W.3.8

Essential Question Why do insurance companies charge higher premiums higher-risk individuals or events?

Learning Goals/Objectives Identify why insurance companies charge different premiums Understand that insurance companies charge higher premiums for higher-risk individuals or events Explain ways to lower your insurance rates by lowering risk

OverviewIn this lesson students will explore the relationship between risk and insurance premiums. They will come to understand that insurance companies charge higher premiums to cover higher-risk individuals and events because the risk of monetary loss is greater for these individuals. Students will analyze different risks and identify ways to minimize risk and lower their insurance premiums.

Materials Attachment #1- Cars (Included) Attachment #2- Types of Car Insurance (Included) Note paper Attachment # 3 Worksheet-Car Insurance (Included) Attachment # 3 Worksheet-Car Insurance Answer Key (Included)

Time50 minutes

Activity SequenceINTRODUCTION/HOOK (5 minutes)

1. Show students pictures of different cars. You can use pictures found on the web or show the pictures of the cars from the lesson (attachment#1)

2. Ask students: How are these cars alike?Solicit answers from students

3. Ask students: How are these cars differentSolicit answers from students

4. Explain to the students that in order to own these cars, the owner must carry insurance.

ACTIVITY (33 minutes)1. Review the idea that people get insurance as a way to manage risk (2 minutes)2. Explain: Auto Insurance (3 minutes)

Auto insurance protects you financially from: an auto accident

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cost of the damage to your car cost of the damage to someone else’s car or property medical expenses due to injuries resulting from an auto accident.

An auto insurance policy is a legal agreement between the policyholder and the insurance company.  You pay a premium, and the company provides coverage.

3. Introduce the different types of car insurance available to consumers using attachment #2 (1 minute)4. Discuss how each one of these options covers a different risk. (5 minutes)5. Explain that the amount of money you pay for your insurance policy (premium) depends on the amount of

risk you are covering. (2 minutes)6. Discuss factors that affect car insurance rate (3 minutes)

Gender and AgeMarital Status.

Where You LiveCredit Score.ProfessionVehicle Safety RatingVehicle SizeAge of the CarLikelihood of TheftDriving HistoryDriving Activity

7. Have students make a list of the factors that affect car insurance while you are discussing it (3 minutes)8. Revisit the cars from step 1 of the introduction. (2 minutes)9. Discuss which car they believe would have a higher insurance premium and why based on the factors

discussed. ( 5 minutes)10. Explain that the risk – premium relationship is the same for different types of insurance as well. Discuss each

of the following: Life Insurance – who would pay the higher premium? (and why?)o A 35 year old man or a 75 year old man (75 year old- greater risk of dying)o A Hollywood stuntman or a teacher (Stuntman – greater risk)o A 30 year old who has had 2 heart attacks or a 35 year old who is healthy (30 year old – greater risk

Homeowner’s Insurance (Hurricane Insurance) – which home would cost more to insure? (and why?)o A home in the Florida keys or a home in Iowa (Florida keys – greater risk of being hit by a hurricane)o A home with a 2 year old tile roof or a home with a 20 year old tile roof? (the 20 year old roof is a bigger

risk because it is less likely to stand up well during a hurricane.o A home with hurricane shutters or a home that does not have hurricane shutters (the home without

hurricane shutters – greater risk of damage during a storm ( 5 minutes)11. Have students give examples of different types of insurance and situations wherein risk creates a higher

premium (e.g. earthquake insurance – California, fire insurance – wooden house etc.) (2 minutes)

CLOSURE (12minutes)Distribute attachment #3 Car Insurance Worksheet. Review directions and provide time for students to complete the activity. Review answers when completed.

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OPTIONAL EXTENSION SUGGESTION/HOME LEARNING1. Research the price of different insurance companies for a car2. Make an informational pamphlet informing people of the importance of car insurance and factors that

influence the premium3. Research the relationship between premium and risk for other insurance policies such as medical, health,

life insurances. Sources/Bibliographic Information that contributed to this lesson:http://www.bing.com/images/search?q=insurance&view=detailv2&&id=CE7C51530E767D7CFB85868A51671C7061A04157&selectedIndex=6&ccid=DQEUiVH6&simid=608042828828445828&thid=OIP.M0d01148951fae7d6f171a098ed85de9fH0&ajaxhist=0

http://www.moneycrashers.com/factors-affect-car-insurance-rates/

https://www.horacemann.com/en/teacher-lounge/resources-for-educators/teaching-kit/auto-insurance.aspx

https://www.tdbank.com/wowzone/lessons/Gr9-12Lesson8.pdf

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(Attachment #1)

CARS

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(Attachment #2)

Different Types of Car Insurance

What is liability insurance?

Liability insurance coverage pays when there is property damage and physical injury if you are at fault. It includes: bodily injury liability (BI), property damage liability (PD), personal injury protection (PIP), additional personal injury protection (APIP), and medical payments (MED PAY)

What is Comprehensive Coverage? Comprehensive coverage is pays for damages caused by several circumstances:

theft vandalism natural disasters fire hail windstorm riot falling objects floodComprehensive coverage has a deductible. The higher the deductible the lower the insurance premium.

What is Collision Coverage?Collision covers damage for all accidents. Pays for loss or damage caused by a collision with another vehicle or object. Must be purchased comprehensive coverage. Also carries a deductible.

Extra Insurances Uninsured Motorist / Underinsured Motorist

Pays when PIP benefits do not supply or are exhausted in order to cover medical, dental, hospital, funeral and related expenses for you and your household relatives resulting from a motor vehicle accident. Protects everyone riding in your vehicle.

Gap Insurancecovers the difference between what the car is worth and what you owe on the car.

TowingIf the car does not run it will pay for towing your car to the nearest place for repairs. May have a limit on the amount of miles it will tow.

Car RentalPays for the expense of renting a vehicle if you have a loss that is covered with comprehensive or collision coverage and your vehicle is disabled more than 24 hours.

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Attachment # 3 Name __________________Car Insurance

Why is car insurance important?

Why do car insurance companies charge different rates to their customers?

List 5 factors that affect car insurance premiums

1.2.3.4.5.

What can you do to try to save money on auto insurance?

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Answer KeyAttachment # 3 Name __________________

Car Insurance

Why is car insurance important?Car insurance will minimize financial risk involved in driving a car (accident, damage to your car, damage to other’s car/property, medical expenses due to injury of yourself or others). Liability insurance is required by law in Florida

Why do car insurance companies charge different rates to their customers?

The higher the risk to the insurer, the higher rate (premium) they will charge.

List 5 factors that affect car insurance premiumsMay be any of the listed factors:Gender and AgeMarital Status.

Where You LiveCredit Score.ProfessionVehicle Safety RatingVehicle SizeAge of the CarLikelihood of TheftDriving HistoryDriving Activity

What can you do to try to save money on auto insurance? Buy a car with a good safety recordDrive carefully so that you have a safe driving recordTake a Driver’s Education CourseGet a policy with a higher deductibleShop different companies to get the best rate possible

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