Buying Insurance Information retrieved from Succeeding in the World of Work Chapter 20, page 335.

Buying Buying InsuranceInsurance

Information retrieved from

Succeeding in the World of Work

Chapter 20, page 335

Terms to KnowTerms to Know

• Insurance• Policy• Premium• Deductible• Cash Value

• Liability• Health Maintenance

Organization (HMOs)• Preferred Provider

Organization (PPOs)• Face Value

Understanding InsuranceUnderstanding Insurance

InsuranceInsurance is a financial precaution against injury, loss, or damage.

Fire Car Health Property

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The Language of The Language of InsuranceInsurance

• Policy and Policyholder

• Coverage

• Benefit and Beneficiary

• Premium

• Deductible

• Filing a Claim


Policy and PolicyholderPolicy and Policyholder -- An insurance policy is a contract

between a person buying insurance and the insurance company that sells it. The person who buys the policy is

called the policyholderpolicyholder.


An insurance policy states how much the insurance company will pay if an event causing a financial loss occurs.


CoverageCoverage – Your insurance coverage is limited to those events listed in your policy as occurrences for which you

are entitled to receive payment.


Benefit and BeneficiaryBenefit and Beneficiary – the insurance company pays the

policyholder a certain amount of money. This amount is often called

the benefitbenefit or cash benefitcash benefit. The person who receives this payment is

called the beneficiary.


PremiumPremium – The amount of money the policyholder agrees to pay the insurance company at regular

intervals for his or her insurance coverage.


DeductibleDeductible – is the amount of loss the policyholder must pay.

The amount of the deductible can vary and can affect the amount of the

premium you pay.


Filing a ClaimFiling a Claim – Reporting a loss to collect payment is called filing a

claim.

Kinds of InsuranceKinds of Insurance

• Renter’s Insurance

• Homeowner’s Insurance

• Automobile Insurance

• Health and Life Insurance

• Other Kinds of Insurance


Renter’s InsuranceRenter’s Insurance – If you have many valuable personal possessions, consider buying renter’s insurance.

Your landlord will probably have insurance on the building in which you live. However, that insurance will not pay to replace the personal

belongings of the renter.


Homeowner’s InsuranceHomeowner’s Insurance – If you borrow money from a bank or other

financial institution to buy your home, you will probably be required to buy

homeowner’s insurance.


Automobile InsuranceAutomobile Insurance – is also property insurance because your

automobile is your personal property. It is insurance to protect you against the loss, damage, or injury that may happen to or because of your car.

Types of CoverageTypes of Coverage

• Liability

• Medical

• Collision

• Comprehensive

• Uninsured Motorist


LiabilityLiability – means responsibility. Liability insurance covers your

responsibility to others. If you cause an accident—if you are at fault—you are responsible for any injury, loss, or

damage that other people suffer because of your mistake.


MedicalMedical – coverage helps pay medical expenses for you and your

passengers should your car be involved in an accident.


CollisionCollision – covers damage to your car, whether the accident is your fault or someone else’s. The coverage pay to repair your vehicle or replace it.

Mississppi law requires that all motorist have at least this type of insurance.


ComprehensiveComprehensive– Damage resulting from fire, lightning, wind, flood, and hail is covered. May also include

glass breakage, theft, vandalism, and falling objects.


Uninsured MotoristUninsured Motorist – protects you against motorist who do not have

liability insurance.Two kinds: one kind insures you for bodily injury and the

other kind covers property damage.

Buying Automobile Buying Automobile InsuranceInsurance

• Driving Record• The Company• Age• Where You Live• Other Factors• Other Vehicles

Cost of automobile Cost of automobile insurance vary insurance vary considerably. considerably.

Insurance Insurance companies take companies take several factors several factors into account in into account in

determining how determining how much your much your

premiums will be.premiums will be.


Driving RecordDriving Record

• If you have a history of violations and accidents, you may not

be able to get insurance at all.

• Insurance companies base their rates on the number of claims. If you are involved in several accidents, your rates will go up.

• Insurance companies usually go back three years in checking your records.

Buying Automobile Buying Automobile InsuranceInsuranceThe CompanyThe Company

• Some companies are very selective about which

people they sell automobile insurance to.

• Some do not sell policies to drivers with bad driving records.

• If you have a good driving record you can get lower rates.


AgeAge

Insurance companies have found that male drivers under the age of 25 file more

accident claims than any other group. Since they have more accidents, they pay higher rates. As you get older, your rates

will go down.


Where You LiveWhere You Live

Urban areas have a higher rate of accidents than rural areas. For this reason, the

premiums are higher in cities. (If you move, your rates may go up or down.)

Buying Automobile Buying Automobile InsuranceInsuranceOther FactorsOther Factors

People who have taken driver education classes sometimes get lower rates than

those who haven’t.

Buying Automobile Buying Automobile InsuranceInsuranceOther VehiclesOther Vehicles

Vehicles other than cars, such as motorcycles or motorboats, should be insured. The

same kinds of coverage are usually available. The same factors—number of claims, age, company, and location—will

determine premium rates.


Health and Life InsuranceHealth and Life Insurance – offers financial protection in the event of

death.


• Basic Coverage

• Major Medical Coverage

• Disability


Basic CoverageBasic Coverage – covers two areas—hospital-surgical expenses (Include room and board in the hospital, medicines given in hospital,

operating room, and surgeon’s fees.) and other medical expenses (None-hospital expenses,

such as doctor’s appointments, prescription drugs, and

test performed on an out-patient basis).


Basic CoverageBasic Coverage

Limits to what services are covered and how much will be paid for them.

Based on what the insurance company feels is “reasonable” regardless of

what is charged by the doctor.


Major Medical CoverageMajor Medical Coverage – pays hospital-surgical and medical

expenses beyond those covered by a basic plan. It pays for long-term hospital stays and catastrophic

illnesses, such as intensive care for a heart-attack patient.


Major Medical CoverageMajor Medical Coverage Major medical takes up where basic

coverage leaves off in two ways.1. It covers more services than the basic plan such as

services for a nurse to come to your home after you have left the hospital.

2. Pay most of the medical expenses that remain after the basic plan has paid its share. For example, if a surgeon’s fee is $2,000 and basic coverage pays only $1,000 for surgeon’s fees, the remaining $1,000 will be covered by major medical.


Major Medical Major Medical CoverageCoverage

Major medical payments are based on a percentage of the remaining expenses and require a deductible.

$17,500 Total expenses

- 7,000 Amount paid by basic plan

$10,500

- 500 Deductible (paid by patient)

$10,000

x .80 Percentage paid by major medical

$8,000 Amount paid by major medical

$10,000

- 8,000

$ 2,000 Amount paid by patient


DisabilityDisability – provides money for people unable to work.

Disability coverage is often of two types:

1. Short-term – pays for a few months.

2. Long-term – can pay for a lifetime.

Buying Health InsuranceBuying Health Insurance

• Group Insurance Plans

• Individual Insurance Plans

• Health Maintenance Organizations (HMOs)

• Preferred Provider Organizations (PPOsD)


Group Insurance PlansGroup Insurance Plans – the main advantage of group plans is that insurance companies can offer better rates to a large

group of people than it can to an individual. Another advantage is that the employer usually pays part of all of the

premium for each employee.


Individual Insurance PlanIndividual Insurance Plan – if you work for a company that does not

offer health insurance, if you are self-employed, or if you don’t work, you should consider buying individual

health insurance.


Health Maintenance Organization (HMOs)Health Maintenance Organization (HMOs) – are based on the idea that health care

costs can be kept down if people are treated for minor health problems before

they become major health problems.HMOs are sponsored by many different kinds of organizations. Doctors, community groups, insurance companies, labor unions, and corporations have organized HMOs throughout the country.


Preferred Provider Organizations (PPOs)Preferred Provider Organizations (PPOs) – usually operate in conjunction with

employer-sponsored group health plans. A PPO is a group of health care providers such as doctors or hospitals, who provide

health care for groups of employees at reduced rates.

The employees have the option of choosing one of the doctors or hospitals on the PPO list at a lower rate, or they may choose

another doctor or hospital at a higher rate.

Types of Life InsuranceTypes of Life InsuranceTerm Life Insurance, Whole Life Insurance

Universal Life Insurance

Life insurance can provide enough money for Life insurance can provide enough money for your family to continue its usual life-style after your family to continue its usual life-style after you’ve gone. It can provide benefits to your you’ve gone. It can provide benefits to your family to help cover the expenses associated family to help cover the expenses associated with your death or it may also provide funds to with your death or it may also provide funds to help cope with the loss of your income. It can help cope with the loss of your income. It can

also provide an investment to be borrowed also provide an investment to be borrowed against or cashed in.against or cashed in.

Types of Life InsuranceTypes of Life InsuranceTerms to know when considering life

insurance:

• Face value – the amount of protection stated – the amount of protection stated on the policy.on the policy.

• Cash value – amount of money the – amount of money the policyholder can take by either borrowing policyholder can take by either borrowing against or cashing in the policy. (only certain against or cashing in the policy. (only certain kinds of life insurance policies have a cash kinds of life insurance policies have a cash value.)value.)

Types of Life InsuranceTypes of Life Insurance

Term Life InsuranceTerm Life Insurance – covers the insured for a specified period of time or a term such as five, ten, or more years. If the insured dies within the term the beneficiary is paid the face

value of the policy.Term life is least expensive type of insurance but must

be renewed at a certain time. At renewal, this type of policy will most likely go up.


Whole Life InsuranceWhole Life Insurance – also called ordinary or straight life insurance. Whole life pay the beneficiary the

face value of the policy if the insured dies.

Whole life continues as long as the insured pay payments. The premiums for whole life remains the

same regardless to how old you get. Whole life builds up cash value.


Universal Life InsuranceUniversal Life Insurance – is a form of whole life insurance. It pays a

death benefit and builds cash value. However, the premium might go up.

(premium variable not fixed)Whole life continues as long as the insured pay

payments. The premiums for whole life remains the same regardless to how old you get. Whole life builds

up cash value.

Buying Life InsuranceBuying Life InsuranceThe amount of your life insurance premiums will

depend on several factors – the coveragecoverage you feel you need, your

ageage, your healthhealth, and the type of policytype of policy you

choose. Before you purchase a life insurance policy, ask yourself the

following questions.

1. How much money do I want to leave my beneficiaries if I die this year? Do I need more insurance to provide for them in the way I want to?

2. What are my retirement plans? Will I need income form an insurance policy?

3. How much can I afford to pay for insurance? How much life insurance will my employer provide?

4. Do I want just the death benefit, or do I want to build up some cash value?


Other Kinds of InsuranceOther Kinds of Insurance – Farmers buy hail insurance, home buyers buy title insurance, and banks buy deposit

insurance.To determine the kind of insurance you

may need, contact an insurance agent.

Buying Insurance Information retrieved from Succeeding in the World of Work Chapter 20, page 335.

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Transcript of Buying Insurance Information retrieved from Succeeding in the World of Work Chapter 20, page 335.