Introduction to Insurance

Outline

• Fundamentals of Insurance• Auto Insurance• Homeowner’s/Renter’s Insurance• Umbrella Insurance

Life and Health

• Health Insurance Could be Discussed at Workplace

• Life Insurance often not Really Necessary for Recent Graduates

• If Specific Questions, Please Ask After Session

“Insurance is the One Thing that You Buy, that You Hope

Never to Use”~ anonymous

What is Insurance?

• Risk Sharing• Everyone Pays a Little so that an

Individual Doesn’t Have to Pay a Lot• Based on Statistics• Only Risk What You Can Afford To Lose• The More You Have to Lose, The More

You Have To Protect

Definitions

• Policy – Insurance Contract• Premium – Cost of Having an Insurance Policy• Deductible – Cost of Using an Insurance Policy• Claim – Act of Using an Insurance Policy• Lapsed – A Policy Terminated by Non-payment

of Premium• Dropped – Disallowed to Renew a Policy• Declaration Page – Summary of Policy Terms

Risk: An Inverse Relationship

As Deductible Increases Premium Decreases

Auto Insurance

Auto Insurance - Coverage

• Liability Insurance – Legal Requirement• Collision Insurance• Comprehensive Insurance• Medical Payments• Uninsured Motorist Coverage• Rental Reimbursement

Liability Insurance

• Protects Others• Two Types

o Bodily Injuryo Property Damage

• Limits – Each Person/Aggregate Limit• Legal Requirement in Illinois

Collision Coverage

• Protects Your Vehicle• Two Types

o Actual Cash Valueo Replacement Cost

Comprehensive Coverage

• Coverage for Problems Other than Driving• Theft, Fire, Etc.• Two Types

o Actual Cash Valueo Replacement Cost

Medical Payments

• Medical Costs for People Involved in an Accident

• Each Person

Uninsured/Underinsured Motorist Coverage

• Protects You From Others• Uninsured vs. Underinsured• Each Person/Aggregate Limit

Rental Reimbursement

• How Will You Get Around While Your Car is Being Repaired?

• Dollar per Day Credit For Time Period

Recommended Coverage AmountsSource: Ernst & Young’s Personal Financial Planning

Guide

• Liability – Bodily Injury, Property Damageo Standard: 100/300 Coverageo Recommended: 250/500 Coverage

• Actual Cash Value vs. Replacement Cost• Medical Payments – Std:1000, Rec:

$10000• Uninsured/Underinsured Coverage

o Protect Yourself at Least as Much as Others

Discounts

• Protective Devices• Safety Devices• Multiple Policies• Multiple Vehicles• Car Type• Good Driver• Loyalty

Declaration Page

Homeowner’s (Renter’s) Insurance

Homeowner’s Insurance - Coverage

• Dwelling Protection – The Living Structure• Other Structures Protection – ie. Garage • Personal Property – All Your Stuff• Special Coverage – Flood, Quakes,

Nukes• Living Expense – Temporary Housing• Liability Protection • Guest Medical Protection

Recommended Coverage AmountsSource: Ernst & Young’s Personal Financial Planning

Guide

• Minimum: Appraised Value (Owned Property)

• How Much is Your Stuff Worth? o Write it Down!!!!

• Personal Liabilityo Standard: 100K o Recommended: 300K

• Medical Payments – Std:1000, Rec:$5000

Declaration Page

Umbrella Policies

• “Kick In” When Other Policies Max Out• Relatively Cheap• May Make Sense If You Have a Lot to

Lose

Should I File a Claim?

Pros and Cons of Filing a Claim

Pros• Getting What You

Paid For• Possibly Saving

Money• Ensuring You Aren’t

Left Paying For Repairs

Cons• Payment of

Deductible• Possible Increase in

Premium• Risk Being Dropped

Questions to Ask Before Filing

• Will The Policy Cover It?• Would the Claim Exceed the Deductible?• Can I Afford to Fix it Myself?• If Not at Fault, Will The Other Guy Pay?• How Long Will It Take?• What Documentation Do I Need? (Police

Report, Estimates)

Summary

• Principles of Insurance• Aspects of Auto/Home/Umbrella

Insurance• Considerations when Filing a Claim

Summary

• Insurance Exists to Protect You From Catastrophe

• I Hope Now You’ll Make Adult and Informed Decisions about How Much Risk You’re Willing to Accept

Questions