Take ChargeTHE FUNDAMENTALS OF INSURANCE
Risk: The possibility of incurring a loss
Economic Risk—related to property liability and one’s own personal well being
Personal Risk—risks associated with illness, disability, loss of income, unemployment, old age, and premature death
Property Risk—risks of damage to or loss ofproperty due to theft, wind, fire, flood, etc.
Liability Risk—potential losses to others that occur as a result of injury or damage that you may have caused
WHAT IS RISK?
Large economic losses can be avoided by sharing the loss with other people
Suppose you and nine of your friends decide to form an organization called the Golf Club Owners Insurance Association (GCOIA). The purpose of the GCOIA is to protect members from financial loss should one member’s clubs gets stolen. To provide protection, each member agrees to share the cost of any stolen clubs. Therefore, if your golf clubs are stolen, each member (including yourself) would contribute $30 to buy new ones for you
If you are not a member of the GCOIA and your clubs are stolen, you would have to pay the total cost ($300) of new clubs. As a member new clubs would only cost you $30.
SHARING ECONOMIC LOSSES
Insurance—the planned protection provided by sharing economic losses among a group of people
--You are protected from economic loss
Insurance Companies – Businesses that provide planned protection against economic losses Agree to assume certain economic risks for you and to pay
you if a loss occurs
Insured/Policyholder – The person for whom the risk is assumed
WHAT IS INSURANCE?
Policy — a contract issued by the insurance company for coverage for the policyholder States the conditions to which the insurance company and
the policyholder have agreed--Unlicensed person to drive an insured car--Skydiving / bungee jumping
INSURANCE
Premium – The amount the policyholder must pay for insurance coverage
Make payments Once a year Every 6 months Every month
INSURANCE
Claim — a policyholder’s request for payment for a loss that is covered by the insurance policy
Deductible — an amount you must pay BEFORE the insurance company pays a claim $500 $1000
INSURANCE
Policyholders should know exactly what protection is provided by the kinds of insurance they have
Some people fail to tell their insurance companies about losses they have suffered because they did not know that their policies covered those losses
Other people have assumed that losses they suffered were covered by their insurance, only to find out by reading their policies that the losses were not covered!
READ THE FINE PRINT!
INSURED LOSSES
Self-insurance: The individual, family, or business assumes the total risk of economic loss No Insurance Company Is Used Place money in a savings account to cover possible
financial losses Would this cover a house destroyed by fire or catastrophic
illness?
SELF-INSURANCE
Coinsurance: The sharing of expenses by the policyholder and the insurance company Policyholder pays a deductible Insurance company pays the balance of the bill up to a
maximum ceiling rate Assume you have a claim for: $5,250 Your deductible is:$250 Remaining balance after deductible $5,000
Your insurance policy says that once the deductible is subtracted from the total amount of the claim, the policyholder will pay 20% of the remaining amount
You will make an additional payment of: $1,000 (5,000 X 20%)
COINSURANCE
COST OF INSURANCE
Premiums charged to a policyholder are also affected by the cost of replacing the insured item A luxury car’s premiums will be higher than they would be
for a less expensive model
If the insurance group that you have been categorized into has more claims for a given period of time, the premiums for everyone in that particular group will increase!! Age Occupation Geographical Location Family History Gender
What can I do to help keep my premiums down? Secure all of your belongings Drive defensively (everyone else is a bad driver!) Take care of yourself! (Good health habits)
COST OF INSURANCE
Employer provided insurance protection Much cheaper because employer will pay anywhere from
25%--100% for policyholder Life Insurance Health Insurance Dental Insurance Vision Insurance
Insurance Agent provided insurance protection Type one: insurance agent works for a large insurance
company and sells only policies written by that company Type two: insurance agent sells many kinds of policies from
a number of different companiesThe insurance agent’s job is to help you select the
proper kind of protection from economic loss
PURCHASING INSURANCE
You decide to purchase a $100,000 home but can only make a $10,000 down payment. You will need to borrow $90,000 and have insurance on your investment to be granted the loan. WHY?
INSURANCE FOR ECONOMIC SECURITY
VEHICLE INSURANCE
What are your risks? You could injure yourself You could injure someone else You could cause property damage to someone else You could cause damage to your vehicle The vehicle might be stolen or vandalized
You could be sued by someone claiming to suffer damages as a result of the accident involving your vehicle
ECONOMIC RISKS OF OWNING A VEHICLE
How Do I Protect Myself From These Risks? Automobile Insurance Policy: protection provided for:
Your Car The Other Car Injuries In Your Car Injuries To Others Property Damage
ECONOMIC RISKS OF OWNING A VEHICLE
Automobile Liability Insurance: protects you against financial loss if you injure someone else or damage someone else’s property in an automobile accident
Minimum Car Insurance Requirements in Nebraska $25,000 for bodily injury to one person in a crash $50,000 for bodily injury in a crash if more than one person is
hurt $25,000 in property damage coverage.
Why is it important to determine who is at fault for an accident? Payment is determined by who is at fault Regardless of who is at fault you can still sue the other party
involved
AUTO INSURANCE
Personal Injury Coverage: deals with injuries to people (the source of most of the money paid in claims by automobile insurance companies) Bodily Injury Liability Medical Payments Uninsured Motorist Protection
AUTO INSURANCE
Bodily Injury Liability Protection: protects the insured from claims resulting from injuries or deaths for which the insured is found to be at fault THIS COVERS
People In Other Cars Passengers Riding With The Insured Any Pedestrians
THE INSURED AND IMMEDIATE FAMILY ARE NOT COVERED!!!
Dollar amounts of bodily injury coverage are expressed as two numbers divided by a slash ($100,000 / $300,000) The first number refers to the limit, in thousands of dollars, that the
insurance company will pay for injuries to any one person in an accident
The second number, refers to the limit, in thousands of dollars, that the insurance company will pay if more than one person were injured
AUTO INSURANCE
Medical Payments Protection: policyholders and their family members are covered if they are injured while riding in their car or in someone else’s car COVERAGE MAY INCLUDE:
If you are a pedestrian Guests riding in the insured car
Medical payments insurance also covers the costs of: Medical Dental Ambulance / Airlift Hospital Nursing Funeral Services
Payment, up to the limit stated in the policy, is made regardless of who is at fault in the accident
AUTO INSURANCE
Uninsured Motorist Protection: protects against injuries caused by hit-and-run drivers or by drivers who have no insurance or money to pay claims Available only to those people who carry bodily injury
liability coverage Covers policyholder and family members Covers guests riding in the policyholder’s car Uninsured Motorist protection covers only the insured person
ONLY if the uninsured motorist is AT FAULT!!! Approximately 10% of the nation’s motorists drive illegally
without automobile insurance
AUTO INSURANCE
Property Damage Coverage: designed to protect you from economic loss due to damage to the property of others and to your car Property Damage Liability Coverage Collision Insurance Coverage Comprehensive Coverage
Property Damage Liabil ity Coverage : protects the insured against claims if the insured’s car damages someone else’s property and the insured is at fault Another Car Telephone Pole Light Pole ($2,250) Fire Hydrants ($1,000 + installation) Houses / Buildings Trees / Landscaping ($750 Per Tree x 3 Trees) THIS DOES NOT COVER DAMAGE TO THE INSURED PERSON’S CAR!!!
AUTO INSURANCE
Collision Insurance Coverage: protects a car owner against financial loss associated with damage resulting from a collision with another car or object (very expensive) DOES NOT COVER INJURIES / DAMAGE TO THE PROPERTY OF
OTHERS
Collision coverage does not provide for payment of damages greater than the car’s assessed value (Kelly’s Blue Book Value)
Assessed Value Of Car New Paint Job New Engine Components (Audio) Antique value
AUTO INSURANCE
Comprehensive Coverage: protects the insured car against almost all damage losses except those caused from a collision or from the car turning over Fire Tornado Hail Flood Windstorm / Tree Damage Vandalism / Breaking In / Keying Falling Objects / Asteroid / Plane
If the insured’s car is totally destroyed or stolen, the amount paid out by the insurance company is not necessarily equal to the amount paid for the car, it is equal to the car’s estimated value at the time of the loss DEPRECIATION AMOUNT
AUTO INSURANCE
People in the United States spend more than $115 billion a year insuring over 143 million vehicles
This expenditure is about 45% of all of the money spent on property and casualty insurance
FYI: Always ask for the Good Student Discount! 3.0 GPA or better
BUYING AUTO INSURANCE
Insurance companies use several factors to determine the cost of your automobile insurance, some of those factors include: Your age and other characteristics (female / male) The purpose for which you use your car (pleasure / work) The number of miles you drive your car each year The value and type of your car (sedan / sport / sport utility) The community in which you live (Lincoln / North Platte) Types of coverage and deductibles
To determine premium rates, drivers are classified according to: Age (25 Years) Marital Status Driving Record Scholastic Achievement (Higher Education)
BUYING AUTO INSURANCE
Taking an approved driver education course can reduce the cost of a teenager’s car insurance by as much as 25% of the premium
If you insure several vehicles under the same company you may receive a discount Motorcycles Recreational Vehicles (4 runners) Jet Skis / Boats Snowmobiles BODILY INJURY LIABILITY INSURANCE IS A MUST!!!
REDUCE YOUR COST
Compulsory Insurance Laws: require you to carry certain types of automobile insurance before your car can be licensed Personal Injuries Property Damage
Compulsory Insurance Laws state that you may not register a car or obtain a license to drive without presenting proof of having the minimum amounts of insurance coverage required
Financial Responsibility Laws: if you cause an accident and cannot pay for the damages either through insurance, your savings, or the sale of property… Your driver’s license will be suspended!
VEHICLE INSURANCE LAWS
HEALTH INSURANCE
Hospital Insurance: type of insurance that covers an illness or injury that requires you to be hospitalized (most popular type of health insurance) Room ($500—Up) Operating Room ($3000—Up) Anesthesia ($600—Up) X-Rays ($160—Up) Laboratory Tests ($150--Up) Medicines ($100—Up)
Surgical Insurance: type of insurance that covers all or part of the surgeon’s fees for an operation, usually bought in combination with hospital insurance (very expensive) $2,500 C-Section (30 minutes) $500 Doctor Assists (30 minutes) $50,000 Open Heart Surgery (2-4 hours)
HEALTH INSURANCE
Non-profit organizations that cover mainly medical and surgical treatment rather than hospital care
These plans list the maximum amounts that will be paid for different types of surgery
Generally, you are not provided coverage for pre-existing conditions or illnesses or injuries that are covered by other insurance
BLUE CROSS/BLUE SHIELD
Regular medical insurance: type of insurance that pays part of or all of the fees for non-surgical care given in the doctor’s office, the patient’s home, or a hospital Amount payable for each visit or call Maximum number of visits allowed Payments for diagnostic and lab expenses
The protection provided by regular medical, hospital, and surgical coverage is referred to as Basic Health Coverage
HEALTH INSURANCE
Major medical insurance: type of insurance that provides protection against the high costs of serious illnesses or injuries (compliments the big three) Health care prescribed by a doctor Treatment in and out of the hospital Special nursing care X-rays Psychiatric care Medicine
Maximum benefits range up to $250,000 and higher
HEALTH INSURANCE
Coinsurance Clause: the policyholder will be expected to pay a certain percentage of the total medical bill (generally 20—25% of the costs over and above the deductible amount)
Comprehensive Medical Policy: insurance policy that combines the features of hospital, surgical, regular, and major medical insurance Features of the individual insurance are the same There is only one deductible Less expensive (package deal)
HEALTH INSURANCE
Dental Insurance: type of insurance that helps pay for normal dental care (annual claims now approaching $10 billion) Examinations X-rays Cleanings Fillings Dental injuries resulting from accidents Other dental work
Some dental plans contain deductibles and coinsurance provisions while others pay for all claims
HEALTH INSURANCE
Vision Insurance: type of insurance that helps pay for normal eye care (provided by many employers)
COVERED NOT COVERED-Eye examinations -Tinted lenses-Prescription lenses -Coated / Plastic
lenses-Frames -Nonprescription lenses-Contact lenses -Vision training
HEALTH INSURANCE
Disability Income Insurance: type of health insurance that provides periodic payments if the policyholder becomes disabled (the insured receives weekly or monthly payments until the person is able to return to work) Long illness Accident A waiting period provision is required before the policyholder can
collect on the disability Health insurance is available from several sources and in
many different forms Individual Policies Group Policies Health Maintenance Organizations Preferred Provider Organizations State Government Assistance
HEALTH INSURANCE
Being dishonest when applying for insurance or filing dishonest claims (fines and or jail time) Not disclosing existing medical conditions Number of miles a policyholder drives their car per year Exaggerated or nonexistent injuries as a result of an
accident
INSURANCE FRAUD
Workers’ Compensation: an insurance plan that provides medical and survivor benefits for people injured, disabled, or killed on the job
Workers’ Compensation Laws provide medical benefits to employees who are injured on the job or become ill as a direct result of their working conditions (Employers are required to provide and pay for this type of insurance) Mold Asbestos
GOVERNMENT ASSISTANCE
Medicaid: federal and state government health insurance plan administered to low income families (meet certain criteria with income) Hospital Care Doctors’ Services X-Rays Lab Tests Nursing Home Care Diagnosis and treatment of children’s illnesses Home Health Care Services
GOVERNMENT ASSISTANCE
Medicare: an insurance program designed to help people age 65 and older and some disabled people pay the high cost of health care (partially funded by Social Security) Hospital Insurance Medical Insurance
The hospital insurance plan includes coverage for: Hospital care Care in an approved nursing home Home health care up to a certain number of visits No premium payments are required for hospital insurance, and almost
everyone 65 years old and older may qualify The medical insurance plan includes coverage for:
Doctors’ services Medical services and supplies Home health services The insured will have to pay a small monthly premium for this type of
coverage
GOVERNMENT ASSISTANCE
The cost of health insurance is usually determined by at least four factors: Extent of the coverage Number of claims filed by the policyholder Age of the policyholder Number of dependents
COST OF HEALTH INSURANCE
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