1.2 Basic Policy Types
Property and Casualty Insurance
ü Fires
ü Burglary
ü Damage
What does it mean when someone says, “You’re liable for that?”
ü Liability
o Legal responsibility
What’s protected
ü Real property (permanent structures & objects like buildings, fences, built-in appliances)
ü Personal property (anything not permanently attached like cars, RVs, furniture, clothes)
Do you own more real property or personal property?
Does anyone own a pool? What types of security do you have to have on it? What do you have on it?
AUTOMOBILE
Most important coverage is liability (cars are dangerous)
(States regulate no-fault, uninsured & underinsured coverage)
No-fault: compensate regardless of who causes accident
Uninsured: compensation from your own insurer for damage caused
by improperly insured driver
Underinsured: compensation from your insurer for amounts not
covered by driver at fault
Complete Coverage:
ü protects against theft & vandalism, fire, collision
ü covers if it’s your fault
ü covers for un/underinsured
ü Expensive!
ü Don’t pay more for collision insurance than worth of car!
RENTER’S & HOMEOWNER’S
When do you want this coverage?
Basic Coverage
ü Damage or loss of dwelling
ü Other structures
ü Personal property
May include:
ü Loss of use of property
ü Personal liability
ü Medical payments
LIFE, HEALTH, DISABILITY & SOCIAL INSURANCE
Life expectancy is going up (we’re living longer)
May need long term care
Benefits & challenges of longer life?
Life
Funds to beneficiaries after you die
Protect family financially when major wage earner dies
Pay funeral expenses, debts, fees to settle debt
How much?
Depends on what you want beneficiaries’ standard of living to be
Can be used as collateral for loan
Who has life insurance?
Do you need it?
Rule: if you have no dependents and your assets would cover your debts & funeral, you don’t need life insurance. Let that $ work for you somewhere else.
Health & Medical
Managed care (HMOs)
Sometimes cover preventative
Traditional fee-for-service plans
Pay larger %age of fees
Federal health plans:
Medicare: hospital benefits over 65 or with disabilities under 65
Medicaid: gov’t medical assistance based on need
Long Term Care
Home health care
Institutional care
Related services for elderly/disabled
Premiums depend on lifestyle choices (Like what?), existing health
problems (like what), family history (like what), & desired
level of care (like what)
Social Insurance-Government
Workers’ Compensation
ü Pays benefits to employees for bodily injury, job-related diseases
ü Benefits paid for medical expenses, lost income, death
Unemployment Insurance
ü Temporary payments
ü Eligible workers—involuntarily unemployed
THINK CRITICALLY 1-3, 6
1.3 PURCHASING CONSIDERATIONS
What does insurability mean?
When might a person become uninsurable?
Insurability: do you meet insurer’s conditions to be insured? Are you likely to file more claims? Why or why not?
Probability: mathematical measurement of whether an event will
happen
mortality tables
1. List one event you believe there is a 10% probability of happening
2. List an event with a 50% chance of happening
3. 100%
What determines if you are insurable?
ü Application
ü Age
ü Gender
ü Family history
ü Lifestyle choices
May affect premium amounts or whether you are accepted at all
Evidence of insurability: personal medical info on application
Why? What happens if you lie?
Before You Buy
1. What risks do you face?
2. What are the causes of the risks?
3. How can you handle these risks?
4. Develop a plan of action; what options are available; what are the premiums; how does your insurance company rate?
Product Options
Special features added to basic policy
ü Customize to your needs
ü Increase premiums
Ask yourself: what’s the worst that could happen if I don’t get this coverage?
Policy Pricing
Internet
Friends & family
Get 3 quotes
Look for discounts: good student discount, multiple coverages
Check apples to apples
To reduce rates:
ü Raise deductible (amt you pay on claim before insurer pays)
o If you file very few claims, get highest available, put it in bank just in case
ü Usually pay annually (monthly or semi-annually=fee)
Company Ratings
Some companies fail—you lose coverage & amounts invested
Check out companies’ financial health
Standard & Poor’s
A.M. Best
Choose company that’s rated at least in top 2 to 4 categories
State insurance division
THINK CRITICALLY P 19 1-4
THINK CRITICALLY P 19 6, 7
CHAPTER REVIEW 1-20, 22-23