MODULE 6
Insurance: Protecting What You Have
Risk – the chance of injury, damage, or economic loss
Loss – refers to some type of physical injury, damage to property, absence of property, or absence of other assets
Insurance – a cash reimbursement to you for having a loss or damage to your assets (car, house, medical illnesses, death)
Insurance Companies (Insurer)
· They manage big risks by insuring the “masses”
· They know the “odds” of a person needing insurance
· They collect small payments from millions, with the hopes of paying out only a fraction of that amount to the few people who have a loss
Insured – the person buying the insurance coverage
I. REASONS TO HAVE INSURANCE
A. Unexpected accidents & losses can be expensive!
B. Costs to replace assets will come out of your own pocket if you’re not insured
C. Ohio laws require all drivers to have car insurance
D. As of 2014, all Americans must have some sort of health insurance (Affordable Care Act -- ACA)
E. If you have a loan for a car or house, the lender/creditor (the bank) mandates that you have it insured
II. BUYING INSURANCE
OPEN ENROLLMENT PERIOD (p. 32) – when your employer gives you the option to sign up for or change your insurance coverage (health insurance—Fall months)
A. Premium – the yearly cost of owning the policy
1. Can have a savings if you pay the whole year’s amount in advance
2. Can make installment payments: every 6 months or every month
3. Might charge you extra if make payments on it, not paying the yearly amount in full
4. Might charge you extra if you want automatic bill-pay or a billing statement sent to you
B. Deductible – a yearly amount (for health insurance) that you must pay out-of-pocket before the insurance company will step in & pay the rest; an amount PER ACCIDENT for car or house insurance ($250, $500, or $1,000).
C. Policyholder (insured) – the person purchasing the insurance & seeking protection against potential losses
D. Insurer – the company selling you the protection
E. Insurance Policy – the legal contract between you and the insurance company; states the details of your insurance coverage
1. Coverage Limit – the maximum amount the company will pay for losses. Amounts higher than the specified amount will be the policyholder’s responsibility
2. Conditions – spells out what the company WILL NOT pay and what you must do to get the insurance monies in the event of a loss
F. Rider – the option to purchase more coverage for specific and expensive items (coin collections, gun collections, instruments, artwork, jewelry)
· Must get an appraisal to prove the value of the asset – should get updated values every 1-2 years
III. Having a Loss (Filing a Claim to Insurance)
A. Claim – a formal request to have the insurance company make a payment for a loss
B. Insurance/Claims Adjuster – car accidents
1. A person that “investigates” a claim
2. They decide if the insurance will pay you for the loss and the amount that will be paid
3. They recommend an effective settlement for damages to all parties involved
4. You can negotiate the amount the insurance company pays you
C. Insurance Settlement – the final amount paid & agreed to, by all parties in order to “close” the claim
D. Actual Cash Value – the amount given for the “current worth” of the asset
E. Replacement Cost – the amount given if you want to purchase a “replacement” of the asset
IV. Insurance for your ASSETS
A. AUTO INSURANCE (See p. 26) – insures car owners & their passengers in case of an accident, a break-in, or theft
· It pays for YOUR car damage if you are at fault
· Covers anyone you hit or injure in your car, as well. (your liability insurance)
1. Bodily & Property Damage Liability – when you are at fault, it pays for THEIR repairs, medical bills, & legal bills (if person sues you)
2. Uninsured Motorist – fixes YOUR car if the other person hits you or “hit-and-run” driver damages your car
3. Underinsured Motorist – fixes YOUR car & pays for your medical bills if the at-fault driver doesn’t have enough coverage to pay all of the bills
4. Collision – fixes damage YOU caused to your car (whether you hit a car, tree, or building)
5. Comprehensive – fixes your car if damaged in a non-collision, like fire, vandalism, theft, hail, & natural disasters
6. Add-on Riders – optional coverage for towing & car rental
7. Declarations page – a one-page summary of the coverage amounts
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B. PROPERTY INSURANCE – insures your personal assets if stolen or destroyed
1. Homeowner’s Insurance -- protects from loss in the home; includes building & its contents (personal property)
2. Renter’s Insurance -- protects against “personal possessions” inside an apartment
3. Create an INVENTORY of your belongings in the house
· Update this regularly on a spreadsheet (Excel)
· List items in alphabetical order, by room location, or by type (appliance vs. furniture)
· Attach any receipts that you have for expensive items
· Include number of items, when they were purchased & the original cost
· Record serial numbers of appliances & computers
· Videotape or take pictures of each room in your house
· Place all of this in a “safe deposit box” or in a fireproof safe
V. Insurance to Protect Others (p. 18)
A. Liability Insurance – when you unintentionally hurt someone or their property/assets
1. Auto & homeowner’s policies mention this
2. Pays for your legal defense costs
3. Pays for medical bills of the victim
4. Pays for repair costs for the victim
5. Buy it for anything that has general exposure to the public.
B. Fidelity Bonds – insurance for “mishaps” on a job; AKA “bonding or bonded”
1. Construction companies buy it
2. Housecleaning services buy it
3. If clients are filing a complaint about a service performed (a knickknack breaks), the “bond insurance” pays to replace it
VI. Insurance to Protect Your Income/Paycheck (p. 19)
A. Unemployment Insurance – employers pay this in order to cover your unemployment benefits in the event you get “laid off”; fulltime employees only
· Can’t collect unemployment benefits if you quit or if you were fired for a “wrongdoing” (stealing)
B. Disability Insurance – If you have a long-term illness that prevents you from working, they will pay you an amount of money
1. The more you purchase, the more you will get paid!
2. Can’t collect on this if a “work related” injury
3. Watch out for details:
· Have to be out a certain length of time before disability kicks in
· Can’t collect on both sick days AND disability
VII. INSURANCE TO PROTECT YOURSELF & YOUR FAMILY
A. Health Insurance – A plan that covers costs for medical bills from injury & illnesses; must get on your own at age of 26!!
1. Co-pay (p. 34) – The amount a patient pays for each visit to the doctor’s office; $15-40
2. Co-insurance – the amount that must be paid by the insured (person) for a total medical expense. (70/30, 90/10, 80/20)
· 80/20 = Insurance will pay 80% of the medical bill, then you must pay for the remaining 20%
3. Yearly Deductible – the amount that must be paid [yearly] FIRST before the [health] insurance will pay
· So, if you have a deductible of $500, and the first medical bill you have for the year is $2,000 . . .
· YOU pay $500 (deductible), then the remaining bill for insurance is $1,500
· BUT: if there is 80/20 co-insurance, you must also pay 20% of the $1,500. THEN the insurance will pay the remaining amount.
· This results in YOU paying $500 (deductible), and $300 (co-insurance); Insurance company will pay $1,200 only
· Deductible gets paid FIRST, then co-insurance must be paid for the remaining balance
4. Dental & Vision – might be an extra plan!
· May have a yearly benefit of up to $2,000 only; includes exams, x-rays & fillings
· Vision covers exams, lenses & frames; sometimes prescription sunglasses & contact lenses
· Does NOT include eye Lasik or cosmetic teeth whitening/bleaching
5. “In Network” vs. “Out of Network” vs. “Specialist”
· Will change what the insurance company will pay for
· “In Network” is the preferred doctor to visit
6. Out-of-Pocket Expense (p. 34) – everything you pay for (co-pays, co-insurance) aside from the insurance premium
7. Out-of-Pocket Maximum – a yearly “cap” on what you pay for your out-of-pocket expenses; once you reach the maximum, the insurance company will pay 100% of all of your medical bills
8. Medicaid – health insurance for lower-income individuals, families, children, seniors; health insurance for people with disabilities
B. Health Savings Accounts (flexible spending) – I love this!!
1. Small amounts get withdrawn from each of your paychecks & sent to this “account” TAX-FREE
2. Send in receipts for your out-of-pocket MEDICAL expenses & get reimbursed TAX-FREE
· I scan in receipts & email them to company
3. BUT: if you don’t use it, you lose it
C. Life Insurance – pays money when the insured person dies
· Beneficiary – The person who receives the money upon the death of the insured; can change them at any time; unlimited number of people
· Best to have when you are married & have children
· Suicide NOT covered
VIII. Business Insurances – Companies pay into these, but YOU reap the benefits!!
A. Worker’s Compensation
1. A state-mandated insurance system that businesses (employers) must purchase.
2. In the event an employee gets injured on the job, this insurance will pay for medical care to the employee.
3. Cannot collect disability insurance
B. Unemployment Insurance (Taxes) – see above
IX. Ways to save money on insurance premiums (yearly cost to own insurance):
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A. If pay lower premiums, you will have a higher deductible
For example:
If you have $1,000 deductible, premium costs you $600 per year; If you have a $250 deductible, premium costs you $1,000 per year
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B. Air bags – standard in all cars now
C. Maintain a good driving record – 0-3 points on driver’s license
D. Get good grades in school (3.0+ GPA)
E. Having a good FICO credit score (being a “good” bill payer)
F. Shorter distances from home to work
G. Multiple car discounts
H. Multiple policy discount (House AND Cars)
I. House alarm systems
J. Don’t turn in claims to your insurance company!! Unfortunately . . . if they pay out too many claims on you, they will raise your premium rates.
X. MISCELLANEOUS POINTERS:
A. Before leaving the scene of an accident, be sure to exchange the following information about the other driver (p. 30):
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· Driver’s license number
· Phone numbers
· Take pictures
· Address
· Place of employment
· Insurance information
· Year, make, model & plate number of their car
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DO NOT RELY ON THE POLICE REPORT!
B. Auto Insurance may be HIGHER due to:
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· Driving a RED car
· Being a male under 30
· Being single
· Driving a sports car
· Driving newer cars
· A poor FICO (credit score) – a bad bill-payer!
· Prior accidents
· More “points” (from getting speeding tickets, moving violations)
· Prior “lapsed” policies – failure to pay the premiums (yearly cost) so the policy was cancelled
C. Never use just one insurance company for life!
· Your needs & priorities will shift over time
· If you move, change jobs, get married/divorced, your current insurance policies & companies may need to change!
· Shop around for new insurance companies (get quotes first!) every 2 years – you may find a better deal somewhere else!
Check out the Allen Group!!
440-826-3676
Ask for Lauren – tell her I (Sejka) sent you!
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