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Presentation on theme: "Insurance."— Presentation transcript:

1 Insurance

2 Chapter 14 – Insurance Basics
Risk management – limiting possible financial losses to amounts you can handle Insurance to manage risk Premium – Regular payment for insurance Diversification – Insurance company diversifies to reduce risk

3 Insurance Basics Policy – legal contract for insurance
Claim – filed if you incur loss covered by policy Shared risk – many pay for the few who incur loss Premiums Statistics

4 Insurance Basics Insurable interest – vested interest in insurable item/person Appraisal Rider – special addition to an insurance policy Life & Health insurance sold at different costs Life expectancy (ave. # of years remaining)

5 Insurance Basics Should protect from a loss that could put you in financial difficulty The more you buy, the higher the cost Insurance provides security Banks won’t lend money to a house that isn’t insured Doctors don’t practice without insurance Our economic system relied on sharing risk

6 Types of Insurance Property Insurance Liability Insurance
Cars, homes, valuable possession Market value (what it’s worth) Replacement value (cost to replace, no matter what market value is) Liability Insurance Your actions cause losses to other people Personal insurance Life, Health

7 Automobile Insurance (14.2)
Bodily injury liabil8ity coverage When YOU are responsible for injuring people 250,000/500,000 (one person/max on all) for each accident Property damage liability coverage When YOU are responsible for injuring another person’s property Does not cover YOUR car x/x/50,000 (3rd number listed)

8 Automobile Insurance Medical Payments Coverage
Medical and funeral expenses for you, your family, and other passengers in your car because of injuries Doesn’t matter who caused accident Uninsured/underinsured motorist coverage Medical and damage for you and your passengers caused by a driver without or too little insurance Does NOT cover the other driver

9 Automobile Insurance Comprehensive Coverage Collision Coverage
Damage to your car caused by other than a collision Environmental hazards, vandalism, theft May exclude easy to steal items (phone) Collision Coverage Damage to your car caused by colliding with another car or object Most expensive portion of policy

10 Automobile Insurance Deductible – amount you pay before company pays anything Additional coverage options Rental car Towing Items within car (stereo) Cover gap between value and what you owe Are these things worth the additional premium?

11 Automobile Insurance How much to buy?
Least you should consider is 50/100/25 Medical at least $50K Collision/comprehensive, depends on car Deductible The Higher the deductible, the lower the premium

12 Why are costs so high? Technology – more expensive to fix
Medical technology, equipment and drugs – more expensive Lighter cars (fuel efficient cars) have more damage Americans more likely to sue Judges awarding higher amounts

13 Factors Affecting Premium
Driver classification Age, gender, marital status Based on statistics Rating territory Some locations more vulnerable than others Claims in an area Driving record Points added to your record Each point raises your premium 10% 2-3 points will increase %

14 Factors Affecting Premium
Assigned risk – you will have to pay very high premiums Type of car More expensive to repair or replace Theft to expensive sports and luxury cars Claims history More claims you have, the higher the premium

15 How to Reduce Your Premium
Be a responsible driver Drive a moderately priced car Discounts for certain safety features Good grades Driver’s Ed Live in safe neighborhoods Increase the size of your deductible

16 Home Insurance Coverage
Provides personal property and liability protection for your home Personal Property – Damage to or loss of your house and its contents House, garage, shed Furniture, clothes, appliances Items from your car that are stolen? Living expenses if house in uninhabitable after loss

17 Home Insurance Coverage
Exclusions – not covered Stamp and coin collections, laptops, silverware, valuable jewelry and cash Liability – Covers bodily injury or damage you cause to others while on your property or in other locations Damage you do to someone else’ property Damage you cause away from home Not auto coverage though

18 Home Insurance Coverage
Umbrella policy – additional liability protection beyond that included in an automobile or homeowners policy. Special risk coverage Hurricanes, for example Basic forms – 6 (number and types of perils covered) Renter’s Insurance (same as home owner but doesn’t cover structure)

19 How much to buy? 80% of its replacement value (land will still remain and that’s included in value) 80 % rule – the company isn’t required to reimburse you for the total amount of a loss unless your policy covers at least 80 % of your home’s actual replacement value at the time of the loss

20 Cost of Homeowner’s Insurance
Location Age of house Distance to a fire station or hydrant

21 Reduce Your Premium Increase your deductible Upgrade your home
Plumbing, wiring Construction (metal siding and interior supports rather than wood) Install smoke detectors Install more security Special discounts Nonsmokers Someone does s not work outside home

22 Providers and the Claims Process
Insurance is a service Insurance needs change Choosing an agent Someone to help you stay current with coverage Two types: Independent and employed with a company Ask for referrals

23 Asking others about agents..
Ability to explain policy Quality of advice Availability in time of need Helpfulness sin getting claims process Speed in getting claims paid

24 Choosing an Insurance Company
Policy is only as good as the company that issues it Financial Health of company (Best’s Insurance Reports, A.M. Best Company) Claims Service – speed & ease of claims processing (Consumer Reports)

25 Filing a Claim Homeowner’s claims Home Inventory – store in safe place
Must demonstrate responsible behavior (stop any future loss or damage) Contact agent Adjustor will assess damage Prove your loss with your inventory Insurance company will issue you a check (sometime to you and contractor to ensure repairs are done)

26 Filing Claims Automobile Claims
Call police and obtain report Ask for other driver’s name, phone number, and insurance company. Give information to insurance agent. Provide details to agent Adjustor assesses damage No Fault Insurance – pays for person’s loss no matter who was at fault

27 Insurance Insurance Fraud

28 Health Insurance (15.1) Malpractice insurance – protecting themselves against a devastating loss (Average settlement exceeds $1 million) Can cost doctors $100,000/year! Higher medical costs!

29 Health Insurance Hospitalization – hospital stay
Surgery – all parts of surgery Outpatient services (Physician’s expense insurance) – nonsurgical car in their office hospital or in your home, doctor visits x-rays, and labs Major Medical – enormous costs from serious illness or accident (extended hospital stays, long-term physical therapy, multiple operations)

30 Additional Coverage Choices
Medications Generic drugs Dental care (preventative) Vision care Usually injuries not regular exams

31 What’s Not Covered Procedures you elect to have done
Cosmetic surgery Visits if you don’t have a problem Some do not cover childbirth but will cover complications from pregnancy Experimental drugs and surgical procedures Some transplants Duplicate benefits

32 Special Health Needs Catastrophic and specified disease insurance
Long-term care insurance Disability Income

33 Health Insurance Plans
Fee-for Service Managed care All cover medical, surgical, and hospital, many offer prescription and dental Both require premiums, usually monthly Difference: Degree of freedom you have to choose your health care providers and how the providers are paid

34 Health Insurance Plans
Fee-for Service plan Indemnity plan You pay for services as you receive them You or doctor’s office submits a claim Deductible 80/20 coverage (the 20% is your coinsurance) You may choose provider Fees paid on reasonable and customary charges Out of pocket maximum

35 Health Insurance Plans
Managed Care Plans Prepaid plans, paid in advanced not as they are used Your premium is prepayment Less paperwork, no claim forms Negotiate fees with participating providers Pay hospitals and doctors a fixed amount per year for each patient, no matter what services they provide (capitation)

36 Health Insurance Plans
Managed Care Approvals for nonemergency hospitalization Copayments usually required Three basic types of managed care: HMO (health Maintenance Organizations) PPO’s (Preferred Provider Organizations) Po’s (Point-of service plans) DIFFERENCE: AMOUNT OF FREEDOM YOU HAVE

37 Insurance Plans HMO PPO PO Choose primary care physician
Must use doctors and hospitals in plan PPO Most like fee-for service plan You can choose to stay in-network or go out No primary care physician PO Combines HMO and PPO (PCP, but can go outside with referral)

38 Choose a Health Plan Group Health Large groups – unions, companies
Premiums lower Employer-sponsored plans Open enrollment Usually just full-tie workers Part-timers can sometimes pay full premium but still cheaper than going on their own COBRA

39 Choose a Health Plan Pre-existing condition
Health Insurance Portability Act (7/1/97) Your new insurance plan must cover any pre-existing conditions without a waiting period if you have been inured continuously the previous 12 months. According to the law, the waiting period must be no more than 12 month (when switching plans but no previous coverage)

40 Health Plans Individual Health Insurance Government sponsored
More flexibility More expensive than group Schools may require students to have policy Government sponsored Medicare – 65 years or older or persons with disabilities Medigap – supplemental to Medicare (sold by private insurance) Medicaid – low incomes or disabilities

41 Health Plans Government (cont’d) Workers’ compensation
Generally receive 2/3 of salary Cash benefits to worker’s surviving family Work-related claims

42 Shop for Health Insurance
Find the plan right for you See questions to ask on p. 508

43 Health Care Rights and Responsibilities
Right to receive accurate, easily understood information about health plans, professionals, and facilities. Right to Choose a health care provider that is sufficient to ensure access to appropriate high-quality health care Right to access emergency health care services

44 Health Care Rights and Responsibilities
Right and responsibility to fully participate in all of your health care decisions Right to considerate, respectful care from all members of the health care system and nondiscrimination in delivery of services. Right to communicate with health care providers in confidence an to have confidentiality of your health care information protected.

45 Health Care Rights and Responsibilities
Right to a fair and efficient resolution to differences with your health providers, including an appeals system Responsibilities p. 512 Referrals In-plan providers Pre-approvals Second opinions

46 Health Care Rights and Responsibilities
Appeals process Start with the company Contact representative Keep written records and all correspondence If still unsatisfied, talk to state insurance commissioner or state department of health Finally, court action

47 Life Insurance Death benefit Beneficiary

48 Types of Life Insurance
Term Level Term Renewable Term Convertible Term Permanent Death benefit plus savings plan Cash value life insurance

49 Permanent Whole life Least expensive permanent For your entire life
Fixed premium Receive dividends or apply to premium Borrow against cash value No flexibility to change policy

50 Permanent Variable Life Universal Life
Decide how your savings will be invested Riskier Can borrow but not withdraw Universal Life More flexibility than either whole- or variable life Can borrow or withdraw savings Can change amount of converge and premium You cannot choose how your savings are invested

51 How much to buy? As an investment? Your family responsibilities
Funds do not earn high returns over time Your family responsibilities Your financial situation Your future Your special needs

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