2 In your life, What Disasters could happen tomorrow? PESSIMISTICIn your life, What Disasters could happen tomorrow?
3 In this Unit, We will: Identify ways to manage risk Describe how insurance is used to protect against potential financial lossExplain the features and processes related to automobile insuranceExamine how insurance needs vary from person to person because of lifestyle and life situationAssess how insurance fits into your financial plan
4 Common Exposures to Loss RiskPotential LossLoss of income from inability to work; uninsured medical bills; deathAccident orIllnessUNLIMITEDYour property is damaged, destroyed, lost, or stolenAmount needed to replace your propertyPropertyOwnershipYou are found liable for injuries to other people or damages to their propertyLiabilityUNLIMITED
5 Risk Management: refers to how you deal with the chance of a potential personal or financial loss. Avoid the RiskReduce the RiskAccept the RiskShare the Risk
6 Why is It important to have insurance? Emergency savings - at least six months of expenses set aside to cover costs of unexpected eventsRisk - chance of loss from an event that cannot be entirely controlledis managed byInsurance - transfers risk from an individual to an insurance organizationWhat are examples of unexpected events that may result in a financial loss?
7 Insurance PolicyPolicy - A contract that specifies what risks are covered and how much will be paid for lossesInsurance: a means of guaranteeing your financial protection against various risksCoverage - The risks covered and amount of money paid for losses under an insurance policyPolicyholder - Person who owns the policyPremium - Money paid to purchase the policyExperts say that buying insurance is buying financial security. Do you think this is true? Why or why not?
8 An Illustration of How Insurance Works Suppose there are 100 people in a groupWith a 1% chance that any one of them could get sick and require $10,000 in medical careBut, no one knows who will get sickIf each person pays $100 into a “pool” they will collectively have $10,000 to cover the medical costs of the person who gets sick99 people do not collect anything, but they gain peace of mind and important protection against a large lossSo, everyone gives up $100, but nobody loses more than $100Insurance shifts the risk of big loss from the individual to the insurance company
9 The benefits of Insurance Types of InsuranceProperty & LiabilityPayments received from an insurance policy can far exceed the premiums paidProvides financial security and peace of mindLifeHealthLong-term CareDisabilityWhy is the best outcome to have insurance but never collect on it?
10 The Insurance ProcessClaim - paperwork submitted to insurance organization describing the accident, illness or injuryEvent occurs resulting in lossDeductible - amount of money paid out of pocket by policyholder before the insurance coverage beginsRemaining amount owed is paid by co-insurance (if applicable)Policyholder makes claim to insurance organizationCo-insurance - amount of money, after deductible, that is paid jointly by the insured and the insurance companyInsurance organization determines if event is covered by policyIf so, policyholder pays a deductible
11 What Do You Think? True True False False One in 10 Americans visits the emergency room each year.Nearly 80% of crashes and 65% of near-crashes involve some form of driver inattention in the 3 seconds before the event.Nearly one in three Americans will become disabled for one year or more before the age of 65.In the United States, an automobile is stolen every 60 seconds.Seventy percent of all fatal bicycle crashes involve head injuries.Using lap and shoulder safety belts reduces the risk of fatal injury to front-seat auto occupants by 45% and the risk of moderate-to-critical injury by 50%.Sixteen-year-old drivers have crash rates that are three times greater than those of 17-year-old drivers and five times greater than those of 18-year-old drivers.A disabling injury occurs every minute.
12 Types of Insurance Automobile Homeowners Renters Health Life DisabilityLong-Term CareIdentity theft Protection
14 ? ? ? ? ? MANAGING LOSS FROM INJURY ALWAYS WEAR SEATBELTS INJURY OBEY IN ACARACCIDENTOBEYSPEEDLIMITSMANAGING LOSSFROM INJURY?AVOIDNIGHTDRIVING?
15 What’s in Your Wallet! Driver’s License Health Insurance Auto Insurance
16 IT IS AGAINST THE LAW TO DRIVE WITHOUT CAR INSURANCE!!!
17 Factors Affecting Automobile Insurance Costs How much you use the carIf you’re a good studentMake of carDriver’s educationCredit ratingFactors Affecting Automobile Insurance CostsGenderType of carWhere you liveMarital statusDriving recordYour ageDo you take the car to work?
18 Auto Insurance What affects your premiums? Age: Younger you are, the higher the premiumGender: Males under the age of 25 have significantly higher accident rates than females under the age of 25, therefore higher premiumsMarital Status: Married people are more careful drivers because they tend to have fewer accidentsType of Car
19 Auto Insurance What affects your premiums? How Often You Use Your CarLocation: High populated areas = more accidentsDriving Record: Speeding tickets and other traffic violations = higher premiumsClaim Record: No accidents = lower premiumsCredit History: Poor credit history = higher premiums
20 Did You Know?In the first year of driving, one in five 16-yearold drivers has an accident.Male teens are much less likely to wear their seat belts than female teens. And 7.7% of guys said they either rarely or never wear their seat belts compared with 2.8% of girls.Sixty-two percent of high school drivers say they talk on a cell phone while driving.Two-thirds of high school drivers say they speed.Injury claim frequencies and overall collision losses for cars driven by insured teenagers are more than double those of cars driven only by insured adults.
21 Main types of Auto Insurance Coverage's: General Liability: Covers damage you cause to other people’s property and bodily injuries you cause to people outside of your carMedical Payments: Cover immediate compensation for bodily injury expenses to you and your passengers regardless of who is at fault.Also covers you and members of your household in any accident involving an automobile, whether you are on foot, on a bicycle, or in a friend’s car
22 Main types of Auto Insurance Coverage's: Collision: Covers repairs for damage you cause to your car caused by an accident, whether it involves another vehicle or an object, such as a tree.A deductible applies to collision payments. This means that you pay the deductible amount first; your insurance company pays the amount over your deductible.
23 Main types of Auto Insurance Coverage's: Comprehensive: (other non-collision damage) This covers fire damage to your vehicle, break-ins, vandalism, or theft, as well as natural disasters such as an earthquake, hail, hurricane, or flood.Covers everythingEXCEPTan actual collision.
24 Main types of Auto Insurance Coverage's: Uninsured Motorist: Covers your lost wages and medical expenses if you are in an accident with someone who doesn’t have auto insuranceUnderinsured Motorist: Covers you when the cost of repairs from an accident caused by another driver exceeds his or her coverage limits
25 Can You Lose Your Insurance? Fail to pay your premiumLose your driver’s licenseLied on your insurance applicationFail to report a change in your circumstances, such as buying a sports car to replace a family sedan.Too many claimsYES!
28 Homeowner’s Insurance Insurance that protects property owners from property and liability risksIncludes coverage for the building as well as personal possessions inside the building3 Types of Risks:Fire, water, wind, and smokeCriminal activityLiability
29 Renter’s Insurance The landlord is responsible for the building Personal possessions that you keep in your rented home are YOUR responsibility to protect – not the landlord’s.Renter’s Policy – insurance that protects renters from property and liability risks.Protects from loss due to fire, smoke, water, etcProtects items at work or in your carLiability
31 Health InsuranceProvides protection against financial losses resulting from injury, illness, and disability.Provide coverage for emergency or routine medical expenses.May cover hospital, surgical, dental, vision, long-term care, prescription, etc.If your parents have health insurance, it will cover you until you turn 19 years old, or until age 26 if you’re a full-time studentMay be purchased by an individual, or through their employer
32 Health InsuranceCo-Payment – amount of coverage that is shared between the insured and the insurer.DeductibleCovered Expenses – expenses the insurer has agreed to pay in the policyClaims – requests for payments (doctors, hospitals, etc)Exclusions – exceptions to coverage agreed to in the policyPremiums
34 Life InsuranceA contract between an insurer and policyholder specifying a sum to be paid to a beneficiary upon the insured’s death.Beneficiary: the recipient of any policy proceeds if the insured person dies.Purpose is to provide money for family members or dependents when a wage earner dies.
36 Disability InsuranceReplaces a portion of one’s income if they become unable to work due to illness or injuryTypically pays between 60% – 70% of one’s full time wageMany employers offer disability insurance as part of the benefits package
37 Employee Benefits Hospitalization, Medical, & Disability Insurance Dental and Vision InsuranceAccidental Death InsuranceSick LeavePaid Vacation Time and HolidaysParental LeaveWorker’s Compensation InsuranceLife InsuranceRetirement BenefitsRetirement Savings PlansEmployee Assistance Programs