Insurance 101 Personal Finance

Learning Goal To be able to define terms relating to insurance.

What is Insurance? Insurance – an arrangement between an individual and an insurance company to protect the individual from risk. We buy insurance to help limit the financial losses when accidents occur.

Insurance Policy Policy – a contract between the individual and the insurer specifying the terms of the insurance arrangement. Premium – the fee paid to the insurer to guarantee coverage. Deductible – the amount paid out of pocket by the policy holder for the initial portion of a loss before the insurance coverage begins.

Example You pay money to have car insurance (Premium) When you get into an accident that is your fault, you must pay a certain amount before the insurance company picks up the rest (Deductible) The higher the deductible, the lower the premium

Automobile Insurance Different types: – Liability (Required by law) Pays for bodily injury to other people, damage to property, court fees – Medical Payments Pays for hospital bills for you and anyone riding in your car – Uninsured Motorist Helps pay bills if hit by someone without insurance – Collision / Comprehensive Pays to repair your car if it was your fault or no other car was involved. Comprehensive is for non-driving risks such as hail, theft, flood, vandalism, etc.

Learning Goal To be able to define terms relating to insurance.

Insurance 101 Personal Finance

Learning Goal To be able to identify and explain the importance of the 5 necessary types of insurance.

Types of Insurance Automobile Health Life Disability Homeowner’s / Renter’s

Health Insurance Covers medical costs if you are injured or become ill Each policy is different Most people receive health insurance from their employer Children are covered up to the age of 19; unless they are attending college full time (23)

Life Insurance Pays people who are dependent on someone else if that person dies Usually offered from an employer, but can (and should) purchase independently. Life insurance is usually very low in price compared to the coverage you receive

Life Insurance Types Term – Coverage for a specific period of time – MUCH cheaper than Cash Value Cash Value (Whole, Universal) – Coverage for life – Includes a savings plan – MUCH more expensive than term ALWAYS GO FOR TERM LIFE!!!!!!

Disability Insurance Will pay a percentage of your income from a job if you are sick or unable to work for long periods of time – Usually will pay between 60% and 70% Also is a common insurance offered by an employer

Homeowner’s / Renter’s Protects your home and possessions within the home from damage – Includes Fire, Storm, etc. – Natural Disasters require a special insurance Also covers liability if someone else is injured on your property and they sue

Learning Goal To be able to identify and explain the importance of the 5 necessary types of insurance.