Insurance Unit Consumer Economics

Unit Overview I. General Terms and Information II. Auto Insurance III. Homeowner’s Insurance IV. Health Insurance V. Life Insurance

I.General Terms & Information  Policyholder – the purchaser of insurance  Policy – written contract between policyholder and insurance company  Premium – payments made in exchange for coverage  Deductible – set amount a policyholder must pay before insurer will begin making payments (video)video  Claim – request for payment of a loss  Floater/Rider/Endorsement – attachments to a policy (additional coverage for a specific item)  Co-payment-

General Terms & Information (cont’d)  Selecting an Insurance Company (video)video  Individual vs. group policies through an employer  Independent vs. corporate agent  Local vs. national companies  Quotes available over telephone, Internet, or the mail  Established vs. new companies  Deciding How Much to Buy  Depends on your specific needs

General Terms & Information (cont’d)  Factors Affecting Premiums –Age –Gender –Marital status –Geographic location –Past history / lifestyle –Risk level –Preventative measures smoke detectors alarm systems

II.Auto Insurance (video)video  Legal Requirements (state of Illinois - link)link  Your car must be covered (25/50/20) $25,000 - injury or death of one person in an accident $50,000 - injury or death of more than one person in an accident $20,000 - damage to property of another person  You have proof of insurance in car at all times  Insurance stays with the car, NOT the driver

Auto Insurance (cont’d)  Types of Auto Insurance (page 361 in text)  Collision Coverage – damage to your own vehicle from an accident  Comprehensive Coverage – loss or damage to vehicle NOT from an accident:  Theft  Vandalism  Fire  Hail  Liability Coverage– injury you cause to others or their property  This is the one required by state law  Medical Payment Coverage - injury to you or others from an accident  Uninsured/underinsured motorist – in case the other driver isn’t covered

Auto Insurance (cont’d)  Needs  Newer or more valuable cars:  Collision and comprehensive coverage are recommended (parts and repairs can be expensive)  Older cars:  Don’t insure a car for more than it’s value  Collision and comprehensive may not be necessary  As coverage goes up, so do premiums  Pick the lowest deductible you are comfortable with  Coverage amount should not be more than what you feel is appropriate

Auto Insurance  Accidents  Call Police immediately to report it get a copy of the report  Exchange information with other driver(s)  Name  Insurance company  Policy number  Driver’s license number  Name of owner of vehicle if it doesn’t belong to the driver  Don’t discuss details of the accident; this could come back to haunt you  Call insurance agent ASAP after the accident to file a claim  Get any other assistance you need  Doctor  Lawyer  Repair estimates

III.Homeowner’s Insurance  Property – insures property against fire and theft  Real property - land and buildings  Personal property - movable objects  Liability – Protection against losses to others  Example: someone slips on your icy sidewalk  Peril – cause of loss (listed on page 370)  Renter’s Insurance – don’t insure the building, just the contents (you don’t own the building)

Homeowner’s Insurance (cont’d)  Personal Property Inventory – everything you want replaced (video)video  Be as detailed as possible  Include photos and receipts of valuables/irreplaceables  Keep list accurate and updated  List items room-by-room  Don’t forget garage / shed / other storage areas  Keep list in safe deposit box / other secure area  Preventing Losses (video)video

Homeowner’s Insurance (cont’d)  80% Rule (not in book) – companies will not fully cover the cost of damage to a house due to the occurrence of an insured event (e.g. fire or flood), unless the homeowner has purchased insurance coverage that is equal to at least 80% of the house's total replacement value.not in book Example 1 Value of house:$100,000 Value of policy:$40,000 (½ of 80% requirement) Loss due to fire:$20,000 Reimbursement:$10,000 (½ of loss) Example 2 Value of house:$100,000 Value of policy:$80,000 (80%) Loss due to fire:$20,000 Reimbursement :$20,000 (full value; you had 80%)

IV.Health Insurance (video)video HMOPPOPOS Choice of Doctors Must be inside network; must have a primary care physician to choose your specialist Can be outside of network—but will pay higher cost for those doctors; do not need a primary care physician— you can go to specialist on your own choosing Can be outside of network but will pay higher cost; must have a primary care physician CostLeast expensive planMore expensive plan than HMO

Health Insurance (cont’d)  Pre-existing Condition – medical condition that was known / existed before you took out a policy  Insurance companies may refuse to pay on this  Examples: pregnancy, AIDS, high blood pressure, heart condition  Worker’s Compensation – covers injuries that occur on the job  Different in each state  Employers pay premiums  Employees receive partial payment of full income until they can work again  By receiving worker’s comp, employee cannot sue employer

Health Insurance (cont’d)  Medicaid – federal/state program offering low-income families medical care  Medicare – federal program offering senior citizens and disabled individuals medical care  Co-insurance / Shared Risk (14.1) – you share cost of claim with insurance company Example Loss on claim$81,000 Deductible$ 1,000 Left to insure$80,000 Insurer pays 80% of remainder$64,000 You pay the other 20%$16,000

Health Insurance (cont’d)  Prescription drugs  Usually covered by policy  Generic drugs  May not be covered by some policies  Much cheaper if you have to pay out-of-pocket  Over-the counter Drugs (22.2) –  Drugs available without prescription  Usually not covered by policies  Reasonable and Customary Charges  The going rate for charges in your geographic area  You might be asked to pay anything beyond this charge if deemed unreasonably high

V.Life Insurance (video)video  Types of Insurance  Term – protection for a specific amount of time (1, 5, 10 years)  Very cheap  Must be renewed at the end of the period or it will expire  May require physical exam  Premium may change when it is renewed  Whole life – coverage for the rest of your life  Premium set when policy is purchased and never changes  Endowment – investment insurance Example  You insure your retirement by paying premiums  If you die before you reach retirement age, your beneficiary gets face value  If you reach the age of retirement, you get face value

Life Insurance (cont’d) (video)video  Beneficiary – person who receives amount of policy  Cash Value – value of the policy if you cancel it  You may get some or all of it returned to you  You may be able to borrow against the cash value  Face Value – original amount of the policy  Exclusion (14.4) – specific conditions not paid for  Elective surgery, laser vision surgery, other policies  Death Benefit – what beneficiary receives  Can be all at once or spread out over time (like the lottery)  Guaranteed Renewability  Can renew a term insurance policy without having to take another physical exam