Personal Finance

2 What is risk? Uncertain and unpredictable factors, some of which can be controlled to a certain extent, that can lead to loss or injury. What is risk management? Predicting, preparing for, controlling, preventing, and dealing with any situations (both predictable and unpredictable) that can lead to loss or injury.

Insurance- An arrangement in which an insuree pays money to an insurer to gain protection against loss and compensation for related expenses. Policy- A written agreement or contract stating the arrangement between insured and insurer. Policyholder- A consumer who has purchased, or paid for, an insurance policy. 3

Coverage- Potential risks, perils and losses against which an insured is covered or protected by a policy. Premium- A fee paid to an insurance company on a regular basis for coverage. Deductible- An authorized or agreed upon amount paid by the insured for a loss before insurance coverage or payment begins. 4

Health Insurance Coverage Hospital insurance  Classified as medical insurance.  Covers for most or all of the charges during a stay in the hospital. Surgical Insurance  Covers all or part of the surgeon’s fees for an operation. 5

Health Insurance Coverage continued Basic (Regular) medical insurance Covers fees for nonsurgical care given in the doctor’s office, the patient’s home, or a hospital. It pays a large part of hospital and surgical care, and may also pay part of some other medical expenses (e.g., doctor’s visits) Major medical insurance Covers cost of extended and specialized care after basic medical benefits limits have been reached (e.g., cancer) including out of the hospital and special nursing care. 6

Comprehensive Medical Policy  Complete coverage for hospital and physician charges subject to deductibles and coinsurance.  Combines the features of hospital, surgical, regular, and major medical insurance. 7

Dental Insurance  Contains deductible and coinsurance to reduce the cost of premiums.  Covers examinations, X rays, cleaning and filling.  Covers dental injuries resulting from accidents.  Covers part or all of complicated dental work such as crowns or bridges. 8

Vision Care Insurance  Cover eye examinations, prescription lenses, frames, and contact lenses.  Some plans cover the cost of laser eye surgery that eliminates the need for glasses. 9

HEALTH INSURANCE PROVIDERS Group Health Insurance  Most popular way to buy health insurance.  Companies pay part or all of the premium for their employees and get a price break for a larger number of policies. 10

HEALTH INSURANCE PROVIDERS Health insurance may be obtained through employer related groups. They include:  Group health insurance  Managed care plans  Health Maintenance Organizations (HMO)  Preferred Provider Organizations (PPO)  State Government Programs 11

HEALTH INSURANCE PROVIDERS Managed Care Plans  Health Maintenance Organization (HMO)  Consists of a staffed medical clinic to serve members.  Members are entitled to a wide range of prepaid health care services, including hospitalization. Preferred Provider Organization (PPO)  Provides a group of physicians, a clinic, or a hospital that contract with an insurance company.  Providers agree to charge a set fee for services. Members are encouraged but not required to use the PPO services. primary care physician -A doctor who provides general medical care and coordinates other health care 12

More terms POS -Point of Service members use a primary provider who refers them as needed to participating specialists- or -members can see non-participating specialist members. But, members pay more to use non-participating health providers. fee-for-services plan -A plan in which an insured can select his/her own doctor and hospital pay costs at time of service and then files form with insurance company for reimbursement of covered expenses pre-existing condition -An illness or condition that a person has at the time he/she enrolls in an insurance plan COBRA -A law that says that someone who leaves work may be eligible to keep insurance coverage at his/her own expense up to 6 months (usually long enough to cover pre-existing condition under new policy.)

CHIP - Children’s Health Insurance Program HSA -Health Savings Account---You contribute pre-tax dollars to the account for future medical expenses for the coming year (often set up through your employer-submit claims and receipts for reimbursement up to amount ) exclusion -A medical service that is not covered preauthorization -Requirement to obtain permission from the plan before having certain treatments or procedures done

Renewability-A patient’s eligibility to restart coverage annually maximum benefit -A limit on the number of times one’s care will be covered, or the maximum dollar amount that can be paid in benefits for a specific procedure. open enrollment period -A set period during which a person can enroll in a health care plan. Usually deals with group insurance.

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Life Insurance Principles Life insurance protects survivors against financial loss associated with death. Two basic types:  Term  Permanent or Whole Life 17

Types of Life Insurance Term Life Insurance  Provides financial protection from losses resulting from a death during a definite period or term.  Least expensive form of life insurance.  Only life insurance that is purely life insurance without savings and investments. 18

Types of Life Insurance continued Permanent or Whole Life Insurance  Has cash value and an investment feature.  Part of the premium paid is used for insurance that provides protection.  The insurance company invests part of the premium. 19

Types of Life Insurance continued Group Life Insurance  Covers a group of people.  Offers term rather than permanent insurance.  Individual is covered by their employer 20