Chapter 25 Insuring Against Loss

Nature of Insurance Use insurance to protect themselves from risk due to fire, accident, or other catastrophes. People pay a yearly premium that goes into a common fund. When disaster strikes one member, the common fund pays for the loss.

Kinds of Risks Personal Risks –Catastrophes that affect individuals. –Accidents, illness, disability, and unemployment. Property Risks –Property is damaged. –Losses include auto accidents, natural disasters, fire, and vandalism. Liability Risks –Certain events may affect the person or property of others. –Injury may result from an auto accident that YOU caused. –Visitor to your home might be hurt.

Paying for Claims Deductible –A set amount of money set by your insurance company. (Example: $100 or $500) –When claims are filed you must pay full amount of claim until you have reached the deductible amount. –Once that amount has been reached, the insurance company will pay 100% of the rest of the bill for that year. Co-insurance –For each insurance claim you and the insurance company split the cost. –Usually 80% paid by the insurance company and 20% paid by you. Or some other percentage determined by you and the insurance company.

Health Insurance Pays expenses resulting from illness or accident. Most necessary form of insurance. Health Maintenance Organization (HMO) is a group that members join to lower costs of health insurance.

Types of Health Insurance Hospital Expense –Provides for hospital charges such as room and meals, operating room use, laboratory fees, and drugs/medicine. –Most common form of health insurance. Surgical Expense –Covers variety of medical procedures and operations. –May be performed on inpatient or outpatient basis.

Types of Health Insurance Medical Expense –Also known as Physician’s Expense. –Pays for the doctor’s medical visits while patient is in the hospital. Major Medical Expense –Protects against huge expenses resulting from a serious illness or accident. Disability Coverage –Pays benefits to someone unable to work because of illness or injury. –Sometimes called loss-of- income insurance.

Life Insurance Terms –Face Value The amount of money to be paid in the event of the policy holder’s death. –Premium Price of the policy. –Beneficiary The name of the person to whom the death benefits are to be paid.

Types of Life Insurance Term –Provides protection only. –Buy for a specified period of time. –Pay as long as you need the coverage then the policy is dropped or terminated. Cash Value –Protection is teamed with savings account. –Permanent…when the policy is paid up after a certain number of years, the policyholder owns the insurance. –A portion of the premium is set aside and accumulates in a type of savings account that can be borrowed against.

Home Insurance In addition to the home itself, household furnishings and personal belongings are covered. The basis for all home insurance policies is coverage against the various damages or perils. Liability coverage is also a part of home insurance. Protects you against a claim resulting from an accident or injury occurring on your property. Will also protect you if someone in your family causes an injury away from home.

Auto Insurance Everyone who drives a vehicle is responsible for operating it safely and paying for any damage the vehicle might cause. All states now have laws that state that drivers pay for damages they cause to people or property.

Types of Auto Insurance Bodily Injury Liability –Applies if you kill or injure someone in an accident in which you are at fault. –Pedestrian, rider in your car, or someone in another car. Property Damage Liability –Won’t repair YOUR car. –WILL cover the other person’ car or property.

Types of Auto Insurance Uninsured Motorists –Applies to bodily injuries that you suffer as a result of a hit-and-run accident. –Also covers you in the event of an accident in which the other driver does not have insurance. Medical Payments –Insurance company agrees to pay medical expenses resulting from accidental injury. –Includes you and family members whether in your car or someone else’s. –Also applies if you are struck by a car. –Payment made regardless of who is at fault.

Types of Auto Insurance Auto Collision –Your car is covered. –Pay to have your car repaired or replaced regardless of who is at fault. –Doesn’t cover repairs greater than actual value of the car. –Most expensive of car insurance. Auto Comprehensive –Protects against loss from theft, vandalism, fire, windstorms, and other perils. No Fault –To reduce time & costs…each person pays for own losses regardless of who caused the accident. –We don’ t have in WI!!