1. Managing Risk with Insurance

2. Property Insurance
Homeowner's Insurance

3. Property Owners Insurance Premiums
A policy that covers your home and protects you against other risks is called homeowners insurance.
Basic homeowners insurance covers:
Dwelling- the home in which you live
Other structures- such as a garage
Personal property- includes the contents of the home
Additional living expenses- pays for the extra costs of living when you cannot use your own home due to damage
Personal liability- protects you in case of lawsuits by persons injured on your property
Medical payments to others- but not to you or your family, for medical expenses in case of injury on your property

4. The amount for which your home is insured is called the face value of the policy.
That amount determines the amount of insurance you have in other categories
Ex: your home is insured for a face value of $60,000, personal property is usually 50% of that amount, or $30,000 and additional living expense is usually 20% of that amount, or $12,000

5. Homeowners policies may provide other options as well.
Ex: A policy may insure personal property when you are away from home.
This coverage is called off premises and is usually 10% of the amount of the policy
Ex: luggage with your clothes you take on vacation were stolen, their loss would be covered under the off premises policy feature.

6. Replacement Cost Policies
Under replacement cost policies, the insurance company will pay the cost of replacing your property at current prices.
If a leather chair that costs $600 is destroyed by fire, the insurer will pay for a replacement chair that now costs $900 even though the cost is higher than the original purchase price.

7. Insurance Premiums
The money paid to an insurance company for property insurance is called the premium.
The premiums you pay depend on many things, such as how much and what kind of coverage you buy, how your house or apartment is built, and where it is located.
For example, the premium rates for a brick house near a fire department will be less than for a house made of wood that is far from a fire department.
Why?

8. Property insurance rates are usually based on $100 units of insurance.
Some items, such as computer systems, jewelry, and expensive entertainment systems may not be covered by a basic policy.
You will have to buy additional insurance, called a rider, or floater to cover possible loss.
Property insurance rates are usually based on $100 units of insurance.
Homeowners insurance premium charges are rounded to the nearest dollar.

9. Renters Insurance Premiums
If you rent a house or an apartment, you can by a renters policy that provides nearly the same coverage as a homeowners policy except for loss of the dwelling and other structures.
Annual premiums for a renters policy are based on the amount of insurance on the contents of your apartment or rental home.

10. Collecting Insurance Claims
If your property is damaged by fire or a theft occurs, you have to file a claim with your insurance company.
The company will send out an adjuster to look at the property and decide on the amount of loss.
The amount of the loss your insurance company pays depends on the type of coverage you have.

11. It will not pay more than the amount of your policy.
If you have a basic policy, the company will pay the full amount of the loss up to the face value of the policy.
It will not pay more than the amount of your policy.
Your basic policy usually contains a deductible.
With a $100 deductable you are responsible for the first $100 of loss
The insurance company pays the full amount less the deductable up to the face value of the policy.
The higher the deductible, the lower the premium (monthly cost)

12. Recap https://youtu.be/2FdB_zCV8kw

13. Life Insurance

14. Life Insurance Premiums
Life insurance is a way of protecting your family from financial hardship when you pass on.
If your income supports your family, they will need to replace that income when you are no longer around.
If you are a homemaker, your surviving spouse may need to pay someone to care for your children and home.

15. A life insurance policy is a contract between the insured (the person whose life is covered) and the insurer, the insurance company.
The contract states the amount of insurance to be paid upon the death of the insured, or the death benefits of the policy.
The death benefits are usually equal to the face amount (or face value) of the policy.

16. The money paid to an insurance company for life insurance is the premium.
When the insured dies, death benefits are paid to the beneficiary.
the person named in the policy to receive death benefits.

17. There are two basic types of life insurance policies: term life insurance and permanent life insurance.
Insurance companies have designed many variations of these two types for people with different needs and budgets.

18. Term life insurance offers protection for a fixed period of time, such as 1, 5, or 10 years.
If you die within that time, your beneficiary receives the face value of the policy.
Term insurance can usually be renewed after the fixed term expires, but usually the policy premiums will be higher because you are older and more likely to die.
Term insurance is the least expensive kind of life insurance.

19. Permanent Life (whole life) Insurance Categories
Whole life insurance - Caters to long-term goals by offering consumers consistent premiums and guaranteed cash value accumulation.
Universal life insurance - Gives consumers flexibility in the premium payments, death benefits and the savings element of their policy.

20. How does Whole Life Insurance Work?
Your insurance company puts part of your insurance money in a high interest bank account
Every premium payment increases your cash value.
This savings element of your policy builds up your cash value on a tax- deferred basis.
Guaranteed cash value
Makes this policy worthwhile because you can borrow against your cash value or surrender your policy to get the cash value in hard cash.

21. How does Universal Life Insurance Work?
also termed "adjustable life insurance,"
offers more flexibility compared to whole life insurance.
You have the liberty to reduce or increase your death benefit and also to pay your premiums at any time and in any amount (subject to certain limits) after your first premium payment has been made.

22. Net Cost of Insurance
Some insurance companies may return part of your premium to you as a dividend.
You may deduct the dividend from the premium due or leave the dividend with the company to buy more insurance or to earn interest.
The total premium for the year less the dividend is the net cost of the insurance for the year
Net cost of insurance = total premiums - dividends

23. Life Insurance Cash Values
If you cancel a term policy, you get nothing.
Whole life policies builds cash value after premiums have been paid for a few years.
Cash value is the money that you get if you cancel the policy.
The policy may give you a choice of taking the cash, or using it to buy a small amount of whole life insurance that is totally paid up, or to buy term insurance.

24. The policy may also allow you to borrow up to the total amount of the cash value, often at a lower interest rate than that offered by other lenders.
If you don’t pay back the loan, it will be subtracted from the amount paid to your beneficiaries when you die.

25. Health Insurance

26. Health Insurance Premiums
Health Insurance like other insurance, protects against financial loss.
In this case, the financial loss is from medical bills.
Employers often provide group health insurance as a job benefit for employees and their families.
The employee usually pays part of the cost of the group policy.
If you are not covered by a group policy, you may buy individual health insurance for yourself and your family, but it is usually more expensive.

27. Group health policies usually provide basic health coverage, including:
Hospitalization insurance, which helps pay expenses of a hospital stay, such as hospital room, medicine, lab tests, X-rays, operating room.
Surgical insurance, which covers the fees of doctors who do surgery or who help with surgery in or out of a hospital.
Medical insurance, which pays the fee of other doctors who see you in or out of the hospital, as well as some other medical expenses, such as physical therapy.

28. You may supplement your basic health coverage with major medical insurance.
It helps pay for hospital, surgical, medical, or other health care expenses due to a major illness or an injury.
Often basic health insurance and major medical insurance policies are combined into one comprehensive health package.
Your employer may also have group plans for other health areas, such as dental insurance and vision insurance.

29. Health Insurance Benefits and Coinsurance
Basic health insurance plans usually include an annual deductible amount for each insured person.
When the health bills for a person covered by the plan exceed the deductible amount for that person, the insurance company begins to pay benefits.

30. Major medical insurance plans usually have a deductible amount for each treated illness or injury.
For example you may be required to pay the first $500 of a health bill for an injury before the insurance company begins to pay benefits.

31. Once the deductible amount has been met, you usually must pay part of the remaining health bills out of your own pocket
These partial payments are called coinsurance, or co-payments.
For example, you may be required to pay as coinsurance 15% of a surgery bill.
Or, you may be required to pay a $25 co-payment for each visit to a doctor’s office.

32. Keep in mind: the total health bill may not be charged by your policy.
Usually coinsurance is stated as a percent and co-payments as a dollar amount.
Whether you pay coinsurance or a co-payment, they are both your share of the bill for services rendered.
Keep in mind: the total health bill may not be charged by your policy.
For example, a psychiatrist may charge $85 for each office visit but your insurance policy may set a maximum benefit of $70 for such visits. How much will your co- payment be?

33. Uncovered amount = total bill – covered amount Coinsurance amount = (covered amount – deductible) x coinsurance rate Amount insured must pay = uncovered amount + deductible + coinsurance

34. Disability Insurance

35. Disability Insurance Benefits
Disability insurance pays you a portion of the income you lose if you cannot work due to a health condition or an injury.
One form of disability insurance is short-term disability insurance.
This policy pays you a portion of your income for a short period of time, such as weeks.
Usually there is a maximum amount that can be paid put per week or month.

36. Another form of disability insurance is long-term disability insurance.
This type of policy may cover you for several years or until you reach retirement age.
The longer the term of coverage, the higher the premium.

37. Disability insurance is usually bought through a group plan offered through your employer.
You can also buy an individual plan rather than group disability insurance, but it is usually more expensive.
If your job is covered by social security, you also may be eligible for disability insurance through the federal government.
Your social security statement shows how much monthly disability benefits you are eligible to receive.

38. If you are injured on the job, you may be covered by Worker’s Compensation Insurance.
This insurance covers lost wages and medical expenses from on the job injuries.
It is usually required by state governments and for work on federal contracts and paid for by the employer.

39. The benefits you receive from disability insurance depend on whether you are totally or partially disabled, how long you have worked, your wages, percent of your wages that are paid as benefits, and other factors.
Also, the benefits you receive may be reduced by the benefits you receive from worker’s compensation and social security disability insurance.

40. Car Insurance

41. Car Insurance
There are four basic types of insurance or coverage for motor vehicles that protect you against the risk of financial loss:
Bodily injury- covers your liability for injury to others.
Property damage- covers damage to other people’s property, including their vehicles.
Collision-covers damage to your own motor vehicle
Comprehensive damage- covers damage or loss to your vehicle from fire, theft, vandalism, hail and other causes

42. States require car owners to carry minimum amounts of car insurance.
Some states combine bodily injury and property damage coverage into one minimum amount of insurance required.
The insurance applies regardless of whether there is injury to one or more persons or whether there is damage to property of others in a single accident.

43. In addition to requiring minimum amounts of the basic types of insurance coverage, states may require car owners to carry additional coverage.
A car owner may be required to buy uninsured and underinsured motorists insurance, which protects against damage to the car or injury to persons in the car caused by a driver who carries no or insufficient insurance.

44. Premiums for automobile insurance may vary from state to state and within a state.
Each insurance company sets its own rates following state regulations.
Premiums may be higher in large cities than in small towns and rural areas.
Premiums may also be higher on cars used for business than those used for pleasure driving.
Premiums also tend to be higher for drivers under the age of 25 than those who are over 25.

45. NYS Insurance Requirements
New York law requires that you have auto liability insurance coverage. The minimum amount of liability coverage is:
$10,000 for property damage for a single accident
$25,000 for bodily injury and $50,000 for death for a person involved in an accident
$50,000 for bodily injury and $100,000 for death for two or more people in an accident