1. Managing Resources Personal Finance Unit 5 Section 3--Insurance

2. Risk—uncertainty of loss Ways to manage risks Ways to manage risks Avoid dangers that cause loss Avoid dangers that cause loss Save large amount of money to use for losses Save large amount of money to use for losses Buy insurance Buy insurance

3. WHAT IS INSURANCE AND WHY IS IT IMPORTANT? Planned protection provided by sharing economic, or monetary loss, resulting from unexpected events such as accidents, injury, loss or death Planned protection provided by sharing economic, or monetary loss, resulting from unexpected events such as accidents, injury, loss or death MAIN TYPES: MAIN TYPES: Auto Auto Home Home Health Health Life Life

4. Terms INSURED—person who pays insurance premiums INSURED—person who pays insurance premiums INSURER—insurance company INSURER—insurance company AGENT—makes or modifies insurance contract AGENT—makes or modifies insurance contract POLICY—contract stating the conditions to which the insurance company and policyholder have agreed and will list items that are and are not covered. POLICY—contract stating the conditions to which the insurance company and policyholder have agreed and will list items that are and are not covered.

5. More Terms PREMIUM—amount paid for insurance coverage PREMIUM—amount paid for insurance coverage Usually paid in installments of one month, six months, semi-annually or annually Usually paid in installments of one month, six months, semi-annually or annually Insurance companies invest the premiums to be able to pay on claims and provided insurance at a relatively low cost Insurance companies invest the premiums to be able to pay on claims and provided insurance at a relatively low cost Determined according to statistics estimating the kind of risks involved Determined according to statistics estimating the kind of risks involved 16 year old vs. 30 year old 16 year old vs. 30 year old Homes in hurricane or flood areas Homes in hurricane or flood areas Crime rates for your area Crime rates for your area

6. Still More Terms CLAIM—a policyholder’s request for payment for a loss that is covered by the insurance company DEDUCTIBLE—Amount you must pay before insurance company begins to pay for your loss PROPERTY VALUE Book value—cost minus depreciation Replacement Value—what is would cost today to buy this item Actual Cash Value—replacement value minus depreciation Functional Replacement Value—cost of an item that is no longer made and replace it with something with same function. RIDER—An addition to the policy for items not normally covered, such as jewelry or antiques.

7. Automobile Insurance LIABILITY—protects other people and their property 1.Covers the following: a.Repair/replacement costs b.Medical expenses c.Loss of income d.Pain & suffering e.Permanent injury 2.Two Types a.Bodily injury b.Property damage 3.Reading your policy-100/300/100 a.100 = $100,000 of coverage for injury per person per accident b.300 = $300,000 coverage for two or more people per accident c.100 = $100,000 coverage for property damages 4.If found liable for more than the amount of your coverage you will have to pay the difference

8. Type of Auto Insurance (continued) B.COLLISION & COMPREHENSIVE 1.COLLISION—pays for damage to your car when you have an accident no matter who is at fault 2.COMPREHENSIVE PHYSICAL DAMAGE—covers your car in situations other than collision—fire, theft, vandalism, glass breakage, etc. 3.Both include a deductible 4.Insurance company has the option to pay only the value of your car should repair costs exceed the value --“totaling your car”

9. Types of Auto Insurance (continued) C.MEDICAL EXPENSE—pays reasonable medical cost in the following situations 1.Driving your car 2.Anyone riding in your car 3.You riding in someone else’s car

10. Types of Auto Insurance (continued) D.UNINSURED MOTORIST, UNDERINSURED MOTORIST, UNDERINSURED MOTORIST PROPERTY DAMAGE 1.Cover you in the following situations a.Hit by uninsured or underinsured motorist b.Hit and run 2.Covers the same as your liability policy

11. Fault Insurance A.NO FAULT—Your insurance pays medical expenses and damages no matter who is at fault --varies from state to state B.COMPARATIVE FAULT—allows damages to be reduced by the percentage you are at fault in the loss --insurers investigate and make a decision as to the percentage of fault of all parties involved --Missouri follows this C.50/50 COMPARATIVE FAULT—used in parking lot accidents --lots are considered private property so no ticket issued

12. Cost of Insurance A.WHAT DETERMINES? 1.Type of car 2.Your age 3.Gender 4.Married or single 5.Driving record 6.Use of car

13. Ways to Keep Premiums Down 1.Be covered as a part-time driver if possible 2.Don’t buy cars on the hot list 3.Keep your grades up 4.Decide which & how much coverage you need 5.Increase your deductible 6.Check on discounts -non-smoker, non-drinker, air bags, etc. 7.Compare premiums from different companies 8.Pay semi-annually 9.Drive safely

14. What to do if You are in an Accident A.DON’T MOVE YOUR CAR B.CALL THE POLICE C.GET THE FOLLOWING INFORMATION FROM THE OTHER DRIVER/DRIVERS 1.Names 2.Addresses 3.Phone numbers 4.License plate number 5.Driver’s license number 6.Insurance information D.GET THE NAMES, ADDRESSES AND PHONE NUMBERS OF ANY WITNESSES E.CALL YOUR INSURANCE AGENT AND THEN REFER ALL FUTURE QUESTIONS TO THEM