Transcript An Introduction to Insurance Notes

An Introduction to
Insurance
What is Insurance?
 Insurance is a means of guaranteeing you
financial protection against various risks.
 In exchange for a relatively small payment, you
gain protection against a potentially large loss.
 Some examples of a large loss would include
your house burning down or spending weeks in
the hospital recovering from an automobile
accident.
Important Insurance
Related Terms
 We are going to discuss some important
terms related to insurance. These terms
include: insurance policy, premium,
coverage limit, and deductible.
 We will also examine specific types of
insurance including: auto, homeowners,
property, life, health, and disability.
What is an Insurance
Policy
 This is a written contract detailing what
an insurance company will cover, how
much it will pay, and how much you will
pay.
What is a premium?
 This is the amount of money that you pay
for an insurance policy.
 Premiums can be paid monthly,
quarterly, semi-annually, or annually.
 The premium is based on the type and
amount of coverage you choose and
varies from one insurance company to
another.
Factors that affect
insurance premiums
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These include:
Your age
Marital status
Whether you live in an urban or rural
area
 Your credit history
 Also, each special type of insurance is
going to consider other factors.
Coverage Limit
 This is the maximum amount the insurance
company will pay if you file a claim.
 It is important that you select an appropriate
coverage limit because any amount over your
coverage limit becomes your responsibility.
 An example of this would be if you were
insured with a coverage limit of $50,000 and a
claim against you was for $60,000. You would
be responsible for the additional $10,000.
Deductible
 This is the amount of a loss you must pay out
of your own pocket before the insurance
company will step in and pay the rest.
 An example of this would be if you were in an
auto accident and it caused $1000 worth of
damage and your deductible was $500.00.
After you paid the initial $500.00, the insurance
company would then pay the remainder of the
bill.
Auto Insurance
 This is insurance that protects your financial
interests in the event that you are involved in
an automobile accident.
 It is extremely important to have automobile
insurance because the damage done to your or
another’s vehicle can be extremely expensive
to repair.
 Also, if you hurt someone else while driving,
there’s virtually no limit to what they can sue
you for.
Homeowners/Property
Insurance
 This is insurance that protects you
financially if your house is damaged.
 Also, this type of insurance protects your
possessions that are located within your
home.
 Renters insurance protects your property
within a rented home or apartment.
Life Insurance
 This type of insurance provides financial
support for the people who depend on you in
the event of your untimely death.
 There are different types of life insurance
policies. Some of these are designed to just
provide insurance benefits (term), while others
(whole life, variable life, universal life, etc…)
are designed to serve as insurance and a type
of investment.
Health Insurance
 This type of insurance pays medical bills
when you or your family becomes sick or
injured.
 You can purchase an individual health
insurance policy for yourself and your
family, but its usually much more
expensive than the coverage an
employer offers.
Disability Insurance
 This type of insurance pays you an
income when an illness or injury prevents
you from working for several weeks or
even years.
 Disability insurance is often a type of
insurance that people don’t purchase.
However, according to the NAIC, people
in their 30s are three times more likely to
suffer a disability than they are to die.