Transcript Insurance 101 Personal Finance

Insurance 101
Personal
Finance
Learning Goal
To be able to define
terms relating to
insurance.
What is Insurance?
Insurance – an arrangement between
an individual and an insurance
company to protect the individual from
risk.
 We buy insurance to help limit the
financial losses when accidents occur.

Insurance Policy
Policy – a contract between the individual
and the insurer specifying the terms of the
insurance arrangement.
 Premium – the fee paid to the insurer to
guarantee coverage.
 Deductible – the amount paid out of
pocket by the policy holder for the initial
portion of a loss before the insurance
coverage begins.

Example
You pay money to have car insurance
(Premium)
 When you get into an accident that is
your fault, you must pay a certain
amount before the insurance company
picks up the rest (Deductible)
 The higher the deductible, the lower the
premium

Automobile Insurance

Different types:
–
Liability (Required by law)

–
Medical Payments

–
Pays for hospital bills for you and anyone riding in your car
Uninsured Motorist

–
Pays for bodily injury to other people, damage to property,
court fees
Helps pay bills if hit by someone without insurance
Collision / Comprehensive

Pays to repair your car if it was your fault or no other car
was involved. Comprehensive is for non-driving risks such
as hail, theft, flood, vandalism, etc.
Learning Goal
To be able to define
terms relating to
insurance.
Insurance 101
Personal
Finance
Learning Goal
To be able to identify and
explain the importance of
the 5 necessary types of
insurance.
Types of Insurance
 Automobile
 Health
 Life
 Disability
 Homeowner’s
/ Renter’s
Health Insurance
Covers medical costs if you are injured
or become ill
 Each policy is different
 Most people receive health insurance
from their employer
 Children are covered up to the age of
19; unless they are attending college
full time (23)

Life Insurance
Pays people who are dependent on
someone else if that person dies
 Usually offered from an employer, but
can (and should) purchase
independently.
 Life insurance is usually very low in
price compared to the coverage you
receive

Life Insurance Types

Term
–
–

Cash Value (Whole, Universal)
–
–
–

Coverage for a specific period of time
MUCH cheaper than Cash Value
Coverage for life
Includes a savings plan
MUCH more expensive than term
ALWAYS GO FOR TERM LIFE!!!!!!
Disability Insurance

Will pay a percentage of your income
from a job if you are sick or unable to
work for long periods of time
–

Usually will pay between 60% and 70%
Also is a common insurance offered
by an employer
Homeowner’s / Renter’s

Protects your home and possessions
within the home from damage
–
–

Includes Fire, Storm, etc.
Natural Disasters require a special
insurance
Also covers liability if someone else
is injured on your property and they
sue
Learning Goal
To be able to identify and
explain the importance of
the 5 necessary types of
insurance.