10/12/2007 mil grauer prepared by: brian alvin life’s greatest risks an introduction to insurance...

Mil Grauer Prepared by: Brian Alvin10/12/2007

Life’s Greatest Risks

An Introduction to Insurance

Mil Grauer


Why Purchase Insurance?

In the next hour: 194 people will be injured in car accidents 57 homes will catch fire 230 people will die 1,027 people will become disabled

How can you as an individual plan ahead in order to protect yourself against these things that you potentially have no control over?


Life Insurance

Provides financial assistance in your absence

Helps pay for funeral costs

Provides an income for your family

Cause of Death Probability

Motor Vehicle Accident 1 in 100

Homicide 1 in 300

Fire 1 in 800

Firearms Accident 1 in 2,500

Electrocution 1 in 5,000

Asteroid/Comet Impact 1 in 20,000

Passenger Aircraft Crash 1 in 20,000

Flood 1 in 30,000

Tornado 1 in 60,000

Venomous bite or sting 1 in 100,000

Fireworks Accident 1 in 1 million


Cumulative Death Table *numbers are out of 1000 people per year at the specified age.

Age in 1990 Total U.S. White Male White Female Black Male Black Female

25 11.52 11.39 7.62 26.85 17.57

35 14.71 15.38 9.08 35.97 21.5

45 20.02 21.57 12.09 50.82 28.75

55 31.03 34.21 19.73 74.7 42.91

65 55.52 63.37 38.37 111.67 69.53

Cumulative Death Chart Out of 1,000

0

20

40

60

80

100

120

Total U.S. White Male WhiteFemale

Black Male BlackFemale

# D

eath

s

25

35

45

55

65


Disability Insurance

Ensures that when a working person is ill or disabled and unable to work, he or she will still receive a monthly income

Savings are often insufficient

Age (year) Probability (%)

25 45

30 42

35 41

40 39

45 36

50 33

55 27

Age at Onset of Disability

Recovered (%)

Died (%)

Still Disabled (%)

25 44.1 9.7 46.2

35 34.0 12.3 53.7

45 21.5 19.9 58.6

55 11.8 28.5 59.7


Fire Insurance

Fire is a very real threat that can destroy your home and possessions

Fire is the largest single cause of property loss in the United States In the last decade, fires have caused direct losses

of more than $120 billion and countless billions more in related costs.

12 out of every 100,000 homes burn down every year


Automobile Insurance

Automobile accidents are common due to the number of vehicles on the road

Even if you are careful, drivers around you may not be as safe 1,163 out of 100,000 vehicles are involved in

Bodily Injury Claims annually 3,846 out of 100,000 vehicles are involved in

Property Damage Claims annually


Auto Insurance Rates

The average cost of car insurance nation wide is $1368.18

Most Expensive Cites for Auto Insurance

Ranking City Average Auto Premium

1 Detroit, MI $5,162

2 Philadelphia, PA $4,142

3 Newark, NJ $3,482

4 Los Angeles, CA $3,225

5 New York City, NY $3,127

Least Expensive Cities for Auto Insurance

Ranking City Average Auto Premium

1 Roanoke, VA $758

2 Wapakoneta, OH $871

3 Chattanooga, TN $911

4 Green Bay, WI $948

5 Raleigh, NC $949


Liability Insurance

A liability lawsuit can completely deplete all of your wealth

Especially important for companies since a loss could cause bankruptcy

Also known as “third party insurance” It is not uncommon for liability claims to be in

the ballpark of $1-10 million!


Long Term Care Insurance

To protect against the high costs a family can incur from placing a family member in a LTC facility

On average, LTC costs $7,000 a month, or about $84,000 a year For a person 65 years old, there is a 44% chance

that they will be disabled for 90 days or longer and require LTC

Over 5 million individuals between the ages of 18 and 64 needed LTC last year


Risk of Living Too Long

Compared to earlier generations, our population as a whole is starting to live longer

Life expectancy for a person who reaches the age of 65: Female 19.5 years left Male 16.6 years left

By saving early though you can avoid this risk by maximizing the benefit of compounding interest.


Health Insurance

People get sick -- It’s just a fact of life $1.7 trillion was spent in 2003 on health care

costs – that is $5,671 per person The average annual growth rate in inpatient

expenditures per health plan member is 5.9% Cost of hospital stay varies greatly from 52%

above the national average in New Jersey to -38% below the national average in Maryland.


Homeowner Insurance

The typical homeowner policies covers property damage as well as liability issues that may arise as a result of owning property

7,330 out of 100,000 homeowner policies file claims each year

$5,082 is the average severity of a homeowner’s claim


Percent of Losses Incurred on Homeowners Policies Type of Damage/Year 2000 2001 2002 2003 2004

Property Damage

Fire, Lightning, Debris Removal 32.82% 31.03% 32.72% 32.92% 22.49%

Wind and Hail 20.45% 21.69% 20.81% 25.56% 48.61%

Water Damage, Freezing, Mold 22.6% 22.14% 21.71% 22.01% 16.62%

Theft 4.91% 4.65% 4.53% 3.29% 2.35%

Other Property Damage, (Vandalism and Mischief)

11.63% 13.11% 12.23% 10.62% 6.01%

Liability

Bodily Injury and Property Damage 6.43% 6.47% 7.00% 5.29% 3.17%

Medical Payments 1.13% 0.88% 0.98% 0.94% 0.74%

Credit Card Fraud (forgery and counterfeit currency)

0.03% 0.03% 0.01% 0.00% 0.00%

84% of claim costs are from property damage, only 4% are from liability suits, and remaining 12% are from settling costs.


Questions?

10/12/2007 mil grauer prepared by: brian alvin life’s greatest risks an introduction to insurance...

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