7.01: Classify types of health and life insurance and features of types of

coverage.

PERSONAL FINANCE

JOURNAL ENTRY

Have you been at risk today? What are some risks to which you have been

subjected? When has your family used insurance to

recover from a form of loss or damage?

REVIEW

Review highlights about homeowner’s and auto insurance in objectives 6.02 and 6.03.

In objective 7.01, YOU will learn about two other very important forms of insurance---health and life insurance.

KWL– Journal Entry

List what YOU know about health and life insurance in the “K” column.

Share one fact YOU have listed. Write questions YOU want answered in the

“W” column.

Life is full of risks and accidents. People are at risk for getting injured while playing sports, riding in

a car, or living in a house. Risk is uncertainty about a situation’s outcome. Risk can be unpredictable events that lead to loss or damage.

Insurance is an arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk.

Insurance plays a large role in most individual’s financial management plans.

In 2007, the United States spent $7,421 on health care for each man, woman, and child in the population.

The purpose of insurance is to help individuals limit their financial losses when an accident occurs. It helps the individual to be prepared for the unexpected.

Activity

Appendix 7.01A, “How Does Insurance Work?”

Need to Know

To purchase insurance, consumers purchase a policy. A policy is a contract between the individual and the insurer

specifying the terms of the insurance arrangements. A policyholder is the consumer who purchased the policy. The policy will state the premium and deductible amounts. A premium is the fee paid to the insurer to be covered under the

specified terms. A deductible is the amount paid out of pocket by the policy

holder for the initial portion of a loss before the insurance coverage begins.

The amount of a premium or a deductible will vary depending on the type of insurance and the terms of the policy.

+

Health Insurance

Options and Benefits

+Sources of Health Insurance

Employer Employers pay part or all the cost of a group health

insurance plan as a benefit to their employees. Costs are generally lower as risk is spread over a large group

Private Individuals purchase a policy to cover health costs for

themselves or their immediate family. Greater flexibility in types of plan, but costs are higher

Government State or federal government managed insurance paid from

tax revenues. Must meet age and/or income qualifications

+Managed Health Care Plans HMO - Health maintenance organization

a health care group that provides health care services to members for a set fee and a small co-pay

HSA – Health Savings Account You contribute pre-tax dollars to the account for expected medical expenses

for the coming year –-submit claims and receipts for reimbursement up to amount deposited

PPO - Preferred provider organization an agreement between health providers with employers or insurers to

provide services at a reduced rate to employees

POS-Point of Service members use a primary physician who refers them as needed to

participating specialist or members can see non-participating specialist members but, members pay more for their services

Fee for Service A plan in which an insured can select his/her own doctors and hospitals, pay

costs at time of visit, and file form with insurance company for reimbursement of covered expenses

+Terms to Know

Deductible – the amount you pay during the term (usually one year) before the insurance pays any medical expenses

Co-payments – Percentage of medical bills you must pay after meeting your deductible. Usually 10, 20 or 30% of the bill

Preauthorization – prior approval is required from the insurance company before major medical procedures are done. (e.g. surgery, chemotherapy)

Exclusions – medical expenses the policy will not cover (e.g. teen pregnancy, cosmetic surgery)

+Terms to Know, continued

Pre-existing Condiitions---An illness or injury that a person has at the time he/she enrolls in a health care plan

Renewability---A patient’s right to restart coverage annually

Maximum Benefit---A limit on the number of days one’s care will be covered, or the highest amount that can be paid in benefits for a specific procedure t

+Types of Health Insurance

Basic medical pay a large part of hospital and

surgical care, may also pay part of some other medical expenses (e.g., doctor’s visits)

Major medical pays for long-term illness

expenses after basic medical benefits limits have been reached (e.g., cancer).

+Other Types of Health Related Insurance Coverage Dental Insurance

Pays for all or part of checkups which include examination, cleaning, and X-rays

Pays a portion or repairs such as fillings, crowns, and root canals

Offered with group rates through some employers

Vision Insurance Pays for checkups Covers a portion of the cost of lenses and frames

Accident Insurance (e.g. School Insurance) Often available at low rates Covers medical bills related to injury occurring at eligible

locations and/or times (e.g. school grounds, sports events)

+Types of Disability Insurance

Disability Pays a portion of income lost to a worker who is unable to

return to work for an extended period of time because of illness or injury

Shop carefully as costs and benefits vary widely

Workmen’s Compensation Employers are require to have in every state in some form Covers medical care, treatment, rehabilitation, and a

portion of wages from injuries that occur in the workplace

Long Term Pays for care when a person with a chronic illness or injury

cannot care for themselves for an extended period of time

+Government Sponsored Health Insurance Medicare

Covers eligible citizens 65 or older or eligible adults who can no longer work due to illness or disability

Funded from payroll taxes

Medicaid Health insurance for eligible low income persons Funded from state and federal tax revenue

CHIP – Children’s Health Insurance Program Health insurance for children under 18 whose parents make

too much to qualify for medicaid, but not enough to afford private insurance

Federal funds are distributed by the state

+Gap Insurance

COBRA Consolidated Omnibus Budget Reconciliation Act Law that gives you the right to continue employer

sponsored group health insurance plan for a limited time after you leave your job. You pay the premiums.

Medigap Insurance Private insurance available to citizens 65 and older who

have Medicare A and B plans. Covers the cost of co-payments and deductibles

Activity

Appendix 7.01D, “Health Insurance Graphic Organizer.”

Use Objective 7.01 PowerPoint, “Health Insurance.” --- complete information about each type of health insurance in the boxes on the graphic organizer.

Activity

Distribute Appendix 7.01F, “Who Will Pay?” Follow the teacher directions at the top of the appendix for preparing materials for the option chosen.

Use Appendix 7.01G, “Who Will Pay? ---Answer Key” to discuss answers.

Activity

Divide students into teams. Distribute Appendix 7.01E, “Types of Life Insurance Policies.” Have half of the teams research the types of term life insurance and the other half research the types of whole life insurance using the internet. Give students 10-15 minutes to fill in the assigned information. Repair teams so a term and whole life are now paired. Give them 10 minutes to share what they learned and finish filling out the graphic organizer.

Things that affect the cost of life insurance

Family health history Pre-existing conditions The policyholder’s current health The policyholder’s occupation and hobbies

(e.g. race car driver) Gender (women live longer than men and

pay lower premiums) Age of insured (the older the insured, the

more the premiums cost)

Things (risks) to consider when selecting the amount of insurance

coverage: Present and future earnings of the policyholder

Financial responsibilities of the policyholder Potential income from other sources Dependents, their ages and their needs Burial expenses Debts

Activity

As a Math-to-Life Connection, have students work in teams of two to complete Appendix 7.01H, “How Much Term Costs.” Remind students to calculate the total cost over the period of time insured. Remind students to keep risk factors and things that affect premium costs in mind as they answer questions 4 through 6. Use Appendix 7.01I, “How Much Term Costs Key”, to check the answers.

Activity

Ask students to give a real life example of the above types of risks. Discuss until all points are covered. Distribute Appendix 7.01J “More or Less” or display as a visual. Have students work in teams of two to decide which scenario in each row carries the greater degree of risk.

KWL—Journal Entry

Go back to the KWL page Complete the L