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CompetitionCompetition Money (all aspects)Money (all aspects) BankingBanking InsuranceInsurance

SSEPF5 The student will describe how SSEPF5 The student will describe how insurance and other risk-management insurance and other risk-management strategies protect against financial loss. strategies protect against financial loss.

a. List various types of insurance such as a. List various types of insurance such as automobile, health, life, disability, and property. automobile, health, life, disability, and property.

b. Explain the costs and benefits associated b. Explain the costs and benefits associated with different types of insurance; include with different types of insurance; include deductibles, premiums, shared liability, and deductibles, premiums, shared liability, and asset protection. asset protection.

An Introduction to An Introduction to InsuranceInsurance

What is Insurance?What is Insurance?

Insurance is a means of guaranteeing you Insurance is a means of guaranteeing you financial protection against various risks.financial protection against various risks.

In exchange for a relatively small payment, you In exchange for a relatively small payment, you gain protection against a potentially large loss.gain protection against a potentially large loss.

Some examples of a large loss would include Some examples of a large loss would include your house burning down or spending weeks in your house burning down or spending weeks in the hospital recovering from an automobile the hospital recovering from an automobile accident. accident.

Important Insurance Important Insurance Related TermsRelated Terms

We are going to discuss some important We are going to discuss some important terms related to insurance. These terms terms related to insurance. These terms include: insurance policy, premium, include: insurance policy, premium, coverage limit, and deductible.coverage limit, and deductible.

We will also examine specific types of We will also examine specific types of insurance including: auto, homeowners, insurance including: auto, homeowners, property, life, health, and disability.property, life, health, and disability.

What is an Insurance What is an Insurance PolicyPolicy

This is a written contract detailing what This is a written contract detailing what an insurance company will cover, how an insurance company will cover, how much it will pay, and how much you will much it will pay, and how much you will pay.pay.

What is a premium?What is a premium?

This is the amount of money that you pay This is the amount of money that you pay for an insurance policy.for an insurance policy.

Premiums can be paid monthly, Premiums can be paid monthly, quarterly, semi-annually, or annually.quarterly, semi-annually, or annually.

The premium is based on the type and The premium is based on the type and amount of coverage you choose and amount of coverage you choose and varies from one insurance company to varies from one insurance company to another.another.

Factors that affect Factors that affect insurance premiumsinsurance premiums

These include: These include: Your ageYour age Marital statusMarital status Whether you live in an urban or rural Whether you live in an urban or rural

areaarea Your credit historyYour credit history Also, each special type of insurance is Also, each special type of insurance is

going to consider other factors.going to consider other factors.

Coverage LimitCoverage Limit

This is the maximum amount the insurance This is the maximum amount the insurance company will pay if you file a claim.company will pay if you file a claim.

It is important that you select an appropriate It is important that you select an appropriate coverage limit because any amount over your coverage limit because any amount over your coverage limit becomes your responsibility.coverage limit becomes your responsibility.

An example of this would be if you were An example of this would be if you were insured with a coverage limit of $50,000 and a insured with a coverage limit of $50,000 and a claim against you was for $60,000. You would claim against you was for $60,000. You would be responsible for the additional $10,000.be responsible for the additional $10,000.

DeductibleDeductible

This is the amount of a loss you must pay out This is the amount of a loss you must pay out of your own pocket before the insurance of your own pocket before the insurance company will step in and pay the rest.company will step in and pay the rest.

An example of this would be if you were in an An example of this would be if you were in an auto accident and it caused $1000 worth of auto accident and it caused $1000 worth of damage and your deductible was $500.00. damage and your deductible was $500.00. After you paid the initial $500.00, the insurance After you paid the initial $500.00, the insurance company would then pay the remainder of the company would then pay the remainder of the bill.bill.

Auto InsuranceAuto Insurance

This is insurance that protects your financial This is insurance that protects your financial interests in the event that you are involved in an interests in the event that you are involved in an automobile accident.automobile accident.

It is extremely important to have automobile It is extremely important to have automobile insurance because the damage done to your or insurance because the damage done to your or another’s vehicle can be extremely expensive to another’s vehicle can be extremely expensive to repair. repair.

Also, if you hurt someone else while driving, Also, if you hurt someone else while driving, there’s virtually no limit to what they can sue you there’s virtually no limit to what they can sue you for.for.

Why is Car Insurance Why is Car Insurance Mandatory?Mandatory?

The simple reason is because in the end, it works The simple reason is because in the end, it works out best for everyone. Requiring insurance means out best for everyone. Requiring insurance means that most people have the coverage required to that most people have the coverage required to pay for any damage they cause, and the penalties pay for any damage they cause, and the penalties for not complying help to cover the rest – Virginia for not complying help to cover the rest – Virginia fines you $500 if it catches you without insurance, fines you $500 if it catches you without insurance, andand makes you get insurance, and then puts that makes you get insurance, and then puts that money into a fund to cover damage done by money into a fund to cover damage done by selfish people like yourself who went and crashed selfish people like yourself who went and crashed without insurancewithout insurance

Homeowners/Property Homeowners/Property InsuranceInsurance

This is insurance that protects you This is insurance that protects you financially if your house is damaged. financially if your house is damaged.

Also, this type of insurance protects your Also, this type of insurance protects your possessions that are located within your possessions that are located within your home.home.

Renters insurance protects your property Renters insurance protects your property within a rented home or apartment.within a rented home or apartment.

Life InsuranceLife Insurance

This type of insurance provides financial This type of insurance provides financial support for the people who depend on you in support for the people who depend on you in the event of your untimely death. the event of your untimely death.

There are different types of life insurance There are different types of life insurance policies. Some of these are designed to just policies. Some of these are designed to just provide insurance benefits (term), while others provide insurance benefits (term), while others (whole life, variable life, universal life, etc…) (whole life, variable life, universal life, etc…) are designed to serve as insurance and a type are designed to serve as insurance and a type of investment.of investment.

Health InsuranceHealth Insurance

This type of insurance pays medical bills This type of insurance pays medical bills when you or your family becomes sick or when you or your family becomes sick or injured.injured.

You can purchase an individual health You can purchase an individual health insurance policy for yourself and your insurance policy for yourself and your family, but its usually much more family, but its usually much more expensive than the coverage an expensive than the coverage an employer offers.employer offers.

Disability InsuranceDisability Insurance

This type of insurance pays you an income This type of insurance pays you an income when an illness or injury prevents you from when an illness or injury prevents you from working for several weeks or even years.working for several weeks or even years.

Disability insurance is often a type of Disability insurance is often a type of insurance that people don’t purchase. insurance that people don’t purchase. However, according to the NAIC, people in However, according to the NAIC, people in their 30s are three times more likely to their 30s are three times more likely to suffer a disability than they are to die.suffer a disability than they are to die.