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Insurance Essentials
How insurance can help you take charge of your finances
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What is Insurance?
Insurance is an arrangement
between an individual and an insurer (insurance company) to protect the individual against risk
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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History of Insurance
Modern Insurance Started as a result of the “Great Fire of London” in 1666
13,200 homes destroyed Citizens formed societies to pool resources in order to protect each other from future loss
Benjamin Franklin helped establish insurance in American
Founded Philadelphia Contributionship Focused on educating people about prevention methods and refused to insure wood buildings
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Why is it important to have insurance? Helps limit financial losses when an accident occurs Helps an individual/family be prepared for the unexpected
Plays a large role in most financial management plans © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
What is an Insurance Policy? A policy is a contract
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between the individual and the insurer specifying the terms of the insurance arrangements
A policyholder is the person who purchases the policy
A premium is a fee paid to the insurer by the policy holder in order to have insurance coverage
A deductible is the amount paid out of pocket by the policyholder for the first portion of a loss before the insurance coverage kicks in
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Types of Insurance Automobile
Health
Homeowners/ Renters
Types of Insurance
Disability
Life
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Automobile Insurance Automobile Insurance arrangement between an individual and insurer to protect the individual against risk from automobile accidents
Liability insurance
Medical payment insurance
Uninsured or underinsured motorists insurance
Physical damage insurance
Collision
Comprehensive © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Types of Auto Insurance Liability Insurance covers the insured if injuries or damages are caused to other people or their property
Medical Payment Insurance covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault
It is the minimum amount of insurance required by law for automobiles
It also covers family members injured as passengers in any car, pedestrians, or bicyclists
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Types of Auto Insurance
Uninsured or Underinsured Motorists Insurance covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insurance Physical Damage Insurance covers damages caused to the vehicle
Collision – covers a collision with another object, car, or from a rollover Comprehensive – covers all physical damage losses except collision and other specified losses
Why would an individual want automobile insurance coverage beyond liability (the minimum required by law)? © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Keeping Your Auto Insurance Premiums Low
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Shop around and compare prices Maintain a good driving record Take the highest deductible you can afford Before buying a vehicle, determine the cost of insuring it On cars worth less than $1,000, consider carrying only liability coverage Ask about discounts such as: Multiple cars on a policy Good student drivers under age 25 Airbags and other safety equipment Anti-theft devices Auto/home insurance with same company © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Health Insurance
Health insurance provides protection against financial losses resulting from injury, illness, and disability
May cover hospital, surgical, dental, vision, long-term care, prescription, or other major expenditures Specific coverage depends upon the individual policy
Why would it be important to have health insurance?
Health care costs are extremely high Large medical expenses could deplete an individual’s savings
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Health Insurance
May be purchased by the individual or through their employer May offer coverage for dependents (spouses and children who rely financially on the insured)
If dependent coverage is offered, children may stay on their parent’s health care plan until age 26
Federal government website to learn about health insurance and compare policies: http://www.healthcare.gov/index.html
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Life Insurance Life insurance is a contract between an insurer and policyholder specifying a sum to be paid to a beneficiary upon the insured’s death • A beneficiary is the recipient of any policy proceeds if the insured person dies
Provides money for family members or dependents when a wage earner dies https://www.northwesternmutual.com/learning-center/tools/the-longevitygame © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Disability Insurance
Disability Insurance replaces a portion of one’s income if they become unable to work due to illness or injury Insurance typically pays between 60-70% of one’s full-time wage
Factors such as the length or severity of a disability influence the percentage of income a person will receive
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Homeowner’s Insurance Peril -an event which may cause a financial loss like fire, falling trees, lightning and others
Homeowner’s Insurance -combines property and liability insurance into one policy to protect a home from damage costs due to perils
Property Insurance -protects the insured from financial losses due to destruction or damage to property or possessions
Liability Insurance- protects the insured party from being held liable for other’s financial losses © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Renter’s Insurance Renter’s Insurance- protects the insured from loss of the contents of their dwelling rather than the dwelling itself • Necessary because a landlord’s insurance policy on the property DOES NOT cover the renter’s personal possessions • Covers major perils, provides liability protection, and provides for additional living expenses if the dwelling is rendered uninhabitable © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
While driving, you hit and injure a pedestrian in a crosswalk Automobile!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
After losing her husband to a heart attack, a wife is left alone to care for 2 children Life!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
You need a cast after breaking an ankle while roller-blading Health!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
Your rented apartment is broken into and your computer is stolen Renters!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
You are injured in an automobile accident and are unable to work for 2 months Disability!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
Your garage was destroyed by a fire which started by a lightning bolt hitting your home Homeowners!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
Sick at home from food poisoning after eating a carnival corndog
Nothing!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
While driving, you have brake failure. You hit a telephone pole and cause damage to the front of the car Automobile!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
While driving to the mall, you are pulled over and receive a speeding ticket Nothing!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
A daughter, who is financially responsible for her mother’s nursing home bills, dies from an undetected heart defect Life!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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What Covers This Risk?
A doctor diagnoses a child with tonsillitis during a visit to a clinic
Health!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 27 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Summary What is insurance? An arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk
What is the purpose of insurance? The purpose of insurance is to help individuals limit their financial losses when an accident occurs © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 28 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
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Summary What is a premium and a deductible? • 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
What are the different types of insurance? Life
Automobile Health
Homeowner’s/Renter’s Disability
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 29 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
