Bus 12 insurance oct 28, 2010


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  • Talk about what insurance deals with – Risk
  • First Define Insurance, then play the video to provide an overview
    The Lecture will reinforce the information contained in the Video
    ( 6 ) mins - Play Video – Insurance Overview
    Talk about what insurance deals with – Risk
  • What is an insurable loss?
    The risk of loss must be definable & Measurable
    There must be a large base to insure – to spread potential losses
    The potential loss must be predictable
    The loss must be an accident – if something is certain to happen or if it is expected to happen = it is not an insurable event
    The loss must not be Catastrophic
  • What is Risk?
    Possibility of an adverse outcome
    If there the chance of loss is uncertain, there is risk.
    Ironically, if loss is certain, there is no risk, the loss will occur
  • Why are they important ?
    What would happen if they were injured or died – who is at risk ?
    Who would suffer if something happened ?
  • Why are they important ?
    What would happen if they were injured or died – who is at risk ?
    Who would suffer if something happened ?
  • Two primary forms of Life Insurance:
    Term & Permanent
    Provides cash upon the death of the insured
    Term Insurance
    Most policies are Term
    Insures for a specific time period
    Less expense than permanent insurance
    Very few renew past age 65
    Permanent Insurance
    In-force past age 65 – making it a tax payment vehicle for large estates with potential inheritance tax due
    2 primary forms: whole life & universal life
  • What is Homeowner insurance?
    Typically required by your lender
    Typically (2) Sections to a policy:
    Section 1 – Coverage (with tons of caveats)
    Other structures
    Contents = Personal Property
    Loss of use
    Section 2 – Personal Liability & Med pmts to others
    ( 1 )mins – Play Video – Save Money on Home Owner Insurance
  • Annuities are designed to do (2) things:
    Provide an income source so that the holder never outlives their income source
    Typically a tax-deferred vehicle – similar to an IRA for tax benefit
    Various forms
  • It is important that the insurance company will be there to honor claims – thus financial strength is critical
    Rating agencies to determine financial strength:
    Fitch, Moody, S&P, AM Best
    IMSA – association monitoring its members ability to operate ethically, lending credibility and hopefully with long term staying power
    National Association of Insurance Commissioners (NAIC) developed ratios for risk at insurance companies to meet = Risk based capital ratio
    Asset, Credit, Underwriting, off-balance sheet risks
    MF Act of 1945 – established state regulation of the insurance industry
  • 1. Health insurance – after the deductible is paid by the insured; the insurance company and the insured shares the cost of incurred expenses – usually in a predetermined manner: eg 80/20 – typically each covered item may have a different ratio
  • Personal Auto Policy (PAP) – (4) General areas of coverage
    Liability Insurance
    Covers potential damage to others caused by the insured
    Medical payments Coverage
    Pays medical expenses of insured & family
    Uninsured motorist Coverage
    Covers when the other party has limited or not insurance
    Physical damage, loss or comprehensive coverage
    Covers damage or loss of your car
  • Bus 12 insurance oct 28, 2010

    1. 1. Insurance October 28, 2010 Bus 12 – Money Matters R. Okumoto
    2. 2. o What is Insurance? o What is Insurance to you? o Who is Important to you ? o What is Important to you ? o How to Buy and Select Insurance Lecture TopicsLecture Topics Bus 12 – Money Matters R. Okumoto
    3. 3. “ If there were no risk in the world, then there would be no need for insurance” Insurance Defined:  Insurance is a financial arrangement with two primary characteristics:  Risk of financial loss is transferred from an individual to a group  Losses are equitably shared by all members of the group What is Insurance?What is Insurance?
    4. 4. Insurance is Legal Gambling! Its foundation is based on Probability Theory o The Formula is simple: o The Insurance company determines if a loss is insurable o You pay your premium for your insurance coverage o The Insurance company invests your money o The Insurance company waits for claims o Both sides are betting or hoping for no losses or claims What is Insurance?What is Insurance?
    5. 5. Video 1Video 1 Bus 12 – Money Matters R. Okumoto Insurance Overview
    6. 6. “ Peace of Mind” “Source of Security” “Allows you to sleep at night” What is Insurance to You?What is Insurance to You?
    7. 7. Insurance is purchased to manage the (3) basic rules of risk: 1. Do not risk more than you can afford to lose 2. Consider the odds of loss 3. Do not insure small items (costs) Why Buy Insurance?Why Buy Insurance?
    8. 8. o Family? o Friends? o Pets? o People who work for you? o People who employ you? Who is Important to you?Who is Important to you?
    9. 9. o Health? o Life? o Home? o Car? o Your Earnings? What is Important to you?What is Important to you?
    10. 10. o Life Insurance o Health / Medical Insurance o Disability Insurance o Long-term Care Insurance Protect You and Your FamilyProtect You and Your Family
    11. 11. Video 2Video 2 Bus 12 – Money Matters R. Okumoto Term versus Whole Life Insurance
    12. 12. Video 3Video 3 Bus 12 – Money Matters R. Okumoto Susie Orman on Life Insurance
    13. 13. Video 4Video 4 Bus 12 – Money Matters R. Okumoto How Health Insurance Works
    14. 14. o Home Owner Insurance o Renter Insurance o Auto Insurance Protect Your PropertyProtect Your Property
    15. 15. Video 5Video 5 Bus 12 – Money Matters R. Okumoto Save Money on Homeowners Insurance
    16. 16. Video 6Video 6 Bus 12 – Money Matters R. Okumoto Save Money on Car Insurance
    17. 17. o Annuities o Permanent Life Insurance Protect Your RetirementProtect Your Retirement
    18. 18. o Criteria for Selection: o Rating Agencies o Financial Size o Age of firm How to Select InsuranceHow to Select Insurance CompaniesCompanies
    19. 19. o Premium o Death Benefit Value o Term Insurance o Permanent Insurance o Whole Life o Universal Life Key Life Insurance TermsKey Life Insurance Terms
    20. 20. o Coinsurance o Co-Payment & Deductible o Covered Expenses / Exclusions o Preexisting Condition o Major Medical Coverage o HMO o PPO Key Medical Insurance TermsKey Medical Insurance Terms
    21. 21. Video 7Video 7 Bus 12 – Money Matters R. Okumoto Co-Pay And Coinsurance
    22. 22. Video 8Video 8 Bus 12 – Money Matters R. Okumoto PPO versus HMO
    23. 23. SPECIFIC TO CARS o Part A – Liability Coverage o Part B – Medical Payment Coverage o Part C – Uninsured Motorist Coverage o Part D – Physical Damage or Loss Coverage Key Property & CasualtyKey Property & Casualty Insurance TermsInsurance Terms
    24. 24. Insurance October 28, 2010 Bus 12 – Money Matters R. Okumoto