Per.fin.7.01 p pt.atypes of insurance

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Per.fin.7.01 p pt.atypes of insurance

  1. 1. 1.10.1.G1 TYPES OF INSURANCE “Take Charge of Your Finances” Advanced Level © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 1Funded 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
  2. 2. 1.10.1.G1 WHY IS IT IMPORTANT TO HAVE INSURANCE? Emergency savings - at least six months of expenses set aside to cover costs of unexpected events Risk - chance of loss from an event that cannot be is managed by entirely controlled Insurance - transfers risk from anWhat are examples of unexpected individual to an events that may result in a insurance organization financial loss? © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 2 - Types of Insurance – Slide 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
  3. 3. 1.10.1.G1 INSURANCE POLICY Coverage - The risks covered and amount of money paid for losses under an insurance policy Policyholder - Person who owns the policy Premium - Money paid to purchase the policyExperts say that buying insurance is buying financial security. Do you think this is true? Why or why not? © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 3 - Types of Insurance – Slide 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
  4. 4. 1.10.1.G1AN ILLUSTRATION OF HOW INSURANCEWORKS With a 1% chance that any one of But, no one them could get sick knows who will and require $10,000 get sick in medical careIf each person pays $100 99 people do not collect into a “pool” they will So, everyone gives up anything, but they gaincollectively have $10,000 $100, but nobody peace of mind and to cover the medical loses more than $100 important protection costs of the person who gets sick against a large loss Insurance shifts the risk of big loss from the individual to the insurance company © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 4 - Types of Insurance – Slide 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
  5. 5. 1.10.1.G1 THE BENEFITS OF INSURANCE Payments received from an Property & Liability insurance policy can far exceed the premiums paid Life Health Provides financial security and peace of mind Long-term Disability CareWhy is the best outcome to have insurance but never collect on it? © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 5 - Types of Insurance – Slide 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
  6. 6. 1.10.1.G1 THE INSURANCE PROCESS Claim - paperwork submitted to Event occurs insurance organization describing resulting in loss the accident, illness or injury Deductible - amount of moneyRemaining amount Policyholder paid out of pocket by policyholderowed is paid by co- makes claim to insurance (if before the insurance coverage insurance begins applicable) organization Co-insurance - amount of money, after deductible, that is paid jointly Insurance by the insured and the insurance If so, policyholder organization company pays a deductible determines if event is covered by policy © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 6 - Types of Insurance – Slide 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
  7. 7. 1.10.1.G1 LOUISE’S ACCIDENT Louise pays the first $500 of any covered Even with medical care plus insurance 20% of the remaining Louise still costs needs funds to Louise is in an Louise pays $500 + 20% of pay the accident resulting in a the remaining $4,500 for a deductiblewhat $5,000 medical total of $1,400 and co- if… insurance procedure that is The insurance company pays covered by insurance $3,600 What would Louise’s options have been if she did not have insurance? © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 7 - Types of Insurance – Slide 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
  8. 8. 1.10.1.G1 YOU DO THE MATH! Carlos was involved in an automobile accident that resulted in $3,788 worth of damage to his car.How much does Carlos pay and how much does the insurance organization pay?Carlos has a property How much does Carlos pay? $500and liability insurance policy with a $500 deductible and 0% How much does his $3,288 co-insurance insurance organization pay? © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 8 - Types of Insurance – Slide 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
  9. 9. 1.10.1.G1 WHICH INSURANCE POLICY WOULD YOU CHOOSE? Janet wants to make sure she has the best health insurance policy. She shopped around and received multiple quotes. What are the pros and cons of each policy? Current Policy New PolicyPremiumamount/month $300 $200Deductibleamount $200 $2000Co-insurance 20% owed by policyholder 0% owed by policyholder 80% owed by insurance 100% owed by insuranceamount organization organization © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 9 - Types of Insurance – Slide 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
  10. 10. 1.10.1.G1WHY DO INSURANCE POLICIES INCLUDEDEDUCTIBLES AND CO-INSURANCE?Dollars paid from an insurance policy are not intended to make a person better off than before the loss happened © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 10 Family Economics & Education – Updated 2012 - 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
  11. 11. 1.10.1.G1SOURCES OF INSURANCEIn most cases, individuals acquire insurance from a combination of sources Employer Special programs for those who Health, disability, qualify and during and occasionally catastrophes life insurance Individual GovernmentIf an employer does not provide insurance, it may be acquired individually © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 11 Family Economics & Education – Updated 2012 - 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
  12. 12. 1.10.1.G1 EMPLOYER PROVIDED INSURANCE Employee benefits - products or services that add extra value for employees beyond wages In-kind income – the provision of a Employer product or service rather than cash Employee Payroll deduction• Policies may be available to the employee’s family members (usually for additional fees)• No income taxes are paid on the in-kind income © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 12 Family Economics & Education – Updated 2012 - 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
  13. 13. 1.10.1.G1GOVERNMENT PROGRAMS Provide basic insurance as a part of the social safety net to protect citizens from economic hardship  Social Security, Medicare, Medicaid Many programs require a work history and employer provided participation to be eligible  Unemployment insurance, worker’s compensation Can address specific catastrophes  Hurricane Katrina © Family Economics & & Financial Education– Updated May 2012 – – Types of InsuranceSlide 13 13 © Family Economics Financial Education – Updated May 2012 Types of Insurance – – Slide Funded by a by a grant from Take Charge America, Inc. to the NortonSchool of Family and Consumer Sciences Take Charge America Institute at thethe University of Arizona Funded grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at University of Arizona
  14. 14. 1.10.1.G1 HEALTH INSURANCE Employer Health insurance - provides Government Provided by And/or money to If dollars health carehealth insurance is pay for are limited, extremely important to protect Individual against high medical bills Risks MentalCovered health Hospital treatment Preventative bills care Doctors’ Vision Prescriptio visits Medical care n drugs procedure Dental s care © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 14 Family Economics & Education – Updated 2012 - 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
  15. 15. 1.10.1.G1 WHAT IF A PERSON CANNOT WORK OR LIVE INDEPENDENTLY? Payment for Payment to replace extended care earnings during when a person times when cannot live workers cannot Why are both independently (but work due to illness disability and doesn’t need to be or injurylong-term care hospitalized) insurance Provided by important? employers, Provided by individuals, and/or individuals government © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 15 Family Economics & Education – Updated 2012 - 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
  16. 16. 1.10.1.G1PROPERTY & LIABILITY INSURANCE Property insurance - Pays for loss payment to insured person if to insured his/her property is damaged person or destroyed by an accident Liability insurance - payment to others if a member of the Pays for injury insured household accidently or loss to causes harm to other people others or property Provided by individuals © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 16 Family Economics & Education – Updated 2012 - 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
  17. 17. 1.10.1.G1TYPES OF PROPERTY & LIABILITY INSURANCE Automobile insurance - payment for liability and property insurance on a vehicle If a person drives Homeowners insurance - an automobile, payment to cover liability automobile liability losses and damage/loss of insurance is home and its contents required by law Renters insurance - payment for damage/loss of property in a rental unit in addition to liability losses © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 17 Family Economics & Education – Updated 2012 - 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
  18. 18. 1.10.1.G1 LIFE INSURANCE Provided by employers and/or individuals Life insurance- payment to beneficiaries if an May cover paid andinsured person dies unpaid work formerly done by the individual Beneficiary- Household production- someone who unpaid work, such as receives insurance money if the child care or meal insured person dies preparation Dependent - When would it be someone who necessary to purchase relies on someone life insurance? else for money income and care © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 18 Family Economics & Education – Updated 2012 - 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
  19. 19. 1.10.1.G1IN REVIEW… Insurance is not Insurance may be Insurance is an intended to make animportant part of a individual better off acquired from financial plan than before the event multiple sources Even with insurance, There are several an individual should types of insurance still have funds to pay the deductible and co- for specific insurance purposes © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 19 Family Economics & Education – Updated 2012 - 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
  20. 20. 1.10.1.G1WHAT COVERS THIS RISK? You are having a baby and need medical care Health Insurance © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 20 Family Economics & Education – Updated 2012 - 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
  21. 21. 1.10.1.G1WHAT COVERS THIS RISK? You are unable to work for six months and need help payingyour expenses while you’re out of work Disability Insurance © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 21 Family Economics & Education – Updated 2012 - 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
  22. 22. 1.10.1.G1WHAT COVERS THIS RISK? You are elderly and need assistance from medical professionals to continue living at home Long-term Care Insurance © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 22 Family Economics & Education – Updated 2012 - 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
  23. 23. 1.10.1.G1WHAT COVERS THIS RISK? Your home is destroyed by a tornado and you need to rebuild Property Insurance Specifically Homeowners © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 23 Family Economics & Education – Updated 2012 - 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
  24. 24. 1.10.1.G1WHAT COVERS THIS RISK? The car you are driving causes an accident that injures someone else Liability Insurance Specifically Automobile © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 24 Family Economics & Education – Updated 2012 - 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
  25. 25. 1.10.1.G1WHAT COVERS THIS RISK? A sudden death of a familymember results in loss of income Life Insurance © Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 25 Family Economics & Education – Updated 2012 - 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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