Insurance Property Health Life Personal Risks and Insurance

Insurance Property, Health, Life

Personal Risks and Insurance

Insurance • Method of spreading the risk to protect assets and income

Risk • Possibility of a loss that faces a person or property covered by insurance

Insurer • Business that charges a fee to issue a policy to protect individuals and companies against loss

How Insurance Companies Make Money • How Does Insurance Work video • Premiums are collected under the assumption that only a few policyholders will have financial losses. • The amount of premiums collected will be more than what is paid out

Indemnification • Putting the policyholder back in the same financial condition they were in before the loss occurred

Probability • Mathematics of chance • Root of indemnification • Every event can be described in terms of probability or likelihood of something happening

Risks 3 major categories

Personal Risks • Involve income and standard of living • Type of insurance to purchase – – Life Health Disability Unemployment • You insure against personal risk when others are depending on your income

Property • Possibility of loss or harm to property – Home, car, possessions damaged or destroyed

Liability • Protecting your income and your assets from liability arising out of your errors and negligence

Risk Management • Organized strategy for protecting assets and people to help reduce financial loss

Pure Risk • Always a chance of loss if certain events occur • Accidental, unpredictable, unavoidable • Financial loss can be determined

Speculative Risk • A risk in which there may be either a gain or a loss • Not accidental, not unpredictable, and not unavoidable • Uninsurable • Examples:

Insurable Interest • Any interest in life or property that if lost you would suffer financially

Property and Liability Insurance

Homeowners Face Three Basic Risks

Physical Damage • Damaged caused by hazards such as fire, wind, water, smoke • Covers attached buildings, shrubs, trees, plants

Loss or Theft Coverage • Threat of robbery, burglary, arson, vandalism • Protects household property and personal belongings that are in your home or with you when you are away from home—vacation, college

Liability • Protects against expensive lawsuits • All homeowners and landlords should carry • Homeowners are responsible for acts occurring on their property, even acts involving uninvited guests

Attractive Nuisance • Dangerous place, condition or object particularly attractive to children • Examples: – Swimming pools – Trampolines

Health and Life Insurance

Health Insurance • Plan for sharing the risk of financial loss due to accidents or illnesses that result in large medical bills

Group Health Insurance • Most common • Shares the risk among large group of people • All have same coverage • Greater coverage, lower premiums • Employers pay some or all of premium for employee

Individual Coverage • For those who don’t have group insurance • More costly

What A Good Health Plan Covers • Basic coverage for hospital and doctor bills • Cost of prescriptions • At least 120 days in hospital • Deductibles of $150/person & $450/family • Reasonable dental/vision care

Types of Health Insurance

Basic Health Insurance • Physician care, not involving surgery – Office visits, routine services • Hospital coverage – Room, board, drugs • Surgical – Surgeon fees – Surgery must be limited and necessary

Major Medical Expense • Protection against large and catastrophic expenses of a serious illness or injury • Coverage beyond basic health insurance

Dental and Vision

Health Plans

Preferred Provider Organization (PPO) • Group of health care providers who ban together to provide health services for set fees • Patients must choose doctors in group • Limits types of services provided and fees to be charged

Health Maintenance Organization (HMO) • Group plan offering prepaid medical care to members • Has own facilities • Must choose from doctors on staff at HMO • Main Idea: Preventative Medicine

Medicare • Health insurance for people currently 65 and older • Funded by employee payroll deductions

Medicaid • People who are qualified under state welfare and public assistance program

Life Insurance

Life Insurance • Protection from financial loss that might otherwise occur when someone dies • Purpose: protect others who are dependent on you as a source of income

Mortality Tables • Used to predict the likelihood of death occuring

Types of Life Insurance

Temporary Life • Aka term life • Protection for a specified period of time. • If insured dies after protection expires, no benefit

Permanent Life Insurance • Offers protection, plus cash value • Can be borrowed against • 4 types

Straight Life • Aka whole or ordinary

Limited Pay Life • Premiums paid for certain time, but coverage continues

Universal Life • Coverage and savings plan

Variable Life • Coverage with investment plan