Unit 9 Insurance Unit 9 Vocabulary l l

Unit 9 Insurance

Unit 9 Vocabulary l l l l l Actuarial Table Actuary Agent Beneficiary Benefits Cash Value Claim Collision Coverage Comprehensive Coverage l l l l l Deductible Disability Insurance Exclusions Face Amount Grace Period Group Health Insurance Hazard Health Insurance Health Maintenance Organization (HMO)

Unit 9 Vocabulary l l l l l Homeowner’s Policy Insurance Insured Liability Coverage Liability Risk Life Insurance Loss No-fault Insurance Peril Personal Injury Protection (PIP) l Personal Risk l Policyholder l Preferred Provider Organization (PPO) l Premium l Proof of Loss l Property Risk l Renter’s Policy l Replacement Value l Rider l Risk

Unit 9 Vocabulary l l l l Risk Assumption Risk Avoidance Risk Management Risk Reduction Standard Policy Umbrella Liability Insurance Unearned Premium Uninsured/Underinsured Motorist Coverage (UM)

Insurance l. Risk Management ¡Insurance: A method of spreading the risk to protect assets and income. ¡Risk: Uncertainty as to a loss, increased by perils and hazards. There are three types of risk: l. Personal Risk: Possible losses involving your income or standard of living. (Life, health, disability, unemployment)

Insurance l. Risk Management l. Property Risk: Possible losses to personal or real property. (Fire, theft, wind, rain, accident, natural disaster) Liability Risk: Risks arising from your errors in judgment or negligence. (Driving accidents, personal injuries, business mistakes)

Insurance l. Risk Management ¡Risk Management: A plan to protect you from risks and reduce financial loss. The three step process for risk management is: l. Identify the risk l. Assess seriousness of the risk l. Handle the risk

Insurance l. Risk Management ¡How risk is handled. l. Risk Avoidance: Avoid situations that involve risk or that will increase risk. l. Risk Reduction: Take measures to lessen the frequency or severity of losses that may occur. Also involves risk transfer. l. Risk Assumption: Self-insure or pay for loses personally.

Insurance l. Homeowner’s Insurance ¡Homeowner’s Policy: Insurance that pays for damage to your property and belongings and provides liability coverage in case someone is injured on your property. Also covers: l. Attached structures such as a garage or shed l. Shrubs, trees, plants, fences l. Temporary housing for a limited period of time if forced to vacate the home due to a fire.

Insurance l. Homeowner’s Insurance ¡The amount of insurance carried should cover the home’s replacement value: The amount required to reconstruct the residence if it is completely destroyed. ¡Homeowner’s insurance does not cover damage caused by flooding, earthquake, nuclear accident, etc. Policies for these risks must be purchased separately.

Insurance l. Homeowner’s Insurance ¡Renter’s Policy: Protects your personal possessions that are kept on the premises of someone else’s property.

Insurance l. Automobile Insurance ¡All states have laws intended to keep off the highways drivers who cannot pay for any property damage or injuries they cause. ¡Minimum automobile insurance is required for registration of a motor vehicle. ¡Georgia’s minimum liability coverage is 15/30/15. l$15, 000 maximum person per accident. l$30, 000 maximum per accident. l$15, 000 maximum for property damage per accident.

Insurance l. Automobile Insurance ¡Cost of Automobile Insurance l. Premium: The amount a policyholder agrees to pay the insurance company for an insurance policy. l. Premiums are based on a number of factors: • • • Make, model, style and age of car. Driver classification: age, sex, marital status, driving record. Location (city, county) of driver and car. Distances driven Purpose of driving such as work.

Insurance l. Automobile Insurance ¡Cost of Automobile Insurance l. Premium discounts are available for: • • More than one vehicle insured with the same company Driver’s education training Good grades in high school (B average or higher) Non-smokers

Insurance l. Automobile Insurance ¡Cost of Automobile Insurance l. Driving Record includes: • Infractions: Parking ticket, failure to come to a complete stop, improper left turn, etc. • Misdemeanors: Offenses that involve the arrest of the driver such as speeding, driving without a license, reckless driving, etc. • Felony: Drunk driving, leaving the scene of an accident, etc. • All of these events will result in an increase in premiums and remain a part of your driving record for a minimum of three years.

Insurance l. Automobile Insurance ¡Types of Automobile Insurance Coverage l. Coverage: Protection provided by the terms of an insurance policy. l. There are five basic types of automobile insurance coverage. l. All five bought under one policy is considered full coverage.

Insurance l. Automobile Insurance ¡Types of Automobile Insurance Coverage l. Liability Coverage • Liability Coverage: Protects the insured against claims for personal injury or damage to another person or their property. • The insured receives nothing for losses either personal injury or property. • All states require all drivers to carry liability insurance. l. Collision Coverage • Collision Coverage: Covers the cost or repairing or replacing the car of the insured even if he or she is at fault. • Most collision coverage has a deductible: the amount paid by the insured before insurance pays. • The smaller the deductible the more expensive the insurance.

Insurance l. Automobile Insurance ¡Types of Automobile Insurance Coverage l. Comprehensive Coverage • Comprehensive Coverage: Covers damage to your car from events other than collision. • These events include fire, theft, tornado, hail, water, falling objects, natural disasters, acts of vandalism, etc. • Usually there is a small or no deductible for comprehensive.

Insurance l. Automobile Insurance ¡Types of Automobile Insurance Coverage l. Personal Injury Protection (PIP) • Personal Injury Protection (PIP): Pays for medical, hospital, and funeral costs of the insured and his or her family members and passengers, regardless of fault. • If the insured is injured as a pedestrian or bicyclist, this PIP insurance will pay the medical costs. • Cost of this insurance can be reduced by buying cars with air bags, antilock brakes, and other safety devices that lower the risk of injury.

Insurance l. Automobile Insurance ¡Types of Automobile Insurance Coverage l. Uninsured/Underinsured Motorist Coverage (UM) • Uninsured/Underinsured Motorist Coverage: Protects the insured in the event he or she sustains bodily injury because of the acts of an uninsured or underinsured motorist. • An uninsured motorist does not carry required insurance. • An underinsured motorist has policy limits that are too low to cover all of your injuries. • It pays for car rental, medical, and other costs that would have been paid by a fully insured motorist. • Protects the insured as a pedestrian if he or she is hit by an uninsured motorist.

Insurance l. Automobile Insurance ¡No-Fault Insurance l. No-Fault Insurance: Drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company, regardless of who is at fault. l. The idea behind no-fault is that it could take years to settle a case and determine who is at fault. l. Georgia is not a no-fault state. l. Florida is a no-fault state.

Insurance l. Umbrella Liability Insurance: Used to pay for damage caused by acts of negligence on the part of the property owner after coverage under other policies has been exhausted.

Insurance l. Health Insurance ¡Health Insurance: A plan for sharing risk of financial loss due to accidents or illnesses that result in large medical bills. l. Group Health Insurance: Health plans that share the risk among a large number of people, usually employees. l. Group health insurance is the most cost effective method of health insurance. l. Individual plans are expensive and you could be rejected due to preexisting conditions.

Insurance l. Health Insurance l. State high-risk insurance pools are available for people who would otherwise be uninsurable but, the premiums are very high. l. Supplemental insurance pays the deductible, co-payments, and other unpaid expenses not covered by the primary policy however, the cost can be expensive in relation to the benefits received.

Insurance l. Health Insurance ¡There are three types of health coverage: l. Basic Health Coverage: Pays for physician care that does not involve surgery such as office visits, x-rays, laboratory tests, etc. l. Major Medical Coverage: Provides protection against the large and catastrophic expenses of a serious injury or illness such as surgery or transplants. l. Dental and Vision Coverage: • Dental covers basic procedures and annual checkups at 80% and major procedures at 50%. • Vision covers examinations and glasses.

Insurance l. Health Insurance ¡Private Health Plans: l. Preferred Provider Organization (PPO): Group of health care providers (doctors and hospitals) that band together to provide health services at a set fee. l. Health Maintenance Organization (HMO): A group plan offering prepaid medical services to its members. • Usually has its own facilities and provides a full range of medical services. • Members are restricted to choosing from the doctors on staff.

Insurance l. Health Insurance ¡Medicare and Medicaid: l. Medicare insurance coverage provided to those over age 65 (age 67 if born after 1960). l. Medicaid insurance coverage is provided to those who qualify for state welfare or other public assistance. l. Funded by employee payroll taxes (1. 45% of gross pay).

Insurance l. Income Protection Insurance ¡Also known as Disability Insurance: provides regular income during a period when a person is injured or ill and unable to work. l. Short term disability insurance provides benefits for up to two years. l. Long term disability insurance provides benefits for periods from over two years to retirement. l. It is the most overlooked type of insurance.

Insurance l. Income Protection Insurance ¡Types of Income Protection Insurance l. Individual Disability Insurance Policy (most expensive) l. Group Disability Insurance Policies l. Social Security Disability Coverage l. Worker’s Compensation Insurance l. Other types, such as Veteran's benefits

Insurance l. Life Insurance ¡Life Insurance: Protects dependents from loss due to death of an income provider. ¡Life insurance is based on mortality tables; young people pay lower premiums because their risk of death is lower.

Insurance l. Life Insurance ¡Types of Life Insurance l. Temporary Life Insurance: Also known as term insurance • Decreasing Term Insurance • Level Term Insurance l. Permanent Life Insurance • Builds cash value: amount of money available to the policyholder to borrow during the life of the policy or a discontinuation of the policy • Straight Life: Also known as whole life and premiums are paid throughout the life of the insured.

Insurance l. Life Insurance ¡Types of Life Insurance l. Permanent Life Insurance • Limited-Pay Life: Premiums are paid for a limited amount of time or until age 65 then the insured is covered for life • Universal Life: Part of the premium pays for insurance and part of the premium goes into a savings plan. • Variable Life: Part of the premium pays for insurance and part of the premium goes into an investment plan.