how insurance can help you take charge of your finances€¦ · 7.10.1.g1 insurance essentials how...
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7.10.1.G1
Insurance Essentials
How insurance can help you take
charge of your finances
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© 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
7.10.1.G1
What is Insurance?
Insurance is an arrangement between an individual and an
insurer (insurance company) to protect the individual against risk
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© 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
7.10.1.G1
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
History of Insurance
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© 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
7.10.1.G1
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
Why is it important to
have insurance?
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© 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
7.10.1.G1
What is an Insurance
Policy? A policy is a contract
between the individual
and the insurer
specifying the terms of
the insurance
arrangements
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
A policyholder is
the person who
purchases the
policy
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© 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
7.10.1.G1
Types of Insurance
Types of Insurance
Automobile
Health
Life Disability
Homeowners/
Renters
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© 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
7.10.1.G1
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
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© 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
7.10.1.G1
Types of Auto Insurance
Liability Insurance covers the insured if injuries or damages are caused to other people or
their property
It is the minimum amount
of insurance required by
law for automobiles
Medical Payment Insurance
covers injuries sustained by
the driver of the insured
vehicle or any passenger
regardless of fault
It also covers family
members injured as
passengers in any car,
pedestrians, or bicyclists
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© 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
7.10.1.G1
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)?
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© 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
7.10.1.G1
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
Keeping Your Auto Insurance
Premiums Low
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© 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
7.10.1.G1
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
Health care costs are extremely high
Large medical expenses could deplete an individual’s savings
Why would it be important to have health insurance?
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© 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
7.10.1.G1
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
Health Insurance
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© 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
7.10.1.G1
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-longevity-
game
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© 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
7.10.1.G1
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
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© 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
7.10.1.G1
Homeowner’s Insurance
Homeowner’s Insurance -combines property and
liability insurance into one policy to protect a home from damage costs due to
perils
Peril -an event which may
cause a financial loss like
fire, falling trees,
lightning and others
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
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© 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
7.10.1.G1
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
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© 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
7.10.1.G1
What Covers This Risk?
While driving, you hit and injure a pedestrian in
a crosswalk
Automobile!
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© 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
7.10.1.G1
What Covers This Risk?
After losing her husband to a heart attack, a wife
is left alone to care for 2 children
Life!
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© 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
7.10.1.G1
What Covers This Risk?
You need a cast after breaking an ankle while
roller-blading
Health!
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© 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
7.10.1.G1
What Covers This Risk?
Your rented apartment is broken into and your
computer is stolen
Renters!
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© 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
7.10.1.G1
What Covers This Risk?
You are injured in an automobile accident and
are unable to work for 2 months
Disability!
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© 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
7.10.1.G1
What Covers This Risk?
Your garage was destroyed by a fire which
started by a lightning bolt hitting your home
Homeowners!
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© 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
7.10.1.G1
What Covers This Risk?
Sick at home from food poisoning after
eating a carnival corndog
Nothing!
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© 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
7.10.1.G1
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!
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© 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
7.10.1.G1
What Covers This Risk?
While driving to the mall, you are pulled over
and receive a speeding ticket
Nothing!
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© 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
7.10.1.G1
What Covers This Risk?
A daughter, who is financially responsible for her
mother’s nursing home bills, dies from an
undetected heart defect
Life!
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© 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
7.10.1.G1
What Covers This Risk?
A doctor diagnoses a child with tonsillitis
during a visit to a clinic
Health!
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© 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
7.10.1.G1
Summary
What is insurance?
What is the purpose of insurance?
An arrangement between an individual (consumer)
and an insurer (insurance company) to protect the
individual against risk
The purpose of insurance is to help individuals limit
their financial losses when an accident occurs
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© 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
7.10.1.G1
What is a premium and a deductible?
What are the different types of insurance?
Summary
• 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
Automobile
Health
Life
Disability
Homeowner’s/Renter’s