Personal Finance

Insurance 101

Learning Goal...

To be able to define terms relating to insurance.

What is Insurance??Insurance – an arrangement between an individual and an insurance company to protect the individual from risk.We buy insurance to help limit the financial losses when accidents occur.

Insurance VocabularyPolicy – a contract between the individual and the insurer specifying the terms of the insurance arrangement.Premium – the fee paid to the insurer to guarantee coverage.Deductible – the amount paid out of pocket by the policy holder for the initial portion of a loss before the insurance coverage begins.

Example...You pay money to have car insurance (Premium)When you get into an accident that is your fault, you must pay a certain amount before the insurance company picks up the rest (Deductible)The higher the deductible, the lower the premium

Learning Goal...

To be able to identify and explain the

importance of the 5 necessary types

of insurance.

Types of Insurance1. Automobile2. Health3. Life4. Disability5. Homeowner’s / Renter’s

Automobile Insurance4 Different types:

1.Liability (Required by law)Pays for bodily injury to other people, damage to property, court fees

2.Medical PaymentsPays for hospital bills for you and anyone riding in your car

Automobile Insurance4 Different types:

3.Uninsured MotoristHelps pay medical bills if hit by someone without insurance

Automobile Insurance4 Different types:

4.Collision/ComprehensivePays to repair your car if it was your fault or no other car was involved. Collision – deer, fence post, etcComprehensive is for non-driving risks such as hail, theft, flood, vandalism, etc.

Health InsuranceCovers medical costs if you are injured or become illEach policy is differentMost people receive health insurance from their employerChildren are covered up to the age of 19; unless they are attending college full time (23)

Life InsurancePays people who are dependent on someone else if that person diesUsually offered from an employer, but can (and should) purchase independently.Life insurance is usually very low in price compared to the coverage you receiveWhen should you get life insurance??

Life Insurance2 Types of Life Insurance

1.Whole LifeCoverage for lifeIncludes a savings plan

2.Term LifeCoverage for a specific period of time.MUCH cheaper than Whole Life

ALWAYS GO WITH TERM LIFE!!!

Disability InsuranceWill pay a percentage of your income from a job if you are sick or unable to work for long periods of time

Usually will pay between 60% and 70%

Also is a common insurance offered by an employer

Homeowner’s / Renter’s

Protects your home and possessions within the home from damage

Includes Fire, Storm, etc.Natural Disasters require a special insuranceTheft

Also covers liability if someone else is injured on your property and they sue

Learning Goal...

To be able to identify and explain the

importance of the 5 necessary types

of insurance.