1.3 PURCHASING CONSIDERATIONS Banking 9/13/2018 1.3 PURCHASING CONSIDERATIONS Discuss insurability and probability. Explain product options, price, and company ratings. GOALS Chapter 1

TERMS Insurability Product options Deductible

Insurance Scene Pg. 17 How can he demonstrate that he is a safe driver? Are there insurance discounts for safe drivers? If so, how do they work?

ARE YOU INSURABLE? Insurability The ability of an individual who has applied for insurance to be accepted by the insurer Insurer determines whether you are insurable and meet the company’s conditions to be insured. Insurer reviews factors such as: Health Occupation Lifestyle Age

ARE YOU INSURABLE? Insurers analyze the insurability factors and decide whether you are likely to file more claims than they would like to pay. If so, they will either refuse to sell you insurance or will charge high premiums.

PROBABILITY, INSURANCE, AND YOU To determine your insurability, the insurer draws heavily upon the laws of probability. Probability The branch of mathematics that measures the likelihood of some event occurring Life insurance is based upon probability, using Mortality (actuarial) tables Use probability to determine death rates

ARE YOU A RISK TO THE INSURER? To reduce cost to the insurer and keep premiums low as possible, a screen process is completed before an application for an insurance policy is approved. Insurers screen potential new policyholders. Personal characteristics (age, gender, family history) Lifestyle choices (smoke, points on driving record) Health insurance companies require evidence of insurability. You supply: Medical information Pre-existing medical conditions All questions must be answered honestly.

BEFORE YOU BUY You should analyze your specific needs: Determine what risks you face. Determine the causes of the risks. Identify ways to handle each risk. Make a plan of action.

PRODUCT OPTIONS Product options Special features added to a basic policy Allow for policy customization Usually increase the cost of premiums For example, options for an automobile insurance policy may include collision, car rental, and comprehensive coverages.

POLICY PRICING Obtain at least three quotes before buying insurance. Compare policies carefully and thoroughly. Search the Internet, Ask friends about their policies, contact different insurance companies and seek whatever discounts you can. Deductible The amount of money the insured agrees to pay in the event of a loss Prior to the insurer paying the rest of the claim amount Raising the deductible can reduce the cost of the policy.

COMPANY RATINGS To protect your investment and to ensure continuous insurance coverage, investigate the stability of your insurance company. You want to be sure the company is in stable financial health. Standard & Poor’s (S&P) A.M. Best Best 2 commonly insurance rating services.

ASK YOUR STATE Each state has an insurance department to regulate insurance. Educational material can be provided by your state.