PROTECTING YOUR WEALTH

Auto and Homeowners Insurance Health and Disability Insurance Life Insurance

AUTO AND HOMEOWNERS INSURANCE I can… Explain the role of risk management Outline provisions of auto insurance Describe financial coverage provided by homeowners insurance

BACKGROUND ON INSURANCE Property Insurance ensures that damages to home and auto are covered and personal assets are protected from liability Liability- you are required to pay someone for damages that you caused Primary function of insurance- maintain existing level of wealth Benefit of insurance is peace of mind knowing your assets are protected

MANAGING RISK In the context of insurance, Risk- exposure to events or perils that can cause financial loss Risk management are decisions about whether and how to protect against risk, alternatives include: Avoid risk reduce risk insurance against risk

AVOID RISK Avoid risk of property damage if you dont own property If you lease a car you are still expose to liability and financial loss if an accident Exposed to financial loss if you require medical attention or become disabled

REDUCE RISK Purchase a small home rather than a large home in order to reduce the maximum possible financial loss Purchase an inexpensive car to limit possible financial loss due to property damage Getting periodic health check ups

INSURE AGAINST RISK If you cannot avoid or reduce risk and you do not want to be exposed to a financial loss Premium is the cost of obtaining insurance

WHAT IMPACT DOES THE ECONOMY HAVE ON THE DECISION TO INSURE AGAINST RISK? Give one, get one. Think about this question and develop an answer. Then, turn to your partner and discuss both of your answers.

ROLE OF INSURANCE COMPANIES Offer insurance policies that can protect you against financial loss. Many different types of insurance Insurance companies generate revenue from receiving payments for policies Insurance underwriters are hired to calculate the risk of specific insurance policies, decide what policies to offer, and what premiums to charge.

EventFinancial LossProtection You have a car accident and damage your car Car repairsAuto Insurance You have a car accident in which another person in your car is injured Medical bills and liabilityAuto Insurance You have a car accident in which another person in the other drivers car is injured Medical bills and liabilityAuto Insurance Your home is damaged by a fireHome repairsHomeowners Insurance Your neighbor is injured while in your home Medical bills and liabilityHomeowners Insurance You become ill and need medical attention Medical billsHealth Insurance You develop an illness that requires long-term car Medical billsLong-term care Insurance You become disabledLoss of incomeDisability insurance You die while family members rely on your income Loss of incomeLife Insurance

ROLE OF INSURANCE AGENTS Insurance agent recommends insurance policies for customers Captive (exclusive) agent works for one particular company ex. State Farm insurance agents Independent agent represents many different insurance companies

AUTOMOBILE INSURANCE Insures damage to an automobile and expenses associated with accidents Protects your car and limits your potential liabilities (expenses due to an accident) Prices vary between states Much larger in highly populated states Insurance policy is a contract between an insurance company and policyholder Auto insurance policy specifies the coverage provided by the insurance company for a particular individual and vehicle Bodily insurance liability coverage protects against liability associated with injuries caused by the policyholder

BASIC TYPES OF AUTO INSURANCE Liability Bodily injury liability Property damage liability Uninsured Motorists Underinsured Motorists Collision Comprehensive

HOW MUCH DOES AUTO INSURANCE COST? Factors that affect your auto insurance premium… Value of a car Repair record of the car Your age Your mileage Your driving record Your location Your driver training Your school performance

HOW CAN YOU LOWER YOUR INSURANCE Get good grades Choose your wheels carefully Consider the age and condition of your vehicle Consider letting your parents insure you on their policy Ms. Vandiver says…Dont text and drive

COVERAGE LIMITS ON YOUR POLICY Policy may show 50/100/25 That means… $50,000 of bodily injury liability if one person is injured $100,000 total for all bodily injury liabilities for all injured $25,000 of property damage coverage

HOMEOWNERS INSURANCE Provides insurance in the event of property damage, theft, or personal liability Protects most valuable assets but limits potential expenses associated with a home Provides a certain amount of liability coverage, which pays for injury or death of others caused by you on your property

WHAT ELSE DOES HOME INSURANCE COVER? The building/residence Home furnishings Most personal belongings Lawn, trees, and shrubs in limited cases Garage Some external structures, like sheds Fence Swimming pool

WHAT ARE PERILS? Things or events that can damage or destroy a home or its contents, a homeowners policy may cover these perils: Fire Lightening Wind Hail Theft Explosion Smoke Glass breakage Vandalism Riot Falling aircraft DOES NOT COVER FLOOD!

PROPERTY DAMAGE Cash-value policy pays you for the value of the damaged property after considering its depreciation (wear and tear) Replacement cost policy pays you for the actual cost of replacing the damaged property

ADDITIONAL COVERAGE: PERSONAL PROPERTY Normally covers furniture, computers, clothing up to a specified amount Home inventory includes detailed information about your personal property that can be used when filing a claim Create a list of personal assets and estimate the market value of each, take pictures or video of items Personal property floater (personal articles floater) is an extension of the homeowners policy that allows you to itemize your valuables, if assets are very valuable and are not fully covered by your policy

HOW MUCH DOES HOMEOWNERS INSURANCE COST? Factors that affect the premium of homeowners insurance policy: Value of insured home Deductible Location Degree of protection Discounts

HOW CAN YOU LOWER THE COST OF HOMEOWNERS INSURANCE? Improve protection Use one insurer for all types of insurance Bundling discounts Stay with the same insurance company Shop around

WHAT DOES RENTERS INSURANCE COVER? Renters insurance is a policy that protects your possessions within a house, condo, or apartment that you are renting Does not insure the structure itself because the insurance is for the renter only, not the property owner Covers personal assets such as furniture, television, computer equipment, and stereo equipment

ETHICAL DILEMMA You teach Personal Finance at a local community college. The state in which you teach requires proof of liability insurance in order to renew your license plates. During the discussion of this topic in class, several students admit that they obtain a liability policy just prior to the renewal of their license plates and then cancel it immediately thereafter. They do this because they know that the state has no system for following up on the cancellation of the liability policies once the license plates are issued. These students, who are out of work as a result of a local plant shutdown, indicate that they cannot afford to maintain the insurance, but they must have access to cars for transportation o Write a paragraph discussing whether you consider the conduct of the students to be unethical. o How does the conduct of these students potentially impact other members of the class who maintain liability insurance on their vehicles?

QUIZ OVER HOME AND AUTO 3/28 Includes the slides above and the vocabulary

HEALTH AND DISABILITY INSURANCE I can… Identify and compare the types of private health care plans Explain the use of government health care plans Describe long-term care insurance Explain the benefits of disability insurance

LIFE INSURANCE I can… Describe the types of life insurance that are available Identify the factors that influence insurance needs Review the factors that affect life insurance premiums Examine the decision of whether to purchase life insurance Explain settlement options available to a beneficiary