Buying Insurance Chapter 22 2/17/2019

Chapter Objectives Define some common insurance terms List some ways to lower insurance costs Explain the importance of owning home insurance Describe the basic types of health, auto, and life insurance coverage Understand group and individual health insurance plans 2/17/2019

Insurance Basics Language of insurance Insurance policy Legal contract between person buying insurance (policyholder) and insurance company Policy explains: Who is covered Types of losses for which the company will pay Amounts the company will pay Cost of insurance Policies are long and technical but you should read it anyway and ask questions about any unclear parts before you sign it 2/17/2019

Insurance coverage Refers to losses that an insurance company agrees to cover Amount of coverage is the actual dollar amount that will be paid by the company in case of loss All insurance policies have a list of exclusions (losses or risks that are not covered). Benefit and beneficiary Benefit – money paid by the insurance company for a loss Beneficiary – who benefit is paid to (usually policyholder) 2/17/2019

Premiums Amount a policyholder pays for insurance Usually paid in installments rather than all at once Deductibles – portion of loss that you pay before insurance company pays remaining cost The higher deductible that you pay, the lower the cost of your premium 2/17/2019

Claim Oral or written notice to the insurance company to collect for a loss. Government insurance programs Unemployment Workers’ compensation Medicare 2/17/2019

Holding down insurance costs Know what type of insurance you want Call several insurance agencies in your area to ask about coverages and costs Ask about differences in premium costs with different deductibles. Consider paying higher deductibles in order to lower your premium costs Don’t buy more coverage than you need or less coverage than you need Last…like all industries, the insurance industry is in business to make money. They are less likely to insure you if they believe you are more likely to use the insurance. 2/17/2019

Home Insurance Renter’s insurance (Apartment) Homeowner’s insurance Covers your belongings up to a set amount, minus your deductible. Homeowner’s insurance Protects your house and its contents against losses due to fire and theft Doesn’t cover floods or earthquakes Supplemental insurance is available to cover these risks 2/17/2019

Automobile Insurance Liability Medical payments Collision Covers damage or injury for which you’re responsible to the other driver. Doesn’t cover your injuries or property damage to your car. Medical payments Covers medical expenses whether or not it’s your fault. Covers your passengers too. Collision Covers the cost of repairs to your car if it’s your fault. Also covers damage to your car if you’re in an accident caused by a driver who is uninsured. Comprehensive Theft, fire, vandalism…reasons other than an accident Uninsured motorist Protects you against drivers who do not have liability insurance. Optional insurance First…many states require by law that drivers have insurance. 2/17/2019

Handling auto accidents Stay calm Think clearly If possible, move your car to the side of the road Check for injuries If you’re not injured, get out of car to see whether anyone else is hurt Report the accident to the police If someone is injured, request an ambulance Record important information Be prepared with ID, insurance, car registration Explain the facts as you saw them. Avoid arguing with other driver 2/17/2019

Buying Automobile Insurance Shop Around Drive carefully Take driver education classes Buy only the coverage you need Raise your deductibles Take advantage of insurance discounts Try to get prices from at least three different companies. Some companies offer safe-driver discounts to policyholders with good driving records 5. If you have a good driving record and can afford higher deductibles, this will save you money. 2/17/2019

Types of health coverage Major medical coverage Covers hospital and medical expenses Required to pay a deductible Able to choose any hospitals and physicians you prefer Health maintenance organizations (HMO) No deductibles Small co-pay for doctor visits Checkups and well-baby visits are covered Choice of physicians is limited Preferred provider organizations (PPO) More freedom of choice for doctors Often pay higher premiums and co-pays 2/17/2019

Types of plans Group plans Individual plans Offered through employers Keep premium costs down by spreading the risk over a large number of people. Individual plans Students living on their own, self-employed workers, retirees Disability coverage – pays a percentage of your salary if you can’t work Short-term Long-term 2/17/2019

Types of life insurance Term Protects your dependents if you die. Has no cash value and provides coverage for a set number of years. Beneficiary receives face value of policy Cash-value Part insurance and part investment You can borrow against the total amount of premiums paid on a cash-value policy Whole life insurance Has a savings component where you can build a reserve of money that you can borrow against or collect when you retire. First…if others in your household count on your salary, life insurance will provide money to them in case you die. Some employers offer life insurance as a benefit, but many people buy additional coverage as well. 2/17/2019

Buying life insurance Amount of premium will depend on factors such as age, health, and type of policy you buy Should you buy it? How much do you need? Depends on how old you are, whether you have dependents, how much you can afford, and how much your family will need to pay off your debts if you die Tips on buying life insurance Shop around (prices vary), talk to others 2/17/2019