Insurance Joan Koonce, Ph.D., AFC®, CPFFE Professor and Extension Financial Planning Specialist, University of Georgia

Presentation Overview Property and Casualty Insurance Automobile Homeowner’s Personal Umbrella Liability Disability Insurance Short-term Long-term Long-term Care

Old ‘Wise’ Saying What exactly does this mean? Is it true?

Property and Casualty Insurance Types of Automobile Insurance Bodily Injury and Property Damage Liability Required coverage in the amount of 25/50/25 in Georgia Medical Payments

Property and Casualty Insurance Uninsured and Underinsured Motorist Bodily Injury and Property Damage Collision and Comprehensive Deductibles Required by lenders if your car is financed

Property and Casualty Insurance Automobile insurance premiums based on the following: Automobile Driving record Zip code Martial status Age Gender Deductibles

Property and Casualty Insurance Homeowner’s Insurance Coverage Property Home Other detached buildings Personal property Landscaping Loss of use Liability Comprehensive personal liability Medical payments Property damage

Property and Casualty Insurance Homeowner’s Insurance Broad Form Homeowner’s Insurance Special Form Homeowner’s Insurance Renter’s Insurance Condominium Owner’s Insurance Older Homes Homeowner’s Insurance

Property and Casualty Insurance Homeowner’s Insurance Terms Replacement Cost/Value: amount necessary to repair, rebuild or replace an asset at today’s prices Current Market Value (CMV): Original purchase price minus depreciation, also referred to as actual cash value Riders or Floater Policies Inflation Protection

Property and Casualty Insurance Homeowner’s insurance premiums based on the following: Insured value of the home Insured value of the contents Age and location of the home Construction material of the home Number or perils covered Amount of liability coverage Deductible

Property and Casualty Insurance Personal Umbrella Liability Covers liability costs after the underlying automobile and homeowner’s policies have been exhausted Standard amount of coverage is $1 million although higher amounts can be purchased May need to increase liability coverage on automobile and homeowner’s policies

Likelihood of Disability Likelihood of long-term disability greater than premature death Estimated that 1 out of 3 persons will have a disability that lasts 3 months or more Estimated that 1 out of 10 persons will have a permanent disability before age 65 Source Dalton, M.A., Gillice, J.M., Dalton, J.F., & Langdon T.P. (2013). Fundamentals of financial planning (3rd ed.). St. Rose, LA: Money Education.

Disability Insurance Replaces 60 to 80 percent of your income if you are unable to work due to an illness or injury Benefit amount depends on income Maximum benefit amount

Disability Insurance Policy definitions and components Own occupation Any occupation Hybrid Partial disability Residual benefit

Disability Insurance Policy definitions and components Benefit period Elimination (waiting) period Pre-existing conditions Exclusions Limitations Additional plan benefits

Disability Insurance Two Types of Disability Insurance Short-term disability Long-term disability

Disability Insurance Short-term Benefit period from 2 to 6 months Elimination (waiting) period of a couple of weeks to 1 or 2 months Used to cover the elimination (waiting) period on long-term disability insurance

Disability Insurance Long-term Benefit period from a few (2-5) years or until retirement or death Elimination (waiting) period of 3 to 6 months or longer

Long-Term Care (LTC) Long term care is a variety of services that includes medical and non medical care for people who have a chronic illness, injury, disability or are experiencing limitations due to aging. Long term care helps meet health and/or personal needs.

Long-Term Care Myths About Long-term Care I'm too young to need it. My family will take care of me. Medicare or Medicaid will cover my bills. Health insurance will cover my bills. I can save enough on my own.

Long-Term Care Insurance Long-term care services are provided when a person cannot perform certain activities of daily living (ADLs) and/or is cognitively impaired.

Long-Term Care Insurance What are ADLs? Eating Bathing Dressing Transferring Toileting Continence

Long-Term Care Insurance What does long-term care insurance cover? Skilled, intermediate and custodial care Home care services, physical therapy, homemakers, home health aides Assisted living, adult daycare, other care in the community Alternate care (other physician recommended services) Respite care for the caregiver

Long-Term Care Insurance Premiums based on following: Person’s Age Person’s Health Rating Benefit Period Benefit Amount Elimination (Waiting) Period Inflation Protection Important policy features Guaranteed renewable Waiver of premium

Long-Term Care Insurance Types of Policies Reimbursement Policy Most common Reimbursed for actual charges up to policy limits Indemnity Policy Compensated based on what policy covers Partnership Policy Protects your assets if LTC benefits are exhausted

What Insurance Should You Buy? What insurance should you purchase? You have to decide for yourself. Insurance should be purchased when the likelihood of the financial loss occurring is small, but the size of the financial loss is large.

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