MoneyCounts: A Financial Literacy Series Insurance Planning 11-A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214

Description Insurance eases financial burdens that can occur when disaster strikes. Insurance planning is to get a group to contribute financially to a fund specifically designed to help individuals recover in the case of an unexpected loss. 

Learning Outcome Understand the purposes and processes of insurance planning Discuss diverse types of insurance and think about what you need Discuss the ways of maintaining proper coverage but reducing insurance cost

Purposes of insurance planning Identify and analyze risk factors in life Seek proper coverage to attain a peace of mind if disaster strikes Transfer risk from an individual to a company Reduce the uncertainty of risk via pooling Insurance Planning

Appropriate plans for YOU Each person has different insurance needs tied to his/her unique situation Insurance planning is a  fluid process, never stagnant or frozen in time

Appropriate plans for YOU Age Family Health Economic Status Assets Profession

Types of Insurance Health & Medical Disability & Long-term Care Mortgage & Asset/Liability Business Life

Health and Medical Insurance Usually (not always) available through employment Many individuals have to seek private insurance For you and your family Most employers offer a choice between HMO (health maintenance organization) and TFSC (traditional fee service care) The cheaper the plan, the more the constraints are imposed on the consumer

Disability & long-term care insurance To replace a portion of your lost income when you are unable to work for an extended period of time Cover the high cost of medical services for the elderly Watch for cancellable versus non- cancellable policies

Life insurance Critical for individuals with family members to protect upon one's loss of life Surviving children, spouse, or other dependents can use the funds to maintain their standard of living, protect loss of assets, or repay debt The amount you would need is dependent on your family situation and what you aim to protect

Mortgage & other asset/liability insurance Not only to protect the asset, but also to protect the creditors in case of loss or need for replacement of the asset Owners, as well as renters, can also get insurance Based on your personal situation including personal, lawsuit, or umbrella liability coverage

Business insurance If you are self-employed, you would need to cover not only yourself, your family, and your loved ones, but also your business Many options available after you decide which risks you need to insure (based on your tolerance for risk)

Key terms Comprehensive means the policy covers all unless specifically excluded in the policy contract.  Premium is the money that the policyholder pays periodically for insurance coverage reflecting an expectation of loss Deductible means what is paid by the policyholder and is usually a portion of the insured loss

Reduce insurance cost Take time to fully understand each policy, ask questions, and compare alternatives Shop for insurance to protect your assets (home, car, boat, jewelry, belongings, etc.) Stay within your medical network whenever possible (approved providers and facilities) Explore high deductible plans, but increase your emergency fund to balance Avoid emergency room visits whenever possible Ask your doctor for less expensive facilities whenever possible Switch to generic drugs (compare ingredients) and use preferred pharmacies Get free preventive care Participate in wellness programs and keep good health Check to see if you qualify and participate in HSA (health saving plan) and FSA (flexible spending plan)

Ask questions before making decisions Is this procedure necessary? How can I pay? Do you have a second opinion? Is there a discount for cash payment? What is the roots of this aliment? What are the side effects of the medication? Any better, cheaper alternatives? Can I switch to generic medication? Do you accept my insurance plan? Can I get the quotes of different insurance plans? Can I receive an itemized bill?

Forecast your insurance budget 5. Review for governmental assistance as applicable for each age bracket and explore other private options. 3. Project your goals for each by adjusting, deleting, and adding insurance needs for each column. 2. Prepare columns by increments of 10 years, using your current age as a starting point. 1. List all of your current insurances and indicate the type and cost for each as a starting point. Current insurances Health/medical: A plan - $$ Life: B plan - $$ Mortgage: F plan - $$ 6. Calculate an average for your insurance budget needs for each decade of your life. 20 30 40 50 60 70 80 90 100 Goal 4. Assign a dollar amount cost for each forecasted insurance need. $$ Governmental assistant (calculate) Budget needs

MoneyCounts: A Financial Literacy Series Comments and questions 11A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214