1. 7.10.1.G1 Types of Insurance Essentials The Essentials to Take Charge of Your Finances

2. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What is Insurance? Risk is the uncertainty about a situation’s outcome- may be an unpredictable event which leads to loss or damage Insurance is an arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk

3. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Helps limit financial losses when an accident occurs Helps an individual/family be prepared for the unexpected Plays a large role in most financial management plans Why is it important to have insurance?

4. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What is an Insurance Policy? A policy is a contract between the individual and the insurer specifying the terms of the insurance arrangements A premium is a fee paid to the insurer to be covered under specified terms outlined in the policy A deductible is the amount paid out of pocket by the policyholder for the initial portion of a loss before the insurance coverage begins- the deductible is stated in the policy A policyholder is a consumer who purchases the policy

5. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Types of Insurance Automobile Health Life Disability Homeowners/ Renters

6. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Automobile Insurance Automobile Insurance - arrangement between an individual (consumer) and insurer (insurance company) to protect the individual against risk from automobile accidents Liability insurance Medical payment insurance Uninsured or underinsured motorists insurance Physical damage insurance Collision Comprehensive

7. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Types of Auto Insurance Liability Insurance covers the insured if injuries or damages are caused to other people or their property It is the minimum amount of insurance required by law for automobiles Medical Payment Insurance covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault It also covers family members injured as passengers in any car, pedestrians, or bicyclists

8. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Types of Auto Insurance Uninsured or Underinsured Motorists Insurance covers injury or damage to the driver, passengers, or the vehicle caused by a driver with insufficient insurance Physical Damage Insurance covers damages caused to the vehicle Collision – covers a collision with another object, car, or from a rollover Comprehensive – covers all physical damage losses except collision and other specified losses Why would an individual want automobile insurance coverage beyond liability (the minimum required by law)?

9. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Health Insurance Health insurance provides protection against financial losses resulting from injury, illness, and disability May cover hospital, surgical, dental, vision, long-term care, prescription, or other major expenditures Specific coverage depends upon the individual policy Health care costs are extremely high Large medical expenses could deplete an individual’s savings Why would it be important to have health insurance?

10. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 May be purchased by the individual or through their employer Individual’s often seek coverage for dependents (spouses and children) Many health insurance policies offer dependent coverage but there is no requirement to do so If dependent coverage is offered, children may stay on their parent’s health care plan until age 26 with no stipulations Federal government website to learn about health insurance and compare policies: http://www.healthcare.gov/index.html http://www.healthcare.gov/index.html Health Insurance

11. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Life Insurance Life insurance is a contract between an insurer and policyholder specifying a sum to be paid to a beneficiary upon the insured’s death A beneficiary is the recipient of any policy proceeds if the insured person dies Provides money for family members or dependents when a wage earner dies A dependent is a person who relies on someone else financially

12. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? While driving, you hit and injure a pedestrian in a crosswalk Automobile!

13. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? After losing her husband to a heart attack, a wife is left alone to care for 2 children Life!

14. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? You need a cast after breaking an ankle while roller-blading Health!

15. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Disability Insurance Disability Insurance replaces a portion of one’s income if they become unable to work due to illness or injury Insurance typically pays between 60-70% of one’s full-time wage Factors such as the length or severity of a disability influence the percentage of income a person will receive

16. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What is a disability?

17. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Savings – one disability could wipe it out Borrowing – no bank will give you a loan if you are not working Group long-term Disability Insurance – has limits Social Security – hard to qualify – only 35% do Workers’ Compensation – only if work-related Individual Disability Income Insurance (AFLAC) If you are disabled, what are your income sources?

18. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Savings Most people don’t have enough savings. One year of disability could wipe out your savings. You won’t be able to continue saving for retirement. Borrowing What bank will give you a loan without employment? Available income sources

19. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Premiums and benefits guaranteed through age 65 Tax-free benefits (when paid with after-tax dollars) Quality benefit provisions Personal disability policy

20. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Homeowner’s Insurance Homeowner’s Insurance - combines property and liability insurance into one policy to protect a home from damage costs due to perils Peril -an event which may cause a financial loss like fire, falling trees, lightning and others Property Insurance -protects the insured from financial losses due to destruction or damage to property or possessions Liability Insurance- protects the insured party from being held liable for other’s financial losses

21. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Renter’s Insurance Renter’s Insurance protects the insured from loss of the contents of the dwelling rather than the dwelling itself Necessary because a landlord’s insurance policy on the dwelling does not cover the renter’s personal possessions Covers major perils, provides liability protection and provides for additional living expenses if the dwelling is rendered uninhabitable

22. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? Your rented apartment is broken into and your computer is stolen Renters!

23. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? You are injured in an automobile accident and are unable to work for 2 months Disability!

24. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? Your garage was destroyed by a fire which started by a lightning bolt hitting your home Homeowners!

25. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 Summary What is insurance? What is the purpose of insurance? An arrangement between an individual (consumer) and an insurer (insurance company) to protect the individual against risk The purpose of insurance is to help individuals limit their financial losses when an accident occurs

26. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What is a premium and a deductible? What are the different types of insurance? Summary A premium is the fee paid to the insurer to be covered under the specified terms A deductible is the amount paid out of pocket by the policy holder for the initial portion of a loss before the insurance coverage begins Automobile Health Life Disability Homeowner’s/Renter’s

27. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 27 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? Sick at home from food poisoning after eating a carnival corndog Nothing!

28. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 28 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? While driving, you have brake failure. You hit a telephone pole and cause damage to the front of the car Automobile!

29. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 29 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? While driving to the mall, you are pulled over and receive a speeding ticket Nothing!

30. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 30 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? A daughter, who is financially responsible for her mother’s nursing home bills, dies from an undetected heart defect Life!

31. © Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 31 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona 7.10.1.G1 What Covers This Risk? A doctor diagnoses a child with tonsillitis during a visit to a clinic Health!