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Published byEvelyn Rich Modified over 8 years ago
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Insurance Unit Consumer Economics
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Unit Overview I. General Terms and Information II. Auto Insurance III. Homeowner’s Insurance IV. Health Insurance V. Life Insurance
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I.General Terms & Information Policyholder – the purchaser of insurance Policy – written contract between policyholder and insurance company Premium – payments made in exchange for coverage Deductible – set amount a policyholder must pay before insurer will begin making payments (video)video Claim – request for payment of a loss Floater/Rider/Endorsement – attachments to a policy (additional coverage for a specific item) Co-payment-
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General Terms & Information (cont’d) Selecting an Insurance Company (video)video Individual vs. group policies through an employer Independent vs. corporate agent Local vs. national companies Quotes available over telephone, Internet, or the mail Established vs. new companies Deciding How Much to Buy Depends on your specific needs
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General Terms & Information (cont’d) Factors Affecting Premiums –Age –Gender –Marital status –Geographic location –Past history / lifestyle –Risk level –Preventative measures smoke detectors alarm systems
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II.Auto Insurance (video)video Legal Requirements (state of Illinois - link)link Your car must be covered (25/50/20) $25,000 - injury or death of one person in an accident $50,000 - injury or death of more than one person in an accident $20,000 - damage to property of another person You have proof of insurance in car at all times Insurance stays with the car, NOT the driver
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Auto Insurance (cont’d) Types of Auto Insurance (page 361 in text) Collision Coverage – damage to your own vehicle from an accident Comprehensive Coverage – loss or damage to vehicle NOT from an accident: Theft Vandalism Fire Hail Liability Coverage– injury you cause to others or their property This is the one required by state law Medical Payment Coverage - injury to you or others from an accident Uninsured/underinsured motorist – in case the other driver isn’t covered
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Auto Insurance (cont’d) Needs Newer or more valuable cars: Collision and comprehensive coverage are recommended (parts and repairs can be expensive) Older cars: Don’t insure a car for more than it’s value Collision and comprehensive may not be necessary As coverage goes up, so do premiums Pick the lowest deductible you are comfortable with Coverage amount should not be more than what you feel is appropriate
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Auto Insurance Accidents Call Police immediately to report it get a copy of the report Exchange information with other driver(s) Name Insurance company Policy number Driver’s license number Name of owner of vehicle if it doesn’t belong to the driver Don’t discuss details of the accident; this could come back to haunt you Call insurance agent ASAP after the accident to file a claim Get any other assistance you need Doctor Lawyer Repair estimates
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III.Homeowner’s Insurance Property – insures property against fire and theft Real property - land and buildings Personal property - movable objects Liability – Protection against losses to others Example: someone slips on your icy sidewalk Peril – cause of loss (listed on page 370) Renter’s Insurance – don’t insure the building, just the contents (you don’t own the building)
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Homeowner’s Insurance (cont’d) Personal Property Inventory – everything you want replaced (video)video Be as detailed as possible Include photos and receipts of valuables/irreplaceables Keep list accurate and updated List items room-by-room Don’t forget garage / shed / other storage areas Keep list in safe deposit box / other secure area Preventing Losses (video)video
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Homeowner’s Insurance (cont’d) 80% Rule (not in book) – companies will not fully cover the cost of damage to a house due to the occurrence of an insured event (e.g. fire or flood), unless the homeowner has purchased insurance coverage that is equal to at least 80% of the house's total replacement value.not in book Example 1 Value of house:$100,000 Value of policy:$40,000 (½ of 80% requirement) Loss due to fire:$20,000 Reimbursement:$10,000 (½ of loss) Example 2 Value of house:$100,000 Value of policy:$80,000 (80%) Loss due to fire:$20,000 Reimbursement :$20,000 (full value; you had 80%)
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IV.Health Insurance (video)video HMOPPOPOS Choice of Doctors Must be inside network; must have a primary care physician to choose your specialist Can be outside of network—but will pay higher cost for those doctors; do not need a primary care physician— you can go to specialist on your own choosing Can be outside of network but will pay higher cost; must have a primary care physician CostLeast expensive planMore expensive plan than HMO
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Health Insurance (cont’d) Pre-existing Condition – medical condition that was known / existed before you took out a policy Insurance companies may refuse to pay on this Examples: pregnancy, AIDS, high blood pressure, heart condition Worker’s Compensation – covers injuries that occur on the job Different in each state Employers pay premiums Employees receive partial payment of full income until they can work again By receiving worker’s comp, employee cannot sue employer
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Health Insurance (cont’d) Medicaid – federal/state program offering low-income families medical care Medicare – federal program offering senior citizens and disabled individuals medical care Co-insurance / Shared Risk (14.1) – you share cost of claim with insurance company Example Loss on claim$81,000 Deductible$ 1,000 Left to insure$80,000 Insurer pays 80% of remainder$64,000 You pay the other 20%$16,000
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Health Insurance (cont’d) Prescription drugs Usually covered by policy Generic drugs May not be covered by some policies Much cheaper if you have to pay out-of-pocket Over-the counter Drugs (22.2) – Drugs available without prescription Usually not covered by policies Reasonable and Customary Charges The going rate for charges in your geographic area You might be asked to pay anything beyond this charge if deemed unreasonably high
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V.Life Insurance (video)video Types of Insurance Term – protection for a specific amount of time (1, 5, 10 years) Very cheap Must be renewed at the end of the period or it will expire May require physical exam Premium may change when it is renewed Whole life – coverage for the rest of your life Premium set when policy is purchased and never changes Endowment – investment insurance Example You insure your retirement by paying premiums If you die before you reach retirement age, your beneficiary gets face value If you reach the age of retirement, you get face value
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Life Insurance (cont’d) (video)video Beneficiary – person who receives amount of policy Cash Value – value of the policy if you cancel it You may get some or all of it returned to you You may be able to borrow against the cash value Face Value – original amount of the policy Exclusion (14.4) – specific conditions not paid for Elective surgery, laser vision surgery, other policies Death Benefit – what beneficiary receives Can be all at once or spread out over time (like the lottery) Guaranteed Renewability Can renew a term insurance policy without having to take another physical exam
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