1. 1 INSURANCE BASICS 1.1 Insurance and Risk 1.2 Basic Policy Types
Banking
5/26/2018
INSURANCE BASICS 1
1.1 Insurance and Risk
1.2 Basic Policy Types
1.3 Purchasing Considerations
Chapter 1

2. Banking Define risk. Describe how insurance works.
5/26/2018
1.1 INSURANCE AND RISK
GOALS
Define risk.
Describe how insurance works.
Chapter 1

3. Standards
BMA-IBT-10
Research and interpret the various risks involved in operating a business while determining the role of insurance for a business.
10.1 Identify possible business threats and employ risk management strategies and techniques to minimize potential financial loss.
10.2 Identify types of business insurance and the need for insurance in a business.
10.3 Explain basic insurance concepts: insurance, policyholder, premium, probability, risk, claim, coverage, deductible, policy, insured, insurer, and liability.
10.4 Analyze risks to make insurance decisions.

4. TERMS Risk Insurance Insured Premiums Insurer Insurance policy
Coverage
Claim
Uninsured
Underinsured

5. Insurance Scene Pg. 4 Do you agree with Aaron or Susan?
What are some other options they should consider?

6. Types of Insurance Health Automobile Life Disability
Homeowner/Property
Homeowners/Renters

7. LIFE CARRIES RISK
Risk - Involved in any situation in which some kind of loss or misfortune is possible
Financial
Physical
Material
Insurance - Provides compensation for loss and spreads the cost of sharing risk
Indiv that are concerned about potential risks pay insurance companies for protection against specific types of risk such as floods, medical costs, car accidents.
Is intangible—you cannot actually see or touch what you are getting.
Some are not motivated to purchase insurance.
Risks are intangible too—many times are not realized until you experience a loss or survive a close call.

8. WTBS…
Write down 3 risks you may face.
List whether they are Financial, Physical, or Material.
5 minutes

9. DEALING WITH RISK Insurance transfers risk.
Ways to deal with risk include:
Avoid
Reduce
Ignore
Transfer
For example:
Avoid risk– By not smoking
Reduce risk – by limiting the number of cigarettes you smoke
Ignore risk – by smoking 3 packs a day
Transfer – by buying health insurance to compensate you for medical treatment for conditions caused by smoking.
Insurance transfers risk.

10. WTBS…
List 1 risk and write down how you can avoid, reduce, ignore, and transfer the risk.
7 minutes
Why do you think people ignore risk?

11. checkpoint
List and describe four ways to deal with risk.

12. Insured - Individuals who buy insurance
HOW INSURANCE WORKS
Insured - Individuals who buy insurance
Premiums - Periodic payments for an insurance policy
Depending on the type of insurance, premiums are paid monthly, every 6 months, or once a year.
Premiums create a pool of money that the insurer invests to earn more money, which is used to compensate the insured for losses
Insurer - The company providing insurance

13. Insurance policy - Written contract between the insurer and the insured
Each individual contract covers a specific losses such as theft, accident, fire, flood, illness, or death.
Coverage -A specific type of loss such as flood coverage or fire coverage.
Individuals agree to pay premiums on an insurance policy, the insurer agrees to reimburse them for their loss on the specific coverage included in their policy.
When a loss occur, the insured files a claim.
Claim - Written request for reimbursement to cover loss or damage that occurred from a specific event.

14. WHO PROVIDES INSURANCE?
Most insurance is provided by private, for-profit corporations.
Other sources of insurance coverage include:
The U.S. government
Joint programs from the federal and state governments
Most recipients of government insurance pay minimal or no premiums for coverage.

15. INCREASING COSTS High cost of insurance causes many Americans to be:
Uninsured - Having no insurance
Underinsured - Not having enough insurance
Premiums for most types of insurance have increased dramatically.
Catastrophic events such as earthquakes, hurricanes, floods, and wildfires have cause premiums to become high.
Insurance companies have excluded wildfires or floods from customer’s coverage or charge higher premiums, if customers built houses in an area that is prone to wildfires or flooding .

16. checkpoint
Who do you think has more responsibility for the rising cost of insurance: the insurance companies or consumers? Why?

17. GOALS Describe basic property and casualty policies.
Banking
5/26/2018
1.2 BASIC POLICY TYPES
GOALS
Describe basic property and casualty policies.
Describe basic life, health, and disability policies.
Chapter 1

18. TERMS
Liability
Real property
Personal property

19. Standards
BMA-IBT-10
Research and interpret the various risks involved in operating a business while determining the role of insurance for a business.
10.1 Identify possible business threats and employ risk management strategies and techniques to minimize potential financial loss.
10.2 Identify types of business insurance and the need for insurance in a business.
10.3 Explain basic insurance concepts: insurance, policyholder, premium, probability, risk, claim, coverage, deductible, policy, insured, insurer, and liability.
10.4 Analyze risks to make insurance decisions.

20. Insurance Scene
Pg. 10
What safety and insurance issues will LaShawne have to consider?
What do you it means when someone says, “You are liable for that.”?

21. PROPERTY AND CASUALTY INSURANCE
Property and casualty insurance includes insurance policies for homes, cars, and businesses.
Protects the insured against losses to his or her property or losses caused by injury to other people or damage to other’s property.
Events such as fire, burglary, and other damage, are covered by policies.
Liability
A legal responsibility to provide compensation for certain types of injury or loss
Ex. Person falls down stairs in your home b/c they were holding onto a loose railing, you may be liable for paying any medical bills incurred.
Property and casualty insurance protects you from financial loss due to liability.

22. PROPERTY AND CASUALTY INSURANCE
Both real property and personal property are covered by property and casualty insurance.
Real property
Permanent structures and objects such as buildings, fences, and built-in appliances.
Personal property
Anything not permanently attach, such as cars, RVs, furniture, clothing, and personal items.

23. AUTOMOBILE INSURANCE
The most important automobile coverage is liability.
Most states mandate a minimum amount of liability insurance individuals must carry to cover property damage and personal injury in case of an auto accident.
Each state has specific regulations for types of automobile insurance policies including:
No-fault
Uninsured
Underinsured motorist coverage

24. AUTOMOBILE INSURANCE No-fault insurance Uninsured motorist
Provides compensation regardless of who was at fault
Uninsured motorist
Provides compensation for accidents caused by a driver who is either uninsured or underinsured
Underinsured motorist
Provides coverage for items not covered by an underinsured driver’s policy

25. COMPREHENSIVE COVERAGE
Comprehensive auto insurance covers
Theft
Collision
Vandalism
Damage from fire
Collision insurance should not exceed the value of the car.

26. HOMEOWNER’S INSURANCE
Basic homeowner’s coverage includes damage to or loss of
The dwelling
Other structures (garage and sheds)
Personal property on the insured premises
Additional coverage may include
Loss of use of the property
Personal liability
Medical payments in case of an accident on the property

27. Renter’s insurance covers
Personal possessions
Liability
The owner of the structure should have insurance to cover the structure.
Coverage depends on the circumstances of the insured.

28. WTBS…
Write down 3 reasons you would need to purchase renter’s or homeowners insurance.
5 minutes

29. LIFE, HEALTH AND DISABILITY INSURANCE
Life expectancy continues to rise.
Varies among races and gender
An increased life span increase the need for various types of insurance.

30. LIFE INSURANCE
Life insurance pays a set amount of money to specified beneficiaries upon the insured’s death.
Life insurance was an early form of insurance developed to protect families financially when their major wage earner died.
Beneficiary
A person or entity named in the insured’s will who should receive the benefits upon the insured’s death
When purchasing life insurance, consider the standard of living you want for your beneficiaries.
Life insurance funds can be used to pay funeral expenses, debts, and fees incurred in settling the estate of the deceased.

31. DON’T BUY WHAT YOU DON’T NEED
Not everyone needs to purchase life insurance.
If you do no have dependents and your assets would cover your debts and funeral expenses, you could use the money you would pay for insurance premiums for money important purposes
Dependents
A person who relies on you for financial support
Assets
The money and property you own
Money not spent on premiums could be used for other investments.

32. WTBS…
List 2 reasons to buy life insurance and 2 reasons not to purchase life insurance?
5 minutes
From your own experience, can you tell if people are living longer or shorter? Explain

33. HEALTH AND MEDICAL INSURANCE
Health/medical insurance plans provide compensation for medical care costs due to disease or injury.
Managed care
May cover preventive treatments
Fee-for-service plans
Requires individuals to pay a larger percentage of all care received.

34. HEALTH AND MEDICAL INSURANCE
Government health/medical plans
Medicare
Provides hospital, medical, and surgical benefits to individuals age 65 or older or those under 65 with certain disabilities.
Medicaid
Government medical assistance program based on need.
Provides medical benefits to low-income families with children and others in need who cannot afford medical insurance.

35. LONG-TERM CARE INSURANCE
Long-term care policies include compensation for:
Nursing homes
Home health care
Institutional care
Assisted living facilities
Personal care
Other related services for the elderly and disabled
The cost of premiums for LTC insurance is affected by existing health problems, lifestyle choices, age, and family history, and desired level of care.

36. Social insurance may be financed by
Employers
Government
A combination of employers and government
Social insurance is provided through government-sponsored programs that provide
Monthly benefits
Benefits to dependents of deceased workers
Disability benefits

37. WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION
Workers’ compensation pays benefits for
Work-related bodily injury
Occupational diseases contracted at the worksite
A work-related death
Unemployment insurance
Provides temporary income to eligible unemployed individuals who meet certain criteria and are involuntarily unemployed or laid off.

38. WTBS…
List 2 reasons you believe a person would be eligible for worker’s compensation.
List 2 reasons you believe a person would be eligible for unemployment benefits.
7 minutes

39. 1.3 PURCHASING CONSIDERATIONS
Banking
5/26/2018
1.3 PURCHASING CONSIDERATIONS
GOALS
Discuss insurability and probability.
Explain product options, price, and company ratings.
Chapter 1

40. TERMS
Insurability
Product options
Deductible

41. Insurance Scene
Pg. 17
How can he demonstrate that he is a safe driver? Are there insurance discounts for safe drivers? If so, how do they work?

42. ARE YOU INSURABLE? Insurability
The ability of an individual who has applied for insurance to be accepted by the insurer
Insurer determines whether you are insurable and meet the company’s conditions to be insured.
Insurer reviews factors such as:
Health
Occupation
Lifestyle
Age

43. ARE YOU INSURABLE?
Insurers analyze the insurability factors and decide whether you are likely to file more claims than they would like to pay.
If so, they will either refuse to sell you insurance or will charge high premiums.

44. PROBABILITY, INSURANCE, AND YOU
To determine your insurability, the insurer draws heavily upon the laws of probability.
Probability
The branch of mathematics that measures the likelihood of some event occurring
Life insurance is based upon probability, using Mortality (actuarial) tables
Use probability to determine death rates

45. ARE YOU A RISK TO THE INSURER?
To reduce cost to the insurer and keep premiums low as possible, a screen process is completed before an application for an insurance policy is approved.
Insurers screen potential new policyholders.
Personal characteristics (age, gender, family history)
Lifestyle choices (smoke, points on driving record)
Health insurance companies require evidence of insurability. You supply:
Medical information
Pre-existing medical conditions
All questions must be answered honestly.

46. You should analyze your specific needs:
BEFORE YOU BUY
You should analyze your specific needs:
Determine what risks you face.
Determine the causes of the risks.
Identify ways to handle each risk.
Make a plan of action.

47. PRODUCT OPTIONS Product options
Special features added to a basic policy
Allow for policy customization
Usually increase the cost of premiums
For example, options for an automobile insurance policy may include collision, car rental, and comprehensive coverages.

48. POLICY PRICING Obtain at least three quotes before buying insurance.
Compare policies carefully and thoroughly.
Search the Internet, Ask friends about their policies, contact different insurance companies and seek whatever discounts you can.
Obtain at least 3 quotes from insurance companies.
Deductible
The amount of money the insured agrees to pay in the event of a loss
Prior to the insurer paying the rest of the claim amount
Raising the deductible can reduce the cost of the policy.

49. You want to be sure the company is in stable financial health.
COMPANY RATINGS
To protect your investment and to ensure continuous insurance coverage, investigate the stability of your insurance company.
You want to be sure the company is in stable financial health.
Standard & Poor’s (S&P)
A.M. Best
Best 2 commonly insurance rating services.

50. ASK YOUR STATE
Each state has an insurance department to regulate insurance.
Educational material can be provided by your state.