1. High School Financial Planning Program
Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

2. High School Financial Planning Program
Lesson 6-2: How Insurance Works
How Insurance Works
Prepare to apply for insurance or to file a claim
Display this slide as you kick off the opening activity.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

3. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Preview
Today we will answer these questions:
How do I get insurance?
What is covered by insurance?
How do I get insurance payments if I have an accident?
Use what you learn today to be prepared to apply for insurance or to file a claim.
To lead into the lesson, ask students to volunteer what they would do if they discovered that something they own was stolen, lost, or damaged. Students who have experienced this type of loss might be willing to volunteer how they handled the problem. If they don’t have (or know that they have) insurance coverage on the items, ask if they would be willing or able to pay for replacement or repair of the item, or would they just go without the item.
Preview the Learning Outcomes in the Student Learning Plan. By the end of this lesson, the students should be able to prepare to apply for insurance or to file a claim.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

4. High School Financial Planning Program
Lesson 6-2: How Insurance Works
What Do You Think?
Can Katie insure the saxophone she rents from school in case she needs to pay to pay to repair a ding that she accidentally caused to the instrument?
Can Aaron’s dad purchase insurance to recover cruise fees paid in advance if the family is unable to go on the trip?
Student Guide, page 8
By a show of hands, ask students to vote “yes” or “no” to answer the insurability questions about Katie and also about Aaron’s dad. NOTE: The answers will be revealed as you present content from Slides 4 and 5.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

5. High School Financial Planning Program
Lesson 6-2: How Insurance Works
INSURE-able
The risk must have certain qualities to be insurable.
Insurable interest
Numerous
Specific loss
Unintentional and Unexpected
Reasonable cost
Estimable
Student Guide, page 9
Point out that while there is insurance coverage for nearly every type of misfortune, certain requirements need to be met for obtaining insurance coverage. Show the INSURE-able qualities that help determine whether or not something can be insured. In general, to get insurance coverage, the loss must be unintentional and unexpected, you must be directly impacted financially, and there must be a way to provide evidence of loss.
NOTE: More detail is displayed on page 9 of the Student Guide.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

6. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Yes or No?
Are these INSURE-able situations?
Katie insure the school’s rental saxophone
Aaron’s dad purchase cruise trip insurance
A parent or guardian purchase your life insurance
You buy insurance to cover pens/pencils lost at school
You insure your vocal chords when you are a famous singer
Student Guide, pages 8-9
Display the scenarios, and arrange for students to work in pairs (2-3 minutes) to decide whether or not each situation meets the INSURE-able guidelines.
Ask the teams to defend their answers as you display each scenario. All scenarios are insurable except the coverage for lost pens or pencils. This is too trivial to bother with coverage. However, a business that sells large quantities of pens or pencils might insure the pen/pencil inventory because it has a significant value and a loss will financially impact the business.
EXTENSION: Students may find it interesting to discuss examples of strange insurance coverage for unusual circumstances. For example, a professional ice cream taster has his taste buds insured as does a coffee bean taster. Search online for more examples of “strange insurance” or “unusual insurance.” Debrief by discussing the reasons for these types of unique insurance policies.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

7. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Get Covered
Student Guide, pages 12-13
Lead into this section by using the Learning the Lingo story on page 12 to point out the value of knowing what is agreed to when buying insurance.
Submit an application (hard copy or online) for insurance coverage.
When approved, insurance company will set specific coverage limits and conditions. The policyholder may have some flexibility in setting limits, but the conditions are typically set by the insurance company as they are standard for all policyholders. Point out that a policyholder can add “riders” for additional coverage of specific items. (Refer to Insuring Treasures for more information about riders.)
Policyholder makes regular premium payments to continue insurance coverage.
Outline the process to get insurance coverage as you introduce students to common insurance terminology. NOTE: At this time, only outline the process. More details about how insurance companies review applications and establish premiums are addressed in Lesson 6-3.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

8. Coverage and Conditions
High School Financial Planning Program
Lesson 6-2: How Insurance Works
Coverage and Conditions
Coverage Examples - Rent
Condition Examples - Rent
Specify amount limits:
Up to $XXX on jewelry usually at residence
Up to $XXX on electronic equipment usually at residence
What is excluded from coverage:
Property of a boarder
Animals
Loss caused by earth movement (i.e earthquake, mudflow)
Intentional loss
What to do in case of a loss:
Give notice to an agent
Report any theft to police
Protect property from further damage
Submit request within XX days
Payment procedures:
Amount paid determined after deductible is applied to the loss
Who payment will be made to
Option for cash settlement or pay cost to repair or replace
Student Guide, page 13
Give examples of how coverage limits and conditions might appear on a policy. Guide the students to examine an insurance policy as they complete Part A of Activity 6.2: Read the Fine Print. Note: They will complete Part B later in the lesson.
RECOMMENDED: The samples provided are state specific. If possible, obtain sample policies that apply to your state.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

9. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Cover a Loss
Student Guide, pages 14-15
Arrange for the students to read about Aaron’s car damage situation (Student Guide, page 14). Refer to Aaron’s situation as you outline the common phases to recover losses from a misfortunate event. Introduce students to insurance terminology (page 15) as you summarize the claim process.
Policyholder files claim form to describe details of a qualifying event.
An insurance claims adjuster will investigate the event to determine if the claim is payment. If payable, the adjuster will establish the settlement amount.
If the claim is approved, the insurance company will settle the claim by paying the policyholder with a check. If a claim is denied, the insurance company will notify the policyholder of why the claim was denied.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

10. Law and Order of Insurance
High School Financial Planning Program
Lesson 6-2: How Insurance Works
Law and Order of Insurance
Take Responsibility
Know Rights
Provide accurate information
Be honest
Know procedures
Pay premiums on time
Keep own records in order for quick retrieval
Know details upfront
Receive notice of any policy or premium changes
Expect fair and prompt processing of claims
Receive explanation of why claim is denied
Expect that personal information is securely protected
Student Guide, page 23
Point out that an insurance policy is a formal contract between the insured and the insurer. The person who purchases an insurance policy agrees to take on responsibilities and also can expect the insurer to agree to certain behaviors.
Student Guide, page 17
Give students a specific amount of time (2-3 minutes) to complete Activity 6.3: From Memory. Debrief by asking students whether they found this to be an easy task or a difficult task. Relate this activity to any property loss incidents that students may be familiar with from personal experience or news reports, such as homes lost due to fire, hurricane, tornado flooding, or mud slides. If any students have access to cars, they can try the same activity to inventory what is currently in their cars.
EXTENSION: Ask a claims adjuster to speak to the class about how an insurance company determines what is paid out for a claim.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

11. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Reflection
What are two habits you can take on now so you are ready to manage your own insurance paperwork and tasks?
Ask the students to reflect on what they think are positive habits to apply now so they are in a position to manage their own insurance business and procedures. Examples might include thoroughly reading insurance policies, setting up a filing system for insurance-related information, keeping an inventory of personal property.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

12. High School Financial Planning Program
Lesson 6-2: How Insurance Works
Challenge
Take an Inventory
Put the finishing touches on your personal property inventory.
Create a system to easily maintain your inventory and any evidence to prove ownership and value when applying for insurance or filing an insurance claim.
Student Guide, page 17
Assign the students to independently complete Challenge 6-B: Take an Inventory. Preview the scoring criteria to guide the students in their work.
Student Guide, page 25
It is also appropriate to assign Challenge 6-C: Cellphone Insurance? YOU Decide! with this lesson or with Lesson 6-3: Choose Insurance.
©2014 National Endowment for Financial Planning | Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |

13. High School Financial Planning Program
Lesson 6-2: How Insurance Works
©2014 National Endowment for Financial Education |