1. CHAPTER 14 AUTOMOBILE AND HOME INSURANCE Sharing the Risk
Economic Educatin for Consumers
4/16/2017
CHAPTER 14 AUTOMOBILE AND HOME INSURANCE Sharing the Risk
WHAT’S AHEAD
14.1 Insurance Basics
14.2 Automobile Insurance
14.3 Home Insurance Coverage
14.4 Providers and the Claims Process
Chapter 14

2. LESSON 14.1 Insurance Basics
Economic Educatin for Consumers
4/16/2017
LESSON Insurance Basics
GOALS
Describe how insurance works to protect consumers.
Explain the basic kinds of insurance and how to determine the amount to buy.
© 2010 South-Western, Cengage Learning
Chapter 14

3. KEY TERMS insurance premium policy claim shared risk
insurable interest
appraisal
rider
property insurance
liability insurance
personal insurance
© 2010 South-Western, Cengage Learning

4. Key Terms
Risk – the chance of financial loss resulting from damage, illness, injury or death.
Insurance – risk management tool that lim its financial loss in exchange for a premium.
Premium – regular payment required to purchase insurance.
Policy – legal insurance contract.
Claim – Formal request for payment from the insurance company.
© 2010 South-Western, Cengage Learning

5. Key Terms
Shared Risk – insurance principle of using premiums from many policyholders to reimburse the losses of a few so that no one suffers a financially devastating loss. Insurable Interest – something of value that, if lost, would cause you financial harm. Appraisal – expert’s determination of the value of property used for insurance. (e.g, value of a diamond ring). Rider – special addition to an insurance policy covering a specific type of loss. Liability Insurance – protects you from losses that you cause to others.
© 2010 South-Western, Cengage Learning

6. Key terms
Property Insurance – protects you from financial loss when things you own are stolen, damaged or destroyed. (homes, cars, valuable possessions). Market Value – amount an item is worth now. Replacement Value – cost of replacing an item regardless of its market value at the time of the loss. Personal Insurance – protects you and your family against loss due to illness, disability or death.
© 2010 South-Western, Cengage Learning

7. How Insurance Works Risk management Premiums and statistics
Life is full of Risks
You can’t eliminate risk, but you can manage it
Premiums and statistics
Statistics from past events predict future losses and determine premiums.
What insurance protects
The insurance trade-off
Role of insurance in the economy
© 2010 South-Western, Cengage Learning

8. Types of Insurance Property insurance Liability insurance
Homes, Cars and valuable possessions.
Market value
Replacement value (higher premiums than market value)
Liability insurance
Losses that you cause to others.
Personal Insurance
Losses from illness, disability or death.
© 2010 South-Western, Cengage Learning

9. Checkpoint 14.1
How does insurance protect individuals from losses they cannot handle on their own?
What are the three basic types of insurance? What does each one cover?
© 2010 South-Western, Cengage Learning

10. Checkpoint 14.1 answers
How does insurance protect individuals from losses they cannot handle on their own?
Insurance provides protection through the principle of shared risk.
The insurance company collects premiums from many policyholders and uses these funds to pay insured people for their covered losses.
© 2010 South-Western, Cengage Learning

11. Checkpoint 14.1 answers
What are the three basic types of insurance? What does each one cover?
Property insurance protects against financial loss when your things are stolen, damaged, or destroyed.
Liability insurance protects against financial loss if your actions cause other people to suffer.
Personal insurance protects you and members of your family from financial loss due to illness, disability, or death.
© 2010 South-Western, Cengage Learning