1. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Insurance Basics Adapted from Money Talk: Women’s Financial Education Series

2. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Objectives increase your awareness of the financial cost of various risks in life discuss key characteristics of different types of insurance policies help formulate questions to ask insurance professionals help identify your current insurance strengths and weaknesses

3. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Life is Full of Risks…Many Have Financial Consequences Damage to truck in accident Fire that destroys home, farm buildings and/or possessions Loss of income due to disability Death of an earner/key personnel Loss of a homemaker’s services Large medical bills for disease or injury A court judgment of liability for damages

4. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie People Manage Risks in Five Ways: Risk avoidance Risk reduction Risk acceptance (Unknowingly accepting risk with no plan is called do nothing and hope for the best) Risk transfer (insurance) Self-Insure

5. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie ProductionMarketingFinancialLegal Human Resources In The Five Areas of Risk Management Insurance Contracts

6. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Insurance Basics Protect against risks by paying premium “Large Loss Principle” (size of loss matters) Major “large-loss” risks: – Loss of income due to disability – Death of an earner/key personnel – Destruction of structures (fire, flood, etc.) – Liability losses due to a court judgment – Large medical expenses (e.g., cancer treatment)

7. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Generally Unnecessary Insurance Credit insurance (life, disability, unemployment) Life insurance for children Cancer insurance “Double Indemnity” insurance riders Hospital indemnity policies Flight insurance Car rental collision-damage waivers

8. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie General Insurance Tips Check policies for “owner”, “Insured”, & “beneficiaries” Insure for major losses Choose a highly rated insurance company Select the highest deductible you can afford Pay premiums annually or semi-annually Avoid duplicating coverage Ask about available discounts Follow “The Rule of Three”

9. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Parts of an Insurance Contract Declarations page Insuring Agreements Exclusions Endorsements and Riders

10. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Policy Features That Limit Coverage Benefit coordination clauses Deductible Elimination period Co-payment Co-insurance Policy limit

11. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Life Insurance Protects against loss of earner’s/key personnel income Provides money to replace homemaker’s services Factors to consider include: – current assets and debts – earning power of surviving spouse – other sources of income – projected expenses

12. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Types of Life Insurance Term Life – Level term – Decreasing term Permanent Life (cash value) – Whole life – Variable life – Universal life

13. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie General Life Insurance Tips Avoid simplistic formulas Never cancel existing policy until you have new one in hand Review beneficiary designations Buy credit life coverage only if you cannot get life insurance elsewhere Compare policies: interest-adjusted net cost

14. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Two Primary Types of Health Insurance – Indemnity or “traditional” Annual deductible Co-insurance up to stop-loss limit – Managed care (HMOs, PPOs) Read “the fine print” for details Emphasizes preventative care and screenings Require use of in-network medical providers

15. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie General Health Insurance Tips Look for a policy that is “guaranteed renewable”or “noncancellable” Inquire about post-retirement coverage Note pre-existing condition clauses Be cautious about switching policies Keep good records!

16. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Other Health Benefit Programs SHIP (State Health Insurance Program) COBRA – Extends group coverage for up to 18 months – Covers employers with 20 or more workers – Ex-worker must pay full cost, plus 2% Free/low cost screenings & immunizations

17. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Disability Insurance Covers income loss from inability to work Maximum coverage: 60% -70% gross pay Particularly important for self-employed Key factors: – Definition of disability Own Occupation Any Occupation – Waiting period

18. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Disability Insurance Tips Base elimination period on – Adequacy of emergency savings – Accrual (if any) of employer sick leave Buy a noncancellable policy to age 65 Request that an ex-spouse buy coverage to protect support payments Try to get benefit of 100% of net income

19. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie More Disability Insurance Tips Look for a policy with residual benefits Consider a cost-of-living rider Avoid gender-based policies (women pay more) Purchase a waiver of premium rider Look for a “recurrent disability” clause

20. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Long Term Care Insurance “LTC” means wide range of services: – Home health care – Nursing home care Three ways to handle risk of LTC costs: – Retain it (self-insure) – Avoid it (no guarantees) – Transfer it (LTC insurance)

21. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Who Should Buy LTC Insurance If premiums are no > 10% of annual income If you’re able to handle 20% -30% increase If > $75,000 of assets per person (excluding house) If > $30,000 annual income per person Around age 60 (55-65) Couples concerned about well spouse

22. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Additional LTC Insurance Tips Understand how to trigger benefits (ADLs) Buy a “compound” inflation rider Consider key policy features: – Elimination period – Length of time benefits will be paid – Benefit amount ($ per day)

23. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Auto Insurance Basics Factors that affect coverage Two parts: – Liability coverage Single limit (e.g., $300,000) Split limit (e.g., 100/300/50) – Physical damage (collision & comprehensive) Liability coverage is most important part State minimum liability is often inadequate

24. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Auto Insurance Tips Increase liability to at least 100/300/50: for self and uninsured motorists Evaluate physical damage coverage on older cars Take advantage of available discounts Buy a less expensive car to insure Notify insurer if driving patterns change

25. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Homeowner’s Insurance Basics Five sections to a HO policy: – Damages to house or other structures – Loss of personal property – Living expenses while home is repaired – Personal liability – Medical payments to others Different types of “HO” policies

26. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Three Important Tips Photograph or videotape home contents – List brands and serial numbers – Store documentation away from home Make sure home is insured for at least 80% of replacement cost – Otherwise, you’ll get partial payment for losses Buy a “guaranteed replacement cost” rider for home (if available) and contents

27. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Other Homeowner’s Insurance Tips Pay the premium annually Check on discounts for safety devices – Alarm system – Smoke detectors Don’t select low ($250) deductibles Consider flood insurance Document damages

28. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Umbrella Liability Coverage Supplements liability limits of homeowner’s and auto policy Also covers libel, slander, defamation of character, false arrest, boat or aircraft accidents, damages on another’s property $1 million policies cost $150 to $250 Sold in $1million increments

29. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Umbrella Insurance Tips Buy required underlying coverage Check to see if service on non-profit boards is covered Check exclusions (e.g., overseas coverage, business coverage) Check discount for all property coverage with one insurer

30. Annie’s National Network Initiative for Educational Success (ANNIES) at Iowa State University Extension www.extension.iastate.edu/annie Questions? Comments? Experiences?