1. Insurance

2. 9-1 Life Insurance  Main purpose: to prevent financial hardship by providing income to people who are dependent when one dies  How important would life insurance be??? –A single person who is in school and has no dependents –A married couple, both employed, with 1 young child –A married couple with 2 children. One spouse works; one stays home to take care of the children –A widow with 2 self-supporting adult children

3. Insurance terminology:  policy: the contract between the insured and the insurer  premium: money paid to the insurance company for life insurance  insured: the person whose life is covered by the policy  insurer: the insurance company  beneficiary: person named on the policy to receive the death benefits

4. Types of life insurance policies: 1.Term life insurance: offers protection for a fixed amount of time such as 1, 5, or 10 years; cheapest 2.Whole life insurance: insures for a fixed amount for as long as you live; premiums are higher 3.Limited-payment life insurance: protects for life, but premiums are paid only for a fixed time such as 20 years.

5. Premiums: *use table on page 322* Ex. Female, age 25, buys $20,000 whole-life policy. $20,000/1,000 = 20 x $7.37 = $ 147.40 Discussion: Why do males pay higher premiums? Who else pays higher premiums?

6.  Whole life and limited-payment policies build CASH value after a few years  CASH value is the money you get after you cancel your policy

7. OPTIONS: 1.Policy loan: take a loan against the face value of policy 2.Paid-Up life insurance: make a 1-time payment to buy a smaller amount of insurance 3.Extended Term life insurance: trade for term life insurance; you will be covered for the original amount for a shorter period of time

8. Ex: You’ve paid premiums on a $100,000 policy for 25 years: What do you get for each option??? 1.Borrow: (100,000/1,000) x $564.33 = $56,433 2.Buy: (100,000/1,000) x 1,599 = $159,900 of paid-up life insurance 3.Buy: $100,000 term policy that will cover you 22 years, and 312 days

9. Dividends: = after paying for so many years, the insurance company may return part of your premiums Total premiums – dividends = net cost of life insurance

10. 9-2 Health Insurance 1. Basic health coverage: pays for hospital stay, medicine, lab tests, X-rays, surgery, doctor visits 2. Major medical insurance: pays for expenses due to MAJOR illness or injury 3. Disability income insurance: replaces income lost if you are unable to work

11. Health Plans: 1. Traditional 2. HMOs (Health Maintenance Organizations)= you must get all your medical care from the list of participants 3. PPOs (Preferred Provider Plans) = choose from preferred providers (doctors, etc.) or outside the network

12. DEDUCTIBLE: you pay a fixed amount before insurance kicks in! Ex. Doctor bill = $367.50 Your insurance has a $500.00 deductible How much do YOU pay? $367.50 Your insurance has NO deductible How much do You pay? $0 Your deductible is $300 You pay $300

13. Ex. Luis has a medical bill of $1270. His insurance coverage pays 90% of the bill above a $300 deductible. How much does insurance pay? 1270-300= 970 x 0.90= $873 How much does Luis pay? $1270 – 873 = $397

14. 9-3 Property Insurance Homeowners’ Insurance covers: Your home Personal property Additional living expense, i.e. hotel Personal liability Medical payments to other Ex. Find the premium for 1 year of a $150,000 policy at $0.55 per $100. 150,000÷100 = 1,500 x $0.55 = $825

15. Ex. Find the premium for 1 year for a $255,000 policy at $0.45 per $100. Deductible: Ex. The damage to Tony’s house was worth $2,600. If his policy has a deductible of $750, how much did he collect from insurance? $2600 – 750 = $1850

16. Cancellation of policy If YOU, the insured, cancel, use the chart to calculate refund. If insurance company cancels, use: 365 - # of daysto calculate % of refund. 365

17. 9.4 Automobile Insurance Basic types: Bodily injury: covers liability for injury to others Property damage: covers damage to other people’s property Collision: covers damage to your own vehicle Comprehensive damage: covers damage or loss to your vehicle from fire, theft, etc

18. *Use chart on page 340* Ex. Mr. Chu drives a car for business. What is his total premium for one year if his policy carries property damage coverage of $50,000, and other coverage is standard? $ 20 + 118 796 132 $1,066