1. How Insurance Works Life is full of risks Life is full of risks The purpose of Insurance is to provide financial protection against different kinds of risks we face in life. The purpose of Insurance is to provide financial protection against different kinds of risks we face in life.

2. Types of Insurance Insurance Policy – A written agreement between you and the insurance company that explains the following: Insurance Policy – A written agreement between you and the insurance company that explains the following: what kinds of losses the company will cover what kinds of losses the company will cover how much it will pay to cover theses losses how much it will pay to cover theses losses how much you will pay for this protection. how much you will pay for this protection.

3. How Insurance Works Coverage limits – the maximum amount the company will pay you for your loss Coverage limits – the maximum amount the company will pay you for your loss Deductible – The amount of loss that you must pay before the company will step in and pay the rest. Deductible – The amount of loss that you must pay before the company will step in and pay the rest.

4. How Insurance Works Claim – a request for payment of your losses Claim – a request for payment of your losses For example, imagine that your car insurance has a $500 deductible. If you get into an accident and it takes $1,500 to repair your car, you will have to pay $500 of the bill yourself and the insurance company will pay $1,00. For example, imagine that your car insurance has a $500 deductible. If you get into an accident and it takes $1,500 to repair your car, you will have to pay $500 of the bill yourself and the insurance company will pay $1,00.

5. How Insurance Works Premium – Your insurance premium is the amount of money you must pay per month, per quarter, or per year in order to guarantee your coverage. Premium – Your insurance premium is the amount of money you must pay per month, per quarter, or per year in order to guarantee your coverage. Insurance premiums vary widely, according to certain factors. Insurance premiums vary widely, according to certain factors.

6. How Insurance Works Health insurance – very expensive, while property insurance is relatively inexpensive. Health insurance – very expensive, while property insurance is relatively inexpensive. That is why people try to find jobs in which their employer will pay for some of their health insurance. That is why people try to find jobs in which their employer will pay for some of their health insurance.

7. How Insurance Works Property Insurance – You can often choose between different coverage limits. If you don't own a lot of personal property, for example, you could choose a property with a low coverage limit, in exchange for low premiums. Property Insurance – You can often choose between different coverage limits. If you don't own a lot of personal property, for example, you could choose a property with a low coverage limit, in exchange for low premiums. Amount of deductible – If you choose a policy with a higher deductible, your premium will be lower, but your out-of- pocket expense will be greater. Amount of deductible – If you choose a policy with a higher deductible, your premium will be lower, but your out-of- pocket expense will be greater.

8. How Insurance Works Premium costs are based on the following: Premium costs are based on the following: Your age Your age Where you live Where you live Credit history Credit history Marital status Marital status For many types of insurance, companies assume that people who are older, married, live outside of cities, and have good credit scores are less risky to insure For many types of insurance, companies assume that people who are older, married, live outside of cities, and have good credit scores are less risky to insure

9. Types of Insurance Car Insurance: The first insurance you are likely to pay – All states require drivers to have at least a minimum amount of car insurance. Car Insurance: The first insurance you are likely to pay – All states require drivers to have at least a minimum amount of car insurance. Liability coverage – Pays for any personal injuries or property damage. Liability coverage – Pays for any personal injuries or property damage. Collision coverage – pays for any damage to your own car. Collision coverage – pays for any damage to your own car. Teens pay higher rates because, statistically, they have more accidents than older drivers. Teens pay higher rates because, statistically, they have more accidents than older drivers. Young male drivers pay more than young females because males have more accidents (according to statistics). Young male drivers pay more than young females because males have more accidents (according to statistics).

10. Types of Insurance As you get older, your rates will go down, as long as you keep a safe driving record. As you get older, your rates will go down, as long as you keep a safe driving record. As you get older, you need to invest in other kinds of insurance protection. As you get older, you need to invest in other kinds of insurance protection.

11. Types of Insurance Health Insurance – Pays medical bills Health Insurance – Pays medical bills Parents' policy will cover you until you are 26 Parents' policy will cover you until you are 26 Cheapest way to get health insurance is through your job, if you are lucky enough to have an employer who either pays your premium or a portion of your premium Cheapest way to get health insurance is through your job, if you are lucky enough to have an employer who either pays your premium or a portion of your premium

12. Types of Insurance Property Insurance – If you live in an apartment, you can get renters' or owner's insurance to help you replace your belongings in case they are stolen or destroyed by fire. Property Insurance – If you live in an apartment, you can get renters' or owner's insurance to help you replace your belongings in case they are stolen or destroyed by fire. If you buy a house, you need homeowners' insurance to protect your belongings, as well as the value of your house. If you buy a house, you need homeowners' insurance to protect your belongings, as well as the value of your house.

13. Types of Insurance Disability Insurance – If you suffer an injury that keeps you from working for an extended period of time. Disability Insurance – If you suffer an injury that keeps you from working for an extended period of time. Disability Insurance will pay you approximately 75% of your monthly income until you recover. Disability Insurance will pay you approximately 75% of your monthly income until you recover.

14. Types of Insurance Life insurance – This insurance provides money to family members. Life insurance – This insurance provides money to family members. When you buy life insurance you name a beneficiary (the person you want to receive the money)‏ When you buy life insurance you name a beneficiary (the person you want to receive the money)‏

15. Types of Insurance Two major types of life insurance: Two major types of life insurance: Term insurance Term insurance Whole life insurance Whole life insurance

16. Types of Insurance Term Insurance Term Insurance Usually cheaper Usually cheaper Pays a higher death benefit Pays a higher death benefit You can only buy a policy for a limited term or period of time You can only buy a policy for a limited term or period of time When that term is over, you must purchase a new policy (at a higher rate). When that term is over, you must purchase a new policy (at a higher rate). Premiums increase as you get older Premiums increase as you get older Pays off only when you die (No cash value). Pays off only when you die (No cash value).

17. Types of Insurance Whole life insurance Whole life insurance More expensive and pays less of a death benefit than term More expensive and pays less of a death benefit than term It provides coverage for your whole life and premiums never increase It provides coverage for your whole life and premiums never increase Also is an investment with a cash value that increases over time Also is an investment with a cash value that increases over time Policy entitles you to withdraw or borrow against the accumulated cash value. Policy entitles you to withdraw or borrow against the accumulated cash value.

18. Define The Following Terms: Insurance Insurance Insurance policy Insurance policy Insurance Premium Insurance Premium Coverage limit Coverage limit Whole Life Insurance Whole Life Insurance Deductible Deductible Liability coverage Liability coverage Collision Coverage Collision Coverage Insurance Claim Insurance Claim Term Life Insurance Term Life Insurance

19. If you switched to an insurance policy with a higher deductible, you could probably expect A. a higher premium A. a higher premium B. a lower premium B. a lower premium C. A higher coverage limit C. A higher coverage limit D. no coverage limit D. no coverage limit

20. Which of the following is NOT a disadvantage of term life insurance, as compared to whole life insurance? A. a lower death benefit A. a lower death benefit B. Increasing premiums as you get older B. Increasing premiums as you get older No cash value No cash value No guarantee of lifelong coverage No guarantee of lifelong coverage

21. Of the following people, which one would probably pay the highest rates for car insurance? A. a 50-year old single man A. a 50-year old single man B. a 30-year old married woman B. a 30-year old married woman C. an 18-year old boy C. an 18-year old boy D. an 18-year old girl D. an 18-year old girl

22. Which kind of insurance pays a monthly income to people who are unable to work for an extended period of time? A. health insurance A. health insurance B. disability insurance B. disability insurance C. Life insurance C. Life insurance D. Homeowners’ insurance D. Homeowners’ insurance