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Introduction to Insurance. Honors C.A.D. Objectives. Define the concept of “insurance.” Understand the key components an insurance policy, as well as reasons behind getting insurance. Why Get It?. Think about it – why would you want to insure yourself? Is it worth not having the insurance?
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Introduction to Insurance Honors C.A.D.
Objectives • Define the concept of “insurance.” • Understand the key components an insurance policy, as well as reasons behind getting insurance.
Why Get It? • Think about it – why would you want to insure yourself? Is it worth not having the insurance? • It does boil down to RISK – you know there are events in life that you cannot predict, yet you should prepare for them. • Should you insure yourself to the absolute highest level? – Probably not, considering that would cost a lot of money.
History of the Business • History of Insurance it has gone a long way to become the multi-trillion dollar business that it is today: • Started in Egypt in 2500 BC – fund for funerals/aid for sick • 1666 – the Great London Fire – fire insurance became important and popular • 1696 – Lloyd’s of London became one of the first “big” companies, insuring ships • 1752 – Ben Franklin (what didn’t he invent!?) – fire insurance in Philadelphia • 1792 – The Company of North America – first American company to take on large risks (think Lewis and Clark’s Expedition) • 1935 – Social Security becomes first social insurance in USA.
We’re In the Money… • Profits: not what you would think. • They make about a 5 cent profit on every dollar they collect in insurance premiums. • Auto insurance companies collect even less (2-5 cents).
Important Terms • Risk – the potential for harm/damages from an event • Hazard – anything that increases the chances of a loss • Peril – the actual cause of a loss (think a fire in a house) • Liability – the person who is responsible for injury/damage to others
More Important Terms • Law of Large Numbers – as the number of people insured by the company increases, then the company’s predicted number of losses will more closely reflect the actual number of losses. • Insurance policy – a legal contract that defines the rights and duties of the insurer and the insured. • Declarations – the specifics on the insurance policy (who/what is covered, premiums, limits, etc).
Different Types • Auto insurance – for your car; insurance on injuries for you (and others, if you pay for it). Also can cover damage to the car and to other’s property. • Homeowners insurance – you protect your house from catastrophe (fire, floods, hurricanes, etc.). You can also get it if you rent.
Different Types • Life Insurance – provides for your family if you die and they depend on you for financial support. You pay for it and the money goes to a beneficiary. • Health Insurance – pays for your medical expenses.
So…Why Get Insurance? • If you suffered from a disaster, like your house burns down or your car is completely totaled in an accident, you probably cannot pay for it on your own. • Insurance allows you some financial security if this happens. • It also allows you (or your family) to recover better from a catastrophic event. Just think if you didn’t have health insurance, and you needed open-heart surgery? Or you owned your own business, an ice-cream shop, that is leveled in a tornado.
