Download
1 / 43
430 likes | 610 Views
Insurance. Managing Your Money 2008. What is insurance? . Spreading risk to protect assets and income It’s the most widely used method to protect yourself against financial loss. Snow skiing involves risk of personal injury. What is Risk?. Everyone has risk—such as:
E N D
Insurance Managing Your Money 2008
What is insurance? • Spreading risk to protect assets and income • It’s the most widely used method to protect yourself against financial loss.
Snow skiing involves risk of personal injury. What is Risk? • Everyone has risk—such as: • Walking across the street • Playing football • Insurance is really… “Risk Management”
What is Risk Management? • Risk Avoidance (take the bus instead to school instead of driving.) • Risk Reduction(wearing a seatbelt, having airbags in your car) • Risk Transfer(buying insurance)
So, what types of Insurancecan you buy? • Health • Auto • Homeowners/Renters • Disability • Liability • Life
What’s the key to Insurance? • Determining how much is needed? • Too much can be a waste of money • Too little can cause financial devastation!
The following slides will explain what each type of insurance really means.
Health Insurance –What does it cover? • Pays medical bills when you or your family becomes sick or injured. • If your parents or guardian has health insurance, it will cover you until you turn 19 years old or until age 23 if you’re a full-time student (college). • Best way to get health insurance is through your job. It’s much, much cheaper than buying it on your own. So, look for good jobs that offer “benefits—health insurance”! • Health insurance can also cover dental and vision insurance. Sometimes, you have to pay “extra” per month for that coverage. Know your policy!
Health Insurance …Try to find some startling facts… • See if you can find what a major surgery may cost (heart, cancer, etc.) • What does an average prescription cost for someone? • Any other facts you found?
Health Insurance cont’d… • Assignment: • Read the article on the link below. Write or type 10 things you learned from the article. Attach it to the back of your study guide. “Medical Costs prove a burden”article. http://www.usatoday.com/money/industries/health/2005-04-28-medical-bills-usat_x.htm
Auto Insurance —why it’s important! • Some facts… • You have a 55% chance of being involved in an accident in the next 3 years. • You have a 75% chance of being involved in an accident in the next 5 years. • Nearly 8000 teenagers in the U.S. are involved in fatal car crashes each year. • 51% are drivers and 47% are passengers of people who die in auto crashes yearly. • 53% of teen motor vehicle deaths occur on Friday, Saturday, or Sunday • 41% of teen motor vehicle deaths occur between 9 p.m. and 6 a.m. • Using seatbelts reduces the risk of serious or fatal injury to front seat passengers by 45-50% • Auto crashes is the No. 1 killer of Americans, ages 15-20.
Auto Insurance—What is it? • Protects the owner of a car from losses as a result of accidents • Types of coverage (definitions covered on the following slides) • Liability • Collision • Comprehensive • Personal injury • Uninsured/underinsured motorist • Towing/rental car 6-3 Property Protection
Auto Insurance cont’d… • What Auto Insurance covers: • Damage to cars, drivers, passengers, uninsured motorists, and property. • Repair of other vehicles and medical expenses of people • Property damage, such as trees, etc. • Theft of car or possessions within car
Here’s how they break it down and what Minnesota Requires: • Minnesota is a “No-Fault” state—means in the event of an accident all drivers involved will have their expenses paid by their own insurance company—regardless of who’s at fault. • No-Fault – your auto policy must pay for bodily injury and property damages regardless of who caused the accident. (it’s often difficult to determine who caused a multi-vehicle collision). • PIP (Personal Injury Protection). – regardless of fault, it pays for medical, hospital, funeral costs, etc.
Auto Insurance cont’d… • Liability 30/60/10 (minimum levels required) • $30,000 – bodily injury maximum paid for one person injured in an accident. • $60,000 – bodily injury maximum paid for all injuries in one accident. • $10,000 – for repairs to property damage maximum paid for one accident. • Uninsured Motorist – protects you from injuries or damages caused by a driver of an uninsured or underinsured motor vehicle.
The following are optional, but a must have if you have a car loan. • Collision – covers your car against collisions it may have with any other object—you are at fault. (back into a parking post, etc.) • Comprehensive – covers your car against vandalism (scratches), theft, broken glass, storms (hail) and falling objects.
What drives the cost of Auto Insurance? • Your premiumsare determined on… • Model and make of car (how expensive to fix or replace) • Age of car • Driver’s driving record • Where you live (zip code)—chances of vandalism, etc. • Distances driven • Age and sex of driver, etc. • Credit Report • Good grades (B average or above)
Homeowner’s Insurance • Protects from risk of loss in the home • Covers the building and its contents • Types of coverage • Fire and other hazards • Criminal activity • Personal liability • Acts of nature 6-3 Property Protection
You should take an Inventory of all your belongings… • Lists all the items of value in your home • Should include receipts for expensive items when possible • Is useful when filing an insurance claim You would be surprised how much it would cost to replace all valuable items in your house or apartment. It adds up fast! 6-3 Property Protection
Sample Home Inventory using a spreadsheet… 6-3 Property Protection
Renter’s insurance protects you from losses as a result of fire. Renter’s Insurance —much like homeowners… • Protects renters from the risk of losing personal property in their homes or cars • Covers the cost of repairing or replacing personal property • Is a low-cost wayto manage risk 6-3 Property Protection
Disability Insurance • Provides money to replace a portion of normal earnings • Pays when the insured is unable to work • Covers an injury or illness that is not job-related • May be short-term or long-term 6-2 Income Protection
Liability Insurance • Google liability insurance and write a one summary paragraph on your study guide defining what it means. Think about the following: • Is it expensive? • What specifically does it cover? • Provide examples of when it covers something happening on your property.
Life insurance can provide benefits for children when a parent dies. Life Insurance • It’s about protecting your loved ones…
Life Insurance Is typically meant to financially protect people in your life when you die. Two types: • Term Life:a benefit is paid to the beneficiaries of the policyholder if death occurs. (it’s the cheapest). • Whole Life(Cash Value):a benefit is paid to the beneficiaries of the policyholder if death occurs. (it’s more expensive) • But, it’s more… • It accumulates a cash value • Can be used for retirement • Can borrow money (loan) against it (collateral) for emergency situations, etc.
Insurance Terms • Agent: A person who sells you insurance. • Policy: An insurance contract. Read it carefully!!! • Policyholder: A person who purchases the insurance policy. • Coverage: Items or circumstances for which the insured is promised payment.
Insurance terms cont’d… • Providers: The hospital, clinic or doctors that will bill you for the services they performed. Ex: Park Nicollet Clinic, Hopkins Chiropractic Service, etc. • Benefits: The actual amount paid by the insurance company for financial loss you’ve obtained. (ie. The bill you received from the clinic).
Insurance terms cont’d… • Claims: A formal request for payment for the financial loss. Ex: you turn in the bill for your clinic visit and they pay the agreed upon portion. • Premium: The amount you pay to the insurance company (each month) for the insurance protection. Medical emergencies can be very expensive.
Insurance terms cont’d… • Deductible: Amount of the loss (bill) you must pay before the insurance company begins to reimburse you. • Lower Premium = Higher Deductible • Higher Premium = Lower Deductible Which is better?? You decide.
Insurance terms cont’d… • Co-Insurance: It’s your portion of the payment. • Ex: 80/20 – means 80% of the bill is covered by insurance and you pay the remaining 20%. • Co-Pay: as with medical insurance, it is a set dollar amount for an office visit or a prescription. • Ex: $20-30. Every time you get a prescription from the pharmacy, you have to pay $20 for your prescription.
Reducing Costs • Choosing higher deductibles can save you money on insurance • To lower costs for car insurance • Take driver training classes • Maintain a good driving record • Buy more than one insurance policy from the same company • Own a car with a high safety rating 6-3 Property Protection
Car Buying Tips • Decide what you want to buy. • Identify the top 3 choices • Research qualities of car—don’t just trust your first impulse! • Get pre-approved for loan from the bank first! You can many times get a better rate on the loan. • Visit dealerships • Notice sticker prices • Consider taxes and licensing fees • Consider the warranty or the worth of buying an additional warranty • Test drive the car—Always!! If the dealership won’t let you, DON’T buy it!! • Make an Offer • Decide value (check out Kelly Blue Book value or Carsoup.com) • Consider the trade in…what’s the value of your vehicle? • Don’t be pressured or too desperate to buy! Make them wait for your business. • ***Check out these websites: www.kbb.com www.carprices.com www.edmunds.com www.autopricing.com www.carsoup.com www.autonation.com www.usedcarbuyingtips.com
Car Buying…General Facts • A “Title” is proof of ownership of a car. Make certain you always get that if you buy a car from another person. If you take out a loan on the car, the bank keeps the title until you pay off the loan. • Often times, you may do better to sell your used car outright to another person, than trading it in at a dealership. • In the State of Minnesota, you can return a car you purchased up to 5 days after the purchase date with no ramifications. • Depreciation means that your car loses value as it gets older. Most cars do—except if it would happen to be considered a “collector” item. • Always consider the cost of insurance on the car, the cost of typical repairs and maintenance on that car model as well as how much it will cost you per month to keep it fueled with gas. You need to add all of that up to figure the true cost of owning that car—not just the purchase amount of the car!
Best Time of the Year to Buy a Car… End of Month • Salespeople are trying to fill their quotas! Late December • People are “Holiday Shopping” End of Model Year • (September/October) Dealers want to reduce inventory and make room for newer models What protects you if you are sold a non-working car? Lemon Laws • Apply to the 1st Year or 12,000 miles of the vehicle • You’ve taken the car to a dealer for unsuccessful attempts to repair it. • Your car has been out-of-service for at least 30 days • ***You must have good documentation of this!!
