Your Insurance Needs

1. Your Insurance Needs Jean Austin University of Maryland Extension Family and Consumer Sciences

2. What Can Insurance Do For Me? • LIABILITY PROTECTION • • REPLACE POSSESSIONS • • CARE FOR SURVIVORS

3. Today’s Objectives • Discuss basic purpose of insurance • Review common types of personal insurance • Identify consumer considerations for purchasing insurance • Suggest ways to reduce insurance costs • Determine insurance needs based on life cycle changes

4. Types of Insurance For Individuals and Families • Most Common • Health • Doctor visits, surgery, hospitalization, dental care • Group plan thru employer, private plans, Medicare or Medicaid, SCHIP • Life • Death benefit to beneficiary (survivors) • Private company or place of employment • Automobile • Liability, property damage, damage to vehicle, medical payments, uninsured motorist protection • Private company • Homeowners or Renters • Property coverage – house, other structures, possessions and liability protection • Private company

5. Types of Insurance For Individuals and Families • Other types of insurance to consider • Rx coverage if not included in health • Reduces cost of Rx drugs • Group plan thru employer, some Medicare supplements • Disability Income Insurance • Provides income when sick leave is exhausted or when unable to return to work for long periods of time • Private company or group plan thru employer • Long Term Care • Pays for assistance with ‘Activities of Daily Living’ • Private company, sometimes offered thru employer • Umbrella Liability • Increase liability coverage beyond the basic auto and homeowners limits • Private company

6. Purpose of Insurance • To provide protection from financial loss. • Sample losses: car or home damaged, possessions stolen or destroyed, you cause damage to someone else’s property, someone is injured on your property or by your actions. • Losses are a risk to your financial health. • Insurance is a method to manage the risk to your personal financial situation. • Choices are to • Avoid Risk • Reduce Risk • Retain Risk • Transfer Risk

7. Options for Buying Insurance • Insurance companies often specialize – life insurers don’t always sell auto or homeowners • Companies can be direct writers or sell thru agents • Agents can be independent or exclusive • In addition to employer group plans some affinity groups offer coverage to group members • Purchase can be thru agent, direct mail, on-line

8. Check Financial Strength Insurance Company Rating Services A. M. Best’s Insurance Reports Moody's Investor Service Standard and Poor’s Duff and Phelps Weiss Research

9. Health Insurance – COBRA and HIPAA • COBRA and HIPAA provide some limited guarantees: • COBRA allows you to continue group health insurance, but you must pay the full premium, including the amount your employer subsidizes. • HIPAA helps to limit the restrictions that can be placed on preexisting conditions Consolidated Omnibus Budget Reconciliation Act of 1985. Health Insurance Portability and Accountability Act 1996

10. Insurance Terms You Need to Know • Limits • Coinsurance • Exclusions • Coverage • Deductibles • Claims • Adjustor • Named Insured • Beneficiary

11. Insurance is a Contract. In Contracts... THE LARGE PRINT GIVETH… ...the small printTAKETH AWAY!

12. The Life-Cycle Approach to Insurance Needs • Major Life Events Determine Needs • Housing Situations • Family Situations • Accumulation of Assets • Retirement • Death • Have you selected the right Coverage? Limits? Company?

13. Buying a Car • Auto Insurance • Liability • Collision and Comprehensive • Uninsured/Under-insured motorist • Medical payments • Optional • Rental Car • Towing and Labor Know your state requirements!

14. Maryland Minimum Coverages and Coverage Limits 20/40/15 $20,000 per person/injuries $40,000 per accident/injuries $15,000 property PIP coverage of $2500 Uninsured Motorist coverage of 20/40/15 www.mdinsurance.state.md.us

15. Auto Insurance – Why You Need It? • Tiffany had a blow out and caused an accident on the beltway. Her car crossed the median and was struck by two other cars. Her car’s fair market value is $12,500. Repairs to her car will cost $13,200. She has a $500 collision deductible. Damage to the other two cars was $17,800 and $6400. Liability limits on Tiffany’s policy are $25,000/$50,000/$15,000. • What dollar amount of the losses will be covered by Tiffany’s auto policy? Will she owe anything?

16. Automobile rates are impacted by: • Geographic Area • Year, Make, Model of Car • Age, Gender, Marital Status • Prior insurance coverage • Annual mileage • Driving Record • Credit History

17. Ways to Save on Car Insurance • Do not buy car insurance from your car dealership • Comparison Shop - check 3 companies • Increase your deductibles • Tickets, claims and accidents make a BIG difference in cost • Be selective when lending your car

18. Ways to Save (cont.) • Check your credit report • Ask for discounts • Good Driver Discount • Safe Vehicle Discount • Good Student Discount • Low Mileage Discount • Internet Discount

19. Living on Your Own! • A Renter’s Policy protects your possessions • Coverage is usually inexpensive • Two options –actual cash value and replacement cost

20. Getting Married • Coordinate health benefits if both employed • Update auto policy • Increase contents value for renters policy • Any special policy needs • Consider life insurance Review all policies and adjust as necessary.

21. Buying a Home • Homeowner’s Insurance • Cover your home • Cover your personal property • Cover your back side -- Liability ! • Ask for replacement cost • Life Insurance • Needs increase based on the mortgage

22. Homeowner’s Policy Limits • Section I Property Coverage • Dwelling, other structures, personal property and contents • Living expense if damage makes property unusable • Section 2 Liability Coverage • General liability, no-fault medical payments and property damage to others

23. Save on Homeowners insurance • Insure your car and your home with the same company • Always insure to at least 80% of the replacement cost of the value • Type of construction and distance from the fire department are part of how premium is determined • Pay premium annually • Protective devices like smoke alarms and fire extinguishers may create a discount • Raise deductibles, increase liability limits • Comparison shop

24. Having Children Changes Life Insurance Needs! • Who needs life insurance? • Wage earners with dependents • Homemakers with young children • What kind of life insurance should you buy? • How much should you buy?

25. Term Insurance • Protection for a limited period of time • Face amount paid if insured dies during specified period • Typically 1, 5, 10, 15, 20 year terms • Premiums generally level for entire term • Premiums low when young, much higher when older • There is no cash value

26. Permanent Insurance • Aka Cash Value • Three major types • Whole Life • Premiums much higher than term in early years • Has cash value • Policy in effect as long as premiums are paid • Universal Life • More flexible than while life • Can stop or reduce premiums • Cash value earns interest • Variable Universal Life • Like Universal life, but with investment options • Higher risk

27. Term Vs Whole Life Insurance Funeral Expenses and Personal Debts Spousal Income Mortgage Birth Death Child’s Income College Fund Estate Planning 20 40 60 80 Whole Life Insurance Term Insurance

28. Divorce • All policies need to be reviewed and re-issued in your name • Life Insurance • Plans for children • Other issues • Review and update beneficiary designations

29. Organize Your Records Record Important Information! Keep a Copy in a safe place ‘off-site’! Keep a Copy at Home! Take care of your survivors!

30. IncreasingAssets • “Umbrella” Insurance • Is it necessary? • Asset protection • Inexpensive • Coordinate with other coverage Review all policies and adjust as necessary.

31. Unexpected Life Problems • Disability Income Insurance • Different from Family Medical Leave or Workers Comp • Income replacement sources are usually limited to savings, borrowing or live off spouse’s income if there is a spouse • Long term SS disability may be an option

32. What to look for in Disability Insurance-- How long will it pay? 1 year, 3 years, until age 65? How long until it starts paying? 30 days, 60 days,... 1 year? Definition of disability? inability to perform any job, your job? Amount paid per month? Disabilities excluded? Premium cost?

33. Retirement on the Horizon • Consider buying Long Term Care insurance • Best price in your 50’s • Know when you are eligible for Medicare and Social Security benefits • Review your investments and financial plan at least semi-annually • Use a retirement calculator to determine needs

34. ShoppingTips • Determine your needs according to life-cycle events • With every event, review all insurance • Shop around for the best deal • Buy insurance, don’t let it be ‘sold’ to you • Keep your insurance records organized • Ask questions • Wait to make a decision if you are not sure Remember – It’s Your Money!

35. Common Mistakes • Not understanding its purpose • Buying as a savings vehicle • Not understanding what you are buying • Too much trust in the agent • Holding a policy forever • Buying unnecessary insurance • Being “talked” into buying Buy insurance, don’t be sold it!