Understanding Insurance: Risk Management and Coverage Types

1. Unit 9 Insurance

2. Unit 9 Vocabulary • Deductible • Disability Insurance • Exclusions • Face Amount • Grace Period • Group Health Insurance • Hazard • Health Insurance • Health Maintenance Organization (HMO) • Actuarial Table • Actuary • Agent • Beneficiary • Benefits • Cash Value • Claim • Collision Coverage • Comprehensive Coverage • Coverage

3. Unit 9 Vocabulary • Personal Risk • Policyholder • Preferred Provider Organization (PPO) • Premium • Proof of Loss • Property Risk • Renter’s Policy • Replacement Value • Rider • Risk • Homeowner’s Policy • Insurance • Insured • Liability Coverage • Liability Risk • Life Insurance • Loss • No-fault Insurance • Peril • Personal Injury Protection (PIP)

4. Unit 9 Vocabulary • Risk Assumption • Risk Avoidance • Risk Management • Risk Reduction • Standard Policy • Umbrella Liability Insurance • Unearned Premium • Uninsured/Underinsured Motorist Coverage (UM)

5. Insurance • Risk Management • Insurance: A method of spreading the risk to protect assets and income. • Risk: Uncertainty as to a loss, increased by perils and hazards. There are three types of risk: • Personal Risk: Possible losses involving your income or standard of living. (Life, health, disability, unemployment)

6. Insurance • Risk Management • Property Risk: Possible losses to personal or real property. (Fire, theft, wind, rain, accident, natural disaster) • Liability Risk: Risks arising from your errors in judgment or negligence. (Driving accidents, personal injuries, business mistakes)

7. Insurance • Risk Management • Risk Management: A plan to protect you from risks and reduce financial loss. The three step process for risk management is: • Identify the risk • Assess seriousness of the risk • Handle the risk

8. Insurance • Risk Management • How risk is handled. • Risk Avoidance: Avoid situations that involve risk or that will increase risk. • Risk Reduction: Take measures to lessen the frequency or severity of losses that may occur. Also involves risk transfer. • Risk Assumption: Self-insure or pay for loses personally.

9. Insurance • Homeowner’s Insurance • Homeowner’s Policy: Insurance that pays for damage to your property and belongings and provides liability coverage in case someone is injured on your property. Also covers: • Attached structures such as a garage or shed • Shrubs, trees, plants, fences • Temporary housing for a limited period of time if forced to vacate the home due to a fire.

10. Insurance • Homeowner’s Insurance • The amount of insurance carried should cover the home’s replacement value: The amount required to reconstruct the residence if it is completely destroyed. • Homeowner’s insurance does not cover damage caused by flooding, earthquake, nuclear accident, etc. Policies for these risks must be purchased separately.

11. Insurance • Homeowner’s Insurance • Renter’s Policy: Protects your personal possessions that are kept on the premises of someone else’s property.

12. Insurance • Automobile Insurance • All states have laws intended to keep off the highways drivers who cannot pay for any property damage or injuries they cause. • Minimum automobile insurance is required for registration of a motor vehicle. • Georgia’s minimum liability coverage is 15/30/15. • $15,000 maximum per person per accident. • $30,000 maximum per accident. • $15,000 maximum for property damage per accident.

13. Insurance • Automobile Insurance • Cost of Automobile Insurance • Premium: The amount a policyholder agrees to pay the insurance company for an insurance policy. • Premiums are based on a number of factors: • Make, model, style and age of car. • Driver classification: age, sex, marital status, driving record. • Location (city, county) of driver and car. • Distances driven • Purpose of driving such as work.

14. Insurance • Automobile Insurance • Cost of Automobile Insurance • Premium discounts are available for: • More than one vehicle insured with the same company • Driver’s education training • Good grades in high school (B average or higher) • Non-smokers

15. Insurance • Automobile Insurance • Cost of Automobile Insurance • Driving Record includes: • Infractions: Parking ticket, failure to come to a complete stop, improper left turn, etc. • Misdemeanors: Offenses that involve the arrest of the driver such as speeding, driving without a license, reckless driving, etc. • Felony: Drunk driving, leaving the scene of an accident, etc. • All of these events will result in an increase in premiums and remain a part of your driving record for a minimum of three years.

16. Insurance • Automobile Insurance • Types of Automobile Insurance Coverage • Coverage: Protection provided by the terms of an insurance policy. • There are five basic types of automobile insurance coverage. • All five bought under one policy is considered full coverage.

17. Insurance • Automobile Insurance • Types of Automobile Insurance Coverage • Liability Coverage • Liability Coverage: Protects the insured against claims for personal injury or damage to another person or their property. • The insured receives nothing for losses either personal injury or property. • All states require all drivers to carry liability insurance. • Collision Coverage • Collision Coverage: Covers the cost or repairing or replacing the car of the insured even if he or she is at fault. • Most collision coverage has a deductible: the amount paid by the insured before insurance pays. • The smaller the deductible the more expensive the insurance.

18. Insurance • Automobile Insurance • Types of Automobile Insurance Coverage • Comprehensive Coverage • Comprehensive Coverage: Covers damage to your car from events other than collision. • These events include fire, theft, tornado, hail, water, falling objects, natural disasters, acts of vandalism, etc. • Usually there is a small or no deductible for comprehensive.

19. Insurance • Automobile Insurance • Types of Automobile Insurance Coverage • Personal Injury Protection (PIP) • Personal Injury Protection (PIP): Pays for medical, hospital, and funeral costs of the insured and his or her family members and passengers, regardless of fault. • If the insured is injured as a pedestrian or bicyclist, this PIP insurance will pay the medical costs. • Cost of this insurance can be reduced by buying cars with air bags, antilock brakes, and other safety devices that lower the risk of injury.

20. Insurance • Automobile Insurance • Types of Automobile Insurance Coverage • Uninsured/Underinsured Motorist Coverage (UM) • Uninsured/Underinsured Motorist Coverage: Protects the insured in the event he or she sustains bodily injury because of the acts of an uninsured or underinsured motorist. • An uninsured motorist does not carry required insurance. • An underinsured motorist has policy limits that are too low to cover all of your injuries. • It pays for car rental, medical, and other costs that would have been paid by a fully insured motorist. • Protects the insured as a pedestrian if he or she is hit by an uninsured motorist.

21. Insurance • Automobile Insurance • No-Fault Insurance • No-Fault Insurance: Drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company, regardless of who is at fault. • The idea behind no-fault is that it could take years to settle a case and determine who is at fault. • Georgia is not a no-fault state. • Florida is a no-fault state.

22. Insurance • Umbrella Liability Insurance:Used to pay for damage caused by acts of negligence on the part of the property owner after coverage under other policies has been exhausted.

23. Insurance • Health Insurance • Health Insurance: A plan for sharing risk of financial loss due to accidents or illnesses that result in large medical bills. • Group Health Insurance: Health plans that share the risk among a large number of people, usually employees. • Group health insurance is the most cost effective method of health insurance. • Individual plans are expensive and you could be rejected due to preexisting conditions.

24. Insurance • Health Insurance • State high-risk insurance pools are available for people who would otherwise be uninsurable but, the premiums are very high. • Supplemental insurance pays the deductible, co-payments, and other unpaid expenses not covered by the primary policy however, the cost can be expensive in relation to the benefits received.

25. Insurance • Health Insurance • There are three types of health coverage: • Basic Health Coverage: Pays for physician care that does not involve surgery such as office visits, x-rays, laboratory tests, etc. • Major Medical Coverage: Provides protection against the large and catastrophic expenses of a serious injury or illness such as surgery or transplants. • Dental and Vision Coverage: • Dental covers basic procedures and annual checkups at 80% and major procedures at 50%. • Vision covers examinations and glasses.

26. Insurance • Health Insurance • Private Health Plans: • Preferred Provider Organization (PPO): Group of health care providers (doctors and hospitals) that band together to provide health services at a set fee. • Health Maintenance Organization (HMO): A group plan offering prepaid medical services to its members. • Usually has its own facilities and provides a full range of medical services. • Members are restricted to choosing from the doctors on staff.

27. Insurance • Health Insurance • Medicare and Medicaid: • Medicare insurance coverage provided to those over age 65 (age 67 if born after 1960). • Medicaid insurance coverage is provided to those who qualify for state welfare or other public assistance. • Funded by employee payroll taxes (1.45% of gross pay).

28. Insurance • Income Protection Insurance • Also known as Disability Insurance:provides regular income during a period when a person is injured or ill and unable to work. • Short term disability insurance provides benefits for up to two years. • Long term disability insurance provides benefits for periods from over two years to retirement. • It is the most overlooked type of insurance.

29. Insurance • Income Protection Insurance • Types of Income Protection Insurance • Individual Disability Insurance Policy (most expensive) • Group Disability Insurance Policies • Social Security Disability Coverage • Worker’s Compensation Insurance • Other types, such as Veteran's benefits

30. Insurance • Life Insurance • Life Insurance:Protects dependents from loss due to death of an income provider. • Life insurance is based on mortality tables; young people pay lower premiums because their risk of death is lower.

31. Insurance • Life Insurance • Types of Life Insurance • Temporary Life Insurance: Also known as term insurance • Decreasing Term Insurance • Level Term Insurance • Permanent Life Insurance • Builds cash value: amount of money available to the policyholder to borrow during the life of the policy or a discontinuation of the policy • Straight Life: Also known as whole lifeand premiums are paid throughout the life of the insured.

32. Insurance • Life Insurance • Types of Life Insurance • Permanent Life Insurance • Limited-Pay Life: Premiums are paid for a limited amount of time or until age 65 then the insured is covered for life • Universal Life: Part of the premium pays for insurance and part of the premium goes into a savings plan. • Variable Life: Part of the premium pays for insurance and part of the premium goes into an investment plan.