Understanding Automobile and Property Insurance Coverage

1. C H A P T E R 20 Insurance 20-1 Vehicle Insurance 20-2 Property Insurance 20-3 Life Insurance 20-4 Health Insurance

2. MOTOR VEHICLE RISKS • Financial responsibility • Compulsory insurance

3. Checkpoint  • What are financial responsibility laws? • Financial responsibility laws protect the public from the financial loss caused by uninsured drivers by making drivers legally responsible for any injuries or property damage they cause.

4. AUTOMOBILE INSURANCE COVERAGE • Personal injury coverage – includes bodily injury liability, medical payments, and uninsured motorist protection (main source of money paid in claims by automobile insurance companies) • Bodily injury liability – insurance that protects a driver from claims resulting from injuries or deaths for which the insured is at fault • Medical payments coverage – when policyholders and family members are covered if they are injured while riding in their car or another car • Uninsured motorist coverage – protection for injuries caused by hit and run drivers or by drivers without insurance or money to pay claims

5. AUTOMOBILE INSURANCE COVERAGE CONTINUED • Property damage coverage – automobile insurance that protects you from economic loss as a result of property damage • Property damage liability – insurance that protects a driver against claims if they insured’s car damages someone else’s property and the insured is at fault • Collision coverage – insurance that protects a car owner against financial loss resulting from a collision or rollover • Deductible – amount that must be paid before the insurance company pays a claim • Comprehensive coverage – protects the insured against almost all damage losses except those caused from a collision or rollover

6. AUTOMOBILE INSURANCE COVERAGE

7. AUTOMOBILE INSURANCE COSTS • Insurance rate factors: • Your age and other characteristics • Purpose for which you use your car • Number of miles you drive each year • Value and type of your car • Community in which you live • Amount of coverage and deductibles • Reducing auto insurance costs • Selecting a company • Assigned-risk plans • Insurance for other vehicles

8. KEY TERMS • Personal liability coverage – covers claims from injuries to people or damage to property caused by you, your family, or even your pets • Homeowners policy – the most common form of home and property insurance policy sold; provides a very convenient package-type insurance policy designed to insure homes • Depreciation – decrease in property value; may affect the amount an insurance company will pay if the property is destroyed

9. PROPERTY INSURANCE COVERAGE • Damage to home or property • Additional living expenses • Liability losses

10. PROPERTY INSURANCE POLICIES • Homeowners policies • Renters policies • Special coverage • Making a claim

11. HOME AND PROPERTY INSURANCE

12. PROPERTY INSURANCE COSTS • Coverage selection • Insurance premium determining factors: • Insurance company’s past experiences • The value of property insured • Construction of the building • Number of claims on the property • Type of policy • Distance to the nearest fire department and water supply • Amount of deductible • Credit rating of the insured

13. KEY TERMS • Beneficiary – the person named in the policy to receive the insurance benefits • Term life insurance – insurance that provides financial protection from losses resulting from a death during a definite period, or term • Permanent life insurance – life insurance that has cash value and an investment feature

14. LIFE INSURANCE PRINCIPLES • The life insurance policy • Beneficiary selection

15. TYPES OF LIFE INSURANCE • Term life insurance • Permanent life insurance • Whole life insurance • Variable life insurance • Universal life insurance • Group life insurance – an insurance policy that covers a group of people; the group acts as single unit in buying the insurance

16. TYPES OF LIFE INSURANCE POLICIES

17. Checkpoint  • What is the difference between term and permanent life? • Term insurance • Less expensive • No savings or investment features • Expires at the end of the term • Permanent life insurance • Policyholder can cash in policy for its cash value • Policyholder can borrow up to the amount of the policy’s cash value.

18. Checkpoint  • What factors affect the need for life insurance? • Factors include the number of dependents who rely on the person, the amount of savings the person has to leave to those dependents and the amount of the person’s debts.

19. KEY TERMS • Hospital insurance – insurance that usually pays most or all hospital charges if an illness or injury requires the insured to be hospitalized • Surgical insurance – insurance that covers all or part of the surgeon’s fees for an operation • Regular medical insurance – insurance that covers fees for nonsurgical care given in the doctor’s office, the patient’s home, or a hospital • Major medical insurance – protection against the high costs of serious illness or injuries

20. KEY TERMS CONTINUED • Coinsurance – the sharing of expenses by the policyholder and the insurance company • Comprehensive medical policy – a policy that combines the features of hospital, surgical, regular, and major medical insurance • Disability income insurance – insurance that replaces income that is lost when the insured cannot work because of an illness or injury

21. OTHER HEALTH INSURANCE COVERAGE • Dental insurance – usually includes exams, X-rays, cleaning, and fillings • Vision care insurance – policies cover eye exams, prescription lenses, frames, and contact lenses

22. HEALTH INSURANCE PROVIDERS • Group health insurance – companies pay part or all of the insurance premiums for their employees • Individual health insurance – policies that are available to individuals and are adapted to individual needs; usually expensive • Managed care plans • Health Maintenance Organization (HMO) • Preferred Provider Organization (PPO)

23. HEALTH INSURANCE PROVIDERS CONTINUED • State government assistance • Federal government assistance – Social Security provided insurance including Medicare • Cost reduction actions • Buy only the insurance you need • Don’t use medical benefits unnecessarily • Obtain second opinions • Use outpatient services as much as possible

24. DISABILITY AND LONG-TERM CARE INSURANCE • Disability income insurance • Long-term care insurance – provides long-term care which is daily assistance needed because of a long-term illness or disability (nursing home care or at home care)