Buying Insurance

1
Buying Insurance

• Chapter 22

2
Chapter Objectives

• Define some common insurance terms
• List some ways to lower insurance costs
• Explain the importance of owning home insurance
• Describe the basic types of health, auto, and
  life insurance coverage
• Understand group and individual health insurance
  plans

3
Insurance Basics

• Language of insurance
• Insurance policy
• Legal contract between person buying insurance
  (policyholder) and insurance company
• Policy explains
• Who is covered
• Types of losses for which the company will pay
• Amounts the company will pay
• Cost of insurance
• Policies are long and technical but you should
  read it anyway and ask questions about any
  unclear parts before you sign it

4
Insurance coverage

• Refers to losses that an insurance company agrees
  to cover
• Amount of coverage is the actual dollar amount
  that will be paid by the company in case of loss
• All insurance policies have a list of exclusions
  (losses or risks that are not covered).
• Benefit and beneficiary
• Benefit money paid by the insurance company for
  a loss
• Beneficiary who benefit is paid to (usually
  policyholder)

5
Premiums

• Amount a policyholder pays for insurance
• Usually paid in installments rather than all at
  once
• Deductibles portion of loss that you pay before
  insurance company pays remaining cost
• The higher deductible that you pay, the lower the
  cost of your premium

6
Claim

• Oral or written notice to the insurance company
  to collect for a loss.
• Government insurance programs
• Unemployment
• Workers compensation
• Medicare

7
Holding down insurance costs

• Know what type of insurance you want
• Call several insurance agencies in your area to
  ask about coverages and costs
• Ask about differences in premium costs with
  different deductibles. Consider paying higher
  deductibles in order to lower your premium costs
• Dont buy more coverage than you need or less
  coverage than you need

8
Home Insurance

• Renters insurance (Apartment)
• Covers your belongings up to a set amount, minus
  your deductible.
• Homeowners insurance
• Protects your house and its contents against
  losses due to fire and theft
• Doesnt cover floods or earthquakes
• Supplemental insurance is available to cover
  these risks

9
Automobile Insurance

• Liability
• Covers damage or injury for which youre
  responsible to the other driver. Doesnt cover
  your injuries or property damage to your car.
• Medical payments
• Covers medical expenses whether or not its your
  fault. Covers your passengers too.
• Collision
• Covers the cost of repairs to your car if its
  your fault. Also covers damage to your car if
  youre in an accident caused by a driver who is
  uninsured.
• Comprehensive
• Theft, fire, vandalismreasons other than an
  accident
• Uninsured motorist
• Protects you against drivers who do not have
  liability insurance. Optional insurance

10
Handling auto accidents

• Stay calm
• Think clearly
• If possible, move your car to the side of the
  road
• Check for injuries
• If youre not injured, get out of car to see
  whether anyone else is hurt
• Report the accident to the police
• If someone is injured, request an ambulance
• Record important information
• Be prepared with ID, insurance, car registration
• Explain the facts as you saw them.
• Avoid arguing with other driver

11
Buying Automobile Insurance

• Shop Around
• Drive carefully
• Take driver education classes
• Buy only the coverage you need
• Raise your deductibles
• Take advantage of insurance discounts

12
Types of health coverage

• Major medical coverage
• Covers hospital and medical expenses
• Required to pay a deductible
• Able to choose any hospitals and physicians you
  prefer
• Health maintenance organizations (HMO)
• No deductibles
• Small co-pay for doctor visits
• Checkups and well-baby visits are covered
• Choice of physicians is limited
• Preferred provider organizations (PPO)
• More freedom of choice for doctors
• Often pay higher premiums and co-pays

13
Types of plans

• Group plans
• Offered through employers
• Keep premium costs down by spreading the risk
  over a large number of people.
• Individual plans
• Students living on their own, self-employed
  workers, retirees
• Disability coverage pays a percentage of your
  salary if you cant work
• Short-term
• Long-term

14
Types of life insurance

• Term
• Protects your dependents if you die.
• Has no cash value and provides coverage for a set
  number of years.
• Beneficiary receives face value of policy
• Cash-value
• Part insurance and part investment
• You can borrow against the total amount of
  premiums paid on a cash-value policy
• Whole life insurance
• Has a savings component where you can build a
  reserve of money that you can borrow against or
  collect when you retire.

15
Buying life insurance

• Amount of premium will depend on factors such as
  age, health, and type of policy you buy
• Should you buy it?
• How much do you need?
• Depends on how old you are, whether you have
  dependents, how much you can afford, and how much
  your family will need to pay off your debts if
  you die
• Tips on buying life insurance
• Shop around (prices vary), talk to others