Risk Management and Insurance Protection
Overview of Risk Management
Think about the answers to the following questions during this unit.
Why have insurance?
What is risk management?
You use various ways to deal with potential personal or financial loss.
List three ways to manage personal/financial risk
1. avoid risk altogether
2. minimize risk
3. transfer risk
Insurance Basics
What is insurance?
Insurance - is protection against financial loss.
What is an insurance premium?
Insurance premium – is the payment you make to an insurance company in exchange for its promise of protection and help.
How Do People Keep Insurance Costs Down?
Ways to Save Money
Get good grades
Shop around
What is a coverage limit?
A coverage limit - is the maximum amount the insurance
company will pay in the event of a claim.
What is a deductible?
A deductible – is the amount of the loss you must pay out of
your own pocket before the insurance company begins to
reimburse you.
What is considered a low deductible?
$100.00
What is considered a high deductible?
$1,000.00
Types of Insurance Coverage For Cars
Liability
What does it pay for?
Pays for bodily injury to other people and damage to property.
Medical
What does it pay for?
Pays for medical expenses for you, your family members, and
anyone riding with you in your car.
Uninsured Motorist
What does it pay for?
Pays for yourself if the other driver doesn’t have insurance
coverage.
Underinsured Motorist
What does it pay for?
Pays for any amounts the other driver’s insurance doesn’t cover.
Collision
What does it pay for?
Pays for your car repair.
Other than collision
Why should you have this?
This covers damage from theft, hail, floods, vandalism, etc..
Coverage Amounts
What are some suggested minimum coverage amounts for car
insurance?
Liability $250,000 per person
$500.00 per accident
Medical $5,000.00
Uninsured/Underinsured Motorist$250,000 per person
$500,000 per accident
Shopping for Car Insurance/Policies
Factors That Affect The Cost of Car Insurance
List one positive and one negative item under each factor
Age
Younger you are the more you pay
Gender
Males under age 25 pay more
Marital Status
Single people pay more
Type of Car
Sports cars, cars with 4 wheel drive pay more.
Safety devices lower cost:
Airbags
Antitheft
Equipment
Antilock brakes
Cost of Repairs
Foreign cars cost more, higher the premium
Mileage
The more the card is drive the greater the risk of being in an accident, higher the premium
Location
Cities have greater odds of having accidents, higher the
premium
Law Enforcement
More speeding tickets, higher the premium
Obey traffic laws, lower the premium
Driving Record
Drivers without accidents, lower premium
Health Insurance
What does health insurance pay for?
Health insurances pays the medical bills in case you, or your family
members, become sick or injured.
What can you do to keep your cost down when purchasing insurance?
Group policy offered by an employer who contributes to the plan.
How long can you become covered under your parents heath plan?
Most health insurance plans will cover you as a “dependent” of an adult
family member until you reach age 19, unless you are going to college
and are a full-time student, up to age 23.
Property Insurance (including renters)
What does property insurance pay for?
Property insurance protects your material possessions, your stuff,
such as : clothes, a stereo, furniture, a bike, computer equipment.
Against fire, flood or theft.
What does homeowner’s insurance cover?
Homeowner’s insurance covers the house itself against damage from
fire, flood or theft.
What does renter’s insurance cover?
Renter’s insurance covers your goods and not the building your rent.
Life Insurance
What does life insurance pay for?
Life insurance protects people who depend on you financially in the
event of your untimely death.
What two forms does life insurance come in?
Life insurance comes in “Term” and “Whole Life”
Term insurance is more affordable and will often meet your life
insurance needs while you are a young single person.
Whole insurance is more expensive, however, it will provide protection
and builds up a savings account, you can borrow against at a
later time if needed.
Disability Insurance
What does disability insurance pay for?
Disability insurance pays for your income from a job if you are sick or
physically unable to wok for long periods of time.
How much of your full-time wage do you usually get paid?
Insurance typically pays you 60% to 70% of your full-time wage.
What are the two main types of disability insurance?
Short-term disability covers you for periods of up to two years.
Long-term disability covers you for periods of one year all the way up
to retirement, which could be decades.
Liability Insurance
Why would you want liability insurance?
Liability insurance covers you from costly legal fees and multi-
thousand dollar settlements in court cases or as enhancement
coverage, often called an umbrella policy.
When should you need liability insurance?
If you own a house and drive a car, you should have an umbrella policy.
Thanks to:
Neffe – Unit Six: Insurance: Your Protection p. 73
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– p. 80, Week 7, Insurance; Risk vs. Reward
Insurance