Insurance Review

Types of Insurance

• Disability

• Property

• Health

• Life

• Liability

• Automobile

Disability Insurance

• Protection against loss of income resulting from a disabling injury or loss

• Usually 50-70% of total gross earnings

• Sometimes, partially paid for by employer

• If you become injured, your employer would pay for part or all of your missed work

• Short term disability and long term disability

Property (Homeowners Insurance)

• Protection against financial losses resulting from damage to or destruction of property or possessions 

ACV (actual cash value)

• pays for what your property is worth at the time it was stolen or damaged

Replacement cost coverage

• will pay for what it actually costs to replace the items you lost – this costs more than ACV

Rider

• separate protection for particularly expensive possessions such as jewelry, furs, electronics, etc

Ways to reduce the cost of property insurance

• Increase deductible

• Claim-free for 3 years

• Smoke detectors

• Fire extinguishers

• Home is less than 10 years old

• Burglar alarm

• Deadbolt locks

• Brick construction

• Lower claim neighborhood

• Sprinkler system (inside house)

Health Insurance

• Protects against the costs of care because of illness, injury, or disability

• Often partially paid for by employer

• An employer would offer health insurance as a benefit or incentive for someone to work for their company

Group health insurance

• Usually purchased through employer

• Less expensive than buying individual health insurance because risk is spread among many people

• Payments deducted from paycheck

Individual health insurance

• Purchased by an individual from an insurance company

• Very expensive

HMO (Health Maintenance Organization)

• Must seek care within the HMO network

• Must have a primary care physician that writes referrals to other doctors if needed

• You pay a copay each visit

PPO (Preferred Provider Option)

• You choose from a list of doctors and hospitals that have agreed to accept a preset fee as total payment for services provided

• You may also choose non-participating doctors and pay the difference in cost of care

• There are deductibles and copayments for health insurance claims

Co-Insurance

• Means that the patient is responsible for paying for a portion of his/her costs.

• Usually 80/20 – insurance pays for 80% while patient covers 20%

Life Insurance

• Protection against financial losses resulting from death

• The younger you are when you purchase, the cheaper the rate

• Higher age = higher risk

• Why do most single adults choose not to buy life insurance?

  • No one to support if death occurs

Permanent Life Insurance

• Potential to build cash value (investment similar to the idea of “buying” a home)

• Some allow you to withdraw money 

  • e.g. College tuition, down payment on home, unexpected health bills

• Costs more upfront (3x or more than term life insurance)

Cost for Permanent Life Insurance depends on…

• Your health and age at the time of purchase

• How much coverage you want/need

• Rates are locked in forever

Term Life Insurance

• Purchased for a certain number of years (10, 20 or 30) - many people purchase this when they have a child

• Very similar to the idea of “renting” your insurance

• Does NOT build a cash value

• More affordable than permanent life insurance

Policy-Holder

The owner of an insurance policy

Beneficiary

The person or entity you name in a life insurance policy to receive distributions of benefits

Liability Insurance

• Protection against financial losses resulting from lawsuits

• Usually written within another type of insurance protection, such as automobile or property insurance (umbrella policy)

• When would this be useful?

  • You accidentally injure someone else or damage someone else’s property

Automobile

• Protections against financial losses resulting from collision, theft, vandalism, fire, acts of nature, injury to the driver, passengers or others

• Most states require auto insurance

• See your “car” notes for more info

Warranties

• Assurances by sellers that goods are as promised 

• Implied warranty – the product sold is warranted to be suitable for sale and to work effectively whether or not a written warranty exists

• Required by state law

• To avoid implied warranties the seller can state in writing that the product is sold “as is”

• If a product is sold as is you have little legal recourse should the product fail to perform

Full Warranty

• 3 requirements:

  • Product must be fixed at no cost to the buyer within a reasonable time after the owner has complained

  • Owner will not have to undertake an unreasonable task to return the product for repair

  • A defective product will be replaced with a new one or the buyer’s money returned if the product cannot be fixed

Limited Warranty

• Includes less than a full warranty

• For example, it may offer only free parts, not labor

• One part may be covered by full, the rest may be covered by limited

• Both full and limited are valid only for a specified amount of time

              READ CAREFULLY!!!