Insurance Basics

1. Insurance Basics

2. Why Do You Need Insurance? • Help you pay for things that could happen to you that you cannot afford • Law says you need to pay to compensate for others losses when you cause damage

3. Types of Insurance • Health • Car • Homeowner’s • Disability • Life

4. Some Terms… • Insurance Policy • contract offered by an insurance company that details what kinds of events are covered, how the amount of payment will be calculated, and how much the insured will pay for the coverage

5. Some Terms… • Premium • The periodic payment made on an insurance policy to have insurance coverage • Policy Holder • All the people who buy insurance, pay premiums and eligible to file claims

6. How does it work? • Need to file a claim • Claim • Request to your insurance company for payment of, or reimbursement for, losses for which you are insured • Need to pay deductable • The amount you pay out of your own pocket before the insurance company pays • The lower the deductable, the higher the premium

7. Car Insurance • Necessary if accident is fault or non-fault • Illegal in PA to drive w/o car insurance! • Provide “proof of insurance” • Protects persons and vehicles in case of an accident of theft • Pays for damage to vehicles and property • May pay for towing and accident-related medical costs

8. Car Insurance Factors • See Handout • Age, type and value of car • Cost to repair/replace • Age of driver • Marital status • Driving Record • Amount of driving you do • Geographic Location • Area of town which you live/work

9. Coverage: Your Loss • Includes • Collision • Pays for damage caused by running into something or someone running into you • Comprehensive • Pays for damages from other sources such as hail or theft • Not required if your cost of insurance is more than the car you drive

10. Coverage: Your Loss • GAP Insurance (guaranteed auto protection) • Not required • Covers the difference between the amount you OWE on a car and the amount the insurance company will give you if your car is totaled. • EX You loaned $25,000 to buy a new car • Six months later you totaled your car • You still owe $24,500 on the car • Insurance says it is worth $20,000 • GAP insurance will reimburse you the $4,500 you need to pay off the bank

11. Coverage: Obligation to Others • Liability Coverage • The cost to compensate others for injury or death or to repair or replace their property when anyone driving your car caused damage or injury • Medical Expenses • The costs to care for both the occupants of your car and other people injured by your accident

12. Coverage: Uninsured Motorist • All states require people to carry at least an uninsured motorist protection • Coverage if accident with someone who has no insurance (they can’t afford to pay your expenses)

13. Coverage Costs and Requirements • Usually policies are written on a six month basis • Rate quoted at $450 ($900 /year) • If you are in an accident expect rates to go up! • Newer cars require more insurance than older • As car ages have insurance re-evaluated so that you aren’t paying to cover expense of “new car”

14. To Lower Your Rate • Completion of driver education course • Good student discount • Nonsmoker • Nondrinker • Safe driving record • Low number of miles driven per year • Anti-lock brakes, airbags, security alarm

15. Homeowner’s Insurance • Designed to protect your “real property” • House • House contents • Land • Structures on Property (garage, shed, barn etc) • If you have a mortgage you will be required to have homeowner’s insurance

16. Personal Property • Defined as all the items you own that can be moved • Usually is part of homeowner’s insurance • Covers losses at home • Items lost or damaged away from home • Includes • Jewelry • Electronics • Clothing, etc…

17. Renter’s Insurance • Designed to insure your personal belongings in a house/apartment you do not own

18. Life Insurance • Designed to protect people left behind when someone dies • Provides survivors with money, which is called a “death benefit” • Generally, only needed when someone has dependents • Family members who rely on the person for financial support

19. Life Insurance • Two Types • Term • Cash Value

20. Cash Value Life Insurance • Cash Value • Grows in value over time, eventually you pay off over course of usually 20-25 years. • Stop having to pay premiums and still have value of policy • Can cash out when you stop paying into it if you choose to

21. Life Insurance (Types) 2. Term Life Insurance • Cheaper than cash value • Is never paid off • Has no cash value

22. Health Insurance • Two Types • HMO Plans • PPO Plans

23. HMO Insurance Plan • HMO Plans • Health Maintenance Organization • Managed Care Plan • Manage or control your use of health care services • One Dr is responsible for your care • Referrals are necessary • Pay co-pay per visit, not a percentage of overall cost

24. PPO Plans • Preferred Provider Organization • Network of health-care providers approved by the insurance company • More choices of places to go • Have deductible • Amount you must pay before insurance covers • (usually a percentage, up to a max) Ex. Pay 20% of costs, up to $250 then insurance pays all the costs

25. COBRA Plans • COBRA law guarantees anyone who leaves a job the right to continue the health-insurance plan for 18 months • You must pay the whole premium