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Insurance

Insurance . Is protection for individuals against possible financial losses Provides protection against many risks such as unexpected property loss, illness and injury Acts like a safety net for unforeseen events . Insurance Companies.

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Insurance

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  1. Insurance • Is protection for individuals against possible financial losses • Provides protection against many risks such as unexpected property loss, illness and injury • Acts like a safety net for unforeseen events

  2. Insurance Companies • Are financial institutions agreeing to compensate for losses of individuals or businesses resulting from damages, injury, treatment or hardship • Allow individuals to benefit from the coverage by purchasing a policy • is the scope of protection provided under an insurance policy

  3. Coverage • Is provided by the insurance company to a policyholder to cover a risk • Is specified in the insurance policy

  4. Insurance Policy • Is a written contract effecting insurance • Binds the insurance company to assume the risk of the policyholder • in return, the policyholder must pay a premium • in many cases, the policyholder is required to pay a deductible when filing a claim The premium is a fee the policyholder pays to the insurance company in order to be insuredfor a defined period of time.

  5. Deductible • Is the portion of a claim the policyholder must pay before the insurance company provides the benefits of the policy • for example, if you have a $200 deductible with your auto insurance, a repair covered by the policy costing $1,000 would require you pay $200, and the insurance covers the remaining $800 • Is specified in the insurance policy

  6. Risk • Is the chance of loss or injury • Refers to an accident or trouble which no one can predict • policyholders transfer risks to insurance companies through a policy • policyholders are required to pay a deductible, which covers their portion of the risk A deductible is the set amount which the policyholder must pay per loss on an insurance policy.

  7. Peril • Is anything which may cause a possible loss, including: • fire • floods • wind or hail storms • explosions • robbery • accidents

  8. Hazard • Is anything which increases the likelihood of loss through some peril • for example, defective house wiring can increase the chance of house fires

  9. Negligence • Is the failure to take ordinary or reasonable care to prevent accidents from happening • for example, if a restaurant owner does not clear the ice from the steps in front of the store, he or she creates a liability risk of customers falling

  10. Pure Risks • Are risks in which the only possibility is loss and there is no beneficial result • Are purely accidental and unintentional • most of these risks can be covered by insurance

  11. Speculative Risks • Are risks which carry a chance of either loss or gain • an individual is starting a small business which may or may not be successful • Are NOT insurable

  12. Automobile Insurance • Reduces the financial impact of an automobile accident • Is often required by Financial Responsibility Laws • these laws vary from state to state, but require people to prove they have the financial means to pay for damage or injury caused by an accident • some states have compulsory insurance laws requiring drivers to have liability insurance • Typically includes a deductible

  13. Types of Automobile Insurance • Include: • bodily injury liability • property damage liability • medical payments coverage • uninsured motorist protection • collision insurance • comprehensive insurance

  14. Bodily Injury Liability • Covers physical injuries to others caused by an automobile accident for which the policyholder was responsible • Covers costs if pedestrians, people in other cars, or passengers in the driver’s car are injured or killed • Does not cover injuries to the policyholder

  15. Property Damage Liability • Applies when the policyholder damages the property of another person • Covers the damage of the vehicle when an individual is driving another person’s vehicle with the owner’s permission • Covers damage done to buildings and equipment such as telephone poles, fences or mail boxes

  16. Medical Payments Coverage • Is insurance which applies to the medical expenses of anyone who is injured in policyholder’s automobile, no matter who was at fault for the accident • Is not available in all states

  17. Uninsured Motorist Protection • Covers costs if an individual is involved in a car accident with an uninsured driver • can include bodily injury and/or damage to the vehicle, depending on the policy • Is relatively inexpensive to add to the automobile policy

  18. Collision Insurance • Covers damage to the policyholder’s car when it is involved in an accident • Allows the policyholder to collect cash value no matter who was at fault • Only allows the policyholder to collect the cash value of the car, or of the cost of repairs, at the time of the accident • Is required when a car is financed or leased

  19. Comprehensive Insurance • Covers physical damage to an individual’s car which occurs as a result of a non-collision incident • examples include fire, flooding, wind, damage resulting from animals, theft, vandalism • Is required when a car is financed or leased

  20. Auto Insurance Prices • Are affected by the following factors: • amount of coverage • vehicle type • rating territory • driver classification

  21. Amount of Coverage • Needs to protect the policyholder legally and financially • liability insurance is required by many states to legally use the vehicle • the policyholder can select the amount of coverage depending on his or her financial state

  22. Vehicle Type • Refers to the year, make and model of a vehicle • Can make insurance more expensive • if the vehicle has expensive replacement parts, requires more complicated repairs or is a type of car that is frequently stolen • Can lower the price of insurance • if the vehicle has added safety features or a security system

  23. Rating Territory • Is the residential location used to determine the automobile insurance premium • different locations have different costs • insurance is cheaper in rural areas due to fewer accidents and thefts.

  24. Driver Classification • Is based on age, sex, marital status, driving record and driving habits • drivers age 21 to 24 typically represent a higher risk than other age groups • Is also influenced by the cost and number of claims the policyholder has filed with the insurance company

  25. Assigned Risk Pools • Consist of people who cannot obtain an insurance policy from regular carriers due to poor driving record or other factors • in states where liability insurance is required, the state assigns high-risk drivers to insurance carriers which charge them much higher rates and only allow them to buy the absolute minimum coverage

  26. Tips • To reduce auto insurance rates include: • compare companies’ rates and services • obtain premium discounts by maintaining a good driving record • install security devices into your vehicle • increase the amount of your deductible

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