Transcript Insurance - Schaumburg High School

Insurance
Insurance Basics
► Risk
management – limiting possible
financial losses to amounts you can handle
► Insurance to manage risk
► Premium – Regular payment for insurance
► Diversification – Insurance company
diversifies to reduce risk
Insurance Basics
► Policy
– legal contract for insurance
► Claim – filed if you incur loss covered by
policy
► Shared risk – many pay for the few who
incur loss
Insurance Basics
► Appraisal
► Rider
– special addition to an insurance
policy
► Life & Health insurance sold at different
costs
 Life expectancy (ave. # of years remaining)
Insurance Basics
► Should
protect from a loss that could put
you in financial difficulty
► The more you buy, the higher the cost
► Insurance provides security
 Banks won’t lend money to a house that isn’t
insured
 Doctors don’t practice without insurance
 Our economic system relied on sharing risk
Types of Insurance
► Property
Insurance
 Cars, homes, valuable possession
 Market value (what it’s worth)
 Replacement value (cost to replace, no matter
what market value is)
► Liability
Insurance
 Your actions cause losses to other people
► Personal
insurance
 Life, Health
Automobile Insurance
► Bodily
injury liability coverage
 When YOU are responsible for injuring people
 250,000/500,000 (one person/max on all) for each
accident
► Property
damage liability coverage
 When YOU are responsible for injuring another
person’s property
 Does not cover YOUR car
 x/x/50,000 (3rd number listed)
 Insurance company will pay up to $50,000 for
property damage to another person’s property for any
one accident
Automobile Insurance
► Medical
Payments Coverage
 Medical and funeral expenses for you, your
family, and other passengers in your car
because of injuries
 Doesn’t matter who caused accident
► Uninsured/underinsured
motorist coverage
 Medical and damage for you and your
passengers caused by a driver without or too
little insurance
 Does NOT cover the other driver
Automobile Insurance
► Comprehensive
Coverage
 Damage to your car caused by other than a
collision
 Environmental hazards, vandalism, theft
 May exclude easy to steal items (phone)
► Collision
Coverage
 Damage to your car caused by colliding with
another car or object
 Most expensive portion of policy
Automobile Insurance
► Deductible
– amount you pay before
company pays anything
► Additional coverage options
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Rental car
Towing
Items within car (stereo)
Cover gap between value and what you owe
Are these things worth the additional premium?
Automobile Insurance
► How
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much to buy?
Least you should consider is 50/100/25
Medical at least $50K
Collision/comprehensive, depends on car
Deductible
►The
Higher the deductible, the lower the premium
Why are costs so high?
► Technology
– more expensive to fix
► Medical technology, equipment and drugs –
more expensive
► Lighter cars (fuel efficient cars) have more
damage
► Americans more likely to sue
► Judges awarding higher amounts
Factors Affecting Premium
► Driver
classification
 Age, gender, marital status
 Based on statistics
► Rating
territory
 Some locations more vulnerable than others
 Claims in an area
► Driving
record
 Points added to your record
 Each point raises your premium 10%
 2-3 points will increase 25-100%
Factors Affecting Premium
 Assigned risk – you will have to pay very high
premiums
► Type
of car
 More expensive to repair or replace
 Theft to expensive sports and luxury cars
► Claims
history
 More claims you have, the higher the premium
How to Reduce Your Premium
► Be
a responsible driver
► Drive a moderately priced car
 Discounts for certain safety features
► Good
grades
► Driver’s Ed
► Live in safe neighborhoods
► Increase the size of your deductible
Home Insurance Coverage
► Provides
personal property and liability
protection for your home
► Personal Property – Damage to or loss of
your house and its contents
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House, garage, shed
Furniture, clothes, appliances
Items from your car that are stolen?
Living expenses if house in uninhabitable after
loss
Home Insurance Coverage
► Exclusions
– not covered
 Stamp and coin collections, laptops, silverware,
valuable jewelry and cash
► Liability
– Covers bodily injury or damage
you cause to others while on your property
or in other locations
 Damage you do to someone else’ property
 Damage you cause away from home
 Not auto coverage though
Home Insurance Coverage
► Umbrella
policy – additional liability
protection beyond that included in an
automobile or homeowners policy.
► Special risk coverage
 Hurricanes, for example
► Basic
forms – 6 (number and types of perils
covered)
► Renter’s Insurance (same as home owner
but doesn’t cover structure)
How much to buy?
► 80%
of its replacement value (land will still
remain and that’s included in value)
► 80 % rule – the company isn’t required to
reimburse you for the total amount of a loss
unless your policy covers at least 80 % of
your home’s actual replacement value at the
time of the loss
EXAMPLE
► An
example: The cost to rebuild your house
is $180,000. You have a partial loss of
$20,000. But you only purchased insurance
coverage for $90,000. You get to share (pay
for it yourself) a portion of the $20,000 loss.
Since you only purchased 50 percent of the
amount of insurance required (based on an
$180,000 cost to rebuild), the insurance
company will only reimburse you 50 percent
of the loss-or $10,000-less your deductible.
Cost of Homeowner’s Insurance
► Location
► Age
of house
► Distance to a fire station or hydrant
Reduce Your Premium
► Increase
your deductible
► Upgrade your home
 Plumbing, wiring
 Construction (metal siding and interior supports rather
than wood)
► Install
smoke detectors
► Install more security
► Special discounts
 Nonsmokers
 Someone does s not work outside home
Providers and the Claims Process
► Insurance
is a service
► Choosing an agent
 Someone to help you stay current with
coverage
 Two types: Independent and employed with a
company
 Ask for referrals
Asking others about agents..
► Ability
to explain policy
► Quality of advice
► Availability in time of need
► Helpfulness in getting claims process
► Speed in getting claims paid
Choosing an Insurance Company
► Policy
is only as good as the company that
issues it
► Financial Health of company (Best’s
Insurance Reports, A.M. Best Company)
► Claims Service – speed & ease of claims
processing (Consumer Reports)
Filing a Claim
► Homeowner’s
claims
 Home Inventory – store in safe place
 Must demonstrate responsible behavior (stop any future
loss or damage)
 Contact agent
 Adjustor will assess damage
 Prove your loss with your inventory
 Insurance company will issue you a check (sometime to
you and contractor to ensure repairs are done)
Filing Claims
► Automobile
Claims
 Call police and obtain report
 Ask for other driver’s name, phone number, and
insurance company.
 Give information to insurance agent.
 Provide details to agent
 Adjustor assesses damage
► No
Fault Insurance – pays for person’s loss
no matter who was at fault
Insurance
► Insurance
Fraud
Health Insurance
► Malpractice
insurance – protecting
themselves against a devastating loss
(Average settlement exceeds $1 million)
 Can cost doctors $100,000/year!
 Higher medical costs!
Health Insurance
► Hospitalization
– hospital stay
► Surgery – all parts of surgery
► Outpatient services (Physician’s expense
insurance) – nonsurgical car in their office hospital
or in your home, doctor visits x-rays, and labs
► Major Medical – enormous costs from serious
illness or accident (extended hospital stays, longterm physical therapy, multiple operations)
Additional Coverage Choices
► Medications
 Generic drugs
► Dental
care (preventative)
► Vision care
 Usually injuries not regular exams
What’s Not Covered
► Procedures
you elect to have done
 Cosmetic surgery
 Visits if you don’t have a problem
► Some
do not cover childbirth but will cover
complications from pregnancy
► Experimental drugs and surgical procedures
► Some transplants
► Duplicate benefits
Special Health Needs
► Catastrophic
and specified disease insurance
► Long-term care insurance
► Disability Income
Health Insurance Plans
► Fee-for
Service
► Managed care
► All cover medical, surgical, and hospital,
many offer prescription and dental
► Both require premiums, usually monthly
► Difference:
Degree of freedom you have to choose your
health care providers and how the providers
are paid
Health Insurance Plans
► Fee-for
Service plan
Indemnity plan
You pay for services as you receive them
You or doctor’s office submits a claim
Deductible
80/20 coverage (the 20% is your coinsurance)
You may choose provider
Fees paid on reasonable and customary
charges
 Out of pocket maximum
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Health Insurance Plans
► Managed
Care Plans
 Prepaid plans, paid in advanced not as they are
used
 Your premium is prepayment
 Less paperwork, no claim forms
 Negotiate fees with participating providers
 Pay hospitals and doctors a fixed amount per
year for each patient, no matter what services
they provide (capitation)
Health Insurance Plans
► Managed
Care
 Approvals for nonemergency hospitalization
 Copayments usually required
 Three basic types of managed care:
►HMO
(health Maintenance Organizations)
►PPO’s (Preferred Provider Organizations)
►Po’s (Point-of service plans)
►DIFFERENCE: AMOUNT OF FREEDOM YOU HAVE
Insurance Plans
► HMO
 Choose primary care physician
 Must use doctors and hospitals in plan
► PPO
 Most like fee-for service plan
 You can choose to stay in-network or go out
 No primary care physician
► PO
 Combines HMO and PPO (PCP, but can go
outside with referral)
Choose a Health Plan
► Group
Health
 Large groups – unions, companies
 Premiums lower
 Employer-sponsored plans
►Open
enrollment
►Usually just full-tie workers
►Part-timers can sometimes pay full premium but still
cheaper than going on their own
 COBRA
Choose a Health Plan
► Pre-existing
condition
 Health Insurance Portability Act (7/1/97)
Your new insurance plan must cover any preexisting conditions without a waiting period if
you have been inured continuously the previous
12 months.
 According to the law, the waiting period must
be no more than 12 month (when switching
plans but no previous coverage)
Health Plans
► Individual
Health Insurance
 More flexibility
 More expensive than group
 Schools may require students to have policy
► Government
sponsored
 Medicare – 65 years or older or persons with disabilities
 Medigap – supplemental to Medicare (sold by private
insurance)
 Medicaid – low incomes or disabilities
Health Plans
► Government
(cont’d)
 Workers’ compensation
►Generally
receive 2/3 of salary
►Cash benefits to worker’s surviving family
►Work-related claims
Shop for Health Insurance
► Find
the plan right for you
► See questions to ask on p. 508
Health Care Rights and
Responsibilities
► Right
to receive accurate, easily understood
information about health plans,
professionals, and facilities.
► Right to Choose a health care provider that
is sufficient to ensure access to appropriate
high-quality health care
► Right to access emergency health care
services
Health Care Rights and
Responsibilities
► Right
and responsibility to fully participate in
all of your health care decisions
► Right to considerate, respectful care from all
members of the health care system and
nondiscrimination in delivery of services.
► Right to communicate with health care
providers in confidence an to have
confidentiality of your health care
information protected.
Health Care Rights and
Responsibilities
► Right
to a fair and efficient resolution to
differences with your health providers,
including an appeals system
► Responsibilities
p. 512
► Referrals
► In-plan
providers
► Pre-approvals
► Second opinions
Health Care Rights and
Responsibilities
► Appeals
process
Start with the company
Contact representative
Keep written records and all correspondence
If still unsatisfied, talk to state insurance
commissioner or state department of health
 Finally, court action
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Life Insurance
► Death
benefit
► Beneficiary
Types of Life Insurance
► Term
 Level Term
 Renewable Term
 Convertible Term
► Permanent
 Death benefit plus savings plan
 Cash value life insurance
Permanent
► Whole
life
 Least expensive permanent
 For your entire life
 Fixed premium Receive dividends or apply to
premium
 Borrow against cash value
 No flexibility to change policy
Permanent
► Variable
Life
 Decide how your savings will be invested
 Riskier
 Can borrow but not withdraw
► Universal
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Life
More flexibility than either whole- or variable life
Can borrow or withdraw savings
Can change amount of converge and premium
You cannot choose how your savings are invested
How much to buy?
► As
an investment?
 Funds do not earn high returns over time
► Your
family responsibilities
► Your financial situation
► Your future
► Your special needs