2.6.5.

G1  

TYPES  OF  
INSURANCE  
Advanced  Level  

©  Take  Charge  Today  –  August  2013  –  Types  of  Insurance  –  Slide  1  

Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHY  IS  IT  IMPORTANT  TO  HAVE  INSURANCE?  

Emergency  savings  
-­‐  at  least  six  
months  of  
expenses  set  aside  
to  cover  costs  of  
unexpected  
Risk  -­‐  chance  of   expenses  
loss  from  an  event  
that  cannot  be   is  managed  by  
enErely  controlled  
Insurance  –  a  
financial  product  
purchased  by  
many  people  
What  are  examples  of  unexpected   facing  a  similar  
events  that  may  result  in  a   risk  to  protect  
against  the  risk  of  
financial  loss?   larger  losses  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  2  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

INSURANCE  POLICY  
Policy  -­‐  A  contract  between  the  insurance  company  and  the  
insured  that  states  the  exact  terms  of  the  policy    

Coverage  -­‐  The  risks  covered  and  amount  of  money  paid  
for  losses  under  an  insurance  policy  

Policyholder    -­‐  Person  who  owns  the  insurance  policy  

Premium  -­‐  Money  paid  to  purchase  the  policy  

 
Experts  say  that  buying  insurance  is  buying  financial  security.    
Do  you  think  this  is  true?    Why  or  why  not?    
 
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  3  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

AN  ILLUSTRATION  OF  HOW  INSURANCE  

WORKS  
Suppose  there  are   With  a  1%  chance  
100  people  in  a   that  any  one  of   But,  no  one  
health  insurance   them  could  get  sick   knows  who  will  
group   and  require  $10,000   get  sick  
  in  medical  care  

If  each  person  pays  $100   99  people  do  not  collect  

into  a  “pool”  they  will   So,  everyone  gives  up   anything,  but  they  gain  
collecEvely  have  $10,000   $100,  but  nobody   peace  of  mind  and  
to  cover  the  medical  
loses  more  than  $100   important  protecEon  
costs  of  the  person  who  
gets  sick   against  a  large  loss  

Insurance  shi]s  the  risk  of  big  loss  from  the  

individual  to  the  insurance  company  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  4  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

THE  BENEFITS  OF  INSURANCE  

Property  &  
„ Payments  received  from  an  
Liability  
insurance  policy  can  far  
exceed  the  premiums  paid  
  Life   Health  
„ Provides  financial  security  
and  peace  of  mind   Types  of  
Insurance  

Long-­‐term  
Disability  
Why  is  the  best  outcome   Care  
to  have  insurance  but  
never  collect  on  it?  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  5  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

THE  INSURANCE  PROCESS  

Claim  –  a  formal  request  to  an  
insurance  company  asking  for  a  
Event  occurs   payment  when  the  policyholder  
resulEng  in  loss   has  an  accident,  illness  or  injury  

DeducEble  –  the  out-­‐of-­‐pocket  

Remaining  amount   Policyholder   money  paid  by  the  policyholder  
owed  is  paid  by  co-­‐ makes  claim  to  
insurance  (if  
before  an  insurance  company  will  
insurance   cover  the  remaining  costs  
applicable)  
organizaEon   afributed  to  the  loss  

Co-­‐insurance  –  requires  the  

Insurance   insured  individual  to  pay  a  fixed  
If  so,  policyholder   organizaEon  
percentage  of  the  loss  a]er  the  
pays  a  deducEble   determines  if  event  
is  covered  by  policy   deducEble  has  been  paid  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  6  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

LOUISE’S  ACCIDENT  
Louise  pays  the  first  
Louise  has  a  health   $500  of  any  covered  
insurance  policy  with   this  
Even  with  
a  $500  deducEble  and   means   medical  care  plus   insurance  
20%  co-­‐insurance   20%  of  the  remaining   Louise  sEll  
costs   needs  
funds  to  
Louise  is  in  an   Louise  pays  $500  +  20%  of   pay  the  
accident  resulEng  in  a   the  remaining  $4,500  for  a   deducEble  
what   $5,000  medical   then   total  of  $1,400   and  co-­‐
if…   insurance  
procedure  that  is   The  insurance  company  pays  
covered  by  insurance   $3,600  

What  would  Louise’s  opEons  have  been  if  she  did  not  have  insurance?  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  7  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

YOU  DO  THE  MATH!  

Carlos  was  involved  in  an  automobile  accident  that  resulted  in  
$3,788  worth  of  damage  to  his  car.      
How  much  does  Carlos  pay  and  how  much  does  the  insurance  organiza7on  pay?  

Carlos  has  a  property   How  much  does  Carlos  pay?   $500  

and  liability  insurance  
policy  with  a  $500  
deducEble  and  0%     How  much  does  his  
$3,288  
co-­‐insurance   insurance  organizaEon  pay?  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  8  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHICH  INSURANCE  POLICY  WOULD  YOU  

CHOOSE?  
Janet  wants  to  make  sure  she  has  the  best  health  insurance  policy.  
She  shopped  around  and  received  mulEple  quotes.    
What  are  the  pros  and  cons  of  each  policy?  

Current  Policy   New  Policy  

Premium  amount/
month   $300   $200  
DeducEble  
amount   $200   $2000  
Co-­‐insurance   20%  owed  by  policyholder   0%  owed  by  policyholder  
80%  owed  by  insurance     100%  owed  by  insurance    
amount  
organizaEon   organizaEon  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  9  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHY  DO  INSURANCE  POLICIES  INCLUDE  

DEDUCTIBLES  AND  CO-­‐INSURANCE?  
Reduce  the  problem  of  moral  hazard  

• When  the  act  of  insuring  an  event  increases  the  likelihood  it  will  
occur  
• DeducEbles  and  co-­‐insurance  place  some  of  the  loss  on  the  
policyholder  

For  example…  

• Not  locking  a  car  or  parking  it  in  a  the]-­‐prone  area  in  hopes  it  
will  be  stolen  and  automobile  insurance  will  pay  for  a  new  
vehicle  

Dollars  paid  from  an  insurance  policy  are  not  intended  to  make  a  person  
befer  off  than  before  the  loss  happened  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  10  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

SOURCES  OF  INSURANCE  

In  most  cases,  individuals  acquire  insurance  from  a  combinaEon  of  sources  

Employer   Special  programs  

• Long-­‐term  
care,  property   for  those  who  
Health,  disability,  
and  liability   qualify  and  during  
and  occasionally  
insurance     catastrophes  
life  insurance  
 
Individual   Government  

If  an  employer  does  not  provide  insurance,  it  may  be  acquired  individually  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  11  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

EMPLOYER  PROVIDED  INSURANCE  

Employee  benefits  -­‐  products  or  services  that  add  extra  value  for  
employees  beyond  earned  wages  
In-­‐kind  income  –  the  
donaEon  of  a  product  
Employer   or  service  in  place  of  
Insurance  
cash  
premiums  
paid  by…    
Employee   Payroll  deducEon  

• Policies  may  be  available  to  the  employee’s  family  members  

(usually  for  addiEonal  fees)  
• No  income  taxes  are  paid  on  the  in-­‐kind  income  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  12  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

GOVERNMENT  PROGRAMS  
„Provide  basic  insurance  as  a  part  of  the  social  safety  
net  to  protect  ciEzens  from  economic  hardship  
„ Social  Security,  Medicare,  Medicaid  

„Many  programs  require  a  work  history  and  

employer  provided  parEcipaEon  to  be  eligible  
„ Unemployment  insurance,  worker’s  compensaEon  

„Can  address  specific  catastrophes  

„ Hurricane  Sandy  

©  Take   ©  CTharge  
ake  Charge  
Today  T–oday  
 August  
–  August  
2013  –2  013  
Types  
–  Toypes  
f  Insurance  
of  Insurance  
–  Slide  
–  1S3  
lide  13  
Funded  
Funded  
by  a  gb
rant  
y  a  gfrom  
rant  Tfrom  
ake  CTharge  
ake  Charge  
America,  
America,  
Inc.  to  Inc.  
the  tN
o  orton  
the  Norton  
School  
School  
of  Family  
of  Family  
and  Consumer  
and  Consumer   Sciences  
Sciences  
 Take    CTharge  
ake  Charge  
America  
America  
InsEtute  
InsEtute  
at  the  aUt  niversity  
the  University  
of  Arizona  
of  Arizona  
 2.6.5.G1  

HEALTH  INSURANCE  

Employer  

Provided  by  
Health  insurance  -­‐  provides   Government  
And/or  
money  to  If  
pay   f or   h ealth   care  
dollars  are  limited,  health  insurance  is  
extremely  important  to  protect  Individual  
against  
high  medical  bills  

Mental  
health  
Hospital   treatment   PreventaEve  
bills   care  
Doctors’   Vision   PrescripEon  
visits   care   drugs  
Medical   Dental  
procedures   care  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  14  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  IF  A  PERSON  CANNOT  WORK  OR  LIVE  

INDEPENDENTLY?  
Disability   Long-­‐term  
insurance   care  insurance  

Payment  for  
Payment  to  replace  
extended  nursing  
earnings  during  
care  when  a  person  
Emes  when  
cannot  live  
workers  cannot  
Why  are  both   independently  (but  
work  due  to  illness  
disability  and   doesn’t  need  to  be  
or  injury  
long-­‐term  care   hospitalized)  
insurance   Provided  by  
important?   employers,   Provided  by  
individuals,  and/or   individuals  
government  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  15  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

PROPERTY  &  LIABILITY  INSURANCE  

Property  insurance  -­‐  

Pays  for  loss  
payment  to  insured  person  if  
to  insured  
his/her  property  is  damaged  
person  
or  destroyed  by  an  accident  
Two  parts  
Liability  insurance  -­‐  payment  
to  others  if  a  member  of  the   Pays  for  injury  
insured  household  accidently   or  loss  to  
causes  harm  to  other  people   others  
or  property  

Provided  by  individuals    

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  16  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

TYPES  OF  PROPERTY  &  LIABILITY  INSURANCE  

Automobile  insurance  -­‐  
payment  for  liability  and  
property  insurance  on  a  
vehicle  
If  a  person  drives  
Homeowners  insurance  -­‐  
payment  to  cover  liability  losses   an  automobile,  
and  damage/loss  of  home   automobile  liability  
structure  and  its  contents   insurance  is  
required  by  law  
Renters  insurance  -­‐  
payment  for  damage/loss  of  
property  in  a  rental  unit  in  
addiEon  to  liability  losses  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  17  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

LIFE  INSURANCE   Provided  by  employers  

and/or  individuals  
Life  insurance-­‐  
payment  to  
beneficiaries  who   May  cover  paid  and  
were  named  by  the   unpaid  work  formerly  
insured  person   done  by  the  individual  

Beneficiary-­‐   Household  producEon-­‐  

someone  who  
unpaid  work,  such  as  child  
receives  money  if  
an  insured  person   care  or  meal  preparaEon  
dies  

Dependent  -­‐   When  would  it  be  

someone  who   necessary  to  purchase  
relies  on  someone   life  insurance?  
else  for  income  
and  care  
©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  18  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

IN  REVIEW…  

Insurance  is  not   Insurance  may  be  

Insurance  is  an   intended  to  make  an  
important  part  of   individual  beUer  off   acquired  from  
a  financial  plan   than  before  the  event   mulEple  sources  

Even  with  insurance,   There  are  several  

an  individual  should  
types  of  insurance  
sEll  have  funds  to  pay  
the  deducEble  and  co-­‐ for  specific  
insurance   purposes  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  19  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

You  are  having  a  baby  and  need  

medical  care  

Health  Insurance  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  20  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

You  are  unable  to  work  for  six  

months  and  need  help  paying  
your  expenses  while  you’re  out  
of  work  

Disability  Insurance  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  21  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

You  are  elderly  and  need  assistance  

from  medical  professionals  to  
conEnue  living  at  home  

Long-­‐term  Care  Insurance  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  22  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

Your  home  is  destroyed  by  a  

tornado  and  you  need  to  rebuild  

Property  Insurance    
Specifically  Homeowners  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  23  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

The  car  you  are  driving  causes  an  

accident  that  injures  someone  else  

Liability  Insurance  
Specifically  Automobile  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  24  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona  
 2.6.5.G1  

WHAT  COVERS  THIS  RISK?  

A  sudden  death  of  a  family  

member  results  in  loss  of  income  

Life  Insurance  

©  Take  Charge  Today  –  August  2013  –-­‐  Types  of  Insurance  –  Slide  25  
Funded  by  a  grant  from  Take  Charge  America,  Inc.  to  the  Norton  School  of  Family  and  Consumer  Sciences    Take  Charge  America  InsEtute  at  the  University  of  Arizona