Insurance 101

Part 1: Terms, Health Insurance, and Life Insurance

Why should you have insurance?
To manage the risk that something bad may happen to you
Emergency Savings:
3-6 months of living
Risk: chance expenses saved in a
of loss from liquid account
an event
Managed by:
that cannot Insurance:
be Financial product
purchased to protect
controlled against risk of loss
Need to Know Insurance Terms
Policy: a contract between the insurance company and
the insured that states exactly what is covered
Coverage: the risks covered and the amount of money
the insurance company will pay to cover losses
Policyholder: person who owns the policy
Premium: money paid each month to purchase the
policy
 How Insurance Works!
100 people in a There is a 1%
Health Insurance chance one person But, how do you
Group in the group will know who that one
need $10,000 person is? Or what
medical care they will need?

Insurance shifts the risk of big loss

from the individual to the insurance company
Each person in the In this situation,
group pays $100 to Everyone in the 99 people did not
cover their insurance. group gives up collect anything,
This money totals $100, but no one but gained peace of
$10,000 to cover the will lose more than mind that they
medical costs if
someone gets sick.
$100. have protection.

The Insurance Process
1. Event occurs resulting in loss
2. Policyholder makes a claim
to the insurance company
3. Insurance decides if the
event is covered by that
policy
4. If so, policyholder pays a
deductible
5. Insurance company then
pays the rest (in most cases)
Claim: a formal request
to an insurance
company asking for
payment when the
policyholder has an
accident, illness, or
injury
Deductible: the out-of-
pocket money paid by
the policyholder before
an insurance company
will cover any costs
 The higher your deductible,
Deductibles the lower your monthly
premium.
The amount you have to
pay if you file a claim The lower your deductible,
the higher your monthly
Ex: If you have an accident and there
is $1000 in damage and you have a premium.
$200 deductible, you pay $200 and
the insurance company pays $800If you are willing to pay a
higher deductible, the

$$ $$$$$$$$ insurance company is willing

to have you pay less
YOU Insurance Company monthly.
 Types of Insurance

Health Disability Property

Long-
Life term Liability
care
Where Can You Get Insurance?
Insurance Company Government

● Long-term care ● Specialty programs for

● Property those in need- you must
● Liability qualify for these
programs
Employer

● Health
● Disability
● Life
Think About It...
Have you ever broken a bone?
Been sick? Needed medicine?
Needed surgery?
Worn glasses? Been to the dentist?
Health insurance is how you can afford to see
someone to treat your needs.
Health Insurance
Provides money to pay for The government provides
health care insurance for citizens in
need through Medicare
Provided by: Employer,
(seniors and disabled) and
Individual, or Government
Medicaid (low income).
IF your employer does not
Risks covered: Doctor visits,
provide health insurance,
hospital bills, vision care,
you can purchase directly
dental care, prescription
from a provider through the
drugs
Affordable Care Act
 Types of Health Insurance
HMO- Health Maintenance
Organization
● Doctor signs a contract with the
HMO
● Policyholder must be seen by an
in-network doctor
● Policyholder must see their
Primary Care Doctor BEFORE
being referred to a specialist
● Premiums are lower
Based on idea that preventative
services will minimize future medical
needs
PPO- Preferred Provider Organization
● Policyholder can choose their
primary care doctor and
specialists with no pre-
authorization
● In-network doctors will charge a
lower fee than out-of-network
doctors
● Premiums are higher
In-network: group of doctors and
hospitals that agree to provide
specific medical services to members
at prearranged fees
 What if a person cannot work or live
independently?

Disability Insurance: Long-term care insurance:

Payment to replace earnings payment for nursing care
when you can’t work due to when a person cannot live
illness or injury independently (ex: nursing
home)
 You are going to explore health
Health insurance options and choose which

Insurance
you think is the best option for you!

Open the Health Insurance

WebQuest WebQuest assignment in Google
Classroom- you will complete online
and turn-in to the assignment in GC.

(30 minutes)
Life Insurance
Payment to beneficiaries who
were named to the insured
person
Beneficiary: someone who
receives money if an insured
person dies
If your death would cause
financial hardship for someone or
a group of persons, you need life
insurance.
How is life insurance
calculated?
● Company makes a rough
guess about a person’s life
span
● Sets premium accordingly
● The sooner a person is likely
to pass away, the higher the
premium will be
Two types:
1. Whole life insurance
2. Term life insurance
 Whole Life Insurance
Also known as universal life: you have it for your whole life
Policy includes both an insurance and an investment part

Insurance part pays a stated Investment part accumulates

death benefit or face value
when you die
Ex: $500,000
This is the money received
when you die (death benefit)
all of the premiums you paid,
called the cash value
If you surrender (cancel) the
policy, you get the premiums
you have paid plus interest
 Term Life Insurance
A policy with a set time period (term)
Ex: 10, 20, or 30 years
When the term ends, you have to buy a new
insurance policy
Usually less expensive than whole life and gives
you the flexibility to change your policy
Where will your assets go when you die?
Will: a document that states who will get your
assets when you die
Executor: the person you name in the will that is
in charge of making sure that all the directions
you set are followed (needs to be someone you
trust!)