6: Insurance & Risk Management

Question 1

What is INSURANCE?

Answer 1

Insurance is protection again

Question 2

An insurance company or insurer

Answer 2

• a risk sharing business that agrees to pay for losses that may happen to someone it insures
• You join the risk sharing group by purchasing a contract known as a POLICY (a written agreement)
• You are now called a POLICYHOLDER
• You pay them a “fee” called a PREMIUM for taking that risk RISK is the chance of loss or injury
• CLAIM: a request for payment of a loss

Question 3

Types of Insurance

Answer 3

1.) Property
2.) health
3.) Life
4.) disability

Question 4

1.) Property Insurance

Answer 4

• HOMEOWNERS INSURANCE: Your homeowners insurance policy provides coverage(protection) for:

^ The home building, or any other structures on the property (FIRE-THEFT)

^ Personal property
^Temporary Living Expenses
^Liability Coverage

Question 5

Building and other structures

Answer 5

• The main purpose is to protect you against financial loss in case your home is damaged or destroyed
• Detached structures on your property like a garage or tool shed are also covered
• Coverage can also include trees, shrubs, and other plants, which are part of the landscaping

Question 6

Personal Property (what is it?)

Answer 6

Personal property are things like:

• Furniture (bed, dresser, tables, lamps, sofa)
• Appliances (stove, refrigerator, microwave, washer, dryer)
• Clothing
• Computers
• Jewlery
• HOUSEHOLD INVENTORY: A list of belongings with purchase dates and costs

Question 7

More Property Information

Answer 7

• RENTERS INSURANCE: For people who rent, home insurance coverage includes personal property protection and additional living expenses coverage. Do not assume you are covered under your Landlord’s insurance policy
• CLAIM SETTLEMENTS: If you have a loss, there are one of two solutions:
• ACTUALY CASH VALUE: The payment you receive is based on the replacement cost of an item minus depreciation (Depreciation is the loss of value of an item as it gets older.) This means you would receive less for a 5 yr old item that what you paid for it.
• REPLACEMENT VALUE: Under this method, you receive the full cost of repairing or replacing the item lost. (This coverage is more expensive)
• ENDORSEMENT OR RIDER: Attached to the policy for added coverage.

Question 8

Property Insurance Deductible

Answer 8

• A deductible

Question 9

Property Liability Coverage

Answer 9

• PERSONAL LIABILITY COVERAGE: protects you from lawsuits arising from property damage or bodily injury.
• MEDICAL PAYMENT COVERAGE: protects you, your family, and your guests from accident-related medical bills
• PHYSICAL DAMAGE COVERAGE: Minor damage that you or someone in your family causes to another’s property

Question 10

Filing a claim

Answer 10

• After a loss, contact your insurance company as soon as possible
• You will most likely be asked to fill out a claim form
• If home damage, a claim adjuster will inspect the damage and submit a report to the company
• Once the insurance company has this verification and an estimate for the cost of repairs, it will pay your claim

Question 11

Motor vehicle insurance

Answer 11

• Types and/or parts of automobile insurance
• Liability coverage
• Collision and comprehensive

Question 12

Liability Insur

Answer 12

• This part of the insurance covers BODILY INJURT LIABIITY or PROPERTY DAMAGE LIABILITY that YOU cause to another person and vehicles, buildings, and property
• ILLINOIS LAW REQUIRES all motor vehicles registered and operated in Illinois to be covered by liability insurance
• MINIMUM AMOUNTS: $25,000 for injury or death of one person in an accident, $50,000 for injury or death of more than one in an accident, $20,000 for damage to property of another person

Question 13

Liability Insurance cont.

Answer 13

• Insurance companies represent the liability coverage expressed as 3 numbers such as 100/300/50
• The first number 100 means $100,000 is the maximum amount they will pay for injuries of any one person in any one accident
• The second number 300 means $300,000 is maximum amount they will pay for all injuries parties (two or more) in any one accident.
• The third number 50 means $50,000, indicates the limit for payment for damage to the property of others.

Question 14

Medical payment, personal injury, and No-fault

Answer 14

• MEDICAL PAYMENT: covers you and your passengers if you were at fault in an accident, this type of coverage also provided medical benefits for you and members of your family while riding in another person’s vehicle or if any of you are hut by a vehicle
• PERSONAL INJURY: this covers lost wages if you cannot work, as a result of an accident, and rehabilitation costs, and home nursing care
• NO DAULT: this allows policyholders to submit a claim to their insurance company for reimbursement instead of waiting to see who’s fault the accident was

Question 15

Uninsured or underinsured motorist

Answer 15

• This type of insurance covers you or your family members if you are involved in an accident with an uninsured or hit and run driver
• UNINSURED: this means the other driver does not have insurance
• UNDERINSURED: this means that your policy will take over to assist with payments, due to injuries and damages that are beyond their policy limits

Question 16

Rental and towing

Answer 16

• RENTAL covers the cost of renting a vehicle when your car is in the shop being repaired for a covered loss.
• TOWING (EMERGENCY ROAD SERVICE) will pay for having your vehicle towed (Limits apply)

Question 17

Motorcycle insurance

Answer 17

• Most auto insurance polices will not cover you while you are driving a motorcycle, A sperate motorcycle insurance policy is required
• Motorcycles are considered high risk vehicles so insurance is more costly taking a safety course and maintaining a good driving record can help reduce premiums

Question 18

Health insurance

Answer 18

• Health insurance is a form of protection that eases the financial burden people may experience as a result of illness or injury

Question 19

Kinds of coverage

Answer 19

• Medical benefits
• Major medical coverage
• Dental benefits
• Visions benefits
• Long term care
• disability insurance

Question 20

Types of health insurance

Answer 20

• Group policies
• Individual policies
• COBRA

Question 21

More healthy insurance terms

Answer 21

• Co payment
• HMO- Healthy maintencance organization
• PPO- Preferred provider organization

Question 22

Goverment health care programs

Answer 22

• Medicare
• Medicaid

Question 23

Life insurance

Answer 23

When you purchase life insurance, you are making a contact with the insurance company issuing the policy. You agree to pay a certain amount of money- the premium- periodically. In return, the company agrees to pay death benefit or a stated sum of money upon your death to your beneficiary
* BENEDICIARY: the person or group named to receive the benefits from the insurance policy, they must file a claim to receive the benefits

Question 24

Purpose of Life Insurance

Answer 24

• Buying a life insurance polict can help you protect the people who depedn on you from financial loss caused by your death. They could be a spouse, children, parent, or business partner
• The money could be needed for:
• Pay off the home mortgage
• Provide income for a puse or business partner
• Provide for the children’s education or income for them
• Pat estate and death taxes

Question 25

Types of Life Insurance

Answer 25

* TERM INSURANCE: Porivdes procetion against loss of life for only a certain amount of time or age. * WHOLE LIFE INSURANCE: a permanent polict dor which you pay a specidide premium each year for the rest of your life * CASH VALUE:

Question 26

more types of life insurance

Answer 26

* Univeral life: a term polict with a cash balue * Group life insurance * Credit life