7.10.1.G1
Types of Insurance
Essentials

The Essentials to Take Charge of Your
Finances
7.10.1.G1
What is Insurance?
Risk is the uncertainty about
a situation’s outcome- may be
an unpredictable event which
leads to loss or damage
Insurance is an arrangement
between an individual
(consumer) and an insurer
(insurance company) to protect
the individual against risk
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Why is it important to
have insurance?
Helps limit financial
losses when an
accident occurs
Helps an
individual/family be
prepared for the
unexpected
Plays a large role in
most financial
management plans
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
What is an Insurance
Policy? A policy is a contract
7.10.1.G1
between the individual
and the insurer
specifying the terms of
the insurance
arrangements
A policyholder is a
consumer who
purchases the
policy
A premium is a fee
paid to the insurer
to be covered under
specified terms
outlined in the
policy
A deductible is the amount
paid out of pocket by the
policyholder for the initial
portion of a loss before the
insurance coverage beginsthe deductible is stated in
the policy
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Types of Insurance
Automobile
Health
Homeowners/
Renters
Types of
Insurance
Disability
Life
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Automobile Insurance
Automobile Insurance arrangement between an
individual (consumer) and
insurer (insurance company) to
protect the individual against
risk from automobile accidents
Liability
insurance
Medical
payment
insurance
Uninsured or
underinsured
motorists
insurance
Physical
damage
insurance
Collision
Comprehensive
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Types of Auto Insurance
Liability Insurance covers the
insured if injuries or damages
are caused to other people or
their property
Medical Payment Insurance
covers injuries sustained by
the driver of the insured
vehicle or any passenger
regardless of fault
It is the minimum amount
of insurance required by
law for automobiles
It also covers family
members injured as
passengers in any car,
pedestrians, or bicyclists
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Types of Auto Insurance


Uninsured or Underinsured Motorists Insurance
covers injury or damage to the driver, passengers, or
the vehicle caused by a driver with insufficient
insurance
Physical Damage Insurance covers damages caused to
the vehicle


Collision – covers a collision with another object, car, or
from a rollover
Comprehensive – covers all physical damage losses except
collision and other specified losses
Why would an individual want automobile insurance coverage
beyond liability (the minimum required by law)?
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Health Insurance

Health insurance provides protection against financial
losses resulting from injury, illness, and disability


May cover hospital, surgical, dental, vision, long-term care,
prescription, or other major expenditures
Specific coverage depends upon the individual policy
Why would it be important to have health insurance?


Health care costs are extremely high
Large medical expenses could deplete an individual’s
savings
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Health Insurance


May be purchased by the individual or through their
employer
Individual’s often seek coverage for dependents
(spouses and children)



Many health insurance policies offer dependent coverage but
there is no requirement to do so
If dependent coverage is offered, children may stay on their
parent’s health care plan until age 26 with no stipulations
Federal government website to learn about health
insurance and compare policies:
http://www.healthcare.gov/index.html
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Life Insurance
Life insurance is a contract between an insurer
and policyholder specifying a sum to be paid
to a beneficiary upon the insured’s death
• A beneficiary is the recipient of any policy proceeds if
the insured person dies
Provides money for family members or
dependents when a wage earner dies
• A dependent is a person who relies on someone else
financially
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

While driving, you hit and injure a pedestrian in
a crosswalk
Automobile!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

After losing her husband to a heart attack, a wife
is left alone to care for 2 children
Life!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

You need a cast after breaking an ankle while
roller-blading
Health!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Disability Insurance


Disability Insurance replaces a portion of one’s
income if they become unable to work due to
illness or injury
Insurance typically pays between 60-70% of
one’s full-time wage

Factors such as the length or severity of a disability
influence the percentage of income a person will
receive
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Homeowner’s Insurance
Peril -an event which may
cause a financial loss like
fire, falling trees, lightning
and others
Homeowner’s Insurance combines property and
liability insurance into one
policy to protect a home
from damage costs due to
perils
Property Insurance -protects the
insured from financial losses due
to destruction or damage to
property or possessions
Liability Insurance- protects
the insured party from being
held liable for other’s
financial losses
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Renter’s Insurance
Renter’s Insurance protects the insured
from loss of the contents of the
dwelling rather than the dwelling itself
• Necessary because a landlord’s insurance policy
on the dwelling does not cover the renter’s
personal possessions
• Covers major perils, provides liability protection
and provides for additional living expenses if the
dwelling is rendered uninhabitable
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

Your rented apartment is broken into and your
computer is stolen
Renters!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

You are injured in an automobile accident and
are unable to work for 2 months
Disability!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

Your garage was destroyed by a fire which
started by a lightning bolt hitting your home
Homeowners!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 20
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Summary
What is insurance?
An arrangement between an individual (consumer)
and an insurer (insurance company) to protect the
individual against risk
What is the purpose of
insurance?
The purpose of insurance is to help individuals limit
their financial losses when an accident occurs
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 21
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
Summary
What is a premium and a deductible?
• A premium is the fee paid to the insurer to be covered under the
specified terms
• A deductible is the amount paid out of pocket by the policy holder
for the initial portion of a loss before the insurance coverage begins
What are the different types of
insurance?
Life
Automobile
Health
Homeowner’s/Renter’s
Disability
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 22
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

Sick at home from food poisoning after
eating a carnival corndog
Nothing!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 23
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

While driving, you have brake failure. You hit
a telephone pole and cause damage to the
front of the car
Automobile!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 24
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

While driving to the mall, you are pulled over
and receive a speeding ticket
Nothing!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 25
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

A daughter, who is financially responsible for her
mother’s nursing home bills, dies from an
undetected heart defect
Life!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 26
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
7.10.1.G1
What Covers This Risk?

A doctor diagnoses a child with tonsillitis
during a visit to a clinic
Health!
© Family Economics & Financial Education – October 2010 – The Essentials to Take Charge of Your Finances – Types of Insurance Essentials – Slide 27
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona