WARM UP 9/6/16

What are some ways we can mitigate

and control risk? (Be specific)

Happy Fight
Procrastination Day!

HHS

I can analyze features that different types

of insurance offer and what each covers.

I can analyze factors to consider when
purchasing insurance.

BY THE END OF CLASS

IDENTIFYING RISK
What helps to minimize risk?
What types of insurance should

you have?

INSURANCE QUIZ
1.

Within a persons first 3 years of

driving, there is a 50% chance a
person will be involved in an
automobile accident.

False

There is a 70% chance that you will be

involved in an accident!

INSURANCE QUIZ
2. Auto insurance is required by law
to drive an automobile.

True

You must provide liability coverage

at the very minimum.

INSURANCE QUIZ
3. Insurance plays a small role in
most individuals financial plan.

False

One in every $12 a person brings home

is spent on some form of insurance.

INSURANCE QUIZ
4. Most individuals or families
can afford health care and
medical expenses.

False
This is a large reason why the Affordable
Care act was established.

INSURANCE QUIZ
5. Life insurance is necessary for
everyone.

False

It is necessary for anyone who has

someone depending on them financially.

INSURANCE QUIZ
6. Disability insurance is
necessary only for people with
disabilities.

False

Anyone who has a job should get

disability insurance 10% of
Americans
will at some point in their lives be
disabled.

INSURANCE QUIZ
7. When renting an apartment, the
renter should purchase renters
insurance because the owners
insurance will not cover the renters
possessions.

True

The owners insurance will cover the

buildings structure but not the
contents
of the renter.

WHY IS IT IMPORTANT TO HAVE

INSURANCE?
Emergency

Risk - chance
of loss from an
event that
cannot be
entirely
controlled

savings - at
least six
months of
expenses set
aside to cover
costs of
unexpected
events
is managed
by

What are examples of

unexpected events that
may result in a financial
loss?

Insurance transfers risk

from an
individual to
an insurance
organization

INSURANCE POLICY
Policy - A contract that specifies what risks are
covered and how much will be paid for losses
Coverage - The risks covered and amount of
money paid for losses under an insurance
policy
Policyholder - Person who owns the 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?

AN ILLUSTRATION OF HOW
INSURANCE WORKS
Suppose there
are 100 people
in a group

If each person pays

$100 into a pool
they will collectively
have $10,000 to
cover the medical
costs of the person
who gets sick

With a 1%
chance that any
one of them
could get sick
and require
$10,000 in
medical care
So, everyone
gives up $100,
but nobody loses
more than $100

But, no one
knows who
will get sick

99 people do not
collect anything, but
they gain peace of
mind and important
protection against a
large loss

Insurance shifts the risk of big loss from

the individual to the insurance company

THE BENEFITS OF INSURANCE

Property
&
Liability

Payments received from

an insurance policy can far

exceed the premiums paid
Provides financial security

Life

and peace of mind

Why is the best

outcome to have
insurance but
never collect on
it?

Health
Types of
Insuranc
e

Disability

Longterm
Care

THE INSURANCE PROCESS

Event
occurs
resulting in
loss
Remaining
amount owed
is paid by coinsurance (if
applicable)

If so,
policyholder
pays a
deductible

Policyholder
makes claim
to insurance
organization

Insurance
organization
determines if
event is
covered by
policy

Claim - paperwork
submitted to insurance
organization describing the
accident, illness or injury
Deductible - amount of
money paid out of pocket by
policyholder before the
insurance coverage begins
Co-insurance - amount of
money, after deductible,
that is paid jointly by the
insured and the insurance
company

LOUISES ACCIDENT
Louise has a
health insurance
policy with a
$500 deductible
and 20% coinsurance

Louise pays the

first $500 of any
covered medical
care plus 20% of
the remaining
costs

Even
with
insuranc
e Louise
still
needs
Louise is in an
Louise pays $500 +
funds to
accident resulting
20% of the remaining
what
pay the
$4,500 for a total of
in a $5,000
then
if
$1,400
deductibl
medical
The insurance company
e and copays
$3,600
procedure that is
insuranc
covered by
e
What insurance
would Louises options have been if she did not
have insurance?
this
mean
s

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
organization pay?

Carlos has a
property and
liability insurance
policy with a $500
deductible and 0%
co-insurance

How much does Carlos

pay?
How much does his
insurance organization
pay?

$500

$3,28
8

WHICH INSURANCE POLICY WOULD YOU

CHOOSE?
Janet wants to make sure she has the best health
insurance policy. She shopped around and received
multiple quotes.
What are the pros and cons of each policy?
Premium
amount/mont
h
Deductible
amount
Co-insurance
amount

Current Policy

New Policy

$300

$200

$200

$2000

20% owed by
policyholder
80% owed by
insurance
organization

0% owed by
policyholder
100% owed by
insurance
organization

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
Deductibles and co-insurance place some of the
loss on the policyholder
For example
Not locking a car or parking it in a theft-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 better off than before the loss happened

SOURCES OF INSURANCE
In most cases, individuals acquire insurance from a
combination of sources

Long-term
care,
property
and liability
insurance

Individual

Employ
er
Health,
disability, and
occasionally
life insurance

Special
programs for
those who
qualify and
during
catastrophes
Governme

nt

If an employer does not provide insurance, it may be

acquired individually

EMPLOYER PROVIDED INSURANCE

Employee benefits - products or services that add
extra value for employees beyond wages

Insurance
premiums
paid by

Employer

Employee

In-kind income
the provision of
a product or
service rather
than cash

Payroll deduction

Policies may be available to the employees family

members (usually for additional fees)
No income taxes are paid on the in-kind income

GOVERNMENT PROGRAMS
Provide basic insurance as a part of the

social safety net to protect citizens from

economic hardship
Social Security, Medicare, Medicaid

Many programs require a work history

and employer provided participation to

be eligible
Unemployment insurance, workers compensation

Can address specific catastrophes

Hurricane Katrina

Health insurance provides money to pay

for health care
s d
k
s re
i
R ve
Co
Doctor
s
visits

Hospita
l bills
Medical
procedu
res

Mental
health
treatme
nt

Vision
care

Provided
by

HEALTH

If dollars are limited, health

insurance is extremely
INSURANCE
important to protect against
high medical bills
Employe
rAnd/o
Governme
r
nt
Individu
al

Preventati
ve care

Dental
care

Prescrip
tion
drugs

WHAT IF A PERSON CANNOT WORK

OR LIVE INDEPENDENTLY?
Disability
insurance

Why are
both
disability
and longterm care
insurance
important?

Payment to
replace
earnings during
times when
workers cannot
work due to
illness or injury
Provided by
employers,
individuals,
and/or
government

Long-term
care
insurance
Payment for
extended care
when a person
cannot live
independently
(but doesnt
need to be
hospitalized)
Provided by
individuals

PROPERTY & LIABILITY

INSURANCE

Two
parts

Property insurance payment to insured

person if his/her
property is damaged or
destroyed by an
accident
Liability
insurance payment to others if a
member of the insured
household accidently
causes harm to other
people or property

Provided by individuals

Pays for
loss to
insured
person
Pays for
injury or
loss to
others

TYPES OF PROPERTY & LIABILITY

INSURANCE
Automobile
insurance payment for liability
and property
insurance on a
Homeowners
vehicle
insurance - payment
to cover liability
losses and
damage/loss of home
Renters insurance and its contents

payment for
damage/loss of property
in a rental unit in
addition to liability
losses

If a person
drives an
automobile,
automobile
liability
insurance is
required by law

LIFE INSURANCE
Life
insurancepayment to
beneficiaries if
an insured
person dies

Beneficiarysomeone who
receives
insurance
money if the
insured person
dies

Provided by
employers and/or
individuals
May cover paid and
unpaid work
formerly done by the
individual

Dependent someone who

relies on
someone else
for money
income and
care

Household
production- unpaid
work, such as child
care or meal
preparation
When would it be
necessary to
purchase life
insurance?

IN REVIEW
Insurance is
an important
part of a
financial plan

Insurance is not
intended to make
an individual
better off than
before the event

Even with
insurance, an
individual
should still have
funds to pay the
deductible and
co-insurance

Insurance
may be
acquired from
multiple
sources

There are
several types
of insurance
for specific
purposes

WHAT COVERS THIS RISK?

You are having a baby and

need medical care
Health Insurance

WHAT COVERS THIS RISK?

You are unable to work for

six months and need help
paying your expenses while
youre out of work
Disability Insurance

WHAT COVERS THIS RISK?

You are elderly and need

assistance from medical
professionals to continue
living at home
Long-term Care Insurance

WHAT COVERS THIS RISK?

Your home is destroyed by

a tornado and you need to
rebuild
Property Insurance
Specifically Homeowners

WHAT COVERS THIS RISK?

The car you are driving causes

an accident that injures
someone else
Liability Insurance
Specifically Automobile

WHAT COVERS THIS RISK?

A sudden death of a family

member results in loss of
income
Life Insurance

REVIEWING INSURANCE
Different types of insurance:
Auto insurance
Life insurance
Homeowners/Renters insurance
*Healthcare insurance

DIFFERENT TYPES OF INSURANCE

As you view each poster, identify what

each type of insurance has to offer

individuals.
You will receive scenarios based on each

type of insurance and you will need to

explain which insurance would work best
for which person AND explain why.

INSURANCE QUIZ
On a separate sheet of paper write your

name, date and period in the top right

hand corner.
Number 1-12 skipping 3 lines in between
each number.
As you read the following scenarios, you
must:
Identify the insurance that would cover the event

(H,L,A)
explain which specific part of your insurance would

be used for the scenario

QUESTION #1

A sudden death of a family

member results in loss of
household income.

QUESTION #2
You lose control of your car and it
rolls.Your car cant be repaired,
so you need to purchase a new
car.

QUESTION #3
You let your best friend borrow
your car. She is sideswiped by
another car on the highway.

QUESTION #4
The house you own is destroyed
by a tornado and you need to
rebuild.

QUESTION #5
A man nearing retirement lets his life
insurance policy lapse and must
find coverage.

QUESTION #6
Someone breaks into the
apartment you rent and steals
your television.

QUESTION#7
While driving a car, you cause an
accident that injures someone
else.

QUESTION #8
You have a water leak in the home
you own and need to replace the
flooring and cabinets in the kitchen.

QUESTION #9
A young married couple has their
first baby.

QUESTION #10
There is a fire in the apartment you rent and you need to

replace all of your clothes and furniture due to smoke

damage.

QUESTION #11
An unexpected death of a family
member results in funeral
expenses.

QUESTION #12
While driving your car, you hit a tree.
Your car must be fixed by a
professional repair shop.

AGENDA
Warm-Up

HOMEWORK
Finish Mind Map as needed