Types of Insurance

Types of Insurance

SSEPF7

•Learning Target:

•Analyze how insurance and other risk-management
strategies protect against financial loss

•Success Criteria:

•Explain why people buy insurance

•Describe various types of insurance such as
automobile, health, life (whole and term), disability,
renters, flood and property.

Introduction

•Insurance is a product purchased to guard oneself against life’s

risks, especially the financial losses associated with these risks.

•One may not be able to avoid dying, but one can avoid leaving

loved ones in financial ruin by purchasing life insurance.

•Some states have laws requiring people to buy certain types of

insurance while other types are voluntary.

•The scope of this standard is to identify type of insurance and

the costs and benefits associated with each type.

Types of Insurance

•Automobile

•Health

•Life

•Disability

•Property

Automobile Insurance

• financial protection to the owners, operators and occupants of an

automobile in case of accidents or damages
• Most states in the U.S. require automobile owners to maintain a

certain level of automobile insurance coverage.
• Georgia requires all drivers to have liability insurance.
• Liability insurance covers the other vehicle(s) when you are at fault

in a car accident.
• Comprehensive provides coverage for events outside your control

that are not caused by a collision, like weather, vandalism and theft.
• Collision coverage is for damage resulting from an accident with

another vehicle or object.

Automobile Insurance

•Vehicles purchased with a loan from a

financial institution require collision
insurance until paid in full.

•It is important for vehicle owners to

know the level of insurance required by
law may not adequately cover all damages
in an accident.

•The other driver can sue the at fault for

any additional damages.

Health Insurance

• Pays medical providers
• protects against financial loss caused by the costs

of illness or accident.

• designed to make going to the doctor or getting

medical care more affordable

• usually offered through an employer
• As of April 2017, federal law required people to

have a certain level of health insurance or pay an
annual penalty when filing federal taxes.

• Health insurance plans vary widely from those

protecting against catastrophic care to plans
paying for routine wellness visits.

Life Insurance

•Life insurance provides a monetary

payment to a designated beneficiary
when the insured person dies.

•The beneficiary is one who

experiences financial harm from the
death of the person covered by the
policy such as a spouse, a parent, or
a child.

Two Types of Life Insurance

• Term Life: life insurance that offers a payment to specified beneficiaries

when the policyholder dies; term life insurance only applies for a specified
period of time, usually maxing out at 30 years.

• Whole Life: unlike term life, whole life insurance has no expiration date and

guarantees payment upon death; this obviously comes with a higher
premium.

Disability Insurance

•Disability insurance provides people

with income in case they become
injured or are unable to work at a job
for a specified period.
•Many employers offer disability

insurance as an option in worker
benefits packages.
•Short-tem disability covers temporary

work restrictions such as the period
of recovery from childbirth or
surgery.

Homeowners Property Insurance

•Property insurance takes a variety of

forms. The most common types are
homeowners and renters insurance.

•Protects the homeowner from loss

caused by fire, theft, and storm damage
of the structure and the possessions
within the structure.

•Policies usually include liability coverage

for guests if they get hurt on your
property

Renter’s Property Insurance

•Renters insurance protects your personal property
assets when you live in a rental property instead
of a home you own.
•Provides coverage for your belongings in case of
theft, fire, or storm damage, but not for the
structure itself.
•Policies usually include liability coverage for
guests if they get hurt at your place.

Flood Insurance

•provides coverage to restore your home to its original

condition in case of a flood or water damage that comes from
outside your walls.

•In certain high-risk areas, homeowners are required to have

flood insurance.

•Most regular homeowner’s insurance policies do not cover

floods (or any water damage that comes from outside the
structure's walls).

•Learning Target:

•Analyze how insurance and other risk-management
strategies protect against financial loss

•Success Criteria:

•Explain the costs and benefits associated with different types

of insurance, including deductibles, premiums, coverage
limits, shared liability, and asset protection.

Cost Associated with Insurance

• Premium:

• this is the “cost” of the insurance policy. This amount of money must be paid to the insurance

company in regular intervals to keep the policy current.

• Deductible:

• an amount of money the insured person is responsible for paying before the insurance company

will start paying benefits.

• If the insured never files a claim, they will never have to pay their deductible.

• Typically, if you choose a plan with a low deductible, you will have a high premium and

visa-versa.

• Coverage Limits:

• the highest amount your insurer will pay for a claim that your insurance policy covers.

• For example, your auto insurance may have a coverage limit for $100,000 per accident. You can

pay higher premiums to get

Cost with Health Insurance Plans

• Copays:

• usually a flat amount of money a person pays out of pocket when using certain medical services.

• this payment is usually made up front or on the same day the service is provided and is only a

portion of the total amount the services cost.

• Coinsurance:

• the amount you pay for covered health care after you meet your deductible.

• this amount is a percentage of the total cost of care—for example, after paying your deductible,

you may be responsible for 20% of any medical bills for the rest of the year, while your
insurance company will pay 80% up to your coverage limit.

Benefits of Life Insurance

• Shared Liability:

• the practice of the insurance company taking some of the responsibility for an

accident away from the insured person.

• Asset protection:

• part of an insurance policy that guarantees that if a stated asset is damaged or

lost, the insurance company will replace it.

• Copays

• The insurance company usually pays any amount over and above the copay for

this type of service, usually predictable flat fees that can help you anticipate your
costs.

• Coinsurance

• If you are required to pay 20%, your insurance company is paying the other

80%.