2. o What is Insurance?
o What is Insurance to you?
o Who is Important to you ?
o What is Important to you ?
o How to Buy and Select Insurance
Lecture TopicsLecture Topics
Bus 12 – Money Matters R. Okumoto
3. “ If there were no risk in the world, then there would be
no need for insurance”
Insurance Defined:
Insurance is a financial arrangement with two primary characteristics:
Risk of financial loss is transferred from an individual to a group
Losses are equitably shared by all members of the group
What is Insurance?What is Insurance?
4. Insurance is Legal Gambling!
Its foundation is based on Probability Theory
o The Formula is simple:
o The Insurance company determines if a loss is insurable
o You pay your premium for your insurance coverage
o The Insurance company invests your money
o The Insurance company waits for claims
o Both sides are betting or hoping for no losses or claims
What is Insurance?What is Insurance?
6. “ Peace of Mind”
“Source of Security”
“Allows you to sleep at night”
What is Insurance to You?What is Insurance to You?
7. Insurance is purchased to manage the (3) basic rules
of risk:
1. Do not risk more than you can afford to lose
2. Consider the odds of loss
3. Do not insure small items (costs)
Why Buy Insurance?Why Buy Insurance?
8. o Family?
o Friends?
o Pets?
o People who work for you?
o People who employ you?
Who is Important to you?Who is Important to you?
9. o Health?
o Life?
o Home?
o Car?
o Your Earnings?
What is Important to you?What is Important to you?
10. o Life Insurance
o Health / Medical Insurance
o Disability Insurance
o Long-term Care Insurance
Protect You and Your FamilyProtect You and Your Family
11. Video 2Video 2
Bus 12 – Money Matters R. Okumoto
Term versus Whole
Life Insurance
12. Video 3Video 3
Bus 12 – Money Matters R. Okumoto
Susie Orman on
Life Insurance
13. Video 4Video 4
Bus 12 – Money Matters R. Okumoto
How Health Insurance
Works
14. o Home Owner Insurance
o Renter Insurance
o Auto Insurance
Protect Your PropertyProtect Your Property
15. Video 5Video 5
Bus 12 – Money Matters R. Okumoto
Save Money on
Homeowners Insurance
16. Video 6Video 6
Bus 12 – Money Matters R. Okumoto
Save Money on Car
Insurance
18. o Criteria for Selection:
o Rating Agencies
o Financial Size
o Age of firm
How to Select InsuranceHow to Select Insurance
CompaniesCompanies
19. o Premium
o Death Benefit Value
o Term Insurance
o Permanent Insurance
o Whole Life
o Universal Life
Key Life Insurance TermsKey Life Insurance Terms
20. o Coinsurance
o Co-Payment & Deductible
o Covered Expenses / Exclusions
o Preexisting Condition
o Major Medical Coverage
o HMO
o PPO
Key Medical Insurance TermsKey Medical Insurance Terms
23. SPECIFIC TO CARS
o Part A – Liability Coverage
o Part B – Medical Payment Coverage
o Part C – Uninsured Motorist Coverage
o Part D – Physical Damage or Loss Coverage
Key Property & CasualtyKey Property & Casualty
Insurance TermsInsurance Terms
First Define Insurance, then play the video to provide an overview
The Lecture will reinforce the information contained in the Video
( 6 ) mins - Play Video – Insurance Overview
Talk about what insurance deals with – Risk
What is an insurable loss?
The risk of loss must be definable & Measurable
There must be a large base to insure – to spread potential losses
The potential loss must be predictable
The loss must be an accident – if something is certain to happen or if it is expected to happen = it is not an insurable event
The loss must not be Catastrophic
What is Risk?
Possibility of an adverse outcome
If there the chance of loss is uncertain, there is risk.
Ironically, if loss is certain, there is no risk, the loss will occur
Why are they important ?
What would happen if they were injured or died – who is at risk ?
Who would suffer if something happened ?
Why are they important ?
What would happen if they were injured or died – who is at risk ?
Who would suffer if something happened ?
Two primary forms of Life Insurance:
Term & Permanent
Provides cash upon the death of the insured
Term Insurance
Most policies are Term
Insures for a specific time period
Less expense than permanent insurance
Very few renew past age 65
Permanent Insurance
In-force past age 65 – making it a tax payment vehicle for large estates with potential inheritance tax due
2 primary forms: whole life & universal life
What is Homeowner insurance?
Typically required by your lender
Typically (2) Sections to a policy:
Section 1 – Coverage (with tons of caveats)
Dwelling
Other structures
Contents = Personal Property
Loss of use
Section 2 – Personal Liability & Med pmts to others
( 1 )mins – Play Video – Save Money on Home Owner Insurance
Annuities are designed to do (2) things:
Provide an income source so that the holder never outlives their income source
Typically a tax-deferred vehicle – similar to an IRA for tax benefit
Various forms
It is important that the insurance company will be there to honor claims – thus financial strength is critical
Rating agencies to determine financial strength:
Fitch, Moody, S&P, AM Best
IMSA – association monitoring its members ability to operate ethically, lending credibility and hopefully with long term staying power
National Association of Insurance Commissioners (NAIC) developed ratios for risk at insurance companies to meet = Risk based capital ratio
Asset, Credit, Underwriting, off-balance sheet risks
MF Act of 1945 – established state regulation of the insurance industry
1. Health insurance – after the deductible is paid by the insured; the insurance company and the insured shares the cost of incurred expenses – usually in a predetermined manner: eg 80/20 – typically each covered item may have a different ratio
Personal Auto Policy (PAP) – (4) General areas of coverage
Liability Insurance
Covers potential damage to others caused by the insured
Medical payments Coverage
Pays medical expenses of insured & family
Uninsured motorist Coverage
Covers when the other party has limited or not insurance
Physical damage, loss or comprehensive coverage
Covers damage or loss of your car
