Chapter 25 Insuring Against Loss Nature of Insurance Use insurance to protect themselves from risk due to fire, accident, or other catastrophes. People pay a yearly premium that goes into a common fund. When disaster strikes one member, the common fund pays for the loss. Kinds of Risks Personal Risks Liability Risks – Catastrophes that affect – Certain events may affect individuals. the person or property of – Accidents, illness, others. disability, and – Injury may result from an unemployment. auto accident that YOU Property Risks caused. – Visitor to your home – Property is damaged. might be hurt. – Losses include auto accidents, natural disasters, fire, and vandalism. Paying for Claims Deductible Co-insurance – A set amount of money – For each insurance claim set by your insurance you and the insurance company. (Example: company split the cost. $100 or $500) – Usually 80% paid by the – When claims are filed insurance company and you must pay full amount 20% paid by you. Or of claim until you have some other percentage reached the deductible determined by you and amount. the insurance company. – Once that amount has been reached, the insurance company will pay 100% of the rest of the bill for that year. Health Insurance Pays expenses resulting from illness or accident. Most necessary form of insurance. Health Maintenance Organization (HMO) is a group that members join to lower costs of health insurance. Types of Health Insurance Hospital Expense Surgical Expense – Provides for hospital – Covers variety of charges such as medical procedures room and meals, and operations. operating room use, – May be performed laboratory fees, and on inpatient or drugs/medicine. outpatient basis. – Most common form of health insurance. Types of Health Insurance Medical Expense Major Medical Expense – Also known as – Protects against huge Physician’s Expense. expenses resulting from a serious illness or – Pays for the doctor’s accident. medical visits while Disability Coverage patient is in the hospital. – Pays benefits to someone unable to work because of illness or injury. – Sometimes called loss-of- income insurance. Life Insurance Terms – Face Value • The amount of money to be paid in the event of the policy holder’s death. – Premium • Price of the policy. – Beneficiary • The name of the person to whom the death benefits are to be paid. Types of Life Insurance Term Cash Value – Provides protection – Protection is teamed with only. savings account. – Permanent…when the policy – Buy for a specified is paid up after a certain period of time. number of years, the – Pay as long as you policyholder owns the insurance. need the coverage – A portion of the premium is then the policy is set aside and accumulates in dropped or a type of savings account terminated. that can be borrowed against. Home Insurance In addition to the home itself, household furnishings and personal belongings are covered. The basis for all home insurance policies is coverage against the various damages or perils. Liability coverage is also a part of home insurance. Protects you against a claim resulting from an accident or injury occurring on your property. Will also protect you if someone in your family causes an injury away from home. Auto Insurance Everyone who drives a vehicle is responsible for operating it safely and paying for any damage the vehicle might cause. All states now have laws that state that drivers pay for damages they cause to people or property. Types of Auto Insurance Bodily Injury Liability Property Damage – Applies if you kill or Liability injure someone in an – Won’t repair YOUR car. accident in which – WILL cover the other you are at fault. person’ car or property. – Pedestrian, rider in your car, or someone in another car. Types of Auto Insurance Uninsured Motorists Medical Payments – Applies to bodily – Insurance company agrees to pay medical injuries that you expenses resulting from suffer as a result of a accidental injury. hit-and-run accident. – Includes you and family – Also covers you in members whether in your car or someone else’s. the event of an – Also applies if you are accident in which the struck by a car. other driver does not – Payment made have insurance. regardless of who is at fault. Types of Auto Insurance Auto Collision Auto Comprehensive – Your car is covered. – Protects against loss from theft, vandalism, – Pay to have your car fire, windstorms, and repaired or replaced other perils. regardless of who is No Fault at fault. – To reduce time & – Doesn’t cover repairs costs…each person pays greater than actual for own losses regardless of who caused the value of the car. accident. – Most expensive of – We don’ t have in WI!! car insurance.
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