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Financial Risk Management: Importance of Insurance
Insurance
Workers compensation
Premises liability
University of Arkansas Vehicle and equipment
Department of Agriculture Economics and Agribusiness
Why Insurance? Why Insurance?
How would your property be replaced if it Most individuals obtain insurance to
was damaged or stolen? protect themselves, their families and
the things of value that they own.
What would you do if you or your spouse
became sick or injured on the job?
How would you take care of your family
financially if one spouse died?
Importance of Good Record Keeping
What is an Insurance? Systems
It is a form of risk management primarily
used to evade the risk of potential financial
loss. Illness and injury prevention
It is a contract an individual receives from
Hazard communication
an insurance company to gain Posters and other notices
reimbursement for personal or financial
loss in return for the payment of Employment records
premiums.
Importance of Good Record Keeping
Systems Types of Insurance
Agricultural management practices Life
Obtaining and maintaining all permits
Homeowner’s or Renter’s
Documenting exceptions to permit
Auto
requirements
Health
Current regulation – environmental,
employment, marketing
Choosing the Right Life Insurance Plan
Life Insurance Life insurance provides protection
against financial losses caused by
a person’s death
Who does not need life
insurance?
Individuals with no dependents
Individuals with no debt
Benefits of Life Insurance Where to Get Life Insurance
Help with final expenses Employer
Bills Policies will vary
Burial
Provide funds for survivors Private insurance agency
Can prevent devastating financial
situations Agriculture lender
Depends on beneficiary
How to Qualify Who can be Insured?
Self
Medical exam
Children
Age Spouse
Other dependents
Occupation
Employees
Things NOT COVERED by Life Insurance Types of Life Insurance
Income and fringe benefits Term insurance
Debt Whole life or cash value life insurance
Endowment insurance
Financial loss
Package contracts
Types of Life Insurance Term Insurance
It provides maximum death
Group life insurance protection with the lowest
Mortgage and credit life premium cost
Universal life insurance Benefits are paid only if the insured
dies during the contract time
Variable life insurance period – the policy “term”
Annuities
Term Insurance Whole Life or Cash Value Life Insurance
Types of term insurance:
Level-term contract- issued for
specific time period, same premium Provides payment of benefits
and payout throughout the term before insured’s death as the cash
Decreasing-term contract- level value accumulates in the policy as
of protection falls each year
well as protection at the time of
Convertible term insurance- can
death
change terms farley easily
Whole Life or Cash Value Life Insurance Endowment Insurance
Types of Whole Life or Cash Value Primarily a savings contract with a
Life Insurance: small protection that covers
Ordinary life or straight life insured if they die before they
policy- premiums paid as long as
insured wishes or until policy expires
savings plan is completed
Modified life contract- lower Policy matures for the face amount at
premiums in early years of contract term end
Limited payment life policy- higher Most expensive protection
premium for set period, after which coverage
no further payments are due
Endowment Insurance Package Contracts
Types of endowment insurance
Limited-term contract- may extend
for 5, 10, 15, 20, or 30 years Insurance policies may combine
Retirement income contract- or alter the basic types of
provide $10/month of retirement insurance to meet special needs
income for every $1,000 of face for individuals or families
amount
Package Contracts Group Life Insurance
Types of package contracts: Offered by employers, employee
associations, unions, professional
Family income policy associations, savings or investment
Family maintenance policy groups and fraternal societies
Multiple protection insurance contract Is usually a form of term insurance
Juvenile life insurance coverage
Generally the least expensive
Jumping juvenile insurance form of life insurance for
Payor clause qualified members
Family group policy
Mortgage and Credit Life Universal Life Insurance
Offered by many financial This provides both protection
institutions to consumers who and a savings element
obtain mortgages, car loans, or This is similar to a combination of
other large purchases whole life protection with a
This is decreasing –term insurance savings plan that is tied to
that will expire when the loan is interest rates currently being paid
paid off in the financial market
Variable Life Insurance Annuities
Allows the insured to choose the Actually another form of investment
investments that are made with the
premiums and cash accumulates
Sold by insurance companies, but
these contracts are not insurance
policies
Should only be used by individuals
who are very knowledgeable about Designed to provide income for a set
investments period of time in return for the
Unprofitable investments will slow the payment of a premium
growth of the policy’s cash value Can help protect individuals from
outliving their income
Helpful Knowledge Helpful Knowledge
Conversion- many term policies may Mortality table- a table that shows the
be turned into a permanent form of number of deaths per thousand and
coverage at or before the date the expectation of life at various ages
term policy expires, without providing
proof of insurability Renewability- allows you to renew a
term policy without undergoing a
Double-indemnity- a writer that will
provide two times the face amount of medical examination
the policy if the insured dies from an
accident
Helpful Knowledge Helpful Knowledge
Suicide clause- requires payment of
face value of policy if the insured Uninsurability- a person’s physical
commits suicide after the policy has condition does not meet minimum
been in force two years, but no medical and /or other standards
payment during the first two years such as occupation, which are listed
except for the return of premiums on mortality tables
What is Homeowner’s Insurance?
Homeowner’s Insurance
Protects you from damage that may
affect the value of your home
Also includes personal liability and
the theft coverage
Homeowner’s Insurance Renter’s Insurance
An inventory of your possessions Works like homeowner’s insurance
helps determine how much
homeowner’s insurance you should This insurance provides protection for
carry, and can help get your things those who rent property to insure
replaced (or returned) if stolen their valuables against harm
Detailed records of antiques, jewelry, Land lord does not generally provide
silver, sporting goods, major
appliances, and collector’s items are coverage, must get yourself
very important
How Much Coverage is Needed?
The amount of personal property Auto Insurance
coverage you need depends on
how much your property is worth
The minimum amount of coverage
a married couple should have is at
least $20,000
Premium on $20,000 coverage is
$180.00 per year
Will vary from area to area
What is Auto Insurance? Why Do I Need It?
An auto insurance policy is a contract In some states, to drive (get
between you and an insurance license plates) you must carry:
company Liability coverage to pay for losses
you cause others, or:
You pay a premium, and in exchange, No-fault coverage to pay you and
the insurance company promises to your passengers for medical related
pay for specific car-related financial expenses caused by injuries form a
losses during the term of the policy car accident, regardless of fault, or
Both coverages
Why Do I Need It? Without Insurance, your risks are:
Even in states where coverage isn’t
required, drivers must, by law, be You risk paying for the full cost
able to pay for losses they may cause of:
others
Any harm you cause others,
and/or:
Coverage for vehicle damage usually
is necessary to finance a car Repairing or replacing your car if
its damaged or stolen
No transportation to work, etc.
What is Health Insurance?
Health Insurance
Health insurance helps to ensure
that you and your family are
protected against the financial
hardships that may result from
health care expenses
Where to Get Health Insurance Types of Health Insurance:
Individual Medical Coverage
Employer
Primary medical insurance
Percentage of coverage is solely coverage designed for people who
up to employer
don’t have this type of coverage
through their employer, or
Private Insurance Agency
another group
Agriculture Lender
Types of Health Insurance: Types of Health Insurance:
Medicare Supplement Hospital Income Insurance
Insurance Ideal for supplementing your primary
health insurance, it provides a pre-
Designed for the senior citizen
determined, daily benefit amount for
who participates in Medicare, yet those extra, unbudgeted expenses
desires additional coverage to help that arise due to a hospital stay for a
with many of the expenses that covered sickness or injury- from
Medicare does not pay meals out and child care to policy
deductibles and co-insurance
Disability Insurance Types of Disability Insurance:
Disability Income Insurance
The amount of coverage a
person receives through Ideal as a primary income
replacement plan or as a
disability insurance will vary supplement to your salary
depending on: continuation or group disability plan.
Occupation Designed to keep you financially
Income stable during difficult times by
Age paying a monthly income, directly to
Health you, when you are sick or hurt and
unable to work
Types of Disability Insurance: Types of Disability Insurance:
Mortgage Disability Income
Insurance Individual Credit Disability
An affordable disability product, designed Insurance
to specifically protect one of your most Designed to help those who have
important assets - your home. a loan payment in equal, regular
Provides you with funds to help meet monthly installments.
your mortgage loan responsibilities if you
become totally disabled
It pays a monthly benefit directly
to your financing institution if you
become totally disabled
Sources for More Information Sources for More Information
Judith R. Urich; Ph.D., CFP, Extension Family Resource
Management Specialist According to the information reported in the State Farm Insurance
homepage:www.statefarm.com/insurance/insurance.asp these are
some of the insurance agents that affirm to speak Spanish:
Choosing the Right Life Insurance Plan
www.uaex.edu/Other_Areas/publications/PDF/MP336.pdf
Taylor Hudson; Springdale, AR; 479-750-1500
Tim Pruitt; Springdale, AR; 479-751-6227
Disability Income Insurance: Karen Williams; Rogers, AR; 479-621-0259
www.uaex.edu/Other_Areas/publications/pdf/FSHEC-68.pdf Rod Badely; Rogers, AR; 479-636-9944
DeWayne Trichell; Bentonville, AR; 479-273-7719
Long-term Care Insurance:
www.uaex.edu/Other_Areas/publications/pdf/FSHEC-98.pdf
University of Arkansas does not endorse the use of any of these
insurance companies or agents
Sources for More Information Sources for More Information
According to the information reported in the Farmers Insurance According to the information reported in the Nationwide Homepage
Group homepage:http://www.segurosfarmers.com/Esp/index2.html http://www.nationwide.com/nw/index.htm these are some of the
these are some of the insurance agents that affirm to speak insurance agents that affirm to speak Spanish:
Spanish:
Esteban Vera; Fayetteville, AR; 479-443-1664
Spencer Scarbrough; Fayetteville, AR; 479-575-0863
Nathan Combs; Springdale, AR; 479-756-0008
Gregory Collier; Springdale, AR; 479-725-0453
Cheryl Linn; Rogers, AR; 479-621-0600
Michael Jones; Rogers, AR; 479-636-9390
Terry Childers; Bentonville, AR; 479-273-7307
University of Arkansas does not endorse the use of any of
these insurance companies or agents
University of Arkansas does not endorse the use of any of
these insurance companies or agents
Presentation References
Jennie Popp
Associate Professor
University of Arkansas
Department of Agricultural Economics and Agribusiness
Janie Hipp
National Program Leader
Risk Management Education
Farm Financial Management
Trade Adjustment Assistance
UDSA/CSREES
Judith R. Urich
Extension Family Resource Management Specialist
University of Arkansas
Cooperative Extension Service
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