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Principles of Business And Personal Finance

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					   Principles of Business
            And
      Personal Finance

10.01 Evaluate the major types of
auto insurance available and the
         basis of costs


                                    1
            INSURANCE TERMS
 Insurance
  – The planned protection provided by sharing economic
    losses.
 Insurance Company
  – Businesses that provide planned protection against
    economic loss.




                                                          2
            INSURANCE TERMS
 Insurable Interest
  – A financial interest in property or a person’s life that
    permits someone to buy insurance to protect against the
    financial loss of that property or person’s life.
 Compulsory Insurance Law
  – Legally requires drivers to have a minimum amount of
    car insurance.



                                                           3
            INSURANCE TERMS
 Policy
  – A contract issued by the insurance company for
    coverage of the policyholder.
 Insured (Policyholder)
  – The person for whom the risk is assumed.
 Insurer
  – The insurance company that provides planned
    protection against economic losses.

                                                     4
                INSURANCE TERMS
   Premium
    – The amount of money the policyholder must pay for insurance
      coverage.
        Drivers in   high-risk categories generally pay higher premiums
   Deductible
    – The amount of money the policyholder must pay before the
      insurance company will pay a claim.
   Claims
    – Requests for payment from the insurance company to cover the
      financial losses.

                                                                           5
            INSURANCE TERMS
 Actual Cash Value
  – The value of a new car minus depreciation.
 Depreciation
  – The decline in value of a vehicle because of use.
 Financial Responsibility Law
  – The law says you must pay for any damage or injury you
    cause in an accident either with insurance, with savings,
    or by selling property.

                                                            6
            INSURANCE TERMS
 Benefit
  – The amount an insurance company pays to you or
    your beneficiary when you file a claim
 Endorsement
  – These are changes to the original insurance
    contract, such as a different deductible or an
    additional car or driver.

 Exclusion
  – Situations that are not covered by a given
    insurance policy; specific exclusions are listed on
    your insurance policy.


                                                          7
             INSURANCE TERMS
   Extraordinary Medical Coverage
    Sometimes included in Personal Injury Protection,
    this coverage protects you if you suffer accident-
    related injuries that require serious and/or long-
    term medical care and begins once you have
    exhausted the limit on your standard medical
    benefits coverage.

   Full Coverage
    This indicates that you have all the minimum
    coverage for your state of residence; it does not
    necessarily mean you will always be fully
    covered.


                                                        8
           INSURANCE TERMS
 Income    Loss Coverage
 Sometimes a part of Personal Injury
 Protection, income loss coverage takes care
 of you if you're unable to work due to
 accident-related injuries.


 Limits
 The maximum amount of money your insurance
 company will pay out for your losses; many
 states have minimum required limits.



                                               9
           TYPES OF AUTOMOBILE
           INSURANCE AVAILABLE

 Bodily Injury Liability
   – Protects the insured person from injury to people in
     other cars, passengers riding with the insured person,
     and pedestrians, but does not cover the insured person
 Medical Payments
   – Covers policyholders and family members while riding in
     a car.


                                                              10
          TYPES OF AUTOMOBILE
          INSURANCE AVAILABLE


 Uninsured Motorist Protection
  – Protects policyholder against drivers without insurance.
 Property Damage Liability
  – Protects the insured person against damage by his/her
    car to another person’s property.



                                                               11
          TYPES OF AUTOMOBILE
          INSURANCE AVAILABLE


 Collision Insurance
  – Protects the car owner against damage from a collision
    with another object or the car turning over, but does not
    cover injuries to people.
 Comprehensive Physical Damage
  – Protects the insured person against almost all damage
    except the collision or the car turning over.
                                                            12
        No-Fault Insurance
 Itdoes not matter who is legally
  responsible for an accident.
 A plan in which people injured in
  automobile accidents are required to
  collect for their financial losses from
  their own insurance companies no
  matter who is at fault.


                                            13
         FACTORS THAT DETERMINE
       AUTOMOBILE INSURANCE COSTS
 Age and sex
 Driving record (tickets and accidents)
 Marital status or academic standing
 Purpose for which the vehicle is used
 Number of miles driven each year
 Value and type of vehicle
 Repair costs for the area
 Geographic location
 Types of Coverage needed
 Deductible desired


                                           14
                Notes
 Building more expensive cars will
  most likely cause an increase in
  automobile insurance premiums.
 A person who sells insurance is an
  Insurance Agent.




                                       15
             Activity
 Great Methods to Lower Your
  Auto Insurance Premium
 http://www.insurance-savings-
  online.com/auto-insurance-
  types.htm




                                  16
            Activity
 Auto quotes
 https://www.comparisonmarket.
  com/QuoteStart.aspx?customerp
  roviderid=1149&cp=1149




                              17
Principles of Business &
   Personal Finance
10.02 Evaluate property insurance
costs and the benefits provided to
    individual and businesses.

                                     18
  Home & Property Insurance
 Home and property insurance protect
 you against three kinds of economic
 loss:
 – Damage to your home or property
 – Additional expenses you must pay to
   live someplace else if your home is
   badly damaged and
 – Liability losses related to your property


                                               19
    Damage to Home or Property
 Every 16 seconds, a fire department
  responds to a fire somewhere in the
  United States.
 Fires cause over $12 billion in damage
  every year.
 Homes and other expensive property
  should be insured for fire damage as well
  as damage caused by vandalism,
  unavoidable accidents, and natural
  disasters such as lightning, earthquake,
  wind, and flood.
                                              20
    Additional Living Expenses
 If a fire or other disaster strikes your
  home, one of the first shocks you will
  experience is that you do not have a place
  to live.
 You may have to move into a hotel, motel,
  or furnished apartment while your home is
  being repaired.
 Property insurance that includes insurance
  for additional living expenses will help to
  pay for the expenses you would incur if
  something happened to your home.
                                            21
         Liability Protection
 The  third kind of loss, liability loss, is
  protected by personal liability
  coverage.
 Personal liability coverage protects
  you from claims arising from injuries
  to other people or damage to other
  people’s property caused by you,
  your family, or even your pets.

                                            22
         Liability Protection
 If a neighbor slips on your icy sidewalk
  and you are shown to be at fault, personal
  liability coverage will pay for any medical
  and legal costs up to a stated limit.
 Awards to injured people for millions of
  dollars are not uncommon.
 Everyone should have some form of
  liability protection from economic loss.



                                            23
   PROPERTY INSURANCE TERMS
 Perils –causes of loss, such as fire, wind, or theft.
 Real Property – items attached to the land

 Personal Property – property that is not real
                              property
 Extended coverage - includes more perils




                                                          24
  PROPERTY INSURANCE TERMS
 Homeowner’s policy –   a convenient package-type
 insurance policy designed to fit the needs of most
 homeowners:
  – Basic Coverage – covers 11 perils
  – Broad Coverage – covers 18 perils
  – Special Coverage – covers all perils except those
    excluded from the policy.



                                                        25
   PROPERTY INSURANCE TERMS
 Renter’s insurance –    special policies designed for
  individuals who are renting
 Inventory – a list of property including the following:
   – Original cost
   – Date purchased
   – Expected life of the article




                                                       26
            Depreciation
A sofa costing $700 that is expected
 to last ten years would depreciate
 $70 each year
  – Cost $700/10 years = $70 depreciation
    per year
    value after six years would be
 Its
 $280
  – Depreciation per year $70 x 6 years =
    total depreciation $420; original cost
    $700 – total depreciation $420 = $280
                                             27
               LOSSES COVERED BY A
               HOMEOWNER’S POLICY
   Basic:
    –   Fire or lightning
    –   Volcanic eruption
    –   Windstorm or hail
    –   Explosion
    –   Vehicles
    –   Riot or civil commotion
    –   Aircraft
    –   Smoke
    –   Vandalism or malicious mischief
    –   Theft
    –   Breakage of glass constituting a part of a building

                                                              28
            LOSSES COVERED BY A
            HOMEOWNER’S POLICY
 Broad (includes the basic perils):
  –   Falling objects
  –   Weight of ice, snow, sleet
  –   Collapse of building(s)
  –   Sudden and accidental tearing apart, cracking, burning,
      or bulging of a steam or hot water heating system or of
      appliances for heating water, an air-conditioning or
      automatic fire protective sprinkler system


                                                                29
          LOSSES COVERED BY A
          HOMEOWNER’S POLICY
 Accidental discharge, leakage or  overflow of water
  or steam from within a plumbing, heating or air-
  conditioning system or domestic appliance
 Freezing of plumbing, heating and air-conditioning
  systems, automatic fire protective sprinkler system
  and domestic appliances
 Sudden and accidental injury from artificially
  generated currents to electrical appliances, devices,
  fixtures and wiring

                                                     30
            LOSSES COVERED BY A
            HOMEOWNER’S POLICY
 Comprehensive (includes basic and broad
 perils):
  – All perils EXCEPT earthquake, flood, war, nuclear
    accidents, and certain others




                                                        31
     Replacement Insurance
 Replaces an item that has been destroyed.
 No depreciation is deducted, but instead
  the item is actually replaced for whatever
  the current cost may be.
 A replacement cost policy would pay
  whatever it cost on the day of the loss to
  replace your property.
 As soon as possible after you discover a
  loss, you should file a claim with your
  insurance company. However, before the
  company will pay, you must provide proof
  of your loss.
                                           32
      Replacement Insurance
 With real property, a representative of the
  insurance company, called an adjuster,
  can look at the damaged property,
  determine the extent of loss, and pay you
  according to the terms of the policy.
 The destroyed contents of a house,
  however would pose a problem.
 In order to prove the amount of personal
  property loss, you must know the
  approximate value of each article
  damaged or destroyed.
                                            33
     Replacement Insurance
 In addition to maintaining an up-to-date
  personal property inventory, some
  insurance companies suggest keeping
  receipts from purchases of your
  possessions and taking photographs or
  videos of your furniture and other
  property.
 These receipts and pictures can be used to
  support claims.
 Insurance companies can provide you with
  inventory forms and information about
  how to make claims for losses.
                                           34
   FACTORS THAT DETERMINE THE
 PREMIUM OF PROPERTY INSURANCE
 The value of the property
 The construction materials used

 The type of policy desired (basic, broad, or
  special)
 Number of perils covered

 The distance to the nearest fire department and
  water supply
 The amount of the deductible

                                                    35
WHAT TO INCLUDE ON AN INVENTORY
              FOR
   HOMEOWNERS INSURANCE
   The Item:
   Name the item and give a detailed description of it
   Original Cost:
   List the original cost of the item including a sales receipt if possible
   The Date of Purchase:
   Give the date the item was purchased including a sales receipt if
    possible
   Expected Life:
   List the expected life of the item including the warranty if possible



                                                                               36
           Business Insurance
 Fires,storms, water damage,
  burglaries, and liability problems face
  business owners.
 Businesses can use insurance to
  protect against the loss of income
  during times when they must be
  closed due to a tragedy.


                                        37
              Deductible
 Theamount you must pay before the
 insurance company pays a claim.
  – For example, if your car suffers $2,500
    damage in an accident and your
    deductible amount is $500, you would
    pay $500 and the insurance company
    would pay $2,000.




                                              38
              Activity
 Prepare an inventory for a room in
  your home.
 Include replacement value for each
  item.




                                       39
              Activity
 Quotes

 http://www.insurance-savings-
 online.com/auto-insurance-
 types.htm




                                  40
Principles of Business &
   Personal Finance
 10.03 Determine the value of major types of health
insurance and advantages/disadvantages of having
protection through disability, accidental death, and
        worker’s compensation insurance.




                                                       41
   TYPES OF HEALTH INSURANCE
 Hospitalization Insurance
   – Highest selling insurance
       Pays themajor part of the cost of a hospital stay
       Covers such charges as room, food, anesthesia,

       X-rays, laboratory tests, and medicines
 Surgical Insurance
   – Pays for all or most of the charges for surgery and in-
     hospital care by physicians


                                                               42
  TYPES OF HEALTH INSURANCE
 Regular Medical Insurance
  – Pays for part or all of non surgical care given in the
    doctor’s office, hospital, or patient’s home
 Major Medical Insurance
  – Pays for extended and serious illnesses
  – Pays for all or most of all kinds of health care prescribed
    by a doctor
  – Covers the cost of treatment in and out of the hospital,
    special nursing care, X-rays, psychiatric care, medicine
                                                              43
  TYPES OF HEALTH INSURANCE
 Comprehensive Medical Insurance
  – Combines the features of hospital, surgical, regular, and
    major medical insurance
 Dental Insurance
  – Pays for normal dental care such as examinations, X-
    rays, cleaning, fillings, and dental injuries due to
    accidents



                                                            44
   TYPES OF HEALTH INSURANCE
 Vision Insurance
  – Pays for eye examinations, prescription lenses, frames,
    and contact lenses
 Mental Health Insurance
  – Pays for psychological counseling and psychiatric care
 Disability Income Insurance
  – Pays for loss of income due to extended illness or
    accident

                                                              45
      HEALTH INSURANCE PROVIDERS

 Group Health Insurance
  – Most popular way to buy health insurance
  – Usually provided by an employer
 Individual Health Insurance
  –   Most expensive method of buying health insurance
  –   The individual pays the entire premium
  –   Usually has a waiting period before the policy is active
  –   Usually requires a physical examination

                                                                 46
   HEALTH INSURANCE PROVIDERS

 Health Maintenance Organization
  – Provides health care to its members usually at a
    medically staffed clinic for a set fee per month
  – Emphasis is on preventative health care
 Government Provided Insurance
  – Medicare
      Federal assistance  for people aged 65 and over and some
       disabled individuals
      Provides medical and hospital insurance


                                                                  47
   HEALTH INSURANCE PROVIDERS

 Medicaid
  – Federal assistance for low-income families
  – Covers the cost of doctor’s services, X-rays, lab tests,
    nursing home care, diagnosis and treatment of
    children’s illnesses, and home health care services
 Worker’s Compensation
  – Provides medical and survivor benefits for people
    injured, disabled, or killed on the job.


                                                               48
Principles of Business &
   Personal Finance
10.04 Evaluate the various types of
      life insurance policies.



                                      49
             LIFE INSURANCE TERMS

   Dependent
    – A person that relies on another for financial support
   Proceeds
    – Money paid to the policyholder’s survivors
   Beneficiary
    – The person named in the policy who receives the proceeds
   Renewable Policy
    – A policy which the policyholder may renew for one or more terms
      without proving he is a good risk


                                                                    50
              LIFE INSURANCE TERMS

   Cash Value
    – The amount of money received if a policyholder decides to give
      up the policy before his death
   Face Value
    – The amount of insurance coverage originally purchased which
      will be paid upon the policyholder’s death
   Insurable Interest
    – A financial interest in or benefit from the continued life of a
      person.


                                                                        51
 FOUR TYPES OF LIFE INSURANCE
 Term Life Insurance
  – Provides financial protection for a survivor of the
    policyholder for a specific period (term) of time
  – Convertible Term Insurance can be changed into
    permanent insurance without taking a physical exam.
 Whole Life Insurance
  – Provides death benefits and savings until the
   policyholder dies


                                                          52
 FOUR TYPES OF LIFE INSURANCE
 Variable Life Insurance
  – Provides death benefits and savings, but allows the
    policyholder to determine how to invest the cash value
 Universal Life Insurance
  – Divides the premium three ways: death benefits,
   insurance company expenses, and investments or
   savings that earn a high interest rate



                                                         53
     FACTORS WHICH DETERMINE THE COST OF
       DIFFERENT TYPES OF LIFE INSURANCE

 The Type Of  Life Insurance Purchased
 The Age Of The Insured

 The Insured’s Health

 Sex of the Insured

 Face Amount Of The Policy

 The Company Selected to Provide the Insurance




                                                  54
 State Government Assistance
 An  important health insurance
  program established by state
  governments is workers’
  compensation.
 Workers’ compensation is an
  insurance plan that provides medical
  and survivor benefits for people
  injured, disabled, or killed on the
  job.

                                     55
 State Government Assistance
 Accidents   may occur on almost any
  job.
 Employees may suffer injuries or
  develop some illness as a result of
  their working conditions.
 To deal with this problem, all states
  have passed legislation known as
  workers’ compensation laws.

                                          56
    State Government Assistance
 These laws provide medical benefits to
  employees who are injured on the job or
  become ill as a direct result of their
  working conditions.
 Under these laws, most employers are
  required to provide and pay for insurance
  for their employees.
 The benefits provided through workers’
  compensation vary from state to state.

                                              57
    State Government Assistance
 State governments also administer a form
  of medical aid to low-income families
  known as Medicaid.
 The federal government shares with states
  the cost of providing health benefits to
  financially needy families.
 A financially needy family is one whose
  income provides for basic necessities but
  who could not afford adequate medical
  care or pay large medical bills.

                                          58
    State Government Assistance
   The services covered by Medicaid include:
    – Hospital care
    – Doctors’ services
    – X rays
    – Lab tests
    – Nursing home care
    – Diagnosis and treatment of children’s
      illnesses
    – Home health care services.


                                                59
Federal Government Assistance
 The   nation’s Social Security laws
  provide a national program of health
  insurance known as Medicare.
 It is designed to help people age 65
  and older and some disabled people
  pay the high cost of health care.
 Medicare has two basic parts:
  – Hospital Insurance
  – Medical Insurance

                                         60
Federal Government Assistance
   The hospital insurance plan includes
    coverage for
    – Hospital care
    – Care in and approved nursing home
    – Home health care up to a certain number
      of visits.
   No premium payments are required for
    the hospital insurance, and almost
    everyone 65 years old and older may
    qualify.

                                                61
Federal Government Assistance
 The medical insurance portion of Medicare
  is often called supplementary or voluntary
  medical insurance.
 The services covered under this plan
  include
    – Doctors’ services
    – Medical services and supplies
    – Home health services
 The medical insurance requires a small
  monthly premium.
 The federal government pays an equal
  amount to help cover the cost of the
  medical insurance.                       62
Principles of Business
           &
   Personal Finance
        10.05




                         63
                        Notes
 Disability Income Insurance provides a
  worker with weekly or monthly payments when he/she
  is unable to work as a result of an illness or injury
  covered by the policy.
 If a worker is unable to return to the job due to a job-
  related illness or accident, a portion of the worker’s
  wages are paid by Workers’ compensation.
 Social Security taxes are paid by workers and
  matched by the employer to provide a retirement
  income for those at age 62 and older.

                                                             64
                     Notes
 A tax disadvantage for employers paying higher
  wages – pays the same percentage but higher
  totals.
 Disability Insurance – the part of social security
  system that provides pensions to disabled workers
  and their families.



                                                       65
         Disadvantages
 Disadvantage  to employers paying
 social security taxes – employees
 receive income protection.

 Disadvantage for self-employed
 workers paying social security taxes
 – receives only ½ of the benefits.


                                        66

				
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