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Name: _______________________________Date: ____________Financial LiteracyChapter 10: InsuranceObjectives:Explain how insurance protects individuals from financial risk.Outline the different types of private health insurance coverage.Describe types of government-sponsored health insurance programs.Explain the purpose of disability insurance.Distinguish among the various types of life insurance.Outline the key factors to consider when buying home insurance.Select auto insurance coverage to meet individual needs.Managing RiskLife involves risk; some events can limit your ability to work or wipe out your assetsFinancial security depends on risk managementFour strategies for dealing with risk____avoidance_______reduction__________retention________transfer_____Insurance ProtectionType and amount of insurance needed depends on ___risks____ being coveredamount available to pay for __losses__financial __obligations____ of insured personsProtection needs increase with each new dependent and with increased assetsWhen you buy insurance, you become a policyholderYou pay a premium to the insurance company on a regular basisPremiums paid by you and others are invested by the insurance companyPremiums and earnings from investments pay insurance claimsPrivate Health InsuranceOffers protection by covering specific medical expenses created by illness, injury, and disabilityGroup plans are sponsored by employers, unions, and other organizationsIndividual plans cost more and provide less coverage than group plansFee-for-Service PlansFee-for-service plans pay for covered medical services after treatment is providedusually allow policyholders to go to any licensed health care provider or accredited hospital of their choicePolicyholders pay ___deductible___ and __coinsurance________Basic coverage____: prescriptions, hospital stays, inpatient tests, some doctor’s visits and outpatient procedures__Major medical coverage___: costs of serious illnesses and high-cost procedures and injuries___Comprehensive plans : combine basic and major medical protection in one policyManaged Care PlansManaged care plans contract with health care providers to deliver medical services to members at reduced costChoice of service providers is limited to those who participate in the planPolicyholders pay __deductibles, _coinsurance, or _co-payments____Three forms of managed care are _____HMOs- Health maintenance organizations_______________PPOs -Preferred provider organization_________________POS- Point of Service_____________Health Maintenance Organizations (HMO)A primary care doctor is chosen from a list of participating doctorsDoctor provides coordination of careProviders in the plan cover treatmentPreferred Provider Organizations (PPO)Provides more choice than an HMOYou receive services at lower cost by seeing participating caregiversYou may go outside the plan if you pay the extra cost; non-participating providers are covered at lower ratesPoint-of-ServiceProvides more choice than an HMOYou receive services at lower cost by seeing participating caregiversYou may go outside the plan if you pay the extra cost; non-participating providers are covered at lower ratesHealth Savings AccountYou may contribute pre-tax dollars into a health savings account (HSA), whose funds accumulate tax-freeUse the HSA savings to pay for health care costsUsed by people enrolled in qualified High Deductible Health PlansYou must use all money put into that account by the end of the year.COBRACOBRA is Consolidated Omnibus Budget Reconciliation Act A qualified worker who leaves a job can continue coverage by his or her former employer’s group health plan for a limited timeWorker must pay premium, which often is expensiveIndividual PlansPeople who must purchase health insurance on their own include _____the self employed______________________those between jobs________________________people not eligible for COBRA_________________Consumers can apply for an individual plan from health insurance companies or for the Patient Protection and Affordable Care Act (PPACA), or Affordable Care Act (ACA) for short. The ACA was signed into law to reform the health care industry by President Barack Obama on March 23, 2010 and upheld by the Supreme Court on June 28, 2012. This plan is commonly called “Obamacare”Problems with individual plans:___High cost of premiumsApplicants are often rejected due to past injuries and illnesses, chronic physical or mental health problemsMany exclusions for preexisting conditions, pregnancy, dental careCoverage for Young AdultsAfter a certain age, young adults are no longer eligible for coverage under their parents’ plans Some young people receive coverage through their employers group plan or by purchasing an individual planMany health insurance plans have extended coverage under certain conditions, such as collegeYoung adults often go uninsuredWith no insurance, a serious illness or injury can wipe out assets and create debtLong-Term CareLong-term care insurance covers certain costs of carein a __nursing home____in an _assisted living facility___at __at home with assistance__Older consumers are primary purchasers of this insuranceChoosing a PlanEmployees often have a choice of employer plansCarefully review materials provided ServicesWhat services are most important to you? To what extent are they covered?What are maximum benefits?Does the plan require preauthorization and utilization reviews for certain services?ChoiceCan you choose your own providers or continue with those you already have?Which providers participate in the plan? Where are they located?What are the provisions for seeing a specialist? Can you change doctors if you are dissatisfied?CostWhat premiums must you pay?If there is a deductible, how much is it and which services are subject to it?What are costs of using non-participating providers and facilities?What are the exclusions, service limitations, and restrictions?What portion of charges must you co-pay? What services are subject to co-pay?Are co-payments higher if you receive treatment outside your plan?Government-Sponsored Health InsuranceMedicare covers specific health care expenses for eligible citizens age _____65 and older___those under 65 with certain _____illnesses____and _disabilities___Payroll taxes fund Medicare; employers and workers pay premiumsMedicare has four partsA. ___Hospital Insurance______B. ___Medical Insurance_____C. ___Medicare Advantage___ (combines Hospital and Medical)D. ___Prescription Drug____Medigap InsuranceProvided by private insurance companiesAvailable to people who have both Medicare Parts A and BHelps pay for health care costs not covered by MedicareThe broader the coverage, the higher the premiumMedicaidA health insurance program for eligible low-income persons and those with certain disabilitiesA state-administered program financed by federal and state taxesServices provided vary from state to stateChildren’s Health Insurance Program (CHIP)Government-provided health insurance coverage for childrenFunded by taxes on tobacco productsDisability InsuranceMany people suffer illnesses and injuries that prevent them from working for a prolonged periodBeing without income can result in serious financial setbacksDisability insurance pays a portion of the income a worker would receive if healthy and workingTwo types:short-term coverage that provides benefits for up to two yearslong-term coverage that provides benefits for a number of years up to lifeMany people are covered by disability insurance paid by their employersImportant questionsWhat benefits are promised?What is the waiting period?How long are benefits available?Can the policy be canceled by the insurer?Workers’ CompensationEmployer-provided insurance for those with work-related illnesses or injuriesBenefits includepayments of a portion of lost wages that continue for life if disability is permanentmedical care and rehabilitation payments to worker’s survivors if worker’s injury or illness is fatalLife InsuranceProtects dependents from loss of income and other expenses after an insured person’s death Especially important if you have a spouse, children, or elderly parents who depend on your incomeAt death, the face value of the policy is paid to the beneficiaryThere are several different types of Life Insurance Policies, each policy is different and fits the needs of different individuals.__Term Life___________ (most common)___Whole Life_____________Limited Payment Policies___________Variable Life___________Adjustable Life_______Universal Life___Each person’s life insurance needs are uniqueThe amount and type of life insurance protection needed depend onpresent and future earningsfinancial responsibilities and obligationsAmount of ProtectionFactors indicating how much insurance to get:Ages and financial needs of those depending on policyholder’s incomeAmount of money needed to maintain dependents’ standard of living without policyholder’s incomeOther sources of income available for dependentscost of funerals and _unpaid debt_Types of ProtectionGroup coverage costs less than an individual policy for the same coverage amountEmployers often provide life insurance as a fringe benefit; pay all or part of premiumsUnions and other groups sometimes provide group coverageFeatures to consider:Guaranteed renewabilityDouble indemnity or accidental death benefitDisability benefitConvertible provisionIf insurance is a form of savings, earnings should match or exceed other forms of savings and investmentsChoosing a Company, Agent, and PolicyDo some research and meet with representatives of the companies you are consideringCheck whether the company has a good reputationis licensed to operate in your stateCompare premiums charged by different companies for similar coverageA good agentclearly explains coverage and benefits can help you evaluate your coverage as your needs and finances changehandles claims and revisions promptlyTalk honestly with the agentReview the policy carefullyInform your beneficiaries of the policyHome InsuranceProperty coverageinsures against damage to or loss of dwelling and personal propertymay also pay additional living expenses if you need to move outLiability coverageprotects you if others are injured on your propertyoffers protection if you or your family, pets, or property accidentally damage the property of others covers higher loss amounts with an umbrella policyAmount of CoverageFind out how much it would cost to rebuild your home if it were destroyedget an appraisalIncrease insurance for home improvements and inflationCheck policy for coverage provided for personal possessionsMake a complete inventory of your belongingsCompare the coverage limits with the total value of your possessionsActual cash value is the replacement cost minus depreciationReplacement value covers the cost of replacing what you lose without deducting depreciationCost of Home InsuranceType and amount of coverageSize of deductibleRisk factors where you liveThe insurance companyOpportunities for discountsRenter’s InsuranceCovers losses due to damage or loss of personal property and possessionsLiability insurance covers expenses incurred by a renter if a guest is harmedFloater insurance covers specific items wherever you take themEndorsement is attachment to a policy that covers items taken out of the homeAuto Insurance__Financial liability laws______—drivers must show proof they can pay minimum damage amounts Compulsory _auto insurance laws__—car owners must buy some bodily injury and property damage liability insuranceTypes of Auto InsuranceBodily injury liability protects you when you cause an auto accident resulting in injury or death of other partiesProperty damage liability protects you when you cause an auto accident in which the property of others is damagedPersonal injury protection covers medical expenses from an accident regardless of who is at faultCollision insurance pays for car damage due to an auto accident collision with another car or objectComprehensive physical damage insurance pays for loss or damage due to most other causesUninsured and underinsured motorist insurancepays insured person for injuries caused by uninsured or hit-and-run drivercovers insured person when driving, riding, or walkingcovers passengers in the insured person’s carAuto Insurance CostsDepend on driver classification:_ age_______gender_____marital status________driving record________habits______Premium Discount Eligibility__Safe driving record______Good grades________Nonsmoker_________Antitheft devices and air bags________Age________Two or more cars on a policy________Positive credit report____Insured Car’s Year, Make, and ModelPremiums are highest forcars costly to repairfrequently stolen carsluxury, sports carsnewer carsDeductible AmountThe higher the deductible, the lower the premiumYou can save money on premium for collision and comprehensive damage coverage by increasing the deductible amount No-Fault Auto InsuranceWith no-fault auto insurance, each party makes a claim to his or her own insurance companyInsurance company pays regardless of who is at faultSimplifies and speeds payments to victims_lower insurance rates___ insurance rates___Reduces___ legal costsPays for claims up to a set amount called a __threshold_____Liability insurance pays for damages over the threshold amountIn most states, people can sue for additional damages when an accident involves severe injuries, death, or major medical billsHigh-Risk DriversPeople with poor driving records may be denied coverage High-risk drivers may obtain coverage through a state-supervised assigned risk planInsurance companies must provide coverage, but premiums are very highVocabulary__________________________________________ An estimate of the current value of property. __________________________________________Person named by the policyholder to receive the death benefit of an insurance policy. __________________________________________Coverage that protects insured persons when they are liable for an auto accident that injured or killed others. __________________________________________ A percentage the policyholder must pay for certain services. __________________________________________ A flat fee the policyholder must pay for certain services. __________________________________________The amount you will be required to pay before insurance pays for any services.__________________________________________ An individual who relies on someone else for financial support. __________________________________________ A decrease in the value of property as a result of age or wear and tear. __________________________________________Insurance that pays the face value of the policy to beneficiaries if the insured dies before the endowment period ends. It also pays the face amount to the insured if he or she lives beyond the endowment period. __________________________________________The services that are not covered in an insurance plan. __________________________________________A health insurance plan that pays for covered medical services after treatment is provided. __________________________________________A tax-advantaged savings account available to people enrolled in qualified High Deductible Health Plans (HDHPs). __________________________________________A person whose care requires a stay in the hospital. __________________________________________ A health care plan that contracts with specific doctors and other health care providers, hospitals, and clinics to provide a range of medical services and preventive care to members of the plan at reduced cost. __________________________________________Coverage that eliminates the faultfinding process in settling claims by having each policyholder make a claim after an accident. __________________________________________ A person who owns an insurance policy. __________________________________________An illness or injury a person has before signing up for a health care plan. __________________________________________Amount of money paid to an insurance company for a policy on a regular basis. __________________________________________Coverage that protects insured persons when they are liable for an auto accident where the property of others is damaged. __________________________________________ A measure of the likelihood that something will be lost. __________________________________________The process of measuring risk and finding ways to minimize or manage loss. __________________________________________Insurance that covers the policyholder for a specific period of time—5, 10, or 20 years or until a specified age. __________________________________________ Insurance that provides the policyholder with basic lifetime protection so long as premiums are paid ................
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