Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
1
Slide 1
Auto, Homeowners,
Medical and Life
Insurance
Dollars and Sense
Insurance, insurance, insurance! What different types of insurance are available? Note to teacher: This slide presentation is divided into four segments:
• Auto insurance
• Homeowners insurance
• Medical insurance
• Life insurance
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
2
Copyright
Copyright © Texas Education Agency, 2014. All rights reserved. Copyright © Texas Education Agency, 2014. These Materials are copyrighted © and trademarked ™ as the property of the Texas Education Agency (TEA) and may not be reproduced without the express written permission of TEA, except under the following conditions:
1) Texas public school districts, charter schools, and Education Service Centers may reproduce and use copies of the Materials and Related Materials for the districts’ and schools’ educational use without obtaining permission from TEA.
2) Residents of the state of Texas may reproduce and use copies of the Materials and Related Materials for individual personal use only, without obtaining written permission of TEA.
3) Any portion reproduced must be reproduced in its entirety and remain unedited, unaltered and unchanged in any way.
4) No monetary charge can be made for the reproduced materials or any document containing them; however, a reasonable charge to cover only the cost of reproduction and distribution may be charged.
Private entities or persons located in Texas that are not Texas public school districts, Texas Education Service Centers, or Texas charter schools or any entity, whether public or private, educational or non-educational, located outside the state of Texas MUST obtain written approval from TEA and will be required to enter into a license agreement that may involve the payment of a licensing fee or a royalty.
For information contact: Office of Copyrights, Trademarks, License Agreements, and Royalties, Texas Education Agency, 1701 N. Congress Ave., Austin, TX 78701-1494; phone 512-463-7004; email: copyrights@tea.state.tx.us
2
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
3
Slide 3
What is Insurance?
Copyright © Texas Education Agency, 2014. All rights reserved. 3
Car wrecks, stolen cars, house fires, major illness, injuries and other unexpected events can disrupt the most carefully made financial plans. Insurance is a way of managing the possible loss from an unfortunate event. A consumer can purchase insurance which will protect him or her financially in case of an unexpected, expensive event. Insurance is purchased protection that guarantees the consumer a financial payback when a loss occurs.
An insurance company is a business that offers this service. Consumers (policyholders) pay into a common fund, and if any of the policyholders suffer a loss, the insurance company will
reimburse them. This is profitable for the insurance company because not everyone will suffer a loss. The insurance company is betting that more people will pay in than suffer a loss. The insurance company keeps the extra money as profit and invests the money until it is needed to pay for losses. The insurance company will make more money in the form of interest from the investments.
What are some other types of insurance available? There are different types of insurance. Recreational vehicle (RV) or boat insurance are examples of insurance that someone might purchase. Some people purchase pet insurance for the health or life of their pet. A doctor purchases malpractice insurance. A traveler might purchase travel insurance, and an engaged couple might purchase wedding insurance. In these lessons, we are going to focus on the most common types of insurance that meet most people’s needs: auto, homeowners, medical and life.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
4
Slide 4
Terms to Know
Appraisal
Asset
Beneficiary
Cash value
Co-pay
Death benefit
Deductible
Estate
Face amount
Group insurance
Open-enrollment period
Premium
Supplemental insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 4
Here are some terms that are frequently used; you should understand what they mean.
If the terms are challenging for your students, you may select to have them create a Personal Word Wall. See:
http://cte.sfasu.edu/wp-content/uploads/2013/01/Personal-Word-Wall1.pdf or utilize the Four Corners Vocabulary / Word Wall Activity http://cte.sfasu.edu/wp-
content/uploads/2012/02/Four-Corner-Vocabulary2.pdf Additional insurance terms can be found at:
Glossary of Common Insurance Terms
http://www.tdi.texas.gov/consumer/glossary.html
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
5
Slide 5
Why is Insurance Needed?
Copyright © Texas Education Agency, 2014. All rights reserved. 5
There are many reasons to purchase insurance:
• Accident
• Death
• Elderly
• Fire
• Flood
• Hail
• Liability
• Lightning
• Sickness
• Theft
• Unemployment
• Uninsured motorist
• Vandalism
• Wind
What kind of insurance does your family have?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
6
Auto Insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 6
Have you ever had an auto accident?
If so, did you file an auto insurance claim? Were you liable? What does it mean to be liable?
All 50 states have financial responsibility laws that require drivers to show proof of their ability to pay stated minimum amounts in damages after an accident.
Most states also have compulsory auto insurance laws that require car owners to buy a minimum amount of bodily injury and property damage liability insurance in order to legally drive their cars.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
7
Slide 7
Auto Insurance
Types of Insurance Available
Collision Coverage
Comprehensive Coverage
Liability Coverage
Medical Payments Coverage
Personal Injury Protection
Rental Reimbursement Coverage
Towing and Labor Coverage
Uninsured Motorist
Copyright © Texas Education Agency, 2014. All rights reserved. 7
Wow! Did you know there were so many types of auto insurance available? Many people do not take the time to understand what all is involved. They rely on an insurance agent, friend or co-worker to give them advice. This method is fine for you if this person is trustworthy and truly understands your needs. Only you truly know what you need, and it is best for you to
understand what is offered. You need to understand what you are buying so you don’t pay too much but still have the coverage you need. For example, if you are a member of an auto club such as American Automobile Association (AAA) that offers towing, and then you purchase towing as part of your auto insurance package, you might be spending money for something you already have. Let’s take a look at these individually so you can be an informed consumer.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
8
What Does Collision
Coverage Pay?
Pays the cost of repairing or replacing your car after an accident regardless of who was driving or who was at fault
Payment is limited to cash value of car minus your deductible
Copyright © Texas Education Agency, 2014. All rights reserved. 8
Collision pays the cost of repairing or replacing your car regardless of who is driving or whose fault the accident is. When an accident causes extensive or costly damage to your vehicle, it's possible your insurance company will declare it a total loss. If the car is totaled, the value of your car is determined by an insurance adjuster. You receive a monetary check for the value of your car minus your deductible. If your car is repairable, your insurance pays the costs of the repair minus your deductible. Your deductible is an agreed amount of risk that you are willing to take. The higher your deductible, the lower your premium. For instance if your deductible is
$1,000.00, your premium will be lower than if your deductible is $500.00.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
9
Slide 9
What does Comprehensive
Insurance Pay?
It pays damage to a car caused by fire,
vandalism, hail or other events besides
collision.
Copyright © Texas Education Agency, 2014. All rights reserved. 9
Comprehensive insurance pays for damage caused by fire, vandalism, hail or other events besides collision.
How would an individual or family determine which types of auto insurance to carry?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
10
What Does Liability Pay?
Texas law requires 30/60/25
Liability protects you from lawsuits and pays other people’s expenses caused by accidents.
Medical / funeral
Car repair or replacement
Rental car during repair
Punitive damages
Attorney fees
Copyright © Texas Education Agency, 2014. All rights reserved. 10
The state requires you to have liability insurance, so you might think, “That is a no-brainer. I have to have it.” Liability protects you from lawsuits and pays other people’s expenses caused by accidents such as:
• Medical / funeral
• Car repair or replacement
• Rental car during repair
• Punitive damages
• Attorney fees
Texas law requires each motorist to purchase a policy that includes 30/60/25, but what does that mean? It means that if you are in an accident, your insurance will cover $30,000 in medical expenses for each injured person totaling $60,000 and up to $25,000 for property damage. With the high cost of medical expenses, you could be sued for expenses not covered by your insurance. For example, let’s say you have the state minimum insurance and you are in an accident with four people whose medical expenses total $100,000. Your insurance would pay
$60,000, but you could be sued for the $40,000 that your insurance does not cover. In addition, let’s say the other party is driving a $50,000 car. You are only insured for $25,000 for property damage, so your insurance company will only pay $25,000. In addition to the $40,000 they can sue for medical, they can also sue for the $25,000 your insurance does not pay for property damage. That is a total of $65,000. Can you afford to take that chance? Most likely not! That is why most people want to purchase more than the minimum amount. In addition to medical and property damage, liability pays for a rental car for a limited time for the damaged party, punitive damage (which means pain and suffering) and attorney fees.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
11
Slide 11
What Does Personal Injury
Protection (PIP) Cover?
Medical payments or funeral expenses for you, your family members and passengers in the car
80% of lost income and cost of hiring a caregiver
Copyright © Texas Education Agency, 2014. All rights reserved. 11
Personal injury protection pays for medical bills caused by an accident for you, your family or any passenger in your car. It can cover 80% of lost income and the cost of hiring a caregiver.
$25,000 in personal injury protection is standard, but you can purchase more. With high medical costs, you can see that unless you have purchased more than the standard personal injury protection, this really just supplements your regular medical insurance.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
12
Rental Reimbursement and
Towing and Labor Coverage
Rental reimbursement pays a set amount for a rental car while your cr is repaired or for a specific time if it is stolen.
Copyright © Texas Education Agency, 2014. All rights reserved. 12
Rental reimbursement pays a set amount for a rental car for a limited time while your car is being repaired. If your car is stolen, it covers a rental car for a specified period of time while the case is being investigated. This allows time for your car to be recovered or replaced. Towing covers towing charges if your car breaks down or is in an accident and cannot be driven. If you belong to a travel club that covers towing, you may not want the added expense of towing on your insurance.
Do you have towing and labor coverage?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
13
Slide 13
What Does Uninsured
Motorist Pay?
Bodily injury
Property damage
Covers you, your family members and
passengers in your car, as well as others driving your car with permission
Copyright © Texas Education Agency, 2014. All rights reserved. 13
What does uninsured motorist pay? It pays expenses resulting from an accident caused by an uninsured or under-insured motorist up to the limits of your policy. Since the law requires insurance, everyone should be insured, but that is not always the case. We talked about how Texas requires 30/60/25. Let’s say you have a luxury car worth $60,000 and you are hit by someone with minimum liability insurance and your car is totaled. Their insurance will only cover $25,000. That means that you are out of pocket $35,000. Yes, you can sue for the
$35,000, but if the person does not have that kind of money, it may take years to recover it from them. Uninsured motorist also covers bodily injury to you and your family as well as passengers in your car. It is a good idea to have some coverage for uninsured motorist.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
14
Factors That Affect Auto
Insurance Rates
Type and level of coverage needed
Age and driving experience
Gender
Model of the car
Where you live
Vehicle use
Driving record, grades and insurance history
Copyright © Texas Education Agency, 2014. All rights reserved. 14
Driver classification is determined by the age, sex and marital status of the driver. Driving record and habits are also considered.
There are several factors that affect your auto insurance rates. We have discussed reasons for purchasing extra insurance. The law requires liability. If you are making payments on your car, the lender is going to require collision and comprehensive, because if an accident or disaster happens, they want the payment of the car to be covered. Your age, driving experience and gender affects your rates. Life is not fair. If you are male, your insurance rates will be higher because statistics show that males are more likely to take risks and have more accidents. Where you live affects your rates. More accidents happen in large cities where there is more traffic, so you will pay more for insurance if you live in one of these cities. If you use your vehicle for work and drive a lot, your insurance rates will be higher than someone who simply drives to and from work. If you have a good driving record (no tickets), good grades (if you are a student) and have not had any insurance claims, your insurance premiums will be lower.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
15
Slide 15
Ways to Lower Your Premium
Bundle auto and homeowners policies with the same company
Buy a vehicle that is not a target for theft
Ask for a higher deductible
Decrease your liability coverage
Have features such as airbags, anti-lock brakes and anti- theft devices
Place teens as occasional drivers on your least expensive car
Copyright © Texas Education Agency, 2014. All rights reserved. 15
The following is a list of ways you can lower your premium. Most of these are good ways to lower your premium, but think hard before decreasing your liability coverage to the state minimum. As we have already discussed, liability might not be enough, and you really do not want to open yourself up to lawsuits.
Other ways to lower your premium:
• Having a safe driving record
• Being a non-smoker
• Installing anti-theft devices and air bags
• Being over a certain age
• Having two or more cars on a policy
• Having a positive credit report
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
16
Homeowners Insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 16
What is homeowners insurance?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
17
Slide 17
Homeowners Insurance
Homeowners insurance - covers the home and the contents of the home
Property coverage
Liability coverage
Appraisal
Renters insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 17
If you have a mortgage on a house, you are required to have homeowners insurance because if a disaster happens, your lender wants to get the money that you owe on the property.
Homeowners insurance also covers the contents of the home up to an amount specified in the policy, so the contents of the home are also insured.
Property coverage insures you against damage to or loss of dwelling and personal property and possessions such as clothes and furnishings. It may also pay should you need to find an
alternate housing choice due to damage to the property.
Liability coverage protects you if others are injured on your property. Why is this coverage so important?
What is an appraisal? Your insurance agent may be able to help you calculate building costs, or you may need an appraisal. An appraisal is an estimate of the current value of property.
What is renters insurance? Many renters do not purchase insurance and take the risk because no one is requiring them to purchase insurance. If you are a renter, you need to think about the value of the contents of your home. If a burglar broke in and stole all your electronics, would you have the money to replace them? If a fire broke out in your apartment building and you lost all the contents of your apartment, how easily could you replace everything? If you left an expensive camera in your car and someone stole it, your auto insurance would not cover it, but your renters or homeowners insurance would. Some young people may not have much of value
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
18
It is a good idea to have photos, model and serial numbers of valuable items. Store this
documentation of your valuables in a fireproof safe or a safe deposit box in a bank. You can do this by taking digital pictures of your possessions and storing them on a CD. If you ever have to make a claim, these pictures might be a valuable asset in working with an insurance adjuster.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
19
Slide 18
Factors That Affect the Cost of Home Insurance
Type and amount of coverage
Size of the deductible
Risk factor where you live
The insurance company
Opportunity for discounts
Copyright © Texas Education Agency, 2014. All rights reserved. 18
Factors That Affect the Cost of Home Insurance:
• Type and amount of coverage – The higher the amount of protection purchased, the higher the premium will be.
• Size of the deductible – The higher the deductible is, the lower the insurance premium will be.
• Risk factors where you live – The type of home you live in and the location influences the premium rates you will pay. Will you pay more for a frame house or a brick house?
• The insurance company – Be an informed consumer and compare the rates between many insurance companies. The premiums vary from company to company.
• Opportunity for discounts – Ask your insurance agent what kind of discounts are available. If you combine your auto and home insurance, you might qualify for a discount. Check if discounts are available for installing devices such as a smoke detector or burglar alarm, for non-smoking policyholders or for long-term policyholders.
Teacher note: Stop the slide presentation and proceed with the Guided Practice Activity One.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
20
Slide 19
Medical Insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 19
Why do you need medical insurance?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
21
Slide 20
The Importance of Medical Insurance
Medical insurance provides payment to cover financial loss as a result of illness or injury.
Medical care is expensive, so adequate health insurance is an important component of your financial plan.
Copyright © Texas Education Agency, 2014. All rights reserved. 21
Insurance is a way to protect your assets. You do not want to lose all the money you have saved because of large medical bills. When you purchase insurance, you are choosing to share that risk with your insurance provider. Without insurance, your net worth can quickly be eliminated with one major health problem.
Your health is an important factor in the quality of life you enjoy. Having insurance to share in your medical expenses allows you to seek the medical attention you need, when you need it, without concerns of cost.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
22
Sources of Medical Insurance
Two Government Programs
Medicare for individuals over 65 years of age or disabled individuals who qualify for social security
Medicaid-for low-income individuals that covers blind, disabled and needy families with dependent children
Employer-provided insurance where there is a group plan and the employer covers some or most of the cost
Private insurance where a person purchases health insurance through a private company
Copyright © Texas Education Agency, 2014. All rights reserved.
There are many sources of health insurance. There are two government programs that provide insurance. Medicare provides insurance for people 65 years of age and older. Medicaid insurance covers low-income individuals, blind, disabled and needy families with dependent children.
Many employers provide insurance through a group plan where the employer picks up some or most of the cost. This can be a great benefit to consider when seeking
employment.
Private insurance is where a person purchases health insurance through a private company. Many entrepreneurs do this so they can have insurance. These policies tend to be expensive.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
23
Slide 22
Indemnity Plans versus Managed Care
Indemnity plans allow participants to seek health care from any qualified medical provider
Managed care plans limit participants to a specific list of
providers
Copyright © Texas Education Agency, 2014. All rights reserved. 22
There are two types of insurance that people can choose from: indemnity plans and managed health care. With an indemnity plan, participants may see any qualified health care provider they choose. The disadvantage is that these plans do not pay as well and co-pays may be greater. The bottom line is it will most likely cost you more money.
With a managed health care plan, you are limited to choosing a doctor from a specific list of providers. This gives you less flexibility in choosing your health care providers. The advantage is these plans can be very affordable and usually have much lower co-pays.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
24
Family Coverage
The person who buys the policy or subscribes to it through an employer is known as the
policyholder.
Children become ineligible when they reach a certain age.
Copyright © Texas Education Agency, 2014. All rights reserved.
23
Family Coverage provides insurance for the family. The employee is the policyholder and the policy covers the immediate family including the spouse and the children until they reach a certain age. Under the Affordable Care Act, you can now be insured as a dependent on your parent’s health insurance if you’re under age 26. You can learn more about insurance for young adults by reading “Improving Health Insurance Protections for Students” at
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/students02092011a.html
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
25
Slide 24
Group Plans
Group plans cover a large group of individuals, such as all the employees of a particular company or local government.
Within a group,
individuals’risk is spread across the entire pool of members.
Copyright © Texas Education Agency, 2014. All rights reserved. 24
Group plans cover a large number of individuals. Many people in a large company may have a group plan. Often the employer pays a portion of the plan for its employees. Since there are many people in the plan, some will have very few medical expenses while others have greater medical needs. The risk is spread across the pool of members so a high-risk member has equal access to health care that a low-risk member does.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
26
Location Restrictions
Some insurance companies will only provide medical care in the United States.
You may want to purchase travel insurance if you travel outside the United States.
Copyright © Texas Education Agency, 2014. All rights reserved.
25
Many insurance companies have restrictions that will only provide for insurance in the United States. When traveling outside the United States, it is a good idea to purchase travel insurance. Travel insurance will not only cover the cost of medical expenses but will also cover things like emergency travel to get you home. It also covers your expenses after you get home for a year.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
27
Slide 26
Pre-existing Conditions
Insurance policies may exclude coverage for pre- existing conditions or health conditions that existed before the policy was granted.
Copyright © Texas Education Agency, 2014. All rights reserved.
26
If a person has a pre-existing condition, it is always a good idea for him or her to ask and make sure that condition will be covered under a new insurance policy.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
28
Deductibles
Many policies limit the total amount they will pay for some procedures
Some companies cover only certain drugs or provide partial payment for unapproved drugs
Many policies have a co-pay, where the policyholder pays a set amount for a doctor visit or emergency room visit
Copyright © Texas Education Agency, 2014. All rights reserved. 27
It is a good idea to know what kind of deductibles are required of you. Most policies have a co- pay where you pay a specific amount when you go to the doctor (usually $10.00 for a doctor visit). That co-pay may be much greater if you go to the emergency room. Some companies will only cover generic drugs. It is always a good idea to be wise about what your policy covers.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
29
Slide 28
Provider Networks
Two most common networks
Health Maintenance Organizations (HMO’s)
Preferred Provider Organizations (PPO’s)
Copyright © Texas Education Agency, 2014. All rights reserved.
Both HMO’s and PPO’s provide a list of providers. HMO’s usually provide a more limited list.
28
The two most common networks are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO). They both work in a similar way. They are both managed care policies which means you select a health care provider from a network. The PPO usually provides a larger list of providers to choose from. These managed health care networks are more affordable than indemnity plans and usually have lower co-pays.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
30
Comparison of Insurance Plans
Type of Health Plan Premium Selection of Physician
Indemnity Plan High Flexibility to select a physician or specialist
Managed Care HMO
Relatively low Primary care physician refers the patient to specialist
Managed Care PPO
Low, but usually higher than HMO
Greater number of physicians to choose from with PPO’s than HMO’s
Copyright © Texas Education Agency, 2014. All rights reserved. 29
Here is a chart that compares indemnity plans to HMO’s and PPO’s. You will see that an
indemnity plan is going to cost you the most in premiums. Why would an individual choose this type of plan? The reason a person would choose this plan is because they desire the flexibility to select any physician or specialist. The PPO will have the next lowest premiums which are a great deal lower than the indemnity plan. Individuals with PPO's choose a physician from a select list. The HMO has the lowest premiums and the most limited list of health care providers.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
31
Slide 30
When You Leave a Job
Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to continue health insurance coverage for up to 18 months after your employment ends.
Copyright © Texas Education Agency, 2014. All rights reserved. 30
The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as
voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.
COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. COBRA outlines how employees and family members may elect continuation coverage. You will be responsible for paying the premiums your former employer was paying.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
32
Disability Insurance
The ability to earn a living is one of your most valuable assets. Disability insurance covers your wages if you are in an accident or too ill to work for an extended period of time.
Copyright © Texas Education Agency, 2014. All rights reserved. 31
Disability insurance protects your income if you cannot work for an extended period of time due to illness or injury. It is usually purchased to cover a percentage of your income up to 80%. The larger the percentage of your income it covers, the higher the cost of the insurance. The cost of disability insurance is pretty high so many people choose not to purchase it. Before you make the choice not to buy disability insurance, you need to answer the following questions:
• Does my family depend solely on my income for support?
• How much sick leave and vacation does my employer offer for such emergencies?
• How much do I have in savings to cover an emergency if I could not work and how long could I survive on those savings?
• How much could we cut our current expenses if we really needed to?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
33
Slide 32
Life Insurance
Copyright © Texas Education Agency, 2014. All rights reserved. 32
What is life insurance?
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
34
Life Insurance
Life insurance provides payment to a specific person when the policyholder dies. This person is known as the beneficiary.
Whole life insurance can build up savings for the policyholder over time and the policyholder may borrow from the “cash value” of the policy
Term insurance provides insurance over a specified period of time.
Universal life insurance is a combination of term and whole life, giving the policy more flexibility.
Copyright © Texas Education Agency, 2014. All rights reserved.
33
Life insurance provides payment to the loved ones of the policyholder when he or she dies. These people are known as beneficiaries. Life insurance is important when you have
dependents who rely on you for income or care. A stay-at-home mom with young children may not have income to replace if she dies. However, if someone had to be hired to care for the children and the home in her place, it would be quite costly, so she should have life insurance. There are different types of life insurance.
A whole life policy builds up a “cash value” that you can borrow from. This policy is more costly. The advantage is that you can build up savings for the policyholder over time.
A term insurance provides insurance over a specified period of time. You never get anything from your investment except the peace of knowing your loved ones will be provided for if you die. Upon your death, your beneficiary receives money. The advantage of this type of policy is that it is low cost if you are young. It is a good deal for a young families who want peace of mind knowing their loved ones will be provided for in the event of death, but do not have a lot of money to spend. The disadvantage of term life is that often the premiums increase as your age increases.
A universal life policy is a combination of term and whole life, giving the policy more flexibility.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
35
Slide 34
Term Life Insurance
Provides protection only for a specific period of time
Copyright © Texas Education Agency, 2014. All rights reserved. 34
Term life insurance provides protection only for a specific period of time. It may be one, five, ten or twenty years or until a specific age. When the term ends, so does the protection. The
advantage to this type of insurance is it offers the most protection for the consumer's money. This coverage benefits individuals who really need insurance and cannot afford high premiums. Term life insurance may be the best choice for them.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
36
Whole Life Insurance
Provides basic lifetime protection so long as premiums are paid
Copyright © Texas Education Agency, 2014. All rights reserved. 35
Whole life insurance is also called straight life insurance. The face amount is paid to the beneficiaries upon the death of the insured. The coverage builds cash value over the years. What is cash value? Cash value is the amount of money a policyholder would receive if the policy were surrendered before death or maturity. An advantage to whole life insurance is an individual may borrow against the cash value of the whole life insurance at a low interest rate. You must repay the amount you borrow to avoid a reduction of benefits.
Teacher note: You may have the students research the new types of whole life insurance: variable life, adjustable life and universal life. After the completion of the slide presentation, proceed with the Guided Practice Activity Two.
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
37
Slide 36
Questions?
Copyright © Texas Education Agency, 2014. All rights reserved.
36
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
38
References and Resources
Images:
Microsoft Clip Art: Used with permission from Microsoft.
Textbooks:
Ross Lowe, 2006. Consumer education & economics, student edition. 6 Edition. Glencoe/McGraw-Hill Madura, Jeff, Mike Casey, and Sherry J. Roberts. Personal financial literacy. Boston: Pearson, 2010. 23-29. Print.
Websites:
All Insurance Information Organization. Great site for general insurance information. http://allinsuranceinfo.org/
Federal Trade Commission
Filing for Bankruptcy: What you should know.
http://www.consumer.ftc.gov/articles/0224-filing-bankruptcy-what-know
Insurance 411 Organization
Web tool to make a credit card size insurance information card to carry in your wallet. http://insurance-411.org/
Copyright © Texas Education Agency, 2014. All rights reserved. 37
Don’t Take the Risk
Copyright © Texas Education Agency, 2014. All rights reserved.
Page
39
Slide 38
References and Resources
Money Matters
Financial Education Curriculum produced by First Command Educational Foundation, 2010. http://www.fcef.com
NEFE High School Financial Planning Program National Endowment for Financial Education. http://www.hsfpp.org/
Privacy Rights Clearing House Information on record Keeping.
https://www.privacyrights.org/fs12a-personal-data-retention-and-destruction-plan#whykeep
Record Keeping and Personal Care Guide Create personal records for the family. http://ddc.ohio.gov/Pub/RecordGuide.pdf
Texas Department of Insurance
Consumer information guide for purchasing insurance. http://www.tdi.texas.gov/pubs/consumer/cb088.html
Texas Financial Responsibility Report Information on Texas law concerning auto insurance. http://www.tdi.texas.gov/pubs/consumer/cb088.html
United States Courts Information on Bankruptcy.
http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics.aspx
Copyright © Texas Education Agency, 2014. All rights reserved. 38