1. 1.10.1.G1
TYPES OF
INSURANCE
“Take Charge of Your
Finances” Advanced Level
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 1
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

2. 1.10.1.G1
WHY IS IT IMPORTANT TO HAVE INSURANCE?
Emergency savings
- at least six
months of
expenses set aside
to cover costs of
unexpected events
Risk - chance of
loss from an event
that cannot be is managed by
entirely controlled
Insurance -
transfers risk
from an
What are examples of unexpected individual to an
events that may result in a insurance
organization
financial loss?
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 2
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

3. 1.10.1.G1
INSURANCE POLICY
Coverage - The risks covered and amount of money paid
for losses under an insurance policy
Policyholder - Person who owns the policy
Premium - Money paid to purchase the policy
Experts say that buying insurance is buying financial security.
Do you think this is true? Why or why not?
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 3
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

4. 1.10.1.G1
AN ILLUSTRATION OF HOW INSURANCE
WORKS
With a 1% chance
that any one of But, no one
them could get sick knows who will
and require $10,000 get sick
in medical care
If each person pays $100 99 people do not collect
into a “pool” they will So, everyone gives up anything, but they gain
collectively have $10,000 $100, but nobody peace of mind and
to cover the medical
loses more than $100 important protection
costs of the person who
gets sick against a large loss
Insurance shifts the risk of big loss from the
individual to the insurance company
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 4
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

5. 1.10.1.G1
THE BENEFITS OF INSURANCE
 Payments received from an Property &
Liability
insurance policy can far
exceed the premiums paid
Life Health
 Provides financial security
and peace of mind
Long-term
Disability
Care
Why is the best outcome
to have insurance but
never collect on it?
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 5
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

6. 1.10.1.G1
THE INSURANCE PROCESS
Claim - paperwork submitted to
Event occurs insurance organization describing
resulting in loss the accident, illness or injury
Deductible - amount of money
Remaining amount Policyholder paid out of pocket by policyholder
owed is paid by co- makes claim to
insurance (if before the insurance coverage
insurance begins
applicable)
organization
Co-insurance - amount of money,
after deductible, that is paid jointly
Insurance by the insured and the insurance
If so, policyholder organization company
pays a deductible determines if event
is covered by policy
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 6
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

7. 1.10.1.G1
LOUISE’S ACCIDENT
Louise pays the first
$500 of any covered Even with
medical care plus insurance
20% of the remaining Louise still
costs needs
funds to
Louise is in an Louise pays $500 + 20% of pay the
accident resulting in a the remaining $4,500 for a deductible
what $5,000 medical total of $1,400 and co-
if… insurance
procedure that is The insurance company pays
covered by insurance $3,600
What would Louise’s options have been if she did not have insurance?
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 7
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

8. 1.10.1.G1
YOU DO THE MATH!
Carlos was involved in an automobile accident that resulted in
$3,788 worth of damage to his car.
How much does Carlos pay and how much does the insurance organization pay?
Carlos has a property How much does Carlos pay? $500
and liability insurance
policy with a $500
deductible and 0% How much does his
$3,288
co-insurance insurance organization pay?
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 8
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

9. 1.10.1.G1
WHICH INSURANCE POLICY WOULD YOU
CHOOSE?
Janet wants to make sure she has the best health insurance policy.
She shopped around and received multiple quotes.
What are the pros and cons of each policy?
Current Policy New Policy
Premium
amount/month
$300 $200
Deductible
amount
$200 $2000
Co-insurance 20% owed by policyholder 0% owed by policyholder
80% owed by insurance 100% owed by insurance
amount organization organization
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 9
- Types of Insurance – Slide
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

10. 1.10.1.G1
WHY DO INSURANCE POLICIES INCLUDE
DEDUCTIBLES AND CO-INSURANCE?
Dollars paid from an insurance policy are not intended to make a person
better off than before the loss happened
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 10
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

11. 1.10.1.G1
SOURCES OF INSURANCE
In most cases, individuals acquire insurance from a combination of sources
Employer Special programs
for those who
Health, disability,
qualify and during
and occasionally
catastrophes
life insurance
Individual Government
If an employer does not provide insurance, it may be acquired individually
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 11
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

12. 1.10.1.G1
EMPLOYER PROVIDED INSURANCE
Employee benefits - products or services that add extra value for
employees beyond wages
In-kind income – the
provision of a
Employer product or service
rather than cash
Employee Payroll deduction
• Policies may be available to the employee’s family members
(usually for additional fees)
• No income taxes are paid on the in-kind income
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 12
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

13. 1.10.1.G1
GOVERNMENT PROGRAMS
 Provide basic insurance as a part of the social safety
net to protect citizens from economic hardship
 Social Security, Medicare, Medicaid
 Many programs require a work history and
employer provided participation to be eligible
 Unemployment insurance, worker’s compensation
 Can address specific catastrophes
 Hurricane Katrina
© Family Economics & & Financial Education– Updated May 2012 – – Types of InsuranceSlide 13 13
© Family Economics Financial Education – Updated May 2012 Types of Insurance – – Slide
Funded by a by a grant from Take Charge America, Inc. to the NortonSchool of Family and Consumer Sciences Take Charge America Institute at thethe University of Arizona
Funded grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at University of Arizona

14. 1.10.1.G1
HEALTH INSURANCE
Employer
Health insurance - provides Government
Provided by And/or
money to If dollars health carehealth insurance is
pay for are limited,
extremely important to protect Individual
against
high medical bills
Risks Mental
Covered health
Hospital treatment Preventative
bills care
Doctors’ Vision Prescriptio
visits Medical care n drugs
procedure Dental
s care
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 14
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

15. 1.10.1.G1
WHAT IF A PERSON CANNOT WORK OR LIVE
INDEPENDENTLY?
Payment for
Payment to replace
extended care
earnings during
when a person
times when
cannot live
workers cannot
Why are both independently (but
work due to illness
disability and doesn’t need to be
or injury
long-term care hospitalized)
insurance
Provided by
important?
employers, Provided by
individuals, and/or individuals
government
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 15
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

16. 1.10.1.G1
PROPERTY & LIABILITY INSURANCE
Property insurance -
Pays for loss
payment to insured person if
to insured
his/her property is damaged
person
or destroyed by an accident
Liability insurance - payment
to others if a member of the Pays for injury
insured household accidently or loss to
causes harm to other people others
or property
Provided by individuals
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 16
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

17. 1.10.1.G1
TYPES OF PROPERTY & LIABILITY INSURANCE
Automobile insurance -
payment for liability and
property insurance on a
vehicle
If a person drives
Homeowners insurance - an automobile,
payment to cover liability automobile liability
losses and damage/loss of insurance is
home and its contents required by law
Renters insurance -
payment for damage/loss of
property in a rental unit in
addition to liability losses
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 17
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

18. 1.10.1.G1
LIFE INSURANCE Provided by employers
and/or individuals
Life insurance-
payment to
beneficiaries if an May cover paid and
insured person dies unpaid work formerly
done by the individual
Beneficiary-
Household production-
someone who
unpaid work, such as
receives insurance
money if the child care or meal
insured person dies preparation
Dependent - When would it be
someone who necessary to purchase
relies on someone life insurance?
else for money
income and care
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 18
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

19. 1.10.1.G1
IN REVIEW…
Insurance is not Insurance may be
Insurance is an
intended to make an
important part of a individual better off acquired from
financial plan than before the event multiple sources
Even with insurance, There are several
an individual should
types of insurance
still have funds to pay
the deductible and co-
for specific
insurance purposes
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 19
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

20. 1.10.1.G1
WHAT COVERS THIS RISK?
You are having a baby and need
medical care
Health Insurance
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 20
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

21. 1.10.1.G1
WHAT COVERS THIS RISK?
You are unable to work for six
months and need help paying
your expenses while you’re out of
work
Disability Insurance
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 21
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

22. 1.10.1.G1
WHAT COVERS THIS RISK?
You are elderly and need assistance
from medical professionals to
continue living at home
Long-term Care Insurance
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 22
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

23. 1.10.1.G1
WHAT COVERS THIS RISK?
Your home is destroyed by a
tornado and you need to rebuild
Property Insurance
Specifically Homeowners
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 23
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

24. 1.10.1.G1
WHAT COVERS THIS RISK?
The car you are driving causes an
accident that injures someone else
Liability Insurance
Specifically Automobile
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 24
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

25. 1.10.1.G1
WHAT COVERS THIS RISK?
A sudden death of a family
member results in loss of income
Life Insurance
© Family Economics & Financial Education – Updated May 2012 – Types of Insurance – Slide 25
Family Economics & Education – Updated 2012 -
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona