RISK MANAGEMENT Insurance. Insurance Terminology Risk Risk: uncertainty, unpredictable events which...
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Transcript of RISK MANAGEMENT Insurance. Insurance Terminology Risk Risk: uncertainty, unpredictable events which...
RISK MANAGEMENTRISK MANAGEMENT
InsuranceInsurance
Insurance Terminology RiskRisk: uncertainty, unpredictable events which lead to loss or
damage InsurerInsurer: business that agrees to pay the cost of potential future
losses InsuredInsured: person or company protected against loss PolicyPolicy: contract between the policy holder and the insurer
specifying the terms of the insurance arrangements PremiumPremium: the fee paid to the insurer DeductibleDeductible: the amount paid out of pocket by the policy holder
before insurance coverage begins
Insurable Risks Personal RisksPersonal Risks: loss involving your income and
standard of living Life Insurance Health Insurance Disability Insurance
Property RiskProperty Risk: loss to personal or real property Property insurance for homeowners, renters, car, other
possessions Liability RisksLiability Risks: loss that occur when your errors or
inappropriate actions result in bodily injury to someone else or damage someone else’s property Liability Insurance
Types of Insurance
Health Disability Life Homeowner’s/Renter’s Automobile
Health Protects against financial loss resulting from injury, illness, and
disability. Covers emergencies and routine medical expenses
Doctor Visits Hospital Surgical Dental Vision Long-term care Prescriptions
61% of Americans have employer-based health insurance Very Expensive to find health insurance as an individual
Types of Health Insurance Coverage Basic HealthBasic Health: medical, hospital, and surgical costs
Office visits, X-rays, laboratory tests, prescriptions (generic)
Necessary surgeries only: not cosmetic or elective surgeries
Major MedicalMajor Medical: protects against catastrophic expenses of serious injury or illness
Dental & VisionDental & Vision: usually at additional cost with maximum benefits per year per person May cover only certain types of services. Insured pays the
difference
Health Plans Preferred Provider OrganizationPreferred Provider Organization: healthcare providers that band
together to provide health services for set fees. Patients choose doctors from list Limits on types of services and fees Co-pay usually required in addition to premium
Health Maintenance OrganizationHealth Maintenance Organization Has its own facilities and offers prepaid medical care to its members. Patient chooses one doctor to be Primary Care Physician PCP
Health Savings AccountsHealth Savings Accounts: set pre-taxed money aside to pay medical expenses not paid by your insurance. Money remaining grows
Flex Spending AccountsFlex Spending Accounts: Like HSA except it must be used up in the year set aside or you lose it
Disability Insurance
1 out of 10 people will become disabled before age 65
Replaces a portion of one’s income if they become unable to work due to illness or injury
Typically pays between 60%-70% of full time wages
Usually requires a waiting period 30-180 days Duration would be until age 65 Often part of a benefits package an employer
offers its employees
Worker’s Compensation
Covers your expenses if your injury or illness resulted from your job.
Pays monthly Carries a death benefit Burial Payment Allowance for living expense for survivors Determined by your earning and work history
Life Insurance
75% of American adults have life insurance Money is paid upon the policy holder’s death
only BeneficiaryBeneficiary: the recipient of policy's proceeds Purpose: provide money for family members
or dependents when wage earner dies
Types of Life Insurance Term Life Insurance PolicyTerm Life Insurance Policy
Contract remains in effect for specific time period At specified time coverage ceases with no remaining value Like paying rent—Money is gone if you are still living at end of time period Low cost Decreasing Term: coverage decreases each year while premium remains
the same Renewable Term: gives insured right to renew each year without having to
pass a physical exam. Premiums increase death benefit is the same Permanent Life Insurance PolicyPermanent Life Insurance Policy
Policy continues as long as premium is paid Cash Value: savings accumulated in a permanent policy that you would
receive if you canceled your policy. Policy holder can cash out the policy Get money back.
Life Insurance
Purposes of Life Insurance To pay off a home mortgage or debt upon death To provide lump-sum payment to children when they reach
a specified age To provide an education or income for children To make charitable bequests after death To provide for retirement income To accumulate savings To make estate and inheritance tax payments To take care of children’s needs as they are growing up To provide cash value that can be borrowed
How Are Premiums Determined?
Age: Age: Mortality TablesMortality Tables predict the probability of death at
different ages Younger people means lower premiums
Health FactorsHealth Factors Diabetes or heart disease probably means you are
uninsurable Smoker will pay higher premiums
OccupationOccupation Risky jobs = higher premiums
Homeowner’s Insurance
Fire occurs in someone’s home in the US every 74 seconds
Combines property and liability insurance PropertyProperty: damage to structure and possessions
Possessions are protected worldwide Fire, wind, water, smoke, criminal activity
LiabilityLiability: protect the insured party from being held liable for other’s financial losses Someone falls on your steps
Renter’s Insurance
Protects insured from loss to the contents of the dwelling only – not the dwelling itself
Homeowner’s Insurance will not cover possessions of renters
Covers Loss of Use: hotel accommodations until dwelling is habitable again
May have to buy special coverage for some items Can get Liability included for additional premium
How Much Insurance is Enough?
Insure contents for half the value of the building Insure building for replacement cost. Insurance
won’t pay more than replacement value Prepare a Comprehensive Personal Property
Inventory Earthquake or Flood endorsements add more
coverage for a higher premium Personal Property Floater: coverage for expense
specific expensive pieces of property (jewelry) no matter where is may be located
Attractive nuisance: swimming pool homeowner is liable for injuries
THE END