Download Insurance and Investments

Insurance and Investments
Lesson 5
Insurance
Why is it important?
– Risk: chance of loss from some type of
danger
Can be reduced (helmet, seatbelt, locked car, etc)
Risk management: how you deal with the
chance of a potential personal or financial
loss
– Avoid
– Reduce
– Accept
– Share
Sharing the Risk
Insurance:
– a means of guaranteeing your financial protection against
various risks
Insurance Policy:
– a written contract detailing what an insurance company
will cover, how much it will pay, and how much you will
pay
– Premium: the amount you pay for an insurance policy
Based on your age, marital status, whether you live in an urban or
rural area, and your credit history
– Coverage Limit: the maximum amount the insurance
company will pay if you file a claim
– Deductible: the amount of a loss you must pay out of
your own pocket before the insurance company will step
in and pay the rest
Driving Down Your Costs
Choose a reasonable coverage limit
– In between maximum and minimum coverage
Go for a higher deductible
– You’ll pay more if there’s an incident, but your premiums will be
lower throughout the year
Shop for your insurance policies
– Changes in the insurance industry, legislation, and/or your
circumstances can lead to lower premiums
Make changes to lower your premiums.
– Having safety equipment in place like anti-theft systems
– Medical insurance is better for nonsmokers
Get all of your policies from the same agent or company.
– Discounts
Types of Insurance
Health insurance: pays medical bills
– everyone needs health coverage
– You’re covered under your parents’ insurance until age19
– Receive health insurance through an employer
Property insurance: protects your possessions
– Protects against flood, fires, natural disasters, etc.
– Homeowners’ insurance protects your stuff as well as the house itself
Take pictures of your home – they will come in handy
Life insurance: supports those who depend on a deceased
family member
– Single: don’t need life insurance
– Family: extremely important
Disability insurance: protects your earning power
– When you can’t work for extended period due to injury/illness
Liability insurance: protects you against unintentional
damage
Automobile Insurance
Age
– Younger = higher cost
Gender
– Males = more expensive
Marital Status
– Single = higher cost
Type of Car
– Value, size, weight, age of your vehicle, cost of
replacement parts determine the premium
– Safety features such as airbags, anti-theft
equipment, and anti-lock brakes = reduced cost
Automobile Insurance (cont.)
How Often You Use Your Car
– Less you drive = lower the cost
Location
– Urban residents = higher cost
Driving Record
– Speeding tickets, other traffic violations = higher cost
Claim Record
– Drivers with a clean driving history = lower cost
Credit History
– Didn’t we say it would follow you everywhere?
– Better credit history = lower cost
Automobile Insurance (cont.)
General Liability
– Covers damage you cause to other people outside of your car
– If sued: general liability covers the legal bills
Medical Payments
– Immediate compensation for bodily injury expenses to you and your
passengers regardless of who is at fault
Collision
– Covers repairs for damage you cause to your car caused by an
accident, whether it involves another vehicle or an object, such as a
tree
Comprehensive
– Covers everything but collision (fire, break-ins, vandalism, theft)
Uninsured Motorist
– Covers you when other person doesn’t have auto insurance.
Underinsured Motorist
– Covers you when the cost exceeds the other person’s coverage
limit
Multiple Choice Question 8
___ 8.) If you have caused an accident,
which type of automobile insurance
would cover damage to your own car?
a) Term
b) Collision
c) Comprehensive
d) Liability
Multiple Choice Question 9
___ 9.) Many young people receive health
insurance benefits through their parents. Which
of the following statements is true about health
insurance coverage?
a) Young people don’t need health insurance because they are
so healthy
b) You continue to be covered by your parents’ insurance as
long as you live at home, regardless of age
c) You are covered by your parents’ until you marry, regardless
of age
d) If your parents become unemployed, your coverage may
stop, regardless of age
Investing
Investment return
– the additional income earned from saving or
investing money.
Risk
– the uncertainty that you will receive the
expected return
– The greater the risk, the higher the expected
return
What Can You Invest In?
Certificate of Deposit
– Money is untouched for a given amount of time with a fixed interest
rate
Money Market Mutual Funds
– sold by companies that sell stocks, bonds, etc.
Stocks
– shares of ownership in a corporation
U.S. Government Savings Bonds
– Buy from government and sell back for cash
Stock mutual funds
– investing in a fund company
– Owning many stocks
Real Estate
– investing in houses and property
Important Tips
You’re not buying a stock; you’re buying a
company
Invest in stock to make money
If you buy a stock when the company isn’t
making a profit, you’re not investing — you’re
speculating
A stock should never be 100 percent of your
assets.
A stock’s price is dependent on the company
–
Company is dependent on the customer base,
industry, the general economy
Continue to monitor your stocks
–
Consider selling them if they’re not appreciating
Numbers to Review
Research the company
– Earnings: should be at least 10 percent
higher than the year before
– Sales: should be higher than the year before
– Debt: should be lower than or about the same
as the year before
Should also be lower than the company’s assets
– Equity: should be higher than the year before
Multiple Choice Question 3
___ 3.) Which of the following types of
investment would best protect the
purchasing power of a family’s savings in
the event of a sudden increase in
inflation?
a) A twenty-five year corporate bond
b) A house financed with a fixed-rate mortgage
c) A 10-year bond issued by a corporation
d) A certificate of deposit at a bank