INSURANCE BASICS (DON’T RISK IT)

WHAT IS INSURANCE?

Risk management tool that limits financial loss due to illness, injury or damage in exchange for a premium

Shared Risk- Insurance company collects premiums from several people and use these premiums to pay losses of another policyholder.

INSURANCE TERMS Premium – regular payment you make to an

insurance company Policy – legal contract you sign when you buy

insurance Policy holder – what you become when you

buy insurance Claim – formal request for payment from an

insurance company Risk - the chance that you will suffer a

financial loss

INSURANCE TERMS

Grace Period - if you do not pay your premium before the due date, you have no insurance

Underwriter – Employee of an insurance company who evaluates risk and assigns premium amounts. Key factors: age, gender, and health

Insurance Agent –representative of an insurance company who sells insurance contracts and provides customer services.

INSURANCE TERMS

Actuary – a person with advanced math training that calculates the risks based on loss percentages and determines insurance rates and premiums

Probability –the chance that something happening or not happening within a certain number of occurrences

INSURANCE TERMS

Liability – the section of the property policy that pays for damages that you may have unintentionally caused; it also pays for personal damage or injuries to others

Comprehensive – auto insurance coverage that pays you if your car is stolen or for any acts of nature

Collision – auto insurance coverage that pays you to fix your car if you are at fault of an accident or the other guy doesn’t have insurance

Uninsured motorist –a person that does not have insurance

INSURANCE TERMS

Discount – Good driver, good student, member and multiple policies are things that can bring down the cost of insurance

Deductible – a clause in your insurance policy that states that you will pay for a specific amount of claim before the company pays

Financial responsibility – Being able to pay for the damage you are legally liable for

Appraisal – an expert’s determination of the value of a piece of property

Rider – a special addition to an insurance policy that covers a specific type of loss (such as jewelry, guns, etc.)

TYPES OF INSURANCE Property Insurance (protection from financial

loss when things you own are stolen, damaged, or destroyed)

Liability Insurance (protects you from loss that you cause others)

Personal Insurance -Health and Life (protects you and your family from loss due to illness, disability, or death)

HOW DOES AN INSURANCE COMPANY

SET PREMIUMS?

Based on data about past losses and their costs

AUTOMOBILE INSURANCE--

Types of CoverageBodily injury liability coverageProperty damage liability coverageMedical payments coverageUninsured/underinsured motorist coverage

LIABILITY INSURANCE Pays for someone else’s property or injuries if you

are liable, or at fault, in an accident Every driver in Mississippi must carry liability

insurance – state law Minimum liability amounts in an auto insurance

policy are: $25,000 for bodily injury per person $50,000 for bodily injury per accident $10,000 for property damage Referred to as 25/50/10

Before you get in an accident, you may wish to carry more than the minimum.

How many cars on the road today cost more than $10,000?

COMPREHENSIVE INSURANCE

Pays you if your car is stolen or damaged by basic acts of nature (hail storm, fire, wind, flood, etc).

Collision coverage Pays to fix your car whether you are at fault or

not if other person has no insurance. Deductible – comprehensive and collision carries

an amount you pay before the insurance company pays anything

The higher the deductible the lower your premium.

If you have an auto loan, you must carry comprehensive and collision insurance.

FACTORS AFFECTING YOUR PREMIUM

Driver classification (age, gender, and marital status)

Rating territory Driving record (accidents and traffic

violations) (“Points” added for these will increase your premium by about 10 percent. Too many points and your company will drop you.)

Type of car Claims history Your grades – “good student discount”

STEPS YOU CAN TAKE TO MINIMIZE YOUR COST OF INSURANCE

Have a good driving record Choose a less expensive car Good grades and driver’s education training

WHY DOES MY INSURANCE PREMIUM CONTINUE TO INCREASE?

Cars are more expensive to repairLitigation involving medical

injuries

CLAIMS

If you’re in an accident and your car is “totaled” most insurance companies pay the Actual Cash Value (ACV) or book value of your vehicle.

Book value determined by: Kelly’s Blue Book NADA

Market value – is amount items are worth now (not what you owe)

Replacement value – is cost of replacing regardless of value

WHAT DO I DO IF I GET INTO AN ACCIDENT?

Make sure everyone in your car is OK Check the other car to see if they are OK Call the police Get the following information from the other

driver: name, address, telephone number, license plate number, drivers license number, insurance information

Give the same information to the other driver Get the name and phone number of any

witnesses Keep a disposable camera in your car and take

accident pictures Call your insurance agent as soon as possible

WHAT ABOUT GIVING OTHERS MY KEYS?

Did you know that if your friend wrecks your car, the accident is on you? You are responsible for who drives your car As far as your insurance company is concerned,

the accident will go on your insurance record and you will pay the charges even if your friend has insurance

Be careful who you give your keys to