INSURANCEINSURANCETerms and OverviewTerms and Overview

Created in part by The Texas Department of Insurance

Risk!Risk!

Life is full of risks an accidents!Life is full of risks an accidents!

Risk is uncertainty about a situation’s Risk is uncertainty about a situation’s outcome.outcome.

Risk can be unpredictable events which Risk can be unpredictable events which lead to loss or damage.lead to loss or damage.

Risk ManagementRisk Management

Insurance is a contract between an Insurance is a contract between an individual (insured/policyholder) and an individual (insured/policyholder) and an insurer (insurance company) to protect the insurer (insurance company) to protect the individual against the financial individual against the financial consequences of risk.consequences of risk.

Insurance plays a large role in an Insurance plays a large role in an individual’s financial management plans.individual’s financial management plans.

More risk…More risk…

Insurance companies take risks on their Insurance companies take risks on their policyholders.policyholders.

They manage the risk by chargingThey manage the risk by charging

“ “risky” policyholders more in premiums.risky” policyholders more in premiums.

What Is Insurance?What Is Insurance?Insurance is a way to ensure you are protected from financial loss.

When something bad happens, such as a hurricane or a car accident, your insurance will cover some or all of the costs to fix the damage, depending on your policy.

There are many types of insurance – they are called lines of insurance.

OH NO!!

Then you remember:

You have insurance!

PHEW!

LinesLines of Insuranceof InsuranceFive of the most common lines of insurance are auto, home, life, disability, and health insurance.

You can also get insurance for a business, your apartment (renter’s insurance), your boat, your pet, and even your jewelry.

Home

Life

AutoHealth

Business

Boat

PetJewelry

What’s a Policy?What’s a Policy?

An policy is a contract between you and your insurance company.

A contract is an enforceable promise for something of value.

You promise to pay the insurance company a premium and the insurance company promises to pay your claims as they arise.

What’s a Premium?What’s a Premium?

A premium is the amount of money you pay every month (or other set time period) for your insurance coverage.

Your premium might be different from the person sitting next to you. The insurance company takes many factors into account before it offers you coverage.

The insurance company determines your premium by deciding what type of risk you (or the thing you are insuring) are.

Who Says I’m a Risk?Who Says I’m a Risk?

A A risk risk is the possibility of is the possibility of financial loss.financial loss.

Depending on the line of Depending on the line of insurance, the insurance insurance, the insurance company will look at many company will look at many factors to determine what factors to determine what kind of risk you are (high, kind of risk you are (high, medium, or low).medium, or low).

In other words, everyone is In other words, everyone is some kind of risk!some kind of risk!

Auto Insurance RisksAuto Insurance RisksFollowing are examples of the factors an insurance company will consider before offering coverage:– The make/model of your vehicle– Your vehicle’s age and mileage– Your age– Your driving record (if you don’t have one, you are considered a greater risk

because the company cannot know what kind of driver you are!)– How you use your car (for pleasure or to drive to work)– Where you keep your car at night

The level of your risk will affect your premium. In other words, if you are considered a high risk, you will probably pay more.

If you can’t find a company to insure you, keep shopping. Companies have different standards, so you might be able to find one willing to accept you.

Claims and AdjustersClaims and Adjusters

A claim is a demand by a person seeking recovery from a loss.

When you file a claim with your insurance company, a claims adjuster will investigate your claim.

The amount of money you will receive from your insurance company depends on your policy. You cannot receive more than your policy allows.

Claims and DeductiblesClaims and Deductibles

You must pay a You must pay a deductibledeductible, if applicable., if applicable.

A deductible is the amount you must pay out of A deductible is the amount you must pay out of your own pocket before the insurance company your own pocket before the insurance company pays any of your claim.pays any of your claim.

The higher the deductible, the lower the premium.The higher the deductible, the lower the premium.

The lower the deductible, the higher the premium.The lower the deductible, the higher the premium.

When Should I Get Insurance?When Should I Get Insurance?

In Washington, you must have auto insurance if you drive.

You may be able to stay on your parents’ policy until your turn 25 (sometimes older).

It’s a good idea to buy other kinds of insurance, even if the law doesn’t require it.

When Should I Buy Other Lines When Should I Buy Other Lines of Insurance?of Insurance?

If you buy a house, you should also buy homeowners insurance.

If you rent a house or apartment/condo, you should buy renters insurance.

If you get married and start a family, you should buy life insurance.

If you start a business, you should buy business insurance to protect your investment and employees..

How Do I Shop for Insurance?How Do I Shop for Insurance?

Do your research!

After you decide on a company and a policy that offers the best coverage for the price, find an agent.

An agent is a person who represents an insurance company. Agents may represent one or several companies.

You can usually contact an agent by:– Phone– Internet– Going to the agent’s office

Why Do I Need Insurance?Why Do I Need Insurance?

If you drive, you If you drive, you must must have car insurance. have car insurance.

When something When something unexpected happens, you unexpected happens, you will be more likely to will be more likely to afford the costs if the afford the costs if the insurance company is insurance company is helping you pay to fix the helping you pay to fix the damage.damage.

Having insurance will give Having insurance will give you “peace of mind.”you “peace of mind.”

Things to Keep in MindThings to Keep in Mind

Insurance can be expensive, but it is usually cheaper than having to pay for all of the cost of accidents or illnesses yourself without any help.

In most cases, insurance will be a monthly charge.

Many employers offer insurance for their employees at affordable prices.

Shop around! Contact several companies. Each insurance company has its own standards, so you might be able to find a better price.