Jean Austin University of Maryland Extension Family and Consumer Sciences 1.

Your Insurance

NeedsJean Austin

University of Maryland ExtensionFamily and Consumer Sciences

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What Can Insurance Do For Me?

• LIABILITY PROTECTION• REPLACE POSSESSIONS• CARE FOR SURVIVORS

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Today’s Objectives• Discuss basic purpose of

insurance

• Review common types of personal insurance

• Identify consumer considerations for purchasing insurance

• Suggest ways to reduce insurance costs

• Determine insurance needs based on life cycle changes

Most CommonHealth

◦Doctor visits, surgery, hospitalization, dental care◦Group plan thru employer, private plans, Medicare or Medicaid, SCHIP

Life◦Death benefit to beneficiary (survivors)◦Private company or place of employment

Automobile◦Liability, property damage, damage to vehicle, medical payments, uninsured motorist protection◦Private company

Homeowners or Renters◦Property coverage – house, other structures, possessions and liability protection◦Private company

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Types of Insurance For Individuals and Families

Other types of insurance to consider

Rx coverage if not included in health◦Reduces cost of Rx drugs◦Group plan thru employer, some Medicare supplements

Disability Income Insurance◦Provides income when sick leave is exhausted or when unable to return to work for long periods of time◦Private company or group plan thru employer

Long Term Care◦Pays for assistance with ‘Activities of Daily Living’◦Private company, sometimes offered thru employer

Umbrella Liability◦Increase liability coverage beyond the basic auto and homeowners limits◦Private company

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Types of Insurance For Individuals and Families

To provide protection from financial loss.Sample losses: car or home damaged, possessions stolen or destroyed, you cause damage to someone else’s property, someone is injured on your property or by your actions. Losses are a risk to your financial health.Insurance is a method to manage the risk to your personal financial situation.Choices are to

Avoid Risk Reduce Risk Retain Risk Transfer Risk

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Purpose of Insurance

Insurance companies often specialize – life insurers don’t always sell auto or homeownersCompanies can be direct writers or sell thru agentsAgents can be independent or exclusiveIn addition to employer group plans some affinity groups offer coverage to group membersPurchase can be thru agent, direct mail, on-line

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Options for Buying Insurance

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Check Financial StrengthInsurance Company Rating Services

A. M. Best’s Insurance ReportsMoody's Investor Service

Standard and Poor’sDuff and PhelpsWeiss Research

Health Insurance – COBRA and HIPAA

Consolidated Omnibus Budget Reconciliation Act of 1985. Health Insurance Portability and Accountability Act 1996

COBRA and HIPAA provide some limited guarantees:

COBRA allows you to continue group health insurance, but you must pay the full premium, including the amount your employer subsidizes.

HIPAA helps to limit the restrictions that can be placed on preexisting conditions

Insurance Terms You Need to Know

Limits Coinsurance Exclusions Coverage Deductibles Claims Adjustor Named

Insured Beneficiary

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Insurance is a Contract.In Contracts...

...the small print TAKETH AWAY!

THE LARGE PRINT GIVETH…

Major Life Events Determine Needs– Housing Situations– Family Situations– Accumulation of Assets– Retirement– Death

Have you selected the right Coverage? Limits? Company?

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The Life-Cycle Approach to Insurance Needs

Auto Insurance– Liability – Collision and

Comprehensive– Uninsured/Under-

insured motorist– Medical payments

Optional– Rental Car– Towing and Labor

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Buying a Car

Know your state requirements!

Know your state requirements!

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Maryland Minimum Coverages and Coverage Limits

20/40/15

$20,000 per person/injuries$40,000 per accident/injuries

$15,000 property PIP coverage of $2500

Uninsured Motorist coverage of 20/40/15www.mdinsurance.state.md.us

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Auto Insurance – Why You Need It?

Tiffany had a blow out and caused an accident on the beltway. Her car crossed the median and was struck by two other cars. Her car’s fair market value is $12,500. Repairs to her car will cost $13,200. She has a $500 collision deductible. Damage to the other two cars was $17,800 and $6400. Liability limits on Tiffany’s policy are $25,000/$50,000/$15,000. • What dollar amount of the losses will be covered by

Tiffany’s auto policy? Will she owe anything?

Geographic Area Year, Make, Model of Car Age, Gender, Marital Status Prior insurance coverage Annual mileage Driving Record Credit History

Do not buy car insurance from your car dealership

Comparison Shop - check 3 companies

Increase your deductibles Tickets, claims and accidents make a

BIG difference in cost Be selective when lending your car

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Ways to Save on Car Insurance

Check your credit report Ask for discounts

– Good Driver Discount

– Safe Vehicle Discount

– Good Student Discount

– Low Mileage Discount

– Internet Discount

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Ways to Save (cont.)

A Renter’s Policy protects your possessionsCoverage is usually inexpensiveTwo options –actual cash value and replacement cost

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Living on Your Own!

Coordinate health benefits if both employed

Update auto policy Increase contents

value for renters policy

Any special policy needs

Consider life insurance

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Getting Married

Review all policies and adjust as necessary.

Homeowner’s Insurance– Cover your home – Cover your personal

property– Cover your back side --

Liability !

– Ask for replacement cost Life Insurance

– Needs increase based on the mortgage

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Buying a Home

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Homeowner’s Policy Limits• Section I Property Coverage

• Dwelling, other structures, personal property and contents

• Living expense if damage makes property unusable

• Section 2 Liability Coverage• General liability, no-fault medical payments and property damage to others

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Save on Homeowners insurance

Insure your car and your home with the same company

Always insure to at least 80% of the replacement cost of the value

Type of construction and distance from the fire department are part of how premium is determined

Pay premium annuallyProtective devices like smoke alarms and

fire extinguishers may create a discountRaise deductibles, increase liability limitsComparison shop

Who needs life insurance?◦ Wage earners with

dependents◦ Homemakers with young

children What kind of life insurance

should you buy? How much should you

buy?

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Having Children Changes Life Insurance Needs!

Protection for a limited period of time Face amount paid if insured dies during specified

period Typically 1, 5, 10, 15, 20 year terms Premiums generally level for entire term Premiums low when young, much higher when

older There is no cash value

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Term Insurance

Aka Cash Value Three major types

– Whole Life Premiums much higher

than term in early years Has cash value Policy in effect as long as

premiums are paid– Universal Life

More flexible than while life

Can stop or reduce premiums

Cash value earns interest– Variable Universal Life

Like Universal life, but with investment options

Higher risk

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Permanent Insurance

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Term Vs Whole Life Insurance

Funeral Expenses and Personal Debts

Spousal Income

Mortgage

Child’s Income

College Fund

Estate Planning

20 40 60 80

Birth Death

Whole Life Insurance Term Insurance

All policies need to be reviewed and re-issued in your name

Life Insurance– Plans for children– Other issues

Review and update beneficiary designations

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Divorce

Record Important

Information!

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Organize Your Records

Keep a Copy at Home!

Keep a Copy at Home!

Keep a Copy in a safe place ‘off-site’!

Keep a Copy in a safe place ‘off-site’!

Take care of your

survivors!

Take care of your

survivors!

“Umbrella” Insurance– Is it necessary?– Asset protection– Inexpensive– Coordinate with other

coverage

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Increasing Assets

Review all policies and adjust as necessary.

Disability Income Insurance◦ Different from Family

Medical Leave or Workers Comp

◦ Income replacement sources are usually limited to savings, borrowing or live off spouse’s income if there is a spouse

◦ Long term SS disability may be an option

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Unexpected Life Problems

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What to look for in Disability Insurance--

How long will it pay?1 year, 3 years, until age 65?

How long until it starts paying?30 days, 60 days,... 1 year?

Definition of disability?inability to perform any job, your job?

Amount paid per month?Disabilities excluded?Premium cost?

Consider buying Long Term Care insurance

◦ Best price in your 50’s

Know when you are eligible for Medicare and Social Security benefits

Review your investments and financial plan at least semi-annually

◦ Use a retirement calculator to determine needs

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Retirement on the Horizon

Determine your needs according to life-cycle events

With every event, review all insurance Shop around for the best deal Buy insurance, don’t let it be ‘sold’ to you Keep your insurance records organized Ask questions Wait to make a decision if you are not sure

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Shopping Tips

Remember – It’s Your Money!Remember – It’s Your Money!

Not understanding its purpose

Buying as a savings vehicle

Not understanding what you are buying

Too much trust in the agent

Holding a policy forever

Buying unnecessary insurance

Being “talked” into buying

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Common Mistakes

Buy insurance, don’t be sold it!

Buy insurance, don’t be sold it!