WHAT INSURANCE PROTECTSThe purpose of insurance is to protect

against the loss of something of value

Designed to restore you to your financial position to where it was before the loss

NOT to allow you to profit from the loss!

Insurable InterestTo insure something, you must have insurable

interest on the item

It must be something of value that, if lost, would cause you financial harm.

Determining the Value of Insurable Interest

Before you can insure your property, its value must be measured in financial terms.

The insurance company can then compensate you based on its value.

APPRAISALWhen the value of property is not clear, you

or the insurance company may have it appraised

An appraisal is an expert’s determination of the value of a piece of property.

EX: if you want to insure your diamond ring, you might have it appraised to make sure you buy enough insurance to cover it’s loss.

RIDERHome insurance does not automatically cover

some particularly valuable items, such as a diamond ring.

To insure it, you must purchase a RIDER

A rider is a special addition to an insurance policy that covers a specific type of loss.

Determining the Amount of Life and Health InsuranceYour life and health don’t carry a price tag

like property does.Health and Life insurance are sold in different

amounts.The greater the amount of coverage you

choose, the higher the premiums.

Life ExpectancyYou life insurance premiums will depend on your

life expectancy

Do you smoke? Do you drink? Do you have history of cancer?

Life expectancy is an estimate of the average number of years remaining in people’s lives based on their

Gender Current age And health

The Insurance Trade OffYour goal in buying insurance should be to protect yourself from a loss that could put you in financial difficulty. It should not be to protect from any loss. The more insurance coverage you buy, the higher the premiums. At some point, the premiums themselves could put you in financial difficulty.

**You should only buy enough insurance to cover the losses you would have trouble paying for yourself.**

The Role of Insurance in the EconomyInsurance benefits you indirectly

Business activities wouldn’t be possible without insurance

Banks wouldn’t lend you money to buy a home or car If your home burned down without insurance, the

bank might not recover the loaned fundsPhysicians usually don’t practice without

insurance to protect them from lawsuits One lawsuit could ruin them financially

TYPES OF INSURANCE

Property InsuranceInsurance that protects you from financial

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

Typically for homes, cars, and valuables

MARKET VALUE: the amount an item is worth now.

REPLACEMENT VALUE: the cost of replacing the item, regardless of its market value at the time of the loss.

Liability InsuranceSometimes your actions cause losses to other

people

You can damage someone else’s car

Protects you from losses that you cause to others

AKA Casualty InsuranceUp to a stated maximum, it will pay the cost of

damage, medical expenses, and legal fees if you are sued

Personal InsuranceInsurance that protects you, your spouse, and

your children against financial loss due to illness, disability, or death

Health and Life insurance are two examples of personal insurance

Often, employers pay part of the cost of health insurance for their employees.