Financial Literacy Insurance – financial education
Financial Literacy Insurance
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I’m going to talk about the basics of insurance. So first of all, what is insurance?
Table of Contents
What is insurance
This may sound like a simple question, but it is nonetheless important that insurance protects us from events that are less likely to occur, but those events can have major financial implications if they do. They’re a necessary evil when you don’t need them, but they’re critically important when you do. Everyone needs some form of insurance, but no one needs every single type of insurance that is provided to us so here are some basics.
Following are the basic terms that you will find in your standard or typical insurance policy, irrespective of the type, so first of all, the policyholder, i.e. you, is the person who buys the insurance. An insurance policy is a contract that defines your list of insurance which is specifically covered.
Financial Literacy Insurance – financial education
For example, you can buy an insurance policy for roof repairs with $5,000, so that means the company has agreed to reimburse you up to $5,000 for damage to your roof. Now, an insurance claim is a A formal request by the policyholder, or you, to an insurance company for that reimbursement in the event of a loss or policy event. So here’s what you pay for. First, there is the premium. This is the amount you pay annually for an insurance policy. Next is Cope. This is a fixed dollar amount that you pay before you receive the service offered by the insurance policy. So for example, a medical copy of $40 per doctor means you pay $40 for each visit to the doctor, regardless of what type of medical insurance coverage you have. Next is the deductible. This is the amount you are responsible for paying before the insurance starts.
For example, a previous roof insurance policy of $5,000 has a deductible of 500. This means you will pay $500 before the policy will pay the balance. Now let me go into the different types of insurance. I would like to start with health insurance. Now it may be less likely to be needed, but it is a must have. It insures against high-risk, high-cost events with disastrous long-term consequences, and it is usually covered by employers and can be a significant portion of your compensation.
Now I am going to talk about three different types of health insurance, PPO, HMO and POS
PPO Health Insurance
There is a preferred provider organization. It is based on geographic region and there is no need to select a primary care physician or location. Now you can go out-of-state and you can go to these out-of-state providers, but generally you will pay a higher premium. After that we have health maintenance organizations,
HMO Health Insurance
This is where you select the primary care physician and the center of service for all health care needs is from that primary care physician. You may now see a provider as out of network costs, but out-of-pocket costs are rising.
POS Health Insurance
Finally, we have a POS, or point of service.
It is a mix of HMO and PPO where you choose a primary care physician, the cost of coverage is similar to that of a PPO but you have more coverage for preferred providers. Next I would like to talk about homeowners insurance. A person needs this after buying a house. This can cover not only your home but personal property inside I.G appliances, electronics, laptops or anything like that. Now water damage and earth movements are common exclusions that are usually not covered with your homeowners insurance.
The most common types of insurance are HO2s and HO3s. HO2s provide comprehensive coverage on housing and other structures on your property. These are classified as named perils, where only the risks listed in the insurance policy are covered. Next, we have HO3s that cover your home, personal property and any liabilities. These are classified as closed perils, where they cover everything except those listed in the policy. Now HO2s cost less than HO3s.
Now we are going to talk about renter’s insurance,
Hence it reimburses you for the loss of personal property held in the room, apartment or house that you are renting out. You know that this includes clothing, computers, audio, other equipment, furnishings, and any valuables you may have in the apartment, and are primarily purchased by tenants who have been using the facility for more than a year. giving on rent. So if you’re only renting something for a month or two, you usually won’t get it.
Next we are going to talk about auto insurance. Now it is necessary for all the states. Even if you have the lowest form of auto insurance, it is still required. These protect you by reimbursing anyone or anything that may be affected by accidents for which you will be responsible. Now many young adults start on their parent’s auto policy and pay their share of their premiums. The pay now insurance policy package is protection. This means that it covers bodily injury as well as any property damage. So if you accidentally run to the side of the road and you hit a house or any type of building on the property, and let’s say you hurt someone, the insurance covers the medical expenses of the person who You have caused injury, as well as any property damage that you did to their property. This may include damage caused by a collision or by things other than a collision.
For example, flood, fire, wind, hail or anything like that
Now we are going to talk about life insurance
Now this is generally not necessary unless a family member is dependent on your income. After the death of the insured, the family members or dependents receive the life insurance amount in cash. Now, this is usually not required, unless you believe that your spouse or dependent cannot live without your income. Many times you must have noticed that people in their 20s and even 30s do not need life insurance whereas as you start moving forward, you may have a wife or husband or children. You all want to buy life insurance.
Then we are going to talk about 2 forms of life insurance
term insurance or permanent insurance
Now Term Insurance- It is low cost but has a big advantage. It is set for a certain number of years, so you are able to protect dependents from that financial hardship. You can set this for an insurance policy for anywhere from 10 to 30 years. Now insurance is renewed annually until you feel it is necessary, but this carries the risk that if you die after the insurance expires, your family or dependents will not have any income Will get Now optionally, permanent insurance. It is a continuous form of that life insurance. It is more expensive than the term, but it is in effect for the entirety of the life insured. Now we are going to talk about disability insurance. Now disability insurance is one of those taboo topics where no one wants to think about the possibility of getting disabled, be it in the short term or in the long term.
Now disability insurance provides financial protection against certain physical or mental disabilities. There is no required deductible or minimum spending limit should you become medically unable to work, and you typically get 40 to 70 of your salary, depending on the insurance. % is received. Now let’s talk about long term vs short term insurance. Long-term, these cover chronic disabilities that can last for years, decades, or even your lifetime. You may now be able to receive Social Security benefits from these specific long-term disabilities and most claims are not related to a workplace injury.
Now, short-term disability typically covers only the first few months of being unable to work, typically 60 to 90 days, and may also provide compensation for 6 to 8 weeks after the baby is born. Now these are linked more to workplace injury than to long-term disabilities.
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Now plus short term or long term disability insurance
A business or own occupation is also disability insurance. Any business is the strictest form of disability insurance, so you are declared disabled only if you are unable to perform any duty related to a business.
It’s the most expensive and most covered, so if you have a job where you’re doing a lot of different jobs or moving to many different places, any occupation will take precedence, vs. Own business, which is the most flexible form of disability insurance. So you are disabled only if you are unable to engage in the major duties of your current job. It is less expensive but also has less cover. Finally, I want to talk about emergency reserve funds. Now these are not technically insurance, but it is a different type of insurance. These are for contingencies or unforeseen adverse events that are not covered by insurance. One of the most popular forms of this is unexpectedly losing your job. An emergency reserve fund offers the ability to pursue attractive investment opportunities, and it also prevents loss of money if a severe economic downturn is expected in the near future. . You can also avoid tax penalties by withdrawing money from a retirement account like a 401K or IRA, and instead pulling it from emergency reserves, that way you don’t have that 10% penalty tax on how much you should have in your emergency reserve fund. is in? Now, the account must have at least three months’ living expenses. So for example, let’s say your living expenses are about $2,500 per month. Then you’ll aim for $7,500 in accounts. Now if you have dependents, or if you’re starting a family, you’ll want to increase this to six months of your living expenses, and now it goes up even if you have a higher income. The job is business or a high injury rate Like I said, it’s not standard, it’s not necessary. You can change it however you want. You may have less than three months, you may have more than six months.
You may have a year to live, and that of course depends on where you are in life and what kind of responsibilities or financial responsibilities you have, so you can adjust the account balance according to your financial needs. Like I just said, and when used you want to focus on backing the account up to the reginal balance as soon as possible so in the end, I want to stress the importance of insurance. It provides peace of mind and a sense of security to the insured. Now, this is rare in the real world. Overall, insurance is definitely an important aspect of that stability and safety net for you whenever you have financial stability and stability. It also ensures family and business capability in times of need, when you know financial crisis or economic downturn, and especially for businesses. Businesses need insurance. They may have more similar forms of insurance than individual insurance, but it is still important to have both. This is usually required by lenders looking for financing. This also applies to getting a personal loan. Many bankers and lenders will require some form of insurance if you are moving on your own or if you are doing business looking for loans. And finally, it drives economic growth through the opportunities that insurance enables. So this concludes the presentation for the insurance plan. If you have any questions, please feel free to contact us at cfasociety.org/pittsburgh. Thank you.