Intro To Insurance

Introduction to Insurance
Insurance
RISK
Aprobabilityorthreatofdamage,injury,liability,
loss,oranyothernegativeoccurrencethatiscaused
byexternalorinternalvulnerabilities,andthatmay
beavoidedthroughpre-emptiveaction.
Why is risk important for insurance?
Riskiswhatmakesyoudecidewhetherornot
youneedinsurance.
Riskiswhatinsurancecompaniesmeasurewhen
determiningwhethertoofferyouinsuranceand
howmuchitwillcost.
A situation where the probability of a variable (such
as burning down of a building) is known but when
a mode of occurrence or the actual value of the
occurrence (whether the fire will occur at a
particular property) is not. A risk is not
an uncertainty (where neither the probability nor the
mode of occurrence is known), a peril (cause of
loss), or a hazard (something that makes the
occurrence of a peril more likely or more severe).
HOW DO WE HANDLE RISK?
1.Avoidance:Choosing not to participate in an activity because of the risk involved,
2.Retention:Saving money in case of future losses, e.g. putting $1000 in a savings
account in case of a car accident;
3.Transfer:Passing the risk on to an insurance company, e.g. paying a monthly fee
for an insurance policy and expecting the insurance company to protect your
assets.
What is Insurance?
Insuranceisalegalcontractthat
transfersriskfromapolicyholdertoan
insuranceprovider.
Premiums
Insurance
Company
HOWINSURANCEWORKS
Claims
WHAT TYPES OF RISKS DOES INSURANCE COVER?
Risk
Insurance
Coverage
1.Youloseyourjob
MortgageandCredit
Willcoveryourdebts
forafixedperiod
whileyouare
unemployed
2.Yourstockslosevalue
None
None
3.Youhaveacarcrash
Auto
Willpayfordamageto
yourcarandother
damagedvehiclesand
property.Willpayfor
medicalexpensesfor
youandotherparties.
WHAT TYPES OF RISKS DOES INSURANCE COVER? (Cont.)
Risk
Insurance
Coverage
1.Your friend falls in your

home and breaks his leg
Homeowners,
renters
Will pay fixed

amount for his
medical expenses
2.A pipe bursts in your

apartment building and
ruins your sofa
Renters
Will pay to replace

your sofa or for
the sofas value
3.The police give you a

speeding ticket
None
None
4.You are hurt on the job
Disability; workers
compensation
Disability: Will pay

your lost wages
and medical
expenses
WHAT TYPES OF RISKS DOES INSURANCE COVER? (Cont.)
Risk
Insurance
Coverage
1.A necklace is stolen

from your home
Homeowners;
renters/ condo;
mobile home
Will pay to replace

your necklace up to
a fixed amount
2.You die
Life Insurance
Will distribute
money to your
beneficiaries and
cover household
expenses
characteristics of an insurance
Accumulationoffunds;
Distributionoffundstothosewhohavelosses;
Transferofriskfromonepersontothegroup;
and
spreadofAwarenessofrisk
Theprimarybenefitsofinsuranceinclude
paymentoflosses;
economicgrowth;
creditsupport;
peaceofmind.
Theproceedsofaninsurancepolicybenefiteveryoneby
restoringtheinsuredpersonororganizationtothesame
financialconditionasbeforethelossandpreventingthe
lossfromripplingoutandaffectingothersnegatively.
EconomicGrowth:Theinsuranceindustryplaysan
importantroleinthenation'seconomy.Itissecondonly
tothecommercialbankingindustryasasourceof
investmentfundsbecauseinsurancecompaniesinvest
thebillionsofthepremiumdollarstheyreceiveannuallyin
awiderangeofinvestments.
Insurancecompaniesusepremiumscollectedfrom
policyholdersto
payforclaims;
payforcostofdoingbusiness;and
buildcashreservesforfuturelosspayments.
Cashreservesareinvestedinfederalandmunicipalbonds
thatareusedtobuildroads,schoolsandutilities.
Reservesarealsoinvestedincommercialdevelopmentsand
thestockmarket.
Theseinvestmentspromoteeconomicgrowthincommunities
andsupporttheinsurancecompany'srequirementof
maintainingsufficientcapitalreservestopayfuturelossesand
earnaprofit
Risk factors determine whether you will be able to

buy a policy and how much it will cost.
Generally speaking:
> Risk = > Cost
RiskFactors:AutoInsurance
Ageofdriver
Genderofdriver
Numberofdriversonpolicy
Accident/Incidenthistory
Whereautoisparked
Annualmileage
Numberoftrafficviolations
Priorinsurancerecord
Yearsofdrivingexperience
Address,City,State
Howautoisused(commute,
business,pleasure)
Mileageperyear
Year,makeandmodelofcar
Specialsafetyfeaturesincar
Ownedorfinanced
Academicperformance(if
currentlyinschool)
Creditratingofpolicyholder
**Amountofcoveragerequired**
Risk Factors for Homeowners/Renters Insurance
Typeofhome(singlefamily,
townhome,high-rise)
Squarefootage
Numberofrooms
Floorlevel(ifinhigh-rise)
Address(city,state,county)
Pets
Pool
Proximitytofirestationand
firehydrant
Businessbeingconductedon
premises?
Personalproperty(including
furniture,electronics,highvalue
items,etc.)
Specialsafetyfeatures(security,
alarms,sprinklers)
Creditratingofpolicyholder
Priorinsurancehistory(claims
filed,etc.)
Constructiontype(brick,frame,
etc.)
Rooftype(shingle,tile,metal,flat,
etc)
RiskFactors:LifeInsurance
Age
Gender
Height&Weight
Medicalrecord
Personalhabits(smoker,drinker,druguse)
Occupation
Categories of Risk
Thethingsyoucanandcannotchange
thataffectyourinsurance
Who You Are

(Traits You Cannot Change)
Age
Medicalhistory
Gender
TheChoicesYouveMade
(TraitsYouCanControl)
Where you live, own property or drive (city/state)
Property type and value
Safety precautions/features on your property
Profession
Grades in school
Driving record & habits
At fault accidents
Personal habits (smoking, drinking)
Marital Status
Number of children or dependents
Credit history
Fault of Another
(Incidents You Cannot Change)
Crash
DamagetoYourProperty
LossofProperty,InjuryorDeath
TheftofYourProperty
CreditHistoryofSpouse/Dependent
Acts of God
Flood
Hurricane
Earthquake
Windstorm
Lightening
ActsofWar
ActsofTerrorism*
(*newlegislationispendingonwhetherproviderswillcoverterrorism)
LIFE EVENT CHALLENGES
Become a driver
Get married
Graduate from high school
Get engaged
Buy a home
Move to own apartment
Have a baby
Graduate from college
Turn 25
Get a new job
Buy a car
Move to a new city
Practice Shopping for a Policy

http://www.nationwide.com

Intro To Insurance

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Intro To Insurance

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Introduction to Insurance

1.Your friend falls in your

Will pay fixed

2.A pipe bursts in your

Will pay to replace

3.The police give you a

4.You are hurt on the job

Disability: Will pay

1.A necklace is stolen

Will pay to replace

Risk factors determine whether you will be able to

Who You Are

Practice Shopping for a Policy

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