Insurance Basics
The main purpose of insurance is this..
Transfer Risk
This is a small payment you make at doctor visits..
a copay
Covers damage to your car from an accident you caused..
collision
Covers the structure of your home...
dwelling coverage.
Dwelling coverage is basically if something happens to the house itself, like the walls, roof, or structure, insurance got you.
With this option, you own the car at the end...
financing
Why do insurance companies need many people paying premiums?
To cover the costs of the few who need help.
This term describes the percentage insurance covers...
Actuarial value.
Actuarial value is just a fancy way of saying what percentage insurance is covering vs what you gotta pay.
Let’s say your plan has 70% actuarial value
So if a bill is $1,000:
Covers damage NOT from a crash (like weather or theft)
comprehensive
Covers your belongings inside the home..
personal property
This covers the car’s loss of value...
depreciation.
This is the monthly payment you make for insurance
A premium.
You must pay this every month to keep your insurance active...
a premium.
Covers injuries no matter who is at fault
personal injury protection.
Covers things like sheds or fences..
Other structures..
Lease payments usually include this...
depreciation + interest
This is the amount you must pay before insurance starts helping
out-of-pocket maximum
Fill in: Premium → Deductible → Copay → ______
out-of-pocket maximum
Covers you if the other driver has no insurance
uninsured/underinsured coverage
Covers if someone gets hurt on your property..
liability coverage.
Big downside of leasing...
no ownership.
This is the amount you must pay before insurance starts helping
a deductible
This is a public insurance program
Medicare
Scenario: You crash your car → $6000 bill → $1500 deductible...
$1500 (you pay deductible)
Example: Someone sues you after getting hurt at your house
liability coverage
Best description of leasing...
lower monthly payments + possible fees + no ownership.