May 03/06
Post date: May 10, 2016 2:41:35 PM
Bell Work: What 2 types of Insurance are most important to you at this stage of life and why?
Insurance Discussion- Insurance Needs Throughout Life
Auto
Health/Dental/Vision
Insurance is the process of covering one's financial assets in order to replace or be reimbursed in case of damage or destruction. Essentially it is transferring risk. We all experience and will experience Risk in our everyday lives, we can't avoid it but we can manage it by insuring against it.
For a small payment (typically monthly but sometimes yearly) we can insure against a major loss. This make sound financial sense and alleviates large out of pocket costs to us if something happens that will cost us a lot in replacement or repairs.
So should someone like Elon Musk have insurance? If he wrecks his Tesla, he has plenty of money to replace it, if his house burns down he has plenty of money to "self insure" and buy a new one.
The answer is still yes, because for that small premium payment he can transfer some of the risk and insure against a large loss. However when an incident or claim against our insurance occurs, we usually pay a deductible (or the amount we pay before the insurance kicks in) There is a correlation between deductibles and premium payments. The more risk we are willing to accept or the higher the deductible we have, the lower the premium payments will be. So, Elon Musk should have insurance, but because he has so much cash to help cover, he should raise his deductibles up high and pay a smaller premium.
The most prominent types of insurance in your life right now is probably Auto and Health. Health is the biggest concern for most adults and health related issues are much more likely than many other incidents like car crashes or plane crashes.
Most insurance policies also carry what we call Liability, this is carried because we all could be sued if someone determines they think we caused them risk that resulted in an injury. Individuals, businesses, home owners, schools, government organizations, all must carry Liability.
The problem with insurance, is we all know we need it, but no one actually wants to have to use it. For example Life Insurance, I have it so that my family is covered if something happens to me, but I don't want to have to file a claim on the insurance. (or in other words die)
Open the following Google Doc Link and complete the worksheet by matching the terms with the correct definition.