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Financial Smarts
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  1. Financial Smarts For Teachers

  2. Sponsors

  3. Risk Management

  4. Shared Risks Accept Need to Manage Risks • Identify potential risks • Find other ways to manage • Have a risk management program

  5. Financial Impact NO INSURANCE Death of Child Loss of Home Dental/Eye Care Automobile

  6. Types of Risk • Personal • Property • Liability

  7. Risk Options • Minimize • Accept • Transfer

  8. Compare Policies • Who/what covered • Deductibles • High deductible = low premium • Low deductible = high premium • Length of coverage • Exclusions • Discounts

  9. Check Ratings • A.M. Best Company • A + is Superior • C - is Fair • Moody’s Investor Service • Aaa is Exceptional • Ca is Extremely Poor • Standard & Poor’s Corp • AAA is Superior • C is Speculative

  10. Automobile Policies • Liability • Personal Injury • Collision • Comprehensive • Medical Payments • Uninsured motorist • Underinsured motorist

  11. Liability Insurance • Bodily injury: 15/30 (minimum) • Property damage: /5 (minimum) • Recommended: 300/500/100

  12. Liability Insurance Features • Medical payments • Helps pay medical, funeral bills • Usually $500 to $10,000 • Extended benefits • Pays some medical, funeral bills • Reimburses portion of lost wages • Pays for some essential services

  13. Liability Insurance Features • Collision (damages to your car) • Comprehensive physical damage • Uninsured motorist • Covers accidents caused by people with no insurance • Collision Deductible Waiver • Underinsured motorist • Pays your expenses after other driver’s coverage is gone

  14. Homeowner’s Insurance Packaged Policies • House • Personal liability • Additional living expenses • Personal property • Medical payments

  15. Property • Real property or physical structures • Personal property • Jewelry • Computers • Artwork • Television • Other valuables

  16. Real Property Market Value? or Replacement Cost? (Rebuild at Current Prices)

  17. Full Insurance At Least 80% of Replacement Cost or Amount Insurance Company SaysIs “Fully Insured”

  18. Other Considerations • Guaranteed Replacement Cost: Pays to rebuild at “today’s” prices • Law and Ordinance Coverage: Pays to bring house up to today’s building codes

  19. Other Considerations • Personal property • Usually limited to 50% of dwelling’s value • Purchase riders to cover most expensive items • Living expenses • Flood insurance • Earthquake insurance

  20. Renter’s Insurance • Loss of personal property • Loss of use of rental unit • May cover • Liability • Medical

  21. Liability Insurance Umbrella Coverage • Injuries to others on your property • Claims against rental properties you own • Liability doing volunteer work • Accidents with recreational equipment • Claims against you for unforeseen loss • Libel

  22. Liability Insurance • High deductible • Kicks in after other insurance resources tapped • Costs $200 – $300 per $1 million

  23. Liability Insurance How Much Is Enough? At Least Net Worth If Not More!

  24. Health Insurance In Event of Illness, Injury

  25. HMOs • Prepaid health service plans • Alternatives to group plans • Offer comprehensive health services • Usually haveassigned doctor

  26. Preferred Provider • Group plan • Lets you choose amonga list of “preferred providers” • Usually co-pay for visits

  27. Life Insurance Reasons to Buy • Financial support for dependents when you die • Financial protection for retirement years

  28. Life Insurance Terminology • Insured Person:Person whose life is being insured • Beneficiary:Person who receives the cash value of the life insurance policy

  29. Life Insurance Types of Policies • Term • Whole Life • Limited Pay Life • Variable Life • Universal Life

  30. Life Insurance Term Insurance • Protection for a specific period of time 5, 10, 20 years • Need • Guaranteed renewable • Convertible • Price increases with age

  31. Life Insurance Whole Life • Death protection throughout life • Premiums stay the same • Builds cash value • Earnings are tax-deferred

  32. Life Insurance Before Buying • Evaluate your needs • Read the policy • Understand coverageyou are buying

  33. Life Insurance What to Do? Buy Term Invest the Difference!

  34. Annuities Provide Income as Long as You Live • Immediate Annuity Lump sum/periodic payments • Deferred Annuity (most common) • Your money accumulates interest • Periodic payments after retirement • Income tax on interest deferred

  35. Annuities Options • Life Annuity (pays as long as you live) • Period Certain (pays for a set period) • Life with Period • Pays as long as you live • Survivor gets income until end of period • Joint and Survivor • Pays as long as you live • Survivor gets percentage as income for life

  36. Deferred Annuities Two Types • Fixed • Money accumulates at minimum rate • May pay higher rate if investments are good • Variable • Contract owner (you) determine investments • Risky, but chance of greater return • Some annuities combine both

  37. Long-Term Care Insurance Coverage • Care in non-acute care facility • Nursing home • Residential care facility (assisted living) • Home care • Community-based care

  38. Long-Term Care Insurance Policies Available in California • Nursing Facility and Residential Care Facility Only • Home Care Only • Comprehensive Long-Term Care • Nursing facility care • Assisted living care • Home and community care.

  39. Long-Term Care Insurance When Do Policies Pay? • Impairment in activities of daily living • Impaired in at least two activities • Need assistance or supervision for those activities • Impairment in cognitive ability • Medical necessity

  40. Disability Insurance California State Disability Insurance • Travels with worker • Mandatory for most California workers • Non-exclusionary Cannot be canceled or denied because of health risk factors, pre-existing medical conditions, or hazardous employment

  41. Disability Insurance California State Disability Insurance • Pays up to 52 weeks Weekly benefit approximately 55% of earnings in highest quarter of your base period

  42. Disability Insurance Supplemental Insurance • Offers long-term coverage • Kicks in after SDI • May provide 70%–80% of base income • Lasts for set period or until retirement • Benefits tax free (if you pay for policy)

  43. Insurance Minimizes Financial Loss