WorksheetsInsurance 101 8.1 NGPF
Total questions: 22
Worksheet time: 48mins
Have you repaired your phone in the last year?
Yes
No
The cost of AppleCare+ is either a one-time fee of $199 or $10 per month. If you want loss and theft protection too, it’s $269 or $13.49 per month. Is having this insurance a “good deal?”
Yes
No
What is the cost to repair an iPhone screen?
Why would you carry cell phone insurance?
AppleCare+ is basically an insurance plan, and like any insurance, before you can decide if it’s a good plan to purchase, you need to understand how it works. Watch this video and answer the next 3 questions.
1. The purpose of insurance is to…
build wealth
transfer risk
manage assets
build relationships
2. Why is it important for insurance companies to have a large risk pool of people paying premiums?
If a large pool of people pay premiums, insurance company employees will get more bonuses included in their next paycheck
The premium payments of all the insured clients will cover the costs for the emergencies of the few who need it
The more people that pay premiums, the more careful each insured client becomes with their lifestyle choices
A large pool of people paying premiums allows insurance companies to have a larger social media following
3. What role does math play in the insurance industry?
Insurance companies use statistics to find how likely a client will need to use the insurance so they can set premiums in order to have the highest chance of making a profit
Insurance companies use algebra and geometry to calculate the distance from clients' major emergencies to nearest hospitals
Insurance companies use statistics to hypothesize how likely clients are to switch over to competitive companies
Insurance companies use calculus to find out how likely a client will need to use the insurance so they can set premiums in order to have the highest chance of making a profit
In addition to having a fixed premium, most insurance plans also have a deductible and a coverage limit. Use this infographic to answer the next 4 questions.
Jerry has an insurance policy with a premium of $150 per month. In June, he causes an accident and receives a bill with a total cost of $6000. His deductible is $1500, and his coverage limit is $10,000.
$1500
How much total money will Jerry have to pay in the month of June, given he pays for the accident?
How much will the insurance company pay for the accident?
$4500
After the accident, Jerry starts thinking, “Wow, that $1500 deductible is a lot to pay for all at once! Who knows when I’ll get in another accident, but I sure wish my deductible were lower!” He asks his auto insurance agent, who shows him this chart:
High monthly to low out-of-pocket cost
What will Jerry need to do in order to pay a lower deductible?
Pay a higher monthly premium
Name a benefit of a lower premium.
Fits a monthly budget
Name a benefit of a lower deductible.
Lower out of pocket cost for an accident
This video will explain how insurance companies manage to make money, when it seems they might be stuck paying out huge claims for ruined houses, wrecked cars, and stolen laptops. Watch the video and answer the next 3 questions.
Why do you think the mathematical models used by insurance companies are so complex?
What is at stake if an insurance company’s models aren’t particularly good at predicting risk?
Provide at least two reasons why self-insurance for risks involving your car or home isn’t feasible for most Americans.
Go to www.thebummergame.com and play Bummer!
As you play the game, pay attention to how your insurance choices and the outcomes of the Wheel of Bummers impact Your Total Money.
Bummer! has 4 rounds - pet, rental, auto, and then all 3 combined.
How many rounds did you make it through before running out of money? Or, did you win the game?
I made it through 1 round
I made it through 2 rounds
I made it through 3 rounds
I won the game!
Rank these in order of importance to you as you considered each type of insurance in the game.
If you played again, what would you do differently? Why?
After buying your basic coverage, the game offered you extra coverage referred to as Add Ons. In real life they’re called riders or endorsements.
What strategies did you use to determine if a rider was worth the additional premium cost per month?
In the game, you’re FORCED to buy at least minimal coverage for each of three insurance types -- pet, rental, and auto.
In real life, if your monthly budget was tight, what insurance type(s) would you cut? Why?
What would be any risk(s) of reducing or eliminating coverage?
House fire - can't purchase replacement items
Car accident - can't replace car
Owe full bill for hospital stay
Doggo gets bit by a snake - vet bill is all yours
Owe a ton of money to a bunch of companies
The purpose of insurance is to provide you with financial protection against a possible risk. In Bummer!, risk is generated by the Wheel of Bummers.
Draw how you FELT each time you spun the Wheel of Bummers, both when you had plenty of money and when you were short on cash.
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Piper is willing to pay a high premium for their disability insurance. What are the likely outcomes of paying that higher premium?
They receive a low deductible and a low coverage limit
They receive a low deductible and a high coverage limit
They receive a low deductible and a low monthly payment
They receive a low deductible and a high risk assessment
Why is risk pooling essential for the insurance industry to exist?
Risk pooling eliminates everyone who files expensive claims and makes them uninsurable
Risk pooling creates large groups to spread the risk level out while maximizing the amount of premiums that can be collected
Risk pooling provides every insured person with a monthly check, called a premium, so they can pay whatever bills they need
Risk pooling is a low-cost way for everyone to save their premiums in a saving account to use later
Karishma has a renters insurance policy with a coverage limit of $25,000. While she’s on vacation a fire breaks out, ruining $9,000 worth of possessions before the fire department puts it out. Her deductible is $500. How much will Karishma and the insurance company each pay?
Karishma pays $0, while the insurance company pays $9,000
Karishma pays $0, while the insurance company pays $500
Karishma pays $500, while the insurance company pays $8,500
Karishma pays $500, while the insurance company pays $24,500
