insurance Overview curriculum areas OutcOmes

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1 module 8 insurance Overview Students will: review the insurance records of their Life Stage Characters review the basic concepts of insurance, the types of insurance and the costs of insurance review their needs for insurance in their transition from secondary school By examining the concepts of insurance and realistic insurance examples, students learn how they can limit risk in their transition from secondary school and budget for their insurance needs. curriculum areas Use this module to teach Learning Outcomes in curriculum areas such as: Personal Finances Consumer Studies Applications of Math For a detailed listing by province/territory and course, refer to Learning Outcomes on the educator pages at Educational Programs > The City. OutcOmes Following this activity, students will be able to: describe different forms of insurance determine their needs for property insurance and auto insurance in their transition from secondary school, and reflect them in a budget materials and tools insurance records for the eight Life Stage Characters copy for each student of Story 8-1, Insurance (optional) transparencies from Overhead 8-1, What Is Insurance? Overhead 8-2, What s Covered? Overhead 8-3, Insurance Fraud copy for each student of Handout 8-1, My Insurance Needs Handout 8-2, Quick Quiz Insurance students Freedom 18 budgets (from Module 5) overhead projector, if using in-class time required one lesson (approximately 45 minutes)

2 overhead The City Module 8 module 8 (cont d) Key words insurance, insured, insurer, insurance policy, coverage, liability, premium, term, compensation, deductible, replacement value, insurance agent, collision coverage, comprehensive coverage suggested approach 1. Present Story 8-1, Insurance, to the class. Discuss the story by asking questions like the following: Vehicle insurance is one kind of insurance. What is it for? How does it work? A car owner or driver pays an insurance company to cover the costs that could result if there is a car crash. Why would Zack need insurance beyond basic compulsory car insurance? Basic compulsory insurance only covers damage or injuries to other parties. It doesn t cover damage to the driver s car. What are two other examples of insurance? E.g., Travel medical insurance, home contents insurance, travel cancellation insurance, etc. What did the characters need to know at the start of the story? What did they learn at the end? Zack needed to carefully read his insurance policy and be sure he had the types of coverage to protect him against damage to his car. What do you want to know about insurance? What type of insurance do you think you might need when you graduate from high school? what is insurance? A contract under which the insured pays a premium to the insurer in exchange for a promise to pay compensation for certain losses, if they occur during the term of the agreement The insurance company takes the risk of large payouts, but spreads out the risk by selling policies to a large number of policy holders, most of whom will not need to make a claim The insured pays the first part of the loss the deductible 2. Show Overhead 8-1, What is Insurance? and explain: Insurance is a contract an agreement (the policy) between two parties, the insured (the party who gets the insurance coverage), and the insurer (the company that provides the insurance) E.g.: in car insurance, a car owner (the insured) pays an annual premium to the insurer based on who the principal driver is If the car is in an accident that results in personal injury or damage (the loss), the insurer pays money (the compensation) to the person who suffers the injury or damage The insured makes a payment the premium and gets the promise of protection from losses that are described in the contract Insurance is a way of transferring risk of economic loss the insured makes a relatively small payment, and the insurer takes the risk. The insurer receives similar small payments from a large number of customers so that it can afford to pay for losses that a few customers may suffer. The insured accepts a portion of the risk by paying the first part of the loss, called the deductible

3 overhead The City Module 8 module 8 (cont d) what s covered? As defined in the policy the written agreement Rate charged depends on risk Basic home insurance usually covers fire, theft, storms, accidents, water damage, vandalism and similar acts Doesn t cover wilful damage by the insured Property is valued as is You can buy coverage for replacement value, at higher cost 3. Show Overhead 8-2, What s Covered?, and explain: What an insurance contract covers depends on what s in the policy the written agreement between the insured and the insurer. Discuss with the insurance sales agent what coverage you need. Many policies exclude or limit high risk items like bicycles and computers. Don t buy insurance you don t need or don t understand. The premium you pay for the insurance depends on the amount of risk if the risk is high, the premium will be high. That s why young drivers in some provinces pay higher car insurance premiums than older drivers. Basic home insurance usually covers losses resulting from fire, storms, accidents, water damage, vandalism and similar acts, but not earthquakes unless you pay for special coverage. Insurance doesn t cover wilful damage by the insured. Property insurance (like car or home insurance) covers only the value of property as is that is, its used value, which may be much less than its replacement value. Coverage for replacement value may be available at a higher cost. The insurer can refuse to sell insurance if the risk is too great or if the buyer has been involved in frequent or fraudulent claims. tip: The explanatory comments beneath each type of insurance apply to life in Canada, not necessarily in The City. 4. Give students the financial records for their Life Stage Character. Have the groups: Use the identifying icons on the character documents to find the insurance records for their Life Stage Characters. Tell the class what forms of insurance they found. Suggest reasons why their Life Stage Character might have that type of insurance. They should include: a) luna (18-year-old university student): bicycle theft insurance certificate (included in bike lock purchase) A simple form of insurance that gives very limited protection b) Nikos (18-year-old apprentice): apartment contents insurance Covers furniture and other contents of an apartment against loss and also offers liability insurance in case someone other than the insured is harmed c) Rio (20-year-old full-time worker): car insurance, basic coverage, collision and extended coverage Basic coverage required by law, but collision and extended coverage offer additional protection to cover damage to the car d) Sienna (20-year-old college graduate): car insurance, basic coverage The minimum insurance required by law, to provide benefits if anyone is injured in a car crash or if you cause damage to someone else s property e) Indigo (25-year-old university graduate): travel medical insurance Covers medical costs when travelling in a foreign country as medical costs can be very high in many countries; this is distinct from trip cancellation insurance, which can also be useful

4 module 8 (cont d) f) liam (25-year-old college graduate): term life insurance Provides income for Liam s family if he dies; often covered in group insurance when employed, but extra coverage may be needed g) Zack (45-year-old consultant): disability insurance Provides income if Zack is unable to work; often covered in group insurance when employed, it s useful for self-employed people or if your job doesn t provide it h) Gaia (45-year-old café owner): home insurance on building and contents Used when policy holder owns the building; covers fire, theft and similar risks and offers liability insurance in case someone other than the insured is harmed; often required as a term of the mortgage Gaia also has insurance on the café, but this module does not cover her business expenses 5. Point out that there are many types of insurance, and what people choose depends on their personal needs, which vary depending on life style and social circumstances: Basic auto insurance is compulsory in every province of Canada and most states, although the specific requirements vary from place to place. It pays for injuries and damage to other people s property in an auto crash. other forms of insurance are not compulsory but often advisable: Collision and extended auto insurance pays for damage to your vehicle, theft and other losses and expenses beyond the basic coverage. Home insurance covers a house or apartment for fire damage, water damage and similar losses. Content insurance covers the furniture, appliances, clothing and other valuables inside. If you rent, a few hundred dollars a year can protect you from theft, fire and other types of losses. medical, dental, disability and life insurance cover losses due to illness, personal injuries and death. 6. Explain that if people choose not to buy insurance, they may be exposing themselves to financial risks: Without insurance, you could be responsible for any of these losses yourself. They can cost many thousands of dollars, or even millions in the case of personal injuries. If you pay a small amount in advance to an insurance company, the insurance company agrees to pay for certain losses. Without insurance, the costs could wreck your financial future. They could take all your savings and force you to make payments for many years

5 overhead The City Module 8 module 8 (cont d) insurance fraud Insurance contract is based on complete honesty When the insured makes a false claim: the cost of insurance goes up, because false claims can lead to higher premiums for everyone coverage is cancelled insurer can sue for damages could be criminal prosecution for fraud may not be able to get insurance again 7. Show Overhead 8-3, Insurance Fraud, and explain: An insurance contract is called a good faith contract you re expected to be completely honest in providing information on an insurance application. If you don t disclose all relevant information, your insurance could be void. An insurer can cancel a contract at any time if it suspects the insured is not being fully honest. Although people sometimes think that no one gets hurt when an insured makes a false claim, in fact all the other insured customers pay. The insurer has to raise the premiums to pay for fraudulent claims. Fraud is one of the reasons for rising auto insurance premiums in many provinces. If a false claim is proven, the insurance company will not pay the claim and may cancel the policy. If a false claim is made, the insurer can sue for any costs and damages of identifying and proving the fraud. A false claim is also a criminal offence and can result in jail or large fines, and a criminal record that can affect the future prospects of anyone found guilty. Insurance companies may refuse to sell insurance to people involved in false claims. 8. Distribute Handout 8-1, My Insurance Needs. Have students: Review the information on the worksheet. Complete the activity to decide what kinds of insurance they ll need in their transition from secondary school. Enter the amount from Handout 8-1 in their Freedom 18 Budget worksheet (from Module 5), adjust the budget totals as necessary, and place their handouts and revised Freedom 18 Budget in their Financial Life Skills binder or portfolio (as described in Module 1). 9. Point out that students can find more detailed information about insurance through consumer information agencies and on the web. Detailed information is available at: Insurance Bureau of Canada website ( which represents the insurance industry The websites of provincial and territorial insurance regulators The websites of insurance companies doing business in your province or territory 10. Option: Have a local insurance agent visit the class to explain the need for and cost of auto insurance, property or medical insurance. a) Have students brainstorm the questions they ll ask and prepare a list of questions about the approximate cost of the types of insurance they might need on their transition from secondary school. b) Following the visit, debrief the students to find out if they got the information they wanted, and their observations about the visit

6 module 8 (cont d) 11. Home Connections: Have students: Review the insurance needs they outlined in their Freedom 18 Budget with their parents or another adult. Discuss whether their budget is realistic, and make any necessary changes to their budget. Write a short report of their discussion on Handout 8-1, My Insurance Needs. 12. Reflection and Summary. Have students individually or in groups: Write the three most important things they ve learned about insurance. Review the items students listed with the class. Points should include: Insurance is a way to control the risk of financial loss by making a small payment to an insurer who will provide financial compensation if a significant loss occurs. Insurance can cover a wide range of risks, including automobile collisions, property damage, health expenses and loss of income. People should get reliable advice to choose the coverage that meets their needs at a competitive price. Have students add their list of things they learned, Handout 8-1, and their Freedom 18 Budget to their Financial Life Skills binder or portfolio (as described in Module 1). ALTERNATIVE: Have students research, write and present a skit in which a student meets with an insurance sales agent to discuss her or his insurance needs on travelling to a new city to attend a post-secondary education institution

7 module 8 (cont d) evidence for assessment Monitor the class discussion to ensure students can identify and describe different types of insurance. Review the students handouts to ensure that they can identify their own needs for property insurance and auto insurance, and adjust their budget for their transition from secondary school. Distribute Handout 8-2, Quick Quiz Insurance, and have the class complete the quiz. Correct answers are as follows: 1) Define the words: Insurance: Answer: A contract in which you pay a fee, or premium, to an insurer who promises to compensate you if a theft, damage, loss, etc. occurs premium: Answer: The amount you pay for an insurance contract deductible: Answer: A set amount that you must pay before an insurance company pays any benefits under an insurance policy 2) The insured is: Answer: b. The person who is protected by an insurance policy 3) List four different types of insurance coverage. Answer: Auto, home, health, life insurance 4) Which of the following should you do when choosing an insurance agent? Answer: e. All of the above. 5) When people make false claims, the cost of insurance can go up for everyone because insurance premiums will be raised. (Circle the correct answer) True False Answer: True 6) In what part of a budget should you show the cost of insurance? Answer: Expenses (particularly the fixed expenses) extension activities Have students research the way auto and other insurance companies assign premiums to different classes of drivers, and report their findings in a comparative poster or spreadsheet. Have students visit local insurance agencies and research the cost of household insurance for the contents of a typical student apartment. Have students research and debate the proposition that young people shouldn t have to pay higher auto insurance premiums than older drivers

8 StoRy 8-1 insurance The squeal of brakes brought Gaia to the café s front window. A flashy sports car, chrome and metallic blue, stood at the curb. Zack, her ex, unfolded himself from the driver s seat. He ran his hand lovingly along the hood, then came in. Some beauty, eh? he said to Gaia. Your latest toy? To go with the touch-screen vid-wall? And the climate-controlled wine cellar? Zack ignored the sarcasm. You only wish you could afford a ride like that. No, Zack. I m not trying to impress anybody. Gaia looked at him. I hope you re being careful. Those things go fast. Why, Gaia, if I didn t know better, I d think you cared. She snorted. Just don t want to have to raise our daughters all by myself. You don t fool anybody. Zack grinned. Besides, why have a fast car if you can t let er rip? Well, knowing how you drive, I hope you re fully insured. Zack waved a hand. You think I m an idiot? All taken care of when I bought the car. * * * If Gaia finds out about this, she ll gloat for years, Zack thought glumly. Here he sat, a block from his house, the front end of his new baby smashed into a MetroPower pole. He d been fiddling with the sound system, taken his eyes off the road for a second just one second! and now his dream car was a heap of accordioned metal and shattered glass. That wasn t the worst of it. He d just re-read his insurance policy and realized that he had chosen the insurance policy with the highest deductible. This was going to be expensive. And it looked like the car was a write-off. One by one, Zack crossed life s pleasures off his mental list. No more sumptuous dinners at Chez Antoine for a while. No ski getaway at The Pinnacle with his new flame, Indigo. No rare vintages for his cellar. And horror of horrors he might actually have to take the ComuTrain to work. lumbia Securities Commission British Co The only thing that was worse than these deprivations was the sound of Gaia saying I told you so. He could already hear it. Whipping out his teleconnector, Zack dialed a tow truck. Then he pounded his hand on the steering wheel, hard. Ow! Now he had a bruised hand, on top of everything else

9 overhead 8-1 what is insurance? A contract under which the insured pays a premium to the insurer in exchange for a promise to pay compensation for certain losses, if they occur during the term of the agreement The insurance company takes the risk of large payouts, but spreads out the risk by selling policies to a large number of policy holders, most of whom will not need to make a claim The insured pays the first part of the loss the deductible

10 overhead 8-2 what s covered? As defined in the policy the written agreement Premium charged depends on risk Basic home insurance usually covers fire, theft, storms, accidents, water damage, vandalism and similar acts Doesn t cover wilful damage by the insured tish Columbia Securities Commission Bri Property is valued as is You can buy coverage for replacement value, at higher cost

11 overhead 8-3 insurance fraud Insurance contract is based on complete honesty When the insured makes a false claim: the cost of insurance goes up, because false claims can lead to higher premiums for everyone coverage is cancelled insurer can sue for damages could be criminal prosecution for fraud may not be able to get insurance again

12 HaNdout 8-1 my insurance needs Name: Class/Block: Date: what is insurance? Insurance is a contract (the policy) under which the insured pays a premium to the insurer in exchange for compensation for certain losses, if they occur during the term of the contract. For example, in car insurance, the owner (the insured) pays an annual premium to the insurer. If an accident occurs causing personal injury or damage (the loss), the insurer pays money (the compensation) to the person who suffers the injury or damage. Insurance companies offer many types of insurance, and the type you need depends on your circumstances. If you own a car, you must have basic auto insurance, but you may also want collision and comprehensive coverage to protect you if your vehicle is stolen, vandalized, or if you are in a crash. If you re living on your own and want to protect your property from theft, fire or other risks, you may need home or contents insurance. Canadians basic health insurance is covered by their province or territory, but you may want additional coverage for the costs of items like extended medical services, eyeglasses, dental work and prescription drugs. If you travel outside of your home province, travel medical insurance will protect you from the high cost of medical expenses elsewhere. When you re older and have people who depend on your income, life or disability insurance can protect them from financial risks. h Columbia Securities Commission Britis what s covered? The insurance policy defines what the insurance agreement covers. The coverage varies with different policies and insurance companies, so you have to read the policy to know what s included. Usually, basic property insurance covers things like fire, theft, storms, accidents, water damage and vandalism. It doesn t cover deliberate damage caused by the person who buys the insurance. When an insurer offers compensation for damaged property, it s based on the value of the property as is, which means the used state it was in when the damage occurred. For example, if you bought a television three years ago for $500 and it was stolen, the insurance company would compensate you for a three-year-old television, which might be worth only $100. For an extra charge, you can buy coverage for replacement value, that is, the cost of replacing the item at its current price, even if the price is higher than what you originally paid for it

13 HaNdout 8-1 (cont d) my insurance needs (cont d) your insurance needs How much property insurance do you need? To find out, you can list the property you own and estimate its value, either its used value or replacement value, including taxes. Then discuss your needs with an insurance agent. Be sure you understand the policy the agent offered to you, and buy only the insurance you need. Take time to compare prices and terms from different insurance companies. Ask others to recommend an insurance company with a good reputation and low costs. Choose an insurance agent with care. An insurance agent is a sales person representing one or more insurance companies. Insurance agents must be licensed and follow a code of conduct. Ask others who have experience with insurance to recommend a good agent. Talk to the agent, and choose an agent who answers your questions and whom you re comfortable with. Check agencies like the Insurance Bureau of Canada ( and your provincial insurance regulator for more information about insurance policies. assignment Decide if you ll need insurance on the contents of your home when you are living on your own, and if you do, how much insurance you ll need. In some cases, students may be covered by their parents home insurance while away from home attending post-secondary schools. Use the chart below to find the cost of the insurance you ll need and add it to your Freedom 18 Budget. Coverage Small apartment, used furniture and appliances (Value up to $5,000) Small apartment, used furniture, media system and computer (Value up to $10,000) Shared apartment, new furniture, media system and computer (Value up to $25,000) Cost Approximately $100 per year Approximately $150 per year Approximately $250 per year

14 HaNdout 8-1 (cont d) my insurance needs (cont d) List what other types of insurance you may need after secondary school. Investigate and write down the approximate annual costs and add the cost to your Freedom 18 budget. Discuss with your parent or another adult how you plan to use insurance in your transition from secondary school. Write a summary of your discussion

15 HaNdout 8-2 quick quiz insurance Name: Class/Block: Date: 1. Define the words: a. insurance b. premium c. deductible 2. The insured is: a. the person who sells an insurance policy b. the person who is protected by an insurance policy c. the company that issues the insurance policy d. the item that the insurance covers 3. List four different types of insurance coverage a. b. c. d. 4. Which of the following should you do when choosing an insurance agent? a. Ask to see the agent s license that s issued by your province or territory. b. Choose an insurance agent with care. c. Ask other family members and/or friends who have dealt with insurance companies to recommend one. d. Choose an agent you feel comfortable with. e. All of the above. a Securities Commission British Columbi 5. When people make false claims, the cost of insurance can go up for everyone because insurance premiums will be raised. (Circle the correct answer) True False 6. In what part of a budget should you show the cost of insurance?