Life

1
Lifes Greatest Risks

• An Introduction to Insurance
• Mil Grauer

2
Why Purchase Insurance?

• In the next hour
• 194 people will be injured in car accidents
• 57 homes will catch fire
• 230 people will die
• 1,027 people will become disabled
• How can you as an individual plan ahead in order
  to protect yourself against these things that you
  potentially have no control over?

3
Life Insurance
Cause of Death Probability
Motor Vehicle Accident 1 in 100
Homicide 1 in 300
Fire 1 in 800
Firearms Accident 1 in 2,500
Electrocution 1 in 5,000
Asteroid/Comet Impact 1 in 20,000
Passenger Aircraft Crash 1 in 20,000
Flood 1 in 30,000
Tornado 1 in 60,000
Venomous bite or sting 1 in 100,000
Fireworks Accident 1 in 1 million

• Provides financial assistance in your absence
• Helps pay for funeral costs
• Provides an income for your family

4
Cumulative Death Table numbers are out of 1000
people per year at the specified age.
Age in 1990 Total U.S. White Male White Female Black Male Black Female
25 11.52 11.39 7.62 26.85 17.57
35 14.71 15.38 9.08 35.97 21.5
45 20.02 21.57 12.09 50.82 28.75
55 31.03 34.21 19.73 74.7 42.91
65 55.52 63.37 38.37 111.67 69.53
5
Disability Insurance

• Ensures that when a working person is ill or
  disabled and unable to work, he or she will still
  receive a monthly income
• Savings are often insufficient

Age (year) Probability ()
25 45
30 42
35 41
40 39
45 36
50 33
55 27
Age at Onset of Disability Recovered () Died () Still Disabled ()
25 44.1 9.7 46.2
35 34.0 12.3 53.7
45 21.5 19.9 58.6
55 11.8 28.5 59.7
6
Fire Insurance

• Fire is a very real threat that can destroy your
  home and possessions
• Fire is the largest single cause of property loss
  in the United States
• In the last decade, fires have caused direct
  losses of more than 120 billion and countless
  billions more in related costs.
• 12 out of every 100,000 homes burn down every year

7
Automobile Insurance

• Automobile accidents are common due to the number
  of vehicles on the road
• Even if you are careful, drivers around you may
  not be as safe
• 1,163 out of 100,000 vehicles are involved in
  Bodily Injury Claims annually
• 3,846 out of 100,000 vehicles are involved in
  Property Damage Claims annually

8
Auto Insurance Rates

• The average cost of car insurance nation wide is
  1368.18

Most Expensive Cites for Auto Insurance Most Expensive Cites for Auto Insurance Most Expensive Cites for Auto Insurance
Ranking City Average Auto Premium
1 Detroit, MI 5,162
2 Philadelphia, PA 4,142
3 Newark, NJ 3,482
4 Los Angeles, CA 3,225
5 New York City, NY 3,127
Least Expensive Cities for Auto Insurance Least Expensive Cities for Auto Insurance Least Expensive Cities for Auto Insurance
Ranking City Average Auto Premium
1 Roanoke, VA 758
2 Wapakoneta, OH 871
3 Chattanooga, TN 911
4 Green Bay, WI 948
5 Raleigh, NC 949
9
Liability Insurance

• A liability lawsuit can completely deplete all of
  your wealth
• Especially important for companies since a loss
  could cause bankruptcy
• Also known as third party insurance
• It is not uncommon for liability claims to be in
  the ballpark of 1-10 million!

10
Long Term Care Insurance

• To protect against the high costs a family can
  incur from placing a family member in a LTC
  facility
• On average, LTC costs 7,000 a month, or about
  84,000 a year
• For a person 65 years old, there is a 44 chance
  that they will be disabled for 90 days or longer
  and require LTC
• Over 5 million individuals between the ages of 18
  and 64 needed LTC last year

11
Risk of Living Too Long

• Compared to earlier generations, our population
  as a whole is starting to live longer
• Life expectancy for a person who reaches the age
  of 65
• Female 19.5 years left
• Male 16.6 years left
• By saving early though you can avoid this risk by
  maximizing the benefit of compounding interest.

12
Health Insurance

• People get sick -- Its just a fact of life
• 1.7 trillion was spent in 2003 on health care
  costs that is 5,671 per person
• The average annual growth rate in inpatient
  expenditures per health plan member is 5.9
• Cost of hospital stay varies greatly from 52
  above the national average in New Jersey to -38
  below the national average in Maryland.

13
Homeowner Insurance

• The typical homeowner policies covers property
  damage as well as liability issues that may arise
  as a result of owning property
• 7,330 out of 100,000 homeowner policies file
  claims each year
• 5,082 is the average severity of a homeowners
  claim

14
Percent of Losses Incurred on Homeowners Policies
Type of Damage/Year 2000 2001 2002 2003 2004
Property Damage
Fire, Lightning, Debris Removal 32.82 31.03 32.72 32.92 22.49
Wind and Hail 20.45 21.69 20.81 25.56 48.61
Water Damage, Freezing, Mold 22.6 22.14 21.71 22.01 16.62
Theft 4.91 4.65 4.53 3.29 2.35
Other Property Damage, (Vandalism and Mischief) 11.63 13.11 12.23 10.62 6.01
Liability
Bodily Injury and Property Damage 6.43 6.47 7.00 5.29 3.17
Medical Payments 1.13 0.88 0.98 0.94 0.74
Credit Card Fraud (forgery and counterfeit currency) 0.03 0.03 0.01 0.00 0.00

• 84 of claim costs are from property damage, only
  4 are from liability suits, and remaining 12
  are from settling costs.

15
Questions?