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Morningstar
Early Investor Education

Protecting and Insuring

Harron Young, Jessica Gibson

Welcome to Protecting and Insuring, the fifth course in a six-part curriculum focused on personal finance and financial literacy. For directions on how to teach this curriculum, see How to Use This Curriculum.

Goals and Outcomes

These are concepts students should understand upon completion of this course and the final project. All outcomes are taken straight from—and expand upon—those of the National Standards for Financial Literacy:

What insurance does and why people purchase it

  • All actions, including financial ones, like buying a home or car, carry an element of risk. Risk is quantified by the probability that a specific event will occur and is usually expressed as the ratio of actual occurrences to the number of possible occurrences. Risk can sometimes result in the loss of something.
  • Insurance is a protection against a loss. For example, if you have phone insurance, you can get a replacement if your phone is lost, stolen, or broken instead of having to buy a new one out of pocket.
  • Insurance will always cost money, no matter how often you use it. You might pay $10 a month for phone insurance and never lose or damage your phone. But in the event that you do have issues, insurance can make replacing or fixing your phone less costly.
  • In addition to phones, almost everything you own can be insured. Examples range from cars and homes (which can be bought or rented) to pets, your health, and even your own life. There is always the chance that you will never need the benefits of the insurance you purchase; that is how insurance companies still make money.
  • Everyone’s risk tolerance is different, but most people are willing to pay small installments in insurance policies now if they can avoid a potentially larger loss (and cost) later.
  • There are many reasons to enroll in an insurance plan. For example, some governments require their citizens to enroll in healthcare coverage. In other cases, certain contracts, such as home mortgages, require an associated insurance policy.

Types of insurance

  • Health insurance pays for medical care in the event of illness and may also cover some or all the cost of preventive care.
  • Disability insurance replaces lost income when individuals are unable to work due to illness or injury.
  • Property and casualty insurance (including renters’ insurance) pays for damage or loss to the insured’s property. It often includes liability coverage if the insured’s actions harm other people or their property.
  • Life insurance benefits are paid to the insured’s beneficiaries in the event of the policyholder’s death. These payments can be used to replace wages lost when the insured person dies.
  • In addition to privately purchased insurance, some government benefit programs (such as Medicaid and the Supplemental Nutrition Assistance Program) provide a social safety net to protect individuals from economic hardship.
  • In the event of identity theft, individuals may experience the loss of property and/or money—as well as damage to their reputations—as thieves use stolen personal information to impersonate victims to commit crimes.
  • Federal and state regulations provide some remedies and assistance for victims of identity theft.

How much does insurance cost?

  • Individuals choose different amounts of insurance coverage based on various factors, such as their occupation, lifestyle, age, finances, the price of an insurance policy, and their personal willingness to accept risk.
  • To share costs, insurance companies will offer options to policyholders such as deductibles (a minimum amount paid out-of-pocket before insurance companies cover additional costs) and copayments (a set percentage of a medical appointment or service).
  • People may be able to lower their insurance premiums through behaviors that show they pose a lower risk of accident, injury, or illness.

Launch

This is the first introduction to the topic. It’s meant to get students thinking and asking questions. Before you share the outline and requirements for the final project, facilitate an open discussion with your students based on the following questions:

  • Have you ever cracked your phone screen?
  • If so, did you get it fixed? How much did it cost? Did you have insurance to cover the cost?
  • Imagine the following scenario: Apple charges $279 to replace an iPhone screen. But if you have Apple Care, a form of insurance, that replacement is free. Do you think it’s worth the $1.99-per-month fee to enroll in Apple’s insurance?
    • What is the probability that you’ll crack your phone screen once during its lifespan?
    • Do the overall savings outweigh the monthly cost of Apple Care if you break your phone screen more than once?
  • What do you think an extended warranty is? What’s the difference between an extended warranty and insurance?
  • Choose two of the following products: a car, a smartphone, and/or a dishwasher, and then evaluate them with the following questions:
    • What is the likelihood that each product will fail?
    • How much would it cost to replace each product?
    • What is the price of an extended warranty for each item?
    • What makes an extended warranty worth it to you?

Pre-Assessment

To gauge students’ baseline understanding of the topics outlined in this course’s goals and outcomes––and to serve as a benchmark for your lesson plans––have students complete this question-based acivity on their own. This activity shouldn’t be graded.

Download the Worksheet
Get the Protecting and Insuring Pre-Assessment Worksheet PDF.

Final Project

Pretend you’re a company that offers every type of insurance. Prepare a presentation on the insurance type of your choice to attract potential customers. Be sure to include data and statistics to back up your argument. Discuss the benefits of your insurance plans and describe situations in which consumers would benefit from enrollment.

Download the Worksheet
Get the Protecting and Insuring Final Project Worksheet PDF.

Checks for Understanding

To complete the final project (and the course itself), students must be able to answer these questions through personal research and any lessons provided in class. These questions are in order of how they should be researched and “checked” by the teacher/facilitator. We’ve provided articles as a starting point, but students can do additional research on these concepts as they see fit.

  1. Is it a waste of money to pay for a premium that insures against an accident or incident that never actually happens? Why or why not?

    Resources:

  2. How does an extended warranty on a consumer product compare to an insurance policy?

    Resource:

  3. What factors should people consider when deciding what insurance coverage is right for them?

    Resources:

  4. What auto insurance coverage is required for drivers in your state? Why do you think this requirement exists? What factors should people consider when deciding what insurance coverage is right for them?

    Resources:

  5. What factors should you consider when selecting the best auto insurance policy for your needs?

    Resource:

  6. Imagine you were just rear-ended in a car accident. (Luckily, no one was injured, but your bumper was severely damaged.) Calculate how much of the repairs your car insurance, and then deduce how much you would have to pay out of pocket, after applying exclusions and deductibles.

    Resource:

  7. Why are homeowners required to purchase homeowner’s insurance? What factors should people consider when deciding what insurance coverage is right for them?

    Resources:

  8. Name two ways a person can lower their insurance premiums.

    Resource:

  9. What factors should people consider when deciding what insurance coverage is right for them?

    Resources:

  10. What is disability insurance, and what policy features or benefits should you consider when choosing a plan?

    Resources:

  11. Identify the ways online transactions, email scams, and telemarketing schemes can make consumers vulnerable to identity theft. What should victims of identity theft do to limit losses and restore their personal security?

    Resources:

  12. In what scenarios should you disclose your Social Security number, bank account numbers, or other sensitive personal information? When should you keep that information a secret?

    Resource:

  13. What should a victim of identity theft do to limit losses and restore their personal security?

    Resource:


About the Authors

Harron Young is a strategy analyst for Morningstar and a former third-grade math teacher with Teach for America. She has a master’s degree in business administration.
Jessica Gibson is an early career programs lead for Morningstar and former first- and second-grade teacher with Teach for America. She has a master’s degree in urban education, with a focus on administration and policy.

Contributors

Lead content strategist: Courey Gruszauskas
Editor: Amelia Buzzell



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