Category Chapter_10

Oct 25 2025

WHAT TO KNOW ABOUT DEDUCTIBLES  

Here are some things to know about deductibles when deciding what policy to buy.

  1. Know the math

A deductible may be a specific dollar amount or a percentage. If a policy has a deductible that’s a percentage, make sure you know how that translates to a dollar amount. Here are two examples for homes insured for $150,000:

  • Policy A has a $500 deductible. A hail storm destroys the home’s roof, and the cost for repairs is $6,500. Policy A will pay $6,000 of the cost to repair the roof.
  • Policy B has a 5 percent deductible – or $7,500. If the home needed $6,500 in roof repairs, Policy B would not pay anything because the amount of repairs is less than the deductible.

2. Know when it applies

Deductibles for home and auto policies work differently than deductibles for health policies.

For health policies, the deductible usually covers a year.

For home and auto policies, the deductible will be applied to each claim. If you have a wreck in February and your car gets broken into in June, your insurance company will subtract the same deductible amount from the damages of each claim before paying.

3. Know what works for you

In general, the higher the deductible, the lower the cost for the policy. When deciding what deductible is right for you, think about how much you can afford to pay if your property is damaged. Remember that filing small claims may affect how much you have to pay for insurance later. Switching from a $500 deductible to a $1,000 deductible can save as much as 20 percent on the cost of your insurance premium payments.

For more information, go to: What to know about deductibles

Teaching Suggestions:

  • Ask students what deductibles they have on their automobile and home insurance.  What factors did they consider to determine their deductibles?
  • Have students talk to friends and relatives to determine methods of reducing home and auto insurance premiums.

 Discussion Questions:

  1. What are some arguments in favor of and against higher deductibles?
  2. What should be the main factors used to determine methods of reducing the cost of home and auto insurance?
Oct 11 2025

How are your auto and homeowners insurance costs calculated?

Insurance companies set prices to match the cost of future claims. To do this, insurance companies look at your personal risk factors (the type of car you drive or where you live). But they also look at how much they spend on all claims.

Insurance companies determine premiums and rates by looking at you

Insurance companies use many factors to calculate what they charge a customer. Each company’s premium formula is different.

For home insurance, common factors include:

  • Your home’s age.
  • Your home’s roof age and material.
  • Where you live.
  • The cost to replace your house.
  • Your claim history.
  • Your credit score.

For auto insurance, common factors include:

  • Your driving record and claims history.
  • Where you live and how much you drive.
  • Your age, gender, and marital status.
  • Your occupation.
  • The cost to replace the car you drive.
  • Your credit score.

If some of these factors changed since your last renewal, it could raise or lower your premium. This includes characteristics that change over time, such as how much your home or auto is worth. You may see such changes in a policy’s premium from one renewal to the next.

Most State laws require that insurance rates:

  • Be adequate.
  • Not be excessive.
  • Be based on sound actuarial principles.
  • Be reasonably related to all costs.
  • Not be based on the insured’s race, creed, color, ethnicity, or national origin.

Ask about discounts and shop around

If your auto or home insurance bill is rising, ask your company to explain the increase and ask if you’re getting all available discounts.

For more information, go to:

How are your auto and homeowners insurance costs calculated?

Teaching Suggestions:

  • Have students ask their insurance company if they are getting all available discounts.
  • Ask students to consider calling an independent insurance agent for insurance cost comparisons.

Discussion Questions:

  1. What factors do insurance companies use to calculate your auto and home insurance premiums?
  2. Why do insurance companies use your credit scores to determine your premium for your home and auto insurance?
  3. What is reinsurance and why do insurance companies buy reinsurance?
Sep 13 2025

Ways to save money on home insurance

Did your homeowner’s premium go up? Use these tips to see if you can get a lower rate.

  1. Shop around

Insurance companies charge different rates, and your company might have raised your rates.

You can shop around for a better price. Get sample rates at HelpInsure.com. Then contact the companies you’re interested in and use these tips.

Learn more: How to shop smart for home insurance (checklist)

2. Ask about discounts

Make sure you’re getting all the discounts you qualify for. Ask your insurance company if it offers discounts for:

  • Having a monitored burglar or fire alarm system.
  • Having other policies with the same company (like auto, home, life, etc.).
  • Not filing any claims for three straight years.

Learn more: Lower your home insurance cost by asking for discounts

3. Look at your deductible

Choosing a policy with a higher deductible can lower your premium. But remember that a higher deductible means you might have to pay more out-of-pocket if you have a claim. How much can you afford to pay if your home is damaged?

Remember: A good price is only a bargain if you also get good service. Call your State Department of Insurance  to check a company’s complaint record before buying a policy.

 For more information, go to:

Ways to save money on home insurance

Teaching Suggestions:

  • Have students suggest methods of determining how to save money on home insurance.  Also, ask for actions that can be taken to achieve the goals.
  • Have students create a system for starting and updating a home inventory.

Discussion Questions:

  1. When does a family or individual know they have enough home insurance?
  2. What type of insurance coverage is more important, property or liability?  Explain
Aug 30 2025

Will my insurance premiums go up if I file a claim?

It depends on the type of claim and how many you file. But, yes, your home and auto premiums can go up if you file claims. You could also lose any discounts you’re getting for being claim free.

  1. What counts as a claim?

Home and auto insurance companies can raise your premium for filing most types of claims. Auto companies can raise your premium if you’ve had accidents or gotten traffic tickets.

Home and auto companies can’t charge you more for:

  • Claims you file that the company didn’t pay. This includes claims the insurance company denied because your policy doesn’t cover the damage.
  • Calling your company or agent to ask questions about your policy or the claims filing process.

Home companies can’t charge you more for:

  • Claims for damage from natural causes, including weather.
  • Appliance-related water damage claims, if the repairs have been inspected and certified, unless you have three or more claims in three years.

    2. Consider your deductible
  • Before you file a claim, find out how much your deductible is. The insurance company will subtract the amount of your deductible from your claim payment. Also get repair estimates. If the cost of repairs is about the same or less than your deductible, you may decide it’s not worth filing a claim. Learn more about deductibles.

    3. Know your claims history

Insurance companies use your claims history to decide if they want to sell you a policy and how much to charge you. Most insurance companies get a report from the Comprehensive Loss Underwriting Exchange (CLUE) to learn your claims history. Because most companies use CLUE, they can learn about home or auto claims you’ve filed, even if the claim was with another insurance company.

For more information, click here.   

Teaching Suggestions:

  • Ask students if they or their family members filed any home or auto claims with rheir insurance company.  If so, what was their experience?
  • Ask students if the insurance company raised their premiums or cancelled their insurance coverage.

Discussion Questions:

  1. Why is it important to consider your deductibles before filing a home or auto insurance claim?
  2. Why do insurance companies use your claims history to decide if they want to sell you a policy or much to charge you?
Nov 23 2024

Do you have enough home insurance?

Could you rebuild if a tornado or fire destroys your home? Some experts say half of all homes may not have enough insurance. Here are tips to make sure you have the right amount of coverage.

1.    Find out what it would cost to rebuild your home.

This is not the same as the real estate price, or market value. The rebuilding cost is based on what kind of home you have and local construction costs. The rebuilding cost is sometimes called replacement cost. Your insurance agent can help find out your rebuilding cost.

2.    Your insurance coverage should match the rebuilding cost.

You can find your policy limits on the front page of the policy or ask your agent. If the amount is lower than the estimate to rebuild, you may need to make changes.

3.    Check your insurance coverage regularly.

Check your coverage when you renew your policy each year. You should also talk to your insurance agent if you remodel or make upgrades. A new deck, garage, or kitchen can increase the cost to rebuild

For more information, click here.

Teaching Suggestions:

  • Have students research special types of property and liability insurance.
  • Have students talk to an insurance agent or claim adjustor to determine the type of documentation required for a claim settlement.
  • Ask students to obtain additional information on home insurance from the Insurance Information Institute or other online sources.

Discussion Questions:

  1. Why is it important to check your insurance coverage regularly?
  2. What type of insurance coverage is more important, property or liability?  Explain.
Aug 31 2024

Home and Auto insurance costs

Each insurance company uses many factors to calculate what they charge a customer for home and auto insurance.

Some factors are about you, your home, or your car.

For home insurance, common factors include:

  • Your home’s age.
  • How old your roof is and what it’s made of.
  • Where you live.
  • The cost to replace your house.
  • Your claim history.
  • Your credit score.

For auto insurance, common factors include:

  • Your driving record and claims history.
  • Where you live and how much you drive.
  • Your age, gender, and marital status.
  • Your occupation.
  • The cost to replace the car you drive.
  • Your credit score.

A change in any factor can raise or lower your premium. This includes characteristics that change over time, such as the value of your home or auto.

For More Information, click here.

Teaching Suggestions

  • Ask students to make a list of major factors that most insurance companies use to calculate your premiums for home and auto insurance.
  • Have students talk with an insurance agent or financial planner to obtain recommendations about the types of insurance you may need for home and auto insurance.

Discussion Questions

  1. Why do insurance companies consider your credit score in determining your home and auto insurance premiums?
  2. In your opinion, what should be the main factors used to determine the amount a person pays for auto insurance?
Jan 6 2024

Artificial Intelligence in Forecasting Severe Storms, Hurricanes, Floods, and Wildfires

Government Accounting Office (GAO) found that machine learning, a type of artificial intelligence (AI) that uses algorithms to identify patterns in information, is being applied to forecasting models for natural hazards—such as severe storms, hurricanes, floods, and wildfires—that can lead to natural disasters. A goal is to improve the warning time for severe storms.

 GAO identified potential benefits of applying machine learning to weather forecasting, including:

  • Reducing the time required to make forecasts.
  • Increasing model accuracy.
  • Reducing the uncertainty of model output.

Forecasting natural disasters using machine learning GAO also identified challenges to the use of machine learning. For example:

  1. Data limitations hamper the training of machine learning models and can reduce accuracy
  2. A lack of trust and understanding of the algorithms as well as concerns about bias
  3. Limited coordination and collaboration create challenges for fully developing some machine learning models.
  4. Workforce and resource gaps also create challenges.

For More Information, click here.

Teaching Suggestions:

  • Make a list of potential benefits of machine learning to weather forecasting in relation to insurance costs.
  • Make a list of potential dangers using machine learning in forecasting natural disasters in relation to insurance costs.

Discussion Questions:

  1. Do you believe that insurance premiums should be calculated based upon forecasting models for natural hazards. such as severe storms, hurricanes, floods, and wild fires? 
  2. What are some challenges to the use of machine learning in forecasting natural disasters?
Apr 1 2023

How you drive could save you money on car insurance

Many auto insurance companies offer policies that adjust what you pay based on how much you drive or how well you drive. Here are some things to know when deciding if this type of policy is right for you.

1.    Pay-by-the-mile policies

These policies charge you a base amount plus a fee for the number of miles you drive each month. Most companies measure this through a device attached to your car’s computer. If you have an older car without a connection, ask your company if you can take a picture of the car’s odometer instead.

Pay-by-the-mile policies might be good for people who work from home. Some companies offer a cap on the number of miles you drive each day so you don’t get charged too much for the occasional road trip.

2.    Usage-based policies

Usage-based insurance policies also use a device plugged into the car’s computer or a phone app to monitor how you drive. They look at where and when you drive, how fast you go, and your braking and acceleration habits, among other things.

Your insurance company uses that information along with other factors – such as your age, type of car, and driving record – to set your cost.

3.    Is it a good deal?

These types of policies could lower your premium cost if you drive safely or don’t drive a lot. Be sure to get an estimate and compare it to the cost and coverage of your current policy.

  • The National Association of Insurance Commissioners Drive Check tool can help you figure out if a usage-based policy could save you money.
    • The Federal Highway Administration says the average car is driven 13,476 miles a year, or 1,123 miles each month. If you usually drive less than that, a pay-by-the-mile policy might be a good choice.

4.    What about my privacy?

Here are some questions to ask when considering these types of policies:

  • What device will my insurer use to track my driving? What exactly will be monitored?
    • Do I want my company to have information about my driving?
    • Am I a good driver? Do I think my driving style will help lower my premium cost?
    • How much could I save?
    • Could that information be used after an accident?

For more information, click here.

Teaching Suggestions:

  • Ask students if they would consider pay-by-the-mile auto insurance policy. Why or why not?
  • Ask students to talk to friends or relatives who might have pay-by-mile insurance policy.  What can you learn from their experience?

Discussion Questions:

  1. What type of drivers should consider pay-by-the-mile auto policy?
  2. Under what circumstances pay-by-the-mile auto insurance policy could lower your premium?
Dec 17 2022

Personal Finance Simulations for Budgeting and Investing

Question:  What is a Personal Finance simulation? 

Answer:  A Personal Finance simulation allows students to fine-tune their decisions when they encounter real-life scenarios while taking a Personal Finance course. 

The authors of Personal Finance, 14e and Focus on Personal Finance, 7e have partnered with StockTrak.com to provide students with an interactive learning experience before they leave the classroom.   

The simulation that accompanies the Kapoor Personal Finance texts includes two components–a personal budgeting simulation and an investing simulation.

The Budgeting Simulation

  • Students assume the role of a full-time employee or part-time employee living on their own.
  • Over a virtual 12-month period, students review their estimated income and expenses, create monthly budgets and savings goals, and try to build an emergency fund. Each month takes about 20 minutes to complete.
  • Each month students manage their checking, savings, and credit card accounts as they deal with life’s expected and unexpected events that affect their budget.  
  • Within the simulation, additional personal finance tutorials are available to make sure students are learning about budgeting, banking, credit, employment, taxes, insurance, and more.
  • A class ranking based on net worth, credit score, and quality of life keep the students fully engaged and professors informed of each student’s progress.

The Investing Simulation

  • Students receive a virtual $25,000 in a brokerage account.
  • They can research U.S. stocks, ETFs, bonds and mutual funds and create their own investment portfolio.
  • All investment trades are based on real-time market prices.
  • Within the simulation, interactive tutorials help students get started and provide additional information during the simulation.
  • Students can monitor their performance versus their classmates.  At the same time, professors can track each student’s progress.

And BEST of ALL, with the new partnership between Stock-Trak and McGraw Hill, classes using the Kapoor Personal Finance textbook get a 50% savings when students register for the simulation – only $9.99 per student instead of retail price of $19.99.

Teaching Suggestions

  • Visit StockTrak.com/kapoor to learn more about the Personal Finance Budgeting and Investing Simulation.  You can learn even more by watching a short video or accessing the Kapoor demo materials located toward the bottom of the above site. 
  • It’s easy to get started.  All you need to do is access the above site, register your classes for Spring 2023, and indicate the dates you want your student to have access to the Personal Finance Simulation.  The site will generate a unique link for you to give to your students.
Aug 27 2022

Preparing for Hurricanes

In 2022, the National Oceanic and Atmospheric Administration (NOAA) predicted that 14 to 21 named storms would develop over the Atlantic Ocean during the hurricane season, which runs from June through November. The agency said there could be six to 10 hurricanes including three to six major hurricanes.  Colorado State University experts forecast 20 named storms this year with 10 becoming hurricanes, including five major hurricanes. The good news is that we have time to prepare.

Here are some tips to protect your home and belongings:

  • Consider buying flood insurance. Flood damage isn’t covered by your home insurance. Don’t wait too long: It typically takes 30 days for flood policies to take effect.
  • Write a family disaster plan. Start on the TexasReady.gov website
  • Decide where and how far you’ll go if you evacuate.
  • Build a “go-kit” with food, medicine, clothes, pet food, and other vital supplies.
  • Make a room-by-room home inventory. This could help later if you file a claim with your insurance company.

For more information, click here.

Teaching Suggestions

  • Ask students to search for flood maps at FEMA’s Flood Map Service Center.  Is their area prone to hurricanes and floods?
  • Ask students to use FEMA’s Historical Flood Risk and Cost data to help evaluate the flood risk in their area.
  • Ask students to talk to their home insurance agent about their need for a flood insurance policy from the National Flood Insurance Program.  (If their agent does not sell flood insurance, call 1-800-427-4661.)
  • Ask students if their families are prepared for the hurricane season?  What preparation have they made, if any?

Discussion Questions

  1. Is flood insurance worth its cost?  Who must purchase flood insurance?
  2. Why isn’t flood damage covered by a standard home insurance policy?
  3. Why are flood maps difficult to keep up to date?
  4. What factors determine the cost of a flood insurance policy?