12.7 Insurance and Consumer Protection

Notes

Insurance protects against large financial losses by pooling risk: many people pay small amounts so that the few who suffer losses can be paid.

• Premium: the regular payment for coverage. Deductible: what you pay before insurance pays. Copay: a fixed fee for a service; coinsurance: a percentage of costs you share after the deductible.
• A higher deductible usually means a lower premium.
• Types: health, auto (most states require liability coverage for damage you cause others), renters and homeowners, life and disability.
• Worked example: with a $500 auto deductible and $3,000 of covered damage, you pay $500 and the insurer pays $3{,}000 - 500 = 2{,}500$ dollars.
• Protect yourself from identity theft and scams: do not share passwords or Social Security numbers in response to unexpected calls, texts or emails (phishing); check bank statements and credit reports.
• The Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Act of 2010, oversees consumer financial products. The FTC handles complaints about fraud and identity theft.