Section 5 Topic 1: Insurance Principles
professor penny
The general goal of insurance is to protect your wealth, to keep you from losing wealth.
Learning goals
By the end of this topic, you should be able to:
- Explain insurance and risk management
- Describe the role of insurance companies
section outline
Topic 1 Insurance Principles
1.1 Insurance and the Management of Risk
1.2 Role of Insurance Companies
Content Videos
The Gus A. Stavros Center for the Advancement of Free Enterprise and Economic Education at Florida State University is pleased to offer these resources. They were created by Teaching Professor Joe Calhoun.
The captions were created by a computer program so sometimes they may be inaccurate or contain spelling or grammatical errors.
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key point
The general goal of insurance is to protect your wealth, to keep you from losing wealth.
Certified peer mentors
Mentors give presentations to groups about our topics. They also assist other students in personal finance matters and answer questions during individual meetings. To schedule a presentation or an appointment to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.
a topical story
Isabella made her way over to Landis Green. The weather was finally nice for the first time in a while, and she was meeting Jamal and Diego for coffee before their Young Professional Alliance meeting this afternoon. Excited to show off her new iPhone, Isabella hurried over to where she saw the guys sitting under the shade of a big tree.
“Look here, gentlemen!” She said proudly, holding up her new phone. “Finally, a new one.”
“Good. That cracked screen was becoming a hazard. I was scared to touch it. Not to mention that phone was really slowing down.” Diego said.
“I know, but don’t worry, I bought insurance this time. Only $10 a month and they’ll fix it for me. Now my awful habit of dropping it won't be a problem.”
“$10?” Jamal started. “Seems like a lot for something you may not ever use.”
“Yeah, you’re right,” Diego said, “You could probably get a cracked screen fixed for 50 bucks.” Diego had always been the frugal one of the bunch. Leave it to him to find everyone a bargain.
“But insurance is like, the thing you do, right? I was trying to be responsible.” Isabella said, much less excited than she’d been minutes before.
“Well, yes, insurance is important in a lot of scenarios, but sometimes it's cheaper to accept the risk than to insure yourself against it. You have to think if the risk is equivalent to the amount you’re paying for that insurance. In your case though—” Jamal started.
“It’s probably smarter to not have it” Isabella finished.
“Right, Sorry Izz, I’m sure you can cancel it easily. I think you’re just a bit over insured. But when you buy a car? Definitely worth it.”
“And kinda required,” Diego said laughing.
“Right, right, true,” They sounded in unison. “Anyway, let’s see it!”
(Story created by Jasmine George, Ana Siqueira, Courtney Swanson and Alex Thompson)
related books
These books have a chapter directly related to this topic. Please read them for more details.
Chapter 7: Ramsey, Dave. Dave Ramsey's Complete Guide To Money. Ramsey Press, 2012.
Chapter 5: Hogan, Chris. Retire Inspired: It's Not an Age, It's a Financial Number. Ramsey Press, 2016.
additional resources
https://www.igrad.com/videos/why-buy-insurance-student Links to an external site.
https://budgeting.thenest.com/contribution-principle-insurance-32635.html Links to an external site.
https://www.annuity.org/financial-literacy/ Links to an external site.
other books
Malkiel, Burton. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing. W. W. Norton & Company, 2020.
Wood, William. Getting a Grip on Your Money: A Plain & Simple Christian Guide to Managing Personal Finances, Eliminating Debt, Spending, Saving & Giving, Investing for the Future. Intervarsity Press, 2002.
Bach, David. Smart Women Finish Rich, Expanded and Updated. Currency, 2018.
Bogle, John. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns. Wiley, 2017.
Clason, George. The Richest man in Babylon. Dauphin Publications Inc., 2018.
Hill, Napoleon; Arthur R. Pell. Think and Grow Rich: The Landmark Bestseller Now Revised and Updated for the 21st Century. TarcherPerigee, 2005.
Lynch, Peter; John Rothchild. Beating the street. Simon & Schuster, 1994.
Kobliner, Beth. Get a Financial Life: Personal Finance in Your Twenties and Thirties. Simon & Schuster, 2017.
Orman, Suze. The 9 Steps to Financial Freedom: Practical and Spiritual Steps So You Can Stop Worrying. Currency, 2006.
Bach, David; John David Mann. The Latte Factor: Why You Don't Have to Be Rich to Live Rich. Atria Books, 2019.
Hogan, Chris. Everyday Millionaires: How Ordinary People Built Extraordinary Wealth―and How You Can Too. Ramsey Press, 2019.
important government sites
Other:
Social Security Administration (Links to an external site.)
ECO 3041
ECO 3041 Personal Finance is a 3 credit hour course offered in-person and online each fall and spring semester. The purpose of the course is to provide you with the specific content knowledge of personal finance and to give you opportunities to start using that knowledge to create good habits, make better financial choices, and live a more fulfilling life. It covers material for all 33 topics listed here. See Professor Calhoun's most recent syllabus here. ECO_3041_SP21.pdf Download ECO_3041_SP21.pdf
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Links to an external site.
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To schedule a presentation or an appointment with a certified peer mentor to discuss your situation email coss-financialpeermentor@fsu.edu or visit the Stavros Center financial wellness page.