Attention: Money 101 will no longer be available after May 31, 2021. After that time the Enrich financial literacy tool will be available at moving forward.

My Colorado Journey

My Colorado Journey My Colorado Journey logo
Sign In | Create an Account | Talk to Us | Need Help? | About CIC

Insurance - Head Matters


1. How Insurance Works

Now that you understand the basic concept of insurance and how it works, let’s explore specific types of insurance. Here’s a list of the most common types of insurance. We discussed these briefly in the Money Management unit and will explain each type in more detail later in this unit.

Types of Insurance
 Life Provides financial protection to a family when the insured dies
 Health Protects against financial loss caused by the costs of illness or accident
 Homeowner's Protects the homeowner from loss caused by fire, theft and storm damage to the structure and the possessions within the structure
(A liability-insurance feature protects the homeowner from loss when someone is injured on the homeowner’s property and sues.)
 Renter's Protects the renter from loss of personal possessions because of such risks as fire, theft or storm damage
 Automobile Provides financial protection to the owners, operators and occupants of an automobile in case of accidents or damages 
 Disability Provides income during a specified period when a person is unable to work because of illness or an accident
Property and Casualty Offers insurance coverage in the event that the actions or non-actions of an insured result in damage or destruction to another's property.   

Often, people are not able to purchase all types of insurance, so that have to choose what types of insurance they need most. Their decision will depend on their situation. The next exercise will help you start to make choices about the types of insurance you might need most.

T.J. is 25  years old, single, and has a good paying job, a car and a house. He’s self-employed and must buy his own health insurance. He has $5,500 to spend on all of his insurance for the year.

Look at the table below, and choose the insurance coverage types you think T.J. should purchase.

 Type of Insurance  Annual Premium Average Loss Probability of One Claim 
 Automobile $1,400   $2,500 per claim, but
actual loss could be
$350,000 to $500,000
if you are liable for
injuries of others
3 out of 10 during covered year
 Health  $3,600  $1,500 per year per
claimant, but maximum
loss depends on illness
and could run into
hundreds of thousands
of dollars
8 out of 10 during covered year
 Disability  $500 $20,000 per year for
rest of life if disabled
during covered year
1 out of 40 in age and
occupational brackets
during covered year
Jewelry valued at $5,000  $115  Loss is value of jewelry: $5,000 1 out of 18 during covered year
Homeowner's $500 for house and
furnishings valued
at $150,000
$3,000 2 out of 10 during covered year


Adobe Flash Player Required

Get Adobe Flash player

Amount and Probability
Remember, it is important to consider the amount of possible loss and the probability of loss when you decide which types of insurance to buy because both affect the economic impact to you of losses.  This is one of the major reasons for purchasing insurance. 

profile photo


My Profile
My Dashboard

Current Course:


Sign In to track your progress.

my toolbox

my toolbox

  • Insurance Information Institute

    Please sign in

    In order to save a page/activity in either your toolbox or favorites you must first be logged in.