3What is an Insurance Policy? A contract with an insurance company that spells out what losses are covered, what the policy costs, and who receives payments if a loss occurs.
4What is basic insurance? Insurance is a protection against possible financial loss, and gives you peace of mind.
5Who sells InsuranceInsurance Companies sell insurance. An insurance compny, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk.
6The Purpose of Insurance The purpose of Insurance is to Provide Economic Protection against losses that may be incurred due to a chance happening or event, such as death, illness, or accident.
7Life and Health Insurance Importance Based on Risk PoolingIndividuals share the financial risks they faceIndividuals “pool” the financial risks associated with death.
8What people put into the pot Premium: The amount that everyone puts into the potThe size of your premium depends on the probability of death.Actuaries: Statisticians who specialize in estimating the probability of death
9What’s provided upon becoming deceased Face Amount or Face of Policy:The amount of insurance provided by the policy at death.Owner of a policy is referred to as the “policy holder.”Beneficiary:Individual designated to receive the insurance policy’s proceeds upon the death of the insured.
10Earnings Multiple Approach Purchasing life insurance that covers from 5 to 15 times your annual gross income.Earnings Multiple Approach:Used to figure out exactly how much insurance this amount to.
11Large-Loss PrincipleIt is wise to pay for small losses out of your own pocket and purchase insurance to cover those large losses that will ruin your financial plans.The purpose, or the meaning of insurance is to cover financial catastrophes.
12Computation for Life Insurance Needs Life Income stream X (1- % of family) X Earnings Multiple insurance to be replaced income spent Needs= on deceased’s needs)
13Needs Approach Immediate needs at the time of death Debt Elimination FundsImmediate Transitional FundsDependency ExpensesSpousal Life IncomeEducational Expenses for the ChildrenRetirement Income
14Two Major Types of Life Insurance: Term & Cash-Value
15Term InsuranceA type of insurance that pays your beneficiary a specific amount of money if you die while covered by the policy.Set amount of coverage for a set amount of years
16Cash-Value InsuranceTwo Components:Life InsuranceSavings Plan
17Contract ClausesContract clauses are provisions or stipulations that appear in your insurance policy
18Beneficiary Provision: Beneficiary Provision: Person designated to receive death benefits when you die.
19Coverage Grace Period: Coverage Grace Period: Late-payment period for premiums during which time the policy stays in effect and no interest is charged. If payments still aren’t made, the policy can be cancelled after the grace period.
20Loan Clause:Loan Clause: A Clause that provides the right to borrow against the cash value of the policy at a guaranteed interest rate.
21Nonforfeiture Clause: Nonforfeiture Clause: The choices available to policyholders who miss premium payments, causing the policy to lapse. Common to exchange the policy’s cash value for a paid up policy with a reduced face value.
22Policy Reinstatement Clause: A clause that provides the right to restore a policy that has lapsed after the grace period has expired. Generally, reinstatement is provided for within a specified period.
23Change of Policy Clause Provides the right of the policyholder to change the form of the policy.For ExampleChange from a continuous-premium whole life policy to a limited-premium whole life policy.
24Suicide ClauseInsurance company's will not pay off for suicide deaths that occur within the first two years of the contract.
25Payment Premium Clause Defines how you pay your premiums
26Incontestability Clause States the insurance company cannot dispute the validity of the contract after a specified period of time, usually two years.Protects your beneficiary against policy cancellations due to error, concealment, or innocent misstatement made by the insured on the original application.
27RidersSpecial Provisions that may be added to your policy, often at an additional cost, to provide extra benefits or features to a policy in order to meet your specific needs.
28Settlement or Payout Options Alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured.
30Traditional Net Cost(TNC) Method A method of comparing insurance costs that sums up the premiums over a stated period (usually 10 or 20 years) and subtracts from this the sum of all dividends over that same period.
31Interest-Adjusted Net Cost (IANC) Method or Surrender Cost Index A method of comparing insurance costs that incorporates the time value of money into its calculations.A method for comparing insurance costs.
38Health Care Choices Fee For Service or Traditional Indemnity Plan You are reimbursed for all or part of your medical expenditures, & have a good deal of freedom to choose your doctor or hospital.Managed Health Care or Prepaid Care PlanMost of your expenses are already covered and don’t need to be reimbursedLimited to receiving healthcare from specific doctors, hospitals, & clinics.
39Government Sponsored Health Care Plans Government Sponsored Plans fall into two categories: State Plans: Which provide for work related accidents & illness and Federal Plans Such as Medicare & Medicaid.
40Workers Compensation Laws State laws that provide payment for work-related accidents and illness.
41MedicareA government insurance program enacted in 1968 to provide medical benefits to the disabled and those over 65. It is divided into two parts.Part A- Hospital InsurancePart B- Supplemental Medical Insurance
42Medigap Insurance Plans Insurance sold by private insurance companies aimed at bridging gaps in Medicare coverage.
43MedicaidA government medical insurance plan for the needy.
45Flexible Spending Accounts A savings plan established by an employer that allows each employee to have pretax earnings deposited into a specially designated account.
46Health Savings Accounts(HASs) Allows individuals to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.
47COBRA & Changing JobsIf you decide to leave a company, or lose your job, you will be given the opportunity to continue your health insurance coverage for 18 months to 3 years after you leave the company.
48Choosing No Coverage Called “Opting Out” When employees opt out they can receive a minimum of $300 in cash or other benefits for doing so.
49Disability InsuranceHealth insurance that provides payments to the insured in the event that income is interrupted by illness, sickness, or accident.
50Long-Term Care Insurance Insurance that’s aimed at covering the costs associated with long-term nursing home care, commonly associated with victims of stroke, chronic illness, or Alzheimer's disease, or those who can no longer manage to live on their own.
52Protecting Your HomeNeeded for every peril, that is, there was an insurance policy to cover fire, theft, windstorm damage, and so forth. Homeowner’s insurance simplified the process by offering protection against multiple perils in one overarching policy.Gives families peace of mind.
62Personal Automobile Policy (PAP) A standardized insurance policy for an individual or family. Contains both liability and property damage coverage, and each package of insurance includes four basic parts.Liability CoverageMedical Expenses CoverageUninsured Motorist’s Protection CoverageDamage to your automobile coverage
63Liability Coverage Split-Limit Coverage Combined Single Limit Allows for either separate coverage limits for bodily injury and property damage, split-coverage limits per person, or both.Combined Single LimitThe coverage applies to a combination of both bodily injury and property damage liability.
64Medical Expenses Coverage The medical expenses coverage pays all reasonable medical and funeral expenses incurred within three years of an accident by the policy holder, his or her family members, and other persons injured in an accident involving a covered automobile.
65Uninsured Motorist’s Protection Coverage Coverage against injuries caused by hit-and-run drivers or by an uninsured motorist or a negligent driver whose insurance company is insolvent.
66Coverage for Damage to Your Automobile Includes both collision loss and other than collision loss, generally called comprehensive physical damage coverage.Collision LossProvides benefits to cover damages resulting from an accident.
68Determinants of the Cost of Automobile Insurance The Type of AutomobileThe use of your automobileThe driver’s personal characteristicsThe driver’s driving recordWhere you liveDiscounts that you qualify forYour insurance credit score
69How to Keep Your Costs Down Shop comparativelyConsider only high-quality insurersTake advantage of discountsBuy a car that’s relatively inexpensive to insureImprove your driving recordRaise your deductiblesKeep Adequate Liability Insurance
71Types of Health Insurance Include: Government Sponsored Plans fall into two categories: State Plans: Which provide for work related accidents & illness and Federal Plans Such as Medicare & MedicaidTypes of Health Insurance Include:Hospital InsuranceSurgical InsurancePhysician Expense InsuranceMajor Medical Expense InsuranceYou need enough homeowner’s insurance to cover the replacement of your home in the event of a complete loss.Keep your automobile costs down follow the guidelines outlined in our presentation. Things like keep a good driving record or improve your driving record.