Presentation on theme: "Business Law Essential Standard 4.00 Objective 4.02"— Presentation transcript:
1 Business Law Essential Standard 4.00 Objective 4.02 4.02: Understand types of insurance.
2 Insurance Defined Premiums What are premiums? What type of insurance types have them?Insurable Interest-Financial ResponsibilityWhat determines whether there is an insurable interest?Risk- What is risk and how does it affectPremiums – the fee paid to an insurance company in return for the insuring of property and casualty insurance and life and health insurance to individuals or businesses.b) Insurable Interest-Financial Responsibility-is said to exist whenever the occurrence of a specific event such as fire or theft, results in a financial loss to a person organization.c) Risk-a risk exists whenever there is uncertainty about the outcomed) Peril-A peril is the cause of a loss such as a fire, flood, theft and earthquake that can cause a loss of life to property and people.e) Hazard-A hazard is a condition that makes a peril more likely to happen or that increases the seriousness of a lossBB30 Business Law 4.02 Summer 2013
3 Insurance Defined (Continued) Exclusions1. What does exclusion mean?2. How does exclusion apply to insurance?3. Why do insurance companies put exclusions in their policies?Claims1. What is a claim in regards to insurance?2. How does a policy holder enter a claim?Insurance- is a social and contractual device that transfers the risk of financial loss from individuals or businesses to an insurer.Insurance Policy- is a document issued by an insurance company to its policyholder that provides details about what is coveredExclusions-provision in an insurance policy eliminating coverage for certain risks or limiting coverageClaims-notice by the insured to the insurance company that a loss has occurred and demand for payment for the lossLoss-occurs when an asset is destroyed or can no longer be used.Depreciation: a decline in value. When there is a reduction in quantity, quality, or value of something.BB30 Business Law 4.02 Summer 2013
4 Insurance Defined (Continued) Deductibles1. What are deductibles?2. What is the purpose of a deductible for the policy holder?Insured1. What or who is the insured2. Is the insured always the policy holder or not?Insurer1. Who is an insurer?2. Is the insurer a business/corporation or an individual?k) Deductibles-a portion of a covered loss that is not paid by the insurerInsured-one for whom insurance is written (named insured)Insurer-An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individualBB30 Business Law 4.02 Summer 2013
5 Automobile Insurance (http://www. ncdoi Personal Auto Policy (PAP)Why have a PAP?What does it protect you from?Liability Coverage-What are the two types?Property Damage CoverageWhat is an example of this type of coverage?Collision CoverageComprehensive Coverage-Other than CollisionHow is this different from collision?Automobile InsurancePersonal Auto Policy (PAP)-introduced in Other policies prior however the PAP is written in plain language without technical terms and is easier to understand.Liability Coverage- provides protect when you are held legally responsible Coverage for Bodily Injury and Property Damage caused by an auto accidentProperty Damage Coverage-Physical injury to or destruction of or loss of use of tangible property such as other vehicles, buildings, telephone poles, fences etc.Collision Coverage-covers your vehicle for damage caused by impact with another vehicle or object or overturn of your vehicle.Comprehensive Coverage-Other than Collision-provides protection fromtheft, fire, windstorm, hail, flood, falling objects, collision with a bird oranimal. (Exceptions-road damage to tires, mechanical breakdown or wearand tear on a vehicle)BB30 Business Law 4.02 Summer 2013
6 Automobile Insurance Coverage Medical Payment Coverage(Med Pay)What is medical Payment Coverage?Whom does this coverage pay for in the case of a covered accident?Uninsured Motorist CoverageWhat is uninsured motorist coverage?What are two types of losses that this type of coverage will cover?Underinsured Motorist CoverageWhat is underinsured motorist coverage?Is this coverage mandatory in North Carolina?Miscellaneous Coverage-Towing, Rental Vehicle, Custom CoverageAre these types of coverage mandatory for automobile insurance?What does towing coverage provide?What does rental coverage provide?What does custom insurance provide?f. Medical Payment Coverage(Med Pay)-pays for medical expenses for you,your family members and passengers in your car as a result of an accident.Uninsured Motorist Coverage-pays if you are struck by someone who does not have insurance. Also will pay if you are a victim in a hit-and-What is run accident.Underinsured Motorist Coverage-pays from your coverage if you are in an accident with another motorist that has lower liability coverage than your coverage. Your underinsured coverage will pay the difference. Not required in North Carolina, but it is suggested.Miscellaneous Coverage-Towing, Rental Vehicle, Custom CoverageThis coverage is elective coverage by the insured that provides specificcoverage for incidents requiring towing of the insured vehicle(s), providescoverage for one of a kind vehicles, classic autos or other special vehiclesRental coverage provides coverage for covered accidents to the insured’s vehicle.Custom insurance provides for documented value of a custom auto or motorcycle or antique or one of a kind vehicles.BB30 Business Law 4.02 Summer 2013
7 Motorcycle InsuranceLiability, Collision, Uninsured/Underinsured and Towing Coverage is identical to a regular automobile policy. It is important to have a special coverage for a customized motorcycle. Traditional motorcycle coverage will only cover the “stock value” not any customizations are added equipment.BB30 Business Law 4.02 Summer 2013
8 Boat InsurancePleasure boat policies or endorsements often state that coverage includes "the boat and all permanently attached equipment". The policy may then list items that are not permanently attached, but are covered as either part of the boat's value, or as a separate limit of insurance.Items that may or may not be considered "permanently attached" under a policy include:AnchorsBatteriesBilge pumpsBoat furnitureBoat and motor coversCook stovesDeck chairsDepth findersDetachable canopiesEmergency signaling devicesFire extinguishersFittingsFuel tanksHornsLife preserversLightsBB30 Business Law 4.02 Summer 2013
9 Property Insurance Homeowners Insurance What is homeowners insurance? Why is it necessary?Coverage for PropertyThere are (4) basic coverage types within a homeowners policy:Coverage A is for dwelling. What constitutes a dwelling?Coverage B is for other structures. What are other structures?Coverage C is Personal Property. What items might you find listed?Coverage D is for loss of use. What is loss of use and what if anything does this coverage pay for?Homeowners Insurance-is designed to protect the physical assets owned, leased, rented or used by individuals and families.Coverage for PropertyCoverage A-Dwelling-located on the residence premises including any attached structures.Coverage B-Other structures (such as a detached garage, workshop, swimming pools, fences and gazebos)Coverage C-Personal Property Coverage-is anything other than real property (land or anything attached to it). Basically clothing, furniture, televisions. Exceptions: Special items such as money, jewelry, firearms, silverware and other high value metals have loss value limits.Coverage D-Loss of Use-Provides money for you and your family to live elsewhere when you cannot live in your home because of a covered loss.BB30 Business Law 4.02 Summer 2013
10 Homeowner’s Exclusions Earth MovementWhat is earth movement?Water DamageWhat is water damage?Why do most homeowners policies not provide water damage coverage from flooding?Power FailureWhat constitutes power failure?Why don’t insurance policies provide coverage for this?NeglectWhat does neglect mean in regards to being a policy exclusion?Why is it an exclusion?Earth Movement-includes earthquakes, landslides, mudslides etc.Water Damage-damage to the home from flooding. (requires a separate flood insurance policy if the home is in a flood zone)Power Failure-if a utility interruption takes place that is not at the insured’s home, coverage is not provided.Neglect-if the insured fails to use reasonable means to protect the insured property from damage, the loss would not be covered.
11 Additional Types of Property Coverage Renters InsuranceWhat is renters insurance?Whom should purchase renters insurance?Do roommates living in the same house, apartment, condo etc., need to each have their own renters insurance?Fire InsuranceWhat hazards does fire insurance provide property coverage for.b. Renters Insurance-offers the same protection as a homeowners policy.Roommates each must have their own renters insurance policy.c. Fire Insurance-Coverage for losses to insured property resulting from fire or lighting, as well as any resulting smoke or water damage.BB30 Business Law 4.02 Summer 2013
12 Health Insurance Traditional Health Insurance (Major Medical Coverage) Annual DeductibleMajor Exclusions for CoverageGroup Insurance CoverageTraditional Health Insurance (Major Medical Coverage)- Contains basic coverage if a catastrophic loss occurs.To prevent the insured from having financial ruin from a long term illness or injury.Characterized by very high deductibles as high as $10,000 and low premiumsAnnual Deductible-a portion of a covered loss not paid by the insurer during the insured’s annual 12 month policy period.Deductible amount resets each policy year period.b) Major Exclusions for Coverage-Provision in an insurance policy eliminating coverage for certain risks or otherwise limiting the scope of coverage.Certain causes and conditions listed in the policy that are not covered. Maternity coverage, major elective surgeries are some examples.c) Possible lengthy waiting periods-is the time that elapses after the insured’s policy is active, before specific exclusions will be covered. (Ex. Maternity coverage)d) Group Insurance Coverage-coverage provided by a group which is normally the insured’s employer or other inclusive group.Coverage rates are based on the group’s “experience rating” so that each group pays according to it’s actual claim experienceAlmost sixty percent of Americans have group health insuranceBB30 Business Law 4.02 Summer 2013
13 Managed Heath Care HMO (Health Maintenance Organization) PPO (Preferred Provider Organization)HMO-(POS)Individual Insurance CoverageManaged Health Care1) HMO-Heath Maintenance Organization-group managed health insurance where will need to receive most or all of your health care from a network provider.HMOs require that you select a primary care physician (PCP) who is responsible for managing and coordinating all of your health Care2) PPO-preferred provider organization (PPO) is a health plan that has contracts with a network of "preferred" providers from which you can choose. You do not need to select a PCP and you do not need referrals to see other providers in the network.3)HMO-(POS)-The POS plan is like a combination of the HMO and PPO plans. You are required to designate an in-network physician to be your primary health care provider. You may go out-of-network if you choose, but in doing so, you will have to pay most of the cost yourselfIndividual Insurance Coverage-is available from most of the same insurer’s that provide group coverage at much higher rates. Less than nine percent of Americans purchase individual health insurance.BB30 Business Law 4.02 Summer 2013
14 Supplemental Health Insurance Cancer Insurance CoverageDental Insurance CoverageLong Term Medical CoverageVision Insurance CoverageMedigap CoverageDisability Insurance CoverageSupplemental Health Insurance CoverageCancer Insurance Coverage-Cancer insurance pays benefits only if you're diagnosed with cancer -- not for other illnesses -- and it doesn't cover all your treatment costs. It's designed to supplement, not replace health insurance2) Dental Insurance Coverage- available in group and individual plans.may have restrictions on certain services, such as orthodontic work. Many dental plans also have a maximum benefit of around $1,000 to $2,000 per year.may restrict coverage of pre-existing conditions3) Long Term Medical Coverage-provides for the daily custodial care as well as the long-term nursing care that an individual may need outside of the hospital.Vision Insurance Coverage-optometrists and ophthalmologists in a provider network offer eye exams, eyewear and other services covered by the vision insurance plan at no charge or at discounted fees compared with doctors outside the network.Medigap (Supplemental Coverage of 20%)-Medicare supplement (Medigap) insurance, sold by private companies, can help pay some of the health care costs that Original Medicare doesn't cover, like copayments, coinsurance, and deductibles.Disability Insurance Coverage-disability income insurance provides monthly benefits to a disabled wage earner to reimburse the wage earner’s income during a period of total or partial disability.BB30 Business Law 4.02 Summer 2013
15 Government Insurance Coverage MedicareMedicaidMedigapGovernment Insurance CoverageMedicare-(Federal)-is part of the federal Social Security program. Covers most individuals that are age 65 or older.Can also pay benefits to qualified disabled individuals under age 65 Covers individuals under age 65 who need long term kidney dialisis treatment or kidney transplantsMedicaid-(Federal-State)-provides health insurance coverage to low income groups. Coverage varies by each State.Medigap (Supplemental Coverage of 20%)-Medicare supplement (Medigap) insurance, sold by private companies, can help pay some of the health care costs that Original Medicare doesn't cover, like copayments, coinsurance, and deductibles.BB30 Business Law 4.02 Summer 2013
16 Life Insurance: Types Term Life Permanent Life Insurance Increasing Term LifeDecreasing Term LifeLevel Term LifePermanent Life InsuranceWhole LifeUniversal LifeVariable LifeOptional RidersAccidental Death and DismembermentTerm Life Insurance-provides coverage for a specific period such as 10 or 20 years. If the insured dies during the policy term, the death benefit amount is paid to the beneficiary. Benefit is lower premium that whole life, universal life policies for higher coverage.Increasing Term Insurance-Because mortality rates increase with age, the.likelihood of dying does too. Therefore the term insurance premiums alsoincreaseDecreasing Term Insurance- In the early years of a decreasing term policy, thedeath benefit will be the face amount of the policy when purchased. Thereafter, asyears pass, the death benefit will decline.Level Term Insurance-has a fixed annual premium for a fixed number of years.Permanent Life Insurancea) Whole Life Insurance-provides lifetime protection, accrues a cash value and has premiums that remain unchanged during the insured’s lifetime.b) Universal Life Insurance-Similar to whole life insurance, but it has flexible premiums that can be increased or decreased based on the insured’s needs.c) Variable Life Insurance-similar to universal life insurance but the insured can control where the policy cash value is invested with any capital gains tax liability.Life Insurance Optional Rider Coveragea) Dependent Children-This type of rider will generally provide level term coverage on the life of your children. Such riders are usually offered at one premium rate and may cover newborns and adopted children who can be added to the coverage without increasing the premium you pay.a) Dependent Children- Riders are attachments to existing policies for additional coverage for family members.This type of rider will generally provide level term coverage on the life of your children. Such riders are usually offered at one premium rate and may cover newborns and adopted children who can be added to the coverage without increasing the premium you pay.b) Spouse Rider-this type of rider will provide level term coverage on the life of the insurer’s spouse.c) Guaranteed Insurability- Guaranteed Insurability Option, often shortened to GIO, is usually added free to most term life insurance policies and means the policy can be altered without the need to reapply and prove your insurability.7) Accidental Death and Dismemberment Insurance-In the event of an accidental death, this insurance will pay benefits in addition to any life insurance but only up to a set amount total regardless of any other insurance held by same insurer, held by the insured.Dismemberment-Fractional amounts of the policy will be paid out if the insured loses a bodily appendage or sight because of an accident.BB30 Business Law 4.02 Summer 2013
17 Life Insurance: Pay Out Who collects on a Life Insurance Plan?BeneficiaryContingent BeneficiaryDismemberment-Fractional amounts of the policy will be paid out if the insured loses a bodily appendage or sight because of an accident.[8) Beneficiaries-Contingent Beneficiaries-a beneficiary is the recipient of the proceeds of the policy when the named insured dies.Contingent Beneficiary-A contingent (or secondary) beneficiary is entitled to the policy proceeds if the primary beneficiary has predeceased the insured. If there are multiple contingent beneficiaries and proceeds are to be distributed, they are distributed equally between the contingent beneficiariesCollecting Death Benefits-Generally, a beneficiary can apply for the proceeds simply by filling out the insurance company's claim form and submitting it to the company along with a certified copy of the death certificate.BB30 Business Law 4.02 Summer 2013
18 Life Insurance: Determining Cost Needs ApproachHuman Life ValueStatistical Basis for Life InsuranceMortality tablesMorbidity tablesCost factors-Needs Approach and the Human Life Value ApproachNeeds Approach-to determine the total financial requirements of the insured’s surviving dependent family.Assets such as existing life insurance, governmental benefits and other liquid assets are applied against the total financial requirementsHow much will it take for the insured’s family to liveHuman Life Value Approach-objective is to determine the total amount of income that will be lost when the primary earner dies.Insured's pay after taxes, estimated interest that could be earned over the insured’s expected working period.How much is a person worthStatistical Basis for Life InsuranceMortality tables provide probabilities based on deaths per 1,000 living that are expected to die in a given year. (Ex: A 17 year old male has a life expectancy of years or age 75.94)Morbidity tables show the rate of disease, illness or sickness among groups of people according to age or other factors such as gender or occupation.BB30 Business Law 4.02 Summer 2013
19 Insurance Fraud Automobile Repair Billing of Medical Services Automobile AccidentProperty Claims AdjustingReport any suspects of Fraud to the NC Department of Insurance and your local law enforcement agency!Insurance Fraud-insurance comes in many forms. Some of the types that routinely occur are below. The criminal charges for this type of fraud is usually a felony classification in North Carolina.Automobile RepairReview all repair shop paper work carefully. Concerns noted in this area may involve one or more of the following:• Falsely reporting lost or damaged parts• Billing for excessive final cost• Providing final statement containing false and/or unauthorized charges• Charging for genuine parts when aftermarket or junkyard parts were actually used• Charging for new parts when bonding or pounding• Referring customers to medical or legal offices for a feeReport any suspects acts of fraud to the NC Dept. of Insurance and your local law enforcement agencyBilling of Medical ServicesFraudulently billing the consumer, his or her insurance company and/or public programs (Medicare, Medicaid, etc.) for:• Treatment not provided or provided by someone other than doctor• Alternative treatment provided• Tests or supplies not conducted or provided• Cancellation charge for unscheduled visits• Charges for office visits not made• Referral fees for services not rendered• Unnecessary lab or other testingReport incidents to your insurance provider, the NC Depart. Of Insurance, Medicare or Medicaid or whomever was responsible for the bill payment of insurance coverage.AUTOMOBILE ACCIDENTSIndividuals and/or organized accident “rings” that stage auto accidents involving one or more of the following:• Sudden stops in front of you for no reason• Disregarding or giving up right of way to cause an accident• No real accident – occurred on paper only with phony drivers and passengers – more popular now due to less of a chance of actual injury and less likelihood of police involvement• Claims that list drivers, passengers, witnesses who do not exist and who claim excessive injuries – especially when compared to vehicle damage• Driver has temporary vehicle registration and there is prior damage to one or both vehicles• Unsolicited referrals or contacts by, from or to body shops, legal offices and medical offices• Fraudulently reporting vehicles as stolen or vandalized in order to collect insurance moneyReport any incidents of suspected fraud involving auto accidents to your local law enforcement agency, the NC Highway Patrol or the NC Department of InsuranceProperty Claims AdjustingThis type of fraud has been extremely prolific in North Carolina due to the recent hurricane-related concerns.AdjustingFraudulent claims adjusting usually involves illegal or questionable methods such as:• Operating as an adjuster without the required licenseLicense Adjuster requests that his or her name be the payee of the insurance checkAdjuster requests that the payee endorse the insurance check over to him or herAdjuster handles all business in person, has no telephone number, address or other means of contact, and avoids use of mailClaim check larger than cost of repairs madeInvoices include charges for services not rendered or for repairs not madeVictims of this type of fraud should first contact their insurance agent to determine if the adjuster was their authorized representative, then contact local law enforcement and the NC Dept. of Insurance.BB30 Business Law 4.02 Summer 2013
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