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Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 1 Chapter 19 Insurance Law Chapter 19 Insurance Law 19-1 19-1Insurance Fundamentals 19-2 19-2Property and Casualty Insurance 19-3 19-3Life and Social Insurance
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 2 Chapter 19 19-1 19-1Insurance Fundamentals Why Have Insurance Contractual agreement that protects against loss (loss may be death, property damage from earthquake or injury) When one party pays to compensate for harm that party is said to indemnify or make good. The party who agrees to indemnify or make good is the insurer The party covered or protected is the insured
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 3 Chapter 19 WHY HAVE INSURANCE? Beneficiary-the recipient of the amount to be paid by the insurer Policy –written contract of insurance Face Value-the stated maximum amount that could be paid if the harm a person is insured against occurs Premium-the consideration or payment for a contract of insurance Risk-the potential for loss arising from injury to or death of a person for damage or destruction of property from a perilm
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 4 Chapter 19 What is the purpose of insurance? To protect against loss or damage
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 5 Chapter 19 COMMON TYPES OF INSURANCE Life insurance Term insurance Whole life insurance Endowment life insurance Fire insurance-for loss or damage due to a fire(and smoke as well) Can be increased to cover losses due to perils such as rain, hail,earthquakes and windstorm Continued on the next slide
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 6 Chapter 19 COMMON TYPES OF INSURANCE Casualty Insurance -coverage for a variety of situations in which the intentional negligent or accidental acts of other or mere chance may result in loss. Insurance against criminal activity- identifiable criminal behavior such a embezzlement, burglary, fraud, theft robbery and larceny. Automobile insurance Liability insurance Disability, accident, or health insurance Social Insurance Continued on the next slide
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 7 Chapter 19 COMMON TYPES OF INSURANCE Marine insurance-loss of damage to vessels, cargo, and other property exposed to the perils of the sea (perhaps the oldest type of insurance dating back to ancient times) Inland marine insurance- covers personal property only white was being transported anywhere but on the ocean-today it covers the property wherever it is located whether in transport or not Fidelity and surety bonding insurance- coverage against finical loss cause by dishonesty-embezzlement or failure of one person to perform a legal olbigation to another such as constructing a building as promised. Often know as surety bonds.
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 8 Chapter 19 Name the seven major types of insurance. Life Fire Casualty Social Marine Inland Marine Fidelity and Surety Bonding
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 9 Chapter 19 WHAT IS AN INSURABLE INTEREST? A person with contractual capacity can acquire insurance if he or she would suffer loss if the insured property is damage or destroyed or if the insured person is injured or dies Insurable interests in property- any person that would suffer a direct and measurable monetary loss if property were damage or destroyed has an insurable interest in that property ( a person may not insure property, then sell it, and expect to be paid if the property is later damage or destroyed) Insurable interests in life -a person has an insurable interest in her or his life-everyone how meets the insurance company’s requirements and is legally competent may acquire a life insurance policy-creditors may insure their debtors, business many insure their partners or key employees and husband and wives may insure one another.
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 10 Chapter 19 What is an insurable interest? The reasonable potential to sustain loss if the insured property is damage or destroyed or if the insured person is injured or dies
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 11 Chapter 19 19-2 19-2 Property and Casualty Insurance Property insurance-The general type of insurance intended to indemnify for harm to the insured personal or real property brought about by perils such as fire, theft and windstorm Casualty Insurance- the type of insurance that indemnifies for losses resulting from accident, chance or negligence (worker’s compensation, disability insurance, and health insurance) Some overlap between the two Exclusions-exceptions in a policy- (losses due to war, terrorism invasion, rebellion, nuclear disaster, deprecation and pollutions
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 12 Chapter 19 PROPERTY AND CASUALTY INSURANCE Fire insurance-type of insurance that covers the direct loss to property resulting from fire, lightning strike, or removal from premises endangered by fire Standard fire policy-basic coverage specified by law Endorsements to the standard fire policy-Riders to add coverage Proving a loss should be indemnified-3 steps 1.Show that there was an actual fire-glow or flame 2.Fire has to be hostile-(fire started by accident, negligence or a deliberate act uncontrolled by the insured or friendly fire (a fire in its intended place that become uncontrollable 3.The hostile fire has be to the nature foreseeable cause of the loss
Law for Business and Personal Use © South-Western, a part of Cengage Learning Coinsurance - a clause in a fire insurance policy that requires the insured to maintain coverage equal to a certain percentage of the total current balance of the insured property Inland marine insurance-loss to most personal property white it is being transported across land or inland waterways Liability insurance-a type of casualty insurance that indemnifies against personal injury or property damage claims for which the insured is legally responsible (major part of most automobile insurance policies) Slide 13 Chapter 19
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 14 Chapter 19 AUTOMOBILE INSURANCE Liability coverage Medical payments coverage Collision and comprehensive coverage Uninsured and underinsured coverage No-fault insurance
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 15 Chapter 19 19-3 LIFE INSURANCE Exemptions Incontestability clause Grace period Additional coverages
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 16 Chapter 19 SOCIAL INSURANCE Retirement insurance Survivor’s insurance Disability insurance Health insurance Medicare
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 17 Chapter 19 PREVENT LEGAL DIFFICULTIES Be honest in answering all questions on insurance applications. A false representation or warranty or concealing a material fact may allow the insurance company to void the policy rather than pay for the loss. Carefully read the insurance contract to be familiar with all its terms. Pay special attention to stated exclusions and conditions. Select your potential insurers with caution as to their financial reserves and their reputation for good service in case of loss. Continued on the next slide
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 18 Chapter 19 PREVENT LEGAL DIFFICULTIES Be aware of the expiration dates, cancellation terms, and renewal provisions of your policies. Move quickly to acquire other coverage if a policy lapses or is terminated. One of the most frequently incurred and potentially disastrous liabilities results from a lawsuit based on bodily injury and property damage in an automobile accident. To protect yourself, carry adequate automobile liability coverage. Continued on the next slide
Law for Business and Personal Use © South-Western, a part of Cengage LearningSlide 19 Chapter 19 PREVENT LEGAL DIFFICULTIES If you are sued as a result of an accident and you have complied with the policy requirements, your insurer is required to defend you. Thus, if you are involved in an accident, no matter how trivial it may seem to you, report it to your insurer immediately. If you are self-employed, report your income fully so as to be eligible for the maximum amount of social security benefits.
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