Personal Insurance and Employee Benefits

Insurance A contractual arrangement that protects against loss. When one party pays to compensate for harm done, that party is said to indemnify, or make good, the loss to the suffering party. The party who agrees to indemnify is the insurer. The party covered or protected in the insured. The recipient of the amount to be paid is the beneficiary.

Insurance The written contract of insurance is called a policy. The face value of a policy is the stated maximum amount that could be paid if the harm a person is insured against occurs. The consideration for a contract of insurance is called the premium. The possible loss arising from injury to or death of a person or from damage to property from a specified peril is called the risk.

Life Insurance A contractual arrangement under which an insurer promises to pay an agreed-upon amount of money to a named party upon the death of a particular person. Three common types of life insurance –Term –Whole Life –Endowment Life

Term Life Written for a certain number of years If the insured dies within the policy term, the beneficiary receives the face value of the policy. If the term ends before the insured dies, the contract ends with no further obligation.

Whole Life Provides for the payment of premiums for as long as the insured lives or until age 10. The premiums remain constant and a portion of the premium goes into a savings program against which the insured can borrow a t a relatively low interest rate.

Endowment Life Requires the insurer to pay the beneficiary the policy’s face amount if the insured dies within the period of coverage (usually 20 years or until the insured reaches retirement age). If the insured lives to the end of the coverage period, the owner of the policy is paid the face value.

Social Insurance Indemnifies persons at least partially from the harsh financial consequences of unemployment, disability, death, or forced retirement. Under provisions of the Social Security Act and related acts, millions of Americans insure themselves against unemployment, disability, poverty, and medical expense problems.

Retirement Insurance An eligible person may elect to begin receiving social security retirement insurance checks as early as age 62. These checks are meant to provide supplemental income only. Individuals can also invest into a retirement savings program through their employers or private agencies.

Disability Insurance A severe long-lasting disability is one that prevents the eligible person from being able to do “any substantial work.” Before any payments can be made, it must be determined that the condition is physical or mental and is expected to continue indefinitely or result in death. The disabled person must have earned a certain number of work credits within a specific time period.

Disability Insurance These are considered severe enough to meet the test of disability: –Loss of both arms, both legs, or a leg and an arm –Heart and lung disease that causes pain or fatigue on slight exertion –Progressive cancer –Brain damage that results in loss of judgment or memory –Loss of vision, inability to speak, deafness

Health Insurance Coverage against the cost of medical care necessary to regain physical well-being after an illness Medicare provides such coverage primarily for those age 65+. –Hospital Insurance –Medical Insurance Private insurance companies provide similar coverage for those not protected by the Social Security Act.