Prepared by Johnny Howard © 2015 South-Western, a part of Cengage Learning

12–2 © 2015 South-Western, a part of Cengage Learning

12–3 © 2015 South-Western, a part of Cengage Learning Auto Insurance Categories Auto liability and property damage insurance protects the insured against claims resulting from personal injuries and property damage. Auto comprehensive insurance protects the vehicle of the insured against water, theft, vandalism, falling objects, and other damage not caused by collision. Auto collision insurance protects the vehicle of the insured against collision damage. T E R M S 1

12–4 © 2015 South-Western, a part of Cengage Learning Automobile Insurance Premium is the payment for an insurance policy. Deductible clause stipulates that the insured will pay the first portion of collision damage. No-fault insurance describes an auto insurance system that requires drivers to carry insurance for their own protection and that limits their ability to sue other drivers for damages. T E R M S 1

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12–6 © 2015 South-Western, a part of Cengage Learning Auto Insurance Low-risk driver is a driver with a clear record of long standing. High-risk driver is a driver with a record of numerous citations or accidents. T E R M S 2

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12–8 © 2015 South-Western, a part of Cengage Learning Auto Insurance (cont’d) Short rates are rates charged for less than a full term of insurance. T E R M S 3

12–9 © 2015 South-Western, a part of Cengage Learning Property Losses Property insurance is insurance against loss of or damage to property. A policy can be written to protect the insured against loss from fire, casualty, liability, and theft. T E R M S 4

12–10 © 2015 South-Western, a part of Cengage Learning to Determine the Owner’s Share of Property Loss Under Coinsurance 1.Compute the amount of insurance required by multiplying the entire value of the property by the percentage of coinsurance specified. 2.Compute the recovery amount, the maximum amount the insurance company will pay, by using the formula 3.Compare the recovery amount with the amount of the insurance policy. a.If the recovery amount is greater than the amount of the policy, the insurance company will limit its payment to the amount of the policy. 4

12–11 © 2015 South-Western, a part of Cengage Learning to Determine the Owner’s Share of Property Loss Under Coinsurance (cont’d) b.If the recovery amount is less than the amount of the policy, the insurance company will pay the recovery amount. Note: The insurance company will never pay more than the amount of the loss. 4.Determine the owner’s share of the property loss by subtracting the amount the insurance company will pay from the loss amount. 4

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12–13 © 2015 South-Western, a part of Cengage Learning Types of Life Insurance Policies Term insurance is payable only in case of death of the insured during the specified time period, or term. Straight (ordinary) life insurance coverage, a certain premium, or fee, is paid every year until the death of the insured. Limited-payment life insurance requires the payment of a specified premium each year for a certain number of years or until the death of the insured, whichever comes first. T E R M S 5

12–14 © 2015 South-Western, a part of Cengage Learning Types of Life Insurance Policies (cont’d) Endowment insurance provides insurance payable on the insured’s death if it occurs within a specified period. Annuity insurance pays a certain sum of money to the insured every year after the insured reaches a specified age, until the insured’s death. An additional death benefit (ADB), sometimes referred to as an accidental death benefit, accompanies some policies. T E R M S 5

12–15 © 2015 South-Western, a part of Cengage Learning Figure 12.1Insurance Premium per $1,000

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12–17 © 2015 South-Western, a part of Cengage Learning Cash Surrender and Loan Values Cash surrender value is the amount of cash that the company will pay the insured on the surrender, or “cashing in,” of the policy. Loan value of a policy is the amount that the insured may borrow on the policy from the insurance company. T E R M S 6

12–18 © 2015 South-Western, a part of Cengage Learning Figure 12.2Insurance Values per $1,000

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12–20 © 2015 South-Western, a part of Cengage Learning Medical Insurance Group insurance plans provide medical insurance coverage to large numbers of people at lower premium rates than individuals could obtain separately. Health maintenance organization (HMO) Preferred provider organization (PPO). T E R M S 6

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12–24 © 2015 South-Western, a part of Cengage Learning Chapter Terms for Review additional death benefit (ADB) affordable care act (ACA) annuity insurance auto collision insurance auto comprehensive insurance auto liability and property damage insurance beneficiary cash surrender value coinsurance clause deductible clause endowment insurance group insurance health maintenance organization (HMO) high-risk driver insured limited-payment life insurance loan value low-risk driver no-fault insurance preferred provider organization (PPO) premium property insurance recovery amount short rates straight (ordinary) life insurance term insurance

12–25 © 2015 South-Western, a part of Cengage Learning Assignment 12.1: Auto Insurance A Solve the following problems.

12–26 © 2015 South-Western, a part of Cengage Learning Assignment 12.1: Auto Insurance A Solve the following problems. (cont’d)

12–27 © 2015 South-Western, a part of Cengage Learning Assignment 12.1: Auto Insurance A Solve the following problems. (cont’d)

12–28 © 2015 South-Western, a part of Cengage Learning Assignment 12.1: Auto Insurance B Solve the following problems. (cont’d)

12–29 © 2015 South-Western, a part of Cengage Learning Assignment 12.1: Auto Insurance B Solve the following problems. (cont’d)

12–30 © 2015 South-Western, a part of Cengage Learning Assignment 12.2: Property Insurance A Solve the following problems.

12–31 © 2015 South-Western, a part of Cengage Learning Assignment 12.2: Property Insurance A Solve the following problems. (cont’d)

12–32 © 2015 South-Western, a part of Cengage Learning Assignment 12.2: Property Insurance B Solve the following problems.

12–33 © 2015 South-Western, a part of Cengage Learning Assignment 12.2: Property Insurance B Solve the following problems. (cont’d)

12–34 © 2015 South-Western, a part of Cengage Learning Assignment 12.3: Life and Medical Insurance A Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long.

12–35 © 2015 South-Western, a part of Cengage Learning Assignment 12.3: Life and Medical Insurance A Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long. (cont’d)

12–36 © 2015 South-Western, a part of Cengage Learning Assignment 12.3: Life and Medical Insurance A Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long. (cont’d)

12–37 © 2015 South-Western, a part of Cengage Learning Assignment 12.3: Life and Medical Insurance B Solve the following problems.

12–38 © 2015 South-Western, a part of Cengage Learning Assignment 12.3: Life and Medical Insurance B Solve the Following Problems Contd.