, Insurance

What is Insurance?

What 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.

What is basic insurance? Insurance is a protection against possible financial loss, and gives you peace of mind.

Who sells Insurance Insurance Companies sell insurance. An insurance compny, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk.

The 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.

Life and Health Insurance Importance Based on Risk Pooling Individuals share the financial risks they face Individuals “pool” the financial risks associated with death.

What people put into the pot Premium: The amount that everyone puts into the pot The size of your premium depends on the probability of death. Actuaries: Statisticians who specialize in estimating the probability of death

What’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.

Earnings 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.

Large-Loss Principle It 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.

Computation 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)

Needs Approach Immediate needs at the time of death Debt Elimination Funds Immediate Transitional Funds Dependency Expenses Spousal Life Income Educational Expenses for the Children Retirement Income

Two Major Types of Life Insurance: Term & Cash-Value

Term Insurance A 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

Cash-Value Insurance Two Components: Life Insurance Savings Plan

Contract Clauses Contract clauses are provisions or stipulations that appear in your insurance policy

Beneficiary Provision: Beneficiary Provision: Person designated to receive death benefits when you die.

Coverage 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.

Loan Clause: Loan Clause: A Clause that provides the right to borrow against the cash value of the policy at a guaranteed interest rate.

Nonforfeiture 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.

Policy 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.

Change of Policy Clause Provides the right of the policyholder to change the form of the policy. For Example Change from a continuous-premium whole life policy to a limited-premium whole life policy.

Suicide Clause Insurance company's will not pay off for suicide deaths that occur within the first two years of the contract.

Payment Premium Clause Defines how you pay your premiums

Incontestability 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.

Riders Special 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.

Settlement or Payout Options Alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured.

Insurance Costs

Traditional 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.

Interest-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.

Health Insurance Types of Health Insurance

Hospital Insurance Insurance that covers the costs associated with a hospital stay, including room charges, nursing costs, operating room fees, and drugs supplied by the hospital.

Surgical Insurance Insurance that covers the cost of surgery.

Physician Expense Insurance Insurance that covers physicians fees outside of surgery.

Major Medical Expense Insurance Insurance that covers medical costs beyond those covered by basic health insurance.

Aflac Major Medical Commercial

Health 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 Plan Most of your expenses are already covered and don’t need to be reimbursed Limited to receiving healthcare from specific doctors, hospitals, & clinics.

Government 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.

Workers Compensation Laws State laws that provide payment for work-related accidents and illness.

Medicare A 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 Insurance Part B- Supplemental Medical Insurance

Medigap Insurance Plans Insurance sold by private insurance companies aimed at bridging gaps in Medicare coverage.

Medicaid A government medical insurance plan for the needy.

Controlling Health Care Costs

Flexible Spending Accounts A savings plan established by an employer that allows each employee to have pretax earnings deposited into a specially designated account.

Health 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.

COBRA & Changing Jobs If 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.

Choosing No Coverage Called “Opting Out” When employees opt out they can receive a minimum of $300 in cash or other benefits for doing so.

Disability Insurance Health insurance that provides payments to the insured in the event that income is interrupted by illness, sickness, or accident.

Long-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.

Property & Liability Insurance

Protecting Your Home Needed 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.

Types of Policies

Packaged Policies: HO’s HO’s stands for homeowners insurance Insurance which covers more than just the home. Provide liability insurance Cover Renters

Supplemental Coverage Endorsement A written attachment to an insurance policy to add or subtract coverage.

Insurance Needs

Coinsurance Provision Requires you pay a portion of your own losses if you don’t purchase what they consider an adequate level of insurance.

80 Percent Rule Your home is insured for at least 80 percent of its replacement cost. Intended to discourage homeowners from insuring for less than the replacement cost of their homes.

Insurance Credit Score A credit score, based on the same information as your traditional credit score, which is used in determining what your home and auto insurance rates will be.

Deductible The amount that you are responsible for paying before insurance coverage kicks in.

Automobile Insurance

Personal 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 Coverage Medical Expenses Coverage Uninsured Motorist’s Protection Coverage Damage to your automobile coverage

Liability 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 Limit The coverage applies to a combination of both bodily injury and property damage liability.

Medical 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.

Uninsured 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.

Coverage for Damage to Your Automobile Includes both collision loss and other than collision loss, generally called comprehensive physical damage coverage. Collision Loss Provides benefits to cover damages resulting from an accident.

Buying Automobile Insurance

Determinants of the Cost of Automobile Insurance The Type of Automobile The use of your automobile The driver’s personal characteristics The driver’s driving record Where you live Discounts that you qualify for Your insurance credit score

How to Keep Your Costs Down Shop comparatively Consider only high-quality insurers Take advantage of discounts Buy a car that’s relatively inexpensive to insure Improve your driving record Raise your deductibles Keep Adequate Liability Insurance

Conclusion

Types 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 & Medicaid Types of Health Insurance Include: Hospital Insurance Surgical Insurance Physician Expense Insurance Major Medical Expense Insurance You 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.