Chapter 23 Insuring Your Future Lesson 1: Insurance and How It Works Lesson 2: Property and Casualty Insurance Coverage Lesson 3: Life and Social Insurance Coverage

Lesson 23-1 Discuss the common types of insurance Identify when an insurable interest is present

Insurance – a contractual arrangement that protects against loss. What is Insurance? Insurance – a contractual arrangement that protects against loss. One party, usually the insurance company, agrees to pay money to help offset a specified type of loss that might occur to another party. The loss may be the death of a person, property damage from acts of God, or injury resulting from exposure to risks.

What is Insurance? Indemnify – Make good the loss to the suffering party.    Insurer – The party who agrees to indemnify. Insured – The party covered or protected. Beneficiary – the recipient of the amount to be paid.

What is Insurance? Risk – The possible loss arising from injury to or death of a person or from damage to property from a specified peril.  Premium – The consideration for a contract of insurance.

Seven Major Types of Insurance Life Insurance Fire Insurance Casualty Insurance Social Insurance Marine Insurance Inland Marine Insurance Fidelity and Surety Bonding Insurance

Life Insurance   Life insurance is insurance that pays the beneficiary a set amount upon the death of a specified person. 3 Common Types Term Whole Life Insurance Endowment

Life Insurance   Term – written for a certain number of years – usually one, five, or ten 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 on the insured or the insurer Term Insurance is a relatively inexpensive type of life insurance.

Life Insurance   Whole Life Insurance – Sometimes called ordinary or straight life insurance Provides for the payment of premiums for as long as the insured lives or until age 100. If the insured dies, the face value less any outstanding loans against it is paid to the beneficiary.

Life Insurance   Endowment Life Insurance – required 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 Premiums for endowment policies are high, but is attractive for those who need a large lump sum available at a set point in time.

Fire Insurance  Insurance that indemnifies for loss or damage due to fire and usually smoke as well. The typical fire insurance policy coverage may be increased to cover losses due to perils such as rain, hail, earthquake, and windstorm.

Casualty Insurance  Provides coverage for a variety of specific situations in which the intentional, negligent, or accidental acts of others or mere chance may result in loss. Burglary, Robbery, Theft, and Larceny Automobile Liability – negligence or torts commited

Social Insurance  Under the provisions of the Social Security Act and related acts, millions of Americans insure themselves against unemployment, disability, poverty, and medical expense problems.

 Marine Insurance – indemnifies for los of or damage to vessels, cargo, and other property exposed to the perils of the sea. It is perhaps the oldest type of insurance, dating back to ancient times. Inland Marine Insurance – Covers personal property against loss or damage caused by various perils where the property is located. The property is also covered while it is begin transported by any means other than on the oceans.

 Fidelity and Surety Bonding Insurance provides coverage against financial loss caused by dishonesty. Such dishonest acts include embezzlement or failure of one person to perform a legal obligation to another, such as constructing a building as promised. Contracts of fidelity insurance are often known as surety bonds.

 Insurance is intended to be a personal contract between the insurer and the insured. A person with contractual capacity can acquire insurance if he or she would suffer loss if the insured property is damaged or destroyed or if the insured person is injured or dies. This potential to sustain loss is referred to as an insurable interest.

Think About Legal Concepts  Page 346 1. A 2. False 3. False 4. D 5. False 6. True

Lesson 23-3 Identify common provisions in life insurance contracts Explain the types of social insurance

Life Insurance  Life Insurance is 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.

Social Insurance  Social Insurance idemnifies persons, at least partially, from the harsh financial consequences of unemployment, disability, death, or forced retirement.

Life Insurance  Incontestability clause – prohibits the insurer from refusing to perform due to misrepresentation or fraud after the policy has been in effect for a specified period of time – usually one or two years. Indemnity Coverage – required the insurer to pay twice the face amount of the policy if the death of the insured is accidental.

Life Insurance  Disability Coverage – provides for protection against the effects of total permanent disability.

Social Insurance Types of Social Insurance Retirement Insurance Survivor’s Insurance Disability Insurance Health Insurance

Think About Legal Concepts  Page 355 1. B 2. False 3. Incontestability 4. False 5. D