 Protects the standard of living of the survivors  At the policy holder’s death, the insurance company pays survivors the face value of a life insurance policy  Proceeds: the money paid to survivors  Beneficiary: each person who receives part of the proceeds  Buyer of policy names beneficiaries

 Cash-value insurance: provides both savings and death benefits ◦ Part of premium pays for death benefits ◦ The rest builds up cash value like a savings account  Cash value increases over life of policy  Cancel policy, claim collected cash-value  Emergency – borrow part or all of cash value  Different kinds of cash value insurance

 A policyholder pays a premium that stays the same throughout his/her lifetime  As long as premiums are paid, policy stays the same until death of the insurer  Provides savings during the policyholder’s life and pays benefits after death

 Pay premiums for certain number of years ◦ EX. 20-payment life policy, you pay premiums for 20 years  “paid up at age 65”  Since many retire at 65, they won’t have to pay premiums after paychecks stop

 Cash value part of premium is invested ◦ Stocks, bonds, and mutual funds rather than savings  Rest of premium is used for death benefits  Increases or decreases depending on value of investments ◦ EX. Part of premium is used to invest in stock and the stock double in value, the cash value will be worth double

 Special type of cash-value  Based more on savings over death benefits  Provides coverage for specific period of time ◦ Usually years  Proceeds go to policyholder if he/she is still alive  If policyholder dies during endowment period, beneficiaries receive proceeds  Usually used to provide income for retirement or education ◦ EX. Parents could buy an 18 year, $15,000 endowment when a child is born

 Term Insurance:life insurance that covers a person for a specific period of time ◦ Could be 5, 10, or 20 years  Only pays benefits if person dies within the term  If the insurer lives longer, policy has no value  Can be renewed….higher premium  “pure protection” – only pays death benefits and no cash value  Low cost

 How it works:  Your friend purchases a 5 year, $10,000 policy (covers him for 5 years)  If your friend dies within those first five years, his/her beneficiary will receive $10,000.  After five years his/her coverage ends  The policy can be renewed over time but with a higher premium  Term insurance is often used as a part of group life insurance  Employers & organizations = employees & members  If you leave company, you lose coverage  Group policies are cheaper than individual policies

 Term insurance costs less than cash value insurance  Several factors effect cost of your premium:  Age, health, occupation  Many people have to take a physical before taking out a policy  Older = higher cost  Dangerous occupations = higher cost

 Protects against the cost of illness and accidents  Average cost of one hospital day stay = $5,000  Most people cannot pay  Medical costs = very high

 *catastrophe insurance  Most important coverage for a serious illness or accident  Covers: hospital care, doctor’s bills, tests and x-rays, and nursing care  Deductible  Some plans may have coinsurance: a percentage of medical expenses a policyholder must pay beyond the deductible  Insurance usually pays 75-80% of costs and policyholder pays 20-25%  EX. $1,000 deductible an coinsurance of 20%. Bills are $6,000, you pay $2,000 ($1,000 deductible and 20 % of $5,000)

 Pays for hospital care for a given period of time  Covers: room and board, tests and x-rays, operating room costs, nursing care, and fees for drugs and treatments  Could have deductible  Some policies have limits for specific expenses  Some set a max per day for max number of days  Most popular type of health insurance

 Pays part of a surgeons entire fee for operation  Max payment for particular surgical expense  Policy lists surgeries and costs allowed  Major Medical Insurance picks up where Surgical Expense does not cover  Usually bought with Hospital Expense  Higher maximums for each surgery = higher premium

 Covers the costs of a doctor’s care not involving surgery  Could cover visits to doctor’s office or doctor’s calls at hospital  Usually purchased with Hospital Expense and Surgical Expense  Insurance company could combine all three types into one basic health insurance plan

 Least expensive form for most people  Company or organization provides it for employees or members  Employees and members can add extra coverage at their own expense  Health maintenance organization (HMO): provides health care at its own health center for a fixed fee per month  HMO- you must go to its own clinic and choose one of their doctors  HMO plans stress preventive health care to keep medical costs down

 Medicare: a major health insurance program set up by the federal government  Provides hospital insurance that covers hospital care  Provides medical insurance that covers doctor’s fees and tests  For Medicare: ◦ Pay a deductible ◦ Coinsurance ◦ Monthly premium  For Hospital Insurance: ◦ Pay deductible

 Medicaid: another government health care plan for certain groups of citizens  Provides care for those who are unable to pay for insurance or health care  Much more comprehensive coverage than medicare

 Coinsurance Clause – requires you to pay a certain percentage of medical expenses beyond the deductible  Copayment: a fee paid each time a service is used  More people covered by a policy = higher premium  Many policies won’t cover a pre-existing condition: a serious health condition diagnosed before a person obtained health insurance  EX. Someone suffers from a heart condition, an insurance company might refuse to cover it

 The act provides comprehensive health insurance reforms that hold insurance companies more accountable  Lower costs  More choices  Enhance the quality of healthcare

 Lower Costs ◦ New creation of a competitive private health insurance market ◦ Stabilizes economy ◦ Expected to reduce deficit over next ten years by $100 billion  End insurance company denial and abuse of care (Americans with pre-existing conditions)  Will continue through 2014  Covers: ◦ Individuals ◦ Families ◦ Seniors ◦ Businesses  Reduced premiums for families and small businesses