19.3 Life and Social Insurance

Life insurance—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 Exemptions—the insurer is liable for return of the premiums paid or cash value instead of the proceeds – examples: death caused by the crash of private plane, or act of terrorism, or during military service

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 (1- 2 years)

Grace period—period of time during which overdue premiums can be paid to keep the policy in force – Normal grace period= one month

Double indemnity provision—the insurer pays twice the face amount of the policy if the death of the insured is accidental Disability coverage –protection against the effects of total permanent disability by cancelling the requirement for payment of policy premiums while the insured is diabled

Social Security Act—primary source for social insurance coverage in this country – Coverage under act RSDI—Retirement, Survivor’s, Disability, and Health Insurance Unemployment compensation—lessens financial hardship of losing one’s job—controlled by state government

Retirement Insurance—supplemental income for retired individuals – Eligible person may elect to receive social security retirement as early as age 62

Survivor’s Insurance – Survivors of a person eligible for benefits under the system may receive benefits if they are: Widow or widower or ex-spouse (if married for at least 10 years) minimum age= 60 A widow or widower of any age if caring for a child under age 16 or a child disabled Dependent children under 18, or 19 if still in high school Dependent parents 62 or older

Disability Insurance – A severe, long lasting disability– one that prevents the eligible person from being able to do “any substantial work” – Must be predicted to last INDEFINITELY – Examples of disability: Loss of both arms or legs Loss of leg and arm Heart and lung disease that cause pain, fatique Brain damage Loss of vision Deafness

Health Insurance – Indemnifies against the cost of medical care necessary to regain physical well being after an illness – Medicare—provides health coverage for those age 65 and older Hospital insurance—hospital expenses and follow up treatment Medical insurance—x-rays, radium treatments, ambulance services, lab tests, casts, therapies

Word Bank No fault Term Coinsurance Underinsured motorist Exclusion Policy Indemnifying Marine Beneficiary Uninsured motorists