1. Estate Planning Chapter 15: Wills & Insurance

2. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What You’ll Learn How to describe what happens when someone dies with and without a will (p 783) How to outline the legal procedures that apply when someone dies owning property (p. 785)

3. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Why It’s Important Knowledge of wills and estates will help you when the time comes in your life.

4. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Making a Will Section Outline Who May Make a Will Formal Requirements of a Will Revoking or Changing a Will

5. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Family Protection Section Outline Protection of Spouses Protection of Children Dying Without a Will Settling an Estate

6. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What is a will?

7. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Making a Will A will is a document that is signed during your lifetime that provides for the distribution of your property upon death. Each state has it own requirements for making a will.

8. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Making a Will A person who dies with a will is said to die testate and is called a testator (male) or testatrix (female).

9. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Making a Will A gift of personal property that is made by will is called a bequest, or legacy. A gift of real property that is made by will is called a devise in most states.

10. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Making a Will Those who receive property by will are referred to as beneficiaries. The term heir refers to one who inherits property under a will or from someone dying without a will.

11. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Who May Make a Will Any person of sound mind who has reached the age of adulthood (eighteen years) may make a will.

12. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Formal Requirements of a Will To be valid, a will must conform exactly to the law of the state where it is made. A will that is legally made in one state will be recognized as valid in every state.

13. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Formal Requirements of a Will With some exceptions, a will must be in writing. It must be signed and witnessed by the number of witnesses required by state law.

14. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What do you think it means to revoke a will?

15. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills In some states, a will may be revoked by Revoking or Changing a Will Burning, tearing, canceling, or obliterating the will with intent to revoke it Executing a new one Marrying after the will was created

16. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question How are families protected when someone dies?

17. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills State laws contain provisions designed to protect surviving family members when a spouse dies. Family Protection

18. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Some states provide for a family allowance, or money taken from the decedent’s estate to meet the family’s needs while the estate is being settled. Family Protection

19. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Another family protection is the homestead exemption, which puts the family home beyond the reach of creditors up to a certain limit. Family Protection

20. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills A surviving spouse who doesn’t like the provisions of a deceased spouse’s will may choose to take a different portion of the estate set by state statute. Protection of Spouses

21. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Children who can prove that they were mistakenly left out of a parent’s will are protected by the laws of most states. Children who are intentionally left out do not have this protection. Protection of Children

22. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Adopted children are treated, in most states, as though they were the naturally born children of their adoptive parents. They inherit from the adoptive parents rather than from their natural parents. Protection of Children

23. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What happens if you die without a will?

24. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills A person who dies without a will is said to have died intestate. The deceased’s personal property is distributed according to the laws of intestate succession of the state in which the deceased was domiciled. Dying Without a Will

25. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills In contrast, the real property passes according to the law where the property is located. Dying Without a Will

26. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills In general, the surviving spouse is entitled to one-third or one-half of the estate. The balance of the estate is usually divided equally among the deceased’s children. Dying Without a Will

27. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills If any of the deceased’s children are deceased, the estate is distributed in the following order. Dying Without a Will 1.Decedent’s grandchildren 2.Decedent’s parents

28. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 3.Decedent’s brothers and sisters 4.Children of decedent’s brothers and sisters 5.Decedent’s aunts and uncles 6.Decedent’s cousins Dying Without a Will

29. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What legal procedure takes place to distribute assets when a person dies?

30. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills When people die owning assets, their estate must be probated; that is, it must be settled under the supervision of the probate court. Settling an Estate

31. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills First, the probate court establishes the validity of the will. A will usually names a personal representative called an executor (male) or executrix (female) to carry out the terms of the will. Settling an Estate

32. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills If there is no will, or if the executor or executrix named in the will fails to perform, someone must petition the court to settle the estate. That person is called an administrator or administratrix. Settling an Estate

33. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills The executor or administrator gathers the estate assets, pays the debts and taxes, and distributes the remainder of the assets according to the terms of the will or state law. Settling an Estate

34. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Read the following scenario and answer the questions below. Petunia Appleby died without a will. Her husband, Clark, had preceded her in death, and they had no children.

35. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Petunia had a sister, Daisy, and a brother, Duke. Daisy was still living, but Duke was dead. He had three children, all of whom were still living.

36. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Both of Petunia’s parents were dead, but she had one living uncle, Trey. Trey had two sons, both living. After Petunia’s debts and taxes are paid there is $1,000,000.

37. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 1. 1.Who inherits from Petunia, if you follow the general guidelines from the text?

38. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills ANSWER Daisy and Duke’s three children.

39. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 2. 2.How much does the heir or heirs inherit?

40. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills ANSWER Daisy inherits $500,000, and Duke’s three children divide the other $500,000 ($166,667 each).

41. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 3. 3.Who is the executor of the estate? How do you know?

42. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills ANSWER There is no executor because there was no will naming an executor.

43. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 2. 2.What are the formal requirements of a will? Section 36.2 Assessment

44. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Must conform exactly to the law of the state where it is made to be valid (in writing, signed, and witnessed). Section 36.2 Assessment Answer

45. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 3. 3.How can a will be changed or revoked? Section 36.2 Assessment

46. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned (1) Burning, tearing, canceling or obliterating the will with intent to revoke; (2) executing a new one; and (3) subsequent marriage. A codicil is a formal document used to supplement or change an existing will. Section 36.2 Assessment Answer

47. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 4. 4.Explain how surviving families are protected legally when a spouse dies. Section 36.2 Assessment

48. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Some states provide for a family allowance (money taken from the decedent’s estate for the family to meet its needs while the estate is being settled). Section 36.2 Assessment Answer

49. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned The homestead exemption puts the family home beyond the reach of creditors up to a certain limit. Section 36.2 Assessment Answer

50. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 5. 5.What happens when a person dies without a will? Section 36.2 Assessment

51. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned The deceased’s personal property is distributed according to the laws of intestate succession of the state where the deceased was domiciled. The real property passes according to the law where the property is located. Section 36.2 Assessment Answer

52. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 6. 6.Discuss the legal procedure that must be followed when someone dies owning property. Section 36.2 Assessment

53. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned The estate must be probated. If a will exists, an executor/executrix carries out the terms. Section 36.2 Assessment Answer

54. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned If there is no will, an administrator/administratrix is appointed. The executor or administrator gathers the estate assets, pays the debts and taxes, and distributes the remainder according to the terms of will or state law. Section 36.2 Assessment Answer

55. Estate Planning End of Section 36.2

56. Estate Planning Section 16.2 Motor Insurance

57. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Financial Responsibility Types of Motor Vehicle Insurance Bodily Injury Coverage Property Damage Coverage No-Fault Insurance Section Outline

58. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What are the different types of motor vehicle insurance?

59. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 16.2 Types of Motor Vehicle Insurance

60. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills The main types of bodily injury coverage are Bodily Injury Coverage Bodily injury liability insurance Medical payments insurance Uninsured motorist insurance Underinsured motorist insurance

61. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Bodily injury liability insurance protects the insured against claims or lawsuits for injuries or death caused by negligence. Bodily Injury Coverage

62. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Medical payments insurance pays for medical, and sometimes funeral, expenses resulting from bodily injuries to anyone occupying the policyholder’s car in an accident. Bodily Injury Coverage

63. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Uninsured motorist insurance provides protection when the insured is injured in an automobile accident that is caused by a driver who has no insurance. It also protects parties who are injured by a hit-and-run driver. Bodily Injury Coverage

64. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Underinsured motorist insurance protects you when another driver has insurance, but not enough to pay for any injuries. Bodily Injury Coverage

65. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Collision insurance covers damage to your vehicle when it is in an accident and pays for vehicle repairs, regardless of who was at fault. Property Damage Coverage

66. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Comprehensive insurance covers damage to your vehicle from sources other than collision, including fire, theft, lightning, flood, hail, windstorm, riot, and vandalism. Property Damage Coverage

67. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Under no-fault insurance, regardless of who caused the accident, all drivers involved collect money from their own insurance companies. No-Fault Insurance

68. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Because no-fault systems vary by state, you should investigate the coverage provided by no-fault insurance in your state. No-Fault Insurance

69. Estate Planning Section 35.1

70. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Why It’s Important Understanding how insurance works and knowing key insurance terms will help you choose good policies throughout your life.

71. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What is Insurance? Section Outline Insurance Terms

72. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What is insurance?

73. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What Is Insurance? Our lives are filled with risks, including the loss of: PropertyHealthIncomeLife

74. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What Is Insurance? Insurance can protect you against such losses.

75. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What Is Insurance? The basic purpose of insurance is to spread the losses among a greater number of people.

76. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills What Is Insurance? Insurance is a contract under which, for consideration, the insurer, or the insurance company, agrees to compensate you for a specific loss.

77. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms The policy is the written contract between a person buying insurance and the insurance company that sells it. When you buy the policy, you are the policyholder.

78. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms The insured is the person whose life or property is insured. The beneficiary is the person named in the policy to receive benefits paid by the insurer in the event of a loss.

79. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms A rider is an attachment to an insurance policy that modifies the policy’s terms.

80. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms You can’t take out insurance unless you have an insurable interest in the person or property you want to insure.

81. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms Consequently, you can only take out insurance on a person or property if the loss of that person or property would pose a financial burden to you.

82. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms The premium is the amount of money you pay to the insurance company for insurance coverage. Proceeds are payments by insurance companies to beneficiaries for losses covered by the policy.

83. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Insurance Terms The face value is the amount of protection stated in a life insurance policy, meaning the amount of money a beneficiary would receive if the insured died.

84. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 1. 1.What is the purpose of insurance? Section 35.1 Assessment

85. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned To spread losses among a greater number of people. Section 35.1 Assessment Answer

86. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 2. 2.Explain why insurance is a contract. Section 35.1 Assessment

87. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Insurance is a contract under which, for consideration, the insurer (the insurance company) agrees to compensate you for a specific loss. Section 35.1 Assessment Answer

88. Estate Planning Section 35.2

89. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Why It’s Important Knowing how to determine your life and health insurance needs will help you handle your finances when dealing with unexpected events.

90. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Life Insurance Section Outline Straight Life Insurance Limited-Payment Life Insurance Endowment Insurance Annuity

91. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Life Insurance, continued Section Outline Accidental Death and Dismemberment Insurance Term Insurance Exemptions from Risk

92. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Health Insurance Section Outline Insurance Plans HMOs and PPOs Government Health Care Plans Disability Insurance

93. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What is life insurance?

94. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Life Insurance Life insurance is an insurance contract that provides monetary compensation for losses suffered as a result of someone’s death.

95. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Life Insurance Premiums for life insurance are based on several factors. Age and health of insured Coverage Type of policy

96. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Straight Life Insurance Straight life insurance, also called ordinary life insurance and whole life insurance, requires the payment of premiums throughout the insured’s life. The premiums remain constant throughout the policy.

97. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Straight Life Insurance Upon the insured’s death, the beneficiary is paid the face value of the policy. Because straight life insurance builds up a cash and loan value, it provides savings as well as protection.

98. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Straight Life Insurance Universal life insurance, a form of straight life insurance, allows policyholders to change the terms of the policy as their needs change.

99. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Limited-Payment Life Insurance Limited-payment life insurance allows you to stop paying premiums after a stated length of time—usually 10, 20, or 30 years.

100. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Limited-Payment Life Insurance The beneficiary will receive the amount of the policy upon the death of the insured, whether it occurs during the payment period or after.

101. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Endowment Insurance Endowment insurance provides protection for a stated time, generally 20 to 30 years. The face value of the policy is paid to the insured at the end of the agreed period.

102. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Endowment Insurance If the insured dies before the end of the agreed period, the full amount is paid to the beneficiary at the time of death.

103. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Accidental Death and Dismemberment Insurance Accidental death and dismemberment insurance provides benefits only when the insured is killed in an accident, loses the use of one or more limbs, or loses sight in one or both eyes.

104. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Term Insurance Term insurance is issued for a particular period, usually five or ten years. It is the least expensive kind of life insurance because it has no cash or loan value.

105. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Term Insurance Premiums for term insurance increase at the end of each term because the insured is older and is considered a greater risk.

106. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Exemptions from Risk Some states do not allow beneficiaries to receive life insurance proceeds if the insured is legally executed or if the insured is killed by the police while trying to avoid capture.

107. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Exemptions from Risk In most cases, the courts allow a beneficiary to receive benefits under a life insurance policy when the insured is murdered, except when the murderer is the beneficiary.

108. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Name the type of insurance described below. Renée Morris, who is a firefighter in New York City, purchased insurance that pays her a benefit if she loses a limb or her eyesight.

109. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What benefits does health insurance include?

110. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Basic health insurance often includes the following benefits: Health Insurance Inpatient and outpatient hospital care Physician care

111. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Surgery Prescription drugs Dental and vision care Health Insurance

112. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Major medical coverage pays for expenses beyond those covered by a basic plan, including long-term hospitalization and the cost of catastrophic illness. Health Insurance

113. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Health insurance companies offer a variety of health insurance plans to make some degree of health insurance coverage available to most people. The type of coverage people carry depends on their individual situations. Insurance Plans

114. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 35.2 Health Insurance Must Haves A health insurance plan should: Offer basic coverage for hospital and doctor bills. Provide at least 120 days’ hospital room and board in full. Provide at least $1 million lifetime maximum for each family member. Pay at least 80 percent for out-of-hospital expenses after a yearly deductible of $500 per person or $1,000 per family. Impose no unreasonable exclusions. Limit your out-of-pocket expenses to no more than $3,000 to $5,000 a year, excluding dental, vision care, and prescription costs.

115. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Many people get their health insurance through a group insurance plan where they work. Insurance companies can offer lower premiums to large groups, and many employers pay part of the premium for each employee. Group Plans

116. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills People who work for a company that does not offer health insurance or who are self-employed can buy individual health insurance. Individual Plans

117. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills This insurance is more expensive than group insurance because the cost cannot be spread among a large group of people. Individual Plans

118. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills HMOs and PPOs are other types of health insurance plans. HMOs and PPOs

119. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Health Maintenance Organizations (HMOs) contract with doctors and other healthcare professionals to provide healthcare services for their members. Health Maintenance Organizations

120. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Members pay monthly premiums and must choose from a list of doctors provided by the HMO. Health Maintenance Organizations

121. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills A Preferred Provider Organization (PPO) is a group of healthcare providers, such as doctors or hospitals, who provide care for groups of employees at reduced rates. Preferred Provider Organizations

122. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills People over 65 who are covered by social security are eligible for Medicare, a federally funded health insurance program. Government Health Care Plans

123. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Medicaid is a healthcare plan for low- income people. State governments administer Medicaid, which is funded by both state and federal funds. Government Health Care Plans

124. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Disability insurance pays you benefits when you can’t work because of a disability. Disability Insurance

125. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 1. 1.What are the principal types of life insurance? Briefly describe each one in your own words. Section 35.2 Assessment

126. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned (1) Straight life—requires payment of premiums through the insured’s life. The premiums remain constant. Section 35.2 Assessment Answer

127. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned (2) Universal life—a form of straight life insurance but it allows policyholders to change the terms of the policy as their needs change. Premiums fluctuate according to the changes. Section 35.2 Assessment Answer

128. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned (3) Limited-payment life—provides that the payment of premiums will stop after a stated length of time. (4) Endowment— provides protection for a stated time. Section 35.2 Assessment Answer

129. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned (5) Term—issued for a particular period. It has no cash or loan value. (Answers may vary but should closely parallel the descriptions in the chapter.) Section 35.2 Assessment Answer

130. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 2. 2.What risks are generally not covered by insurance? Section 35.2 Assessment

131. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Some states do not allow beneficiaries to receive life insurance proceeds when an insured is legally executed or killed by the police to avoid capture. When the beneficiary is the murderer of the insured, no proceeds are allowed. Section 35.2 Assessment Answer

132. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 3. 3.What benefits are provided by basic health insurance? Major medical? Section 35.2 Assessment

133. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Basic—inpatient and outpatient hospital care, physician care, surgery, prescription drugs, and dental and vision care. Section 35.2 Assessment Answer

134. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Major medical—covers expenses beyond those covered by a basic plan, including long-term hospitalization and catastrophic illness. Section 35.2 Assessment Answer

135. Estate Planning Section 35.3

136. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Why It’s Important Understanding property insurance will help you protect your property at the lowest cost.

137. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Property Insurance Homeowner’s and Renter’s Insurance Fire Insurance Section Outline

138. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What is property insurance?

139. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Property Insurance Property insurance is a contract in which the insurer promises, for a stated premium, to pay you a sum of money if a particular piece of real or personal property is damaged or destroyed.

140. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Property Insurance The policy becomes effective as soon as the insurer accepts your application, or even sooner if a binder is issued. A binder gives you temporary protection until a policy is issued.

141. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Property Insurance A floater policy is one that insures property that cannot be covered by specific insurance because it is constantly changing in value or location.

142. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Property Insurance A personal property floater, for example, can cover a bicycle or laptop computer, no matter where the items are located.

143. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What does homeowner’s and renter’s insurance cover?

144. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Homeowner’s and Renter’s Insurance Homeowner’s insurance protects against most types of losses and liabilities related to home ownership.

145. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Homeowner’s Insurance Covers FireWindstormVandalismBurglary Injuries suffered by other persons while on the property

146. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Homeowner’s Insurance Covers With certain limitations, homeowner’s policies cover your personal property anywhere in the world.

147. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Homeowner’s and Renter’s Insurance Renter’s insurance protects you against loss of personal property, liability for a visitor’s personal injury, and liability for negligent destruction of the rented premises.

148. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What does fire insurance cover?

149. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Fire Insurance Fire insurance covers loss resulting directly from an unfriendly or hostile fire.

150. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Fire Insurance Damages that result from trying to put out a fire, or from theft or breakage while attempting to remove insured goods to a safe location are considered directly related to the fire and are usually covered.

151. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What is coinsurance?

152. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Coinsurance Clauses Coinsurance is a provision in an insurance policy that limits your liability for a loss if the property is not insured for its full replacement value.

153. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Coinsurance Clauses For example, if your insurance policy has an 80 percent coinsurance clause, your house must be insured for 80 percent of its replacement value to receive full reimbursement for a loss.

154. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills 35.3 Coinsurance Clauses COINSURANCE CLAUSE “The insurance company will pay that part of a loss that the insurance carrier bears to 80 percent of the replacement cost of the building.” It would cost $100,000 to replace Zelia’s house. If she insured it for $60,000, the insurance company would pay only three-fourths of any loss, computed as follows: $60,000$60,0003 80% of $100,000$80,0004 80% of $100,000$80,0004 A fire partially destroys the building, causing $40,000 worth of damage. Because of the coinsurance clause, Zelia would recover $30,000 (3/4 of the loss) from the insurance company.

155. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Pre-Learning Question What does marine insurance cover?

156. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Marine Insurance Marine insurance is one of the oldest kinds of insurance coverage, dating back to Venetian traders who sailed the Mediterranean Sea.

157. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Marine Insurance Ocean marine insurance covers ships at sea. Inland marine insurance covers goods that are moved by land carriers such as trains, trucks, and airplanes.

158. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 1. 1.What types of losses are covered by homeowner’s insurance? Fire insurance? Section 35.3 Assessment

159. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Homeowner’s insurance covers losses from fire, windstorm, vandalism, burglary, and injuries suffered by other persons while on the property. Section 35.3 Assessment Answer

160. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned With certain limitations, homeowner’s policies cover personal property owned by the insured anywhere in the world. Fire insurance covers loss resulting directly from an unfriendly or hostile fire. Section 35.3 Assessment Answer

161. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 2. 2.What is a coinsurance clause? What does it mean if your policy has an 80 percent coinsurance clause? Section 35.3 Assessment

162. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Coinsurance is a provision in an insurance policy that limits the insurer’s liability for a loss if the property is not insured for its full replacement value. Section 35.3 Assessment Answer

163. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned If your policy has an 80 percent coinsurance clause, your house must be insured for 80 percent of its replacement value to receive full reimbursement for a loss. Section 35.3 Assessment Answer

164. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned 3. 3.Explain marine insurance coverage. Section 35.3 Assessment

165. Understanding Business and Personal Law Estate Planning Section 36.2 Retirement and Wills Reviewing What You Learned Ocean marine insurance covers ships at sea. Inland marine insurance covers goods that are moved by land carriers such as rail, truck, and airplane. Section 35.3 Assessment Answer

166. Estate Planning End of Section 35.3