chapter 19 outline coping with risk why life insurance? basic elements of life insurance buying life...

Chapter 19 Outline

• Coping with Risk• Why Life Insurance?• Basic Elements of Life Insurance• Buying Life Insurance: Who needs it and How

Much?• Insurance When the Risk May Not Occur• Health Insurance• Income Insurance

Important terms

• Actuaries - run statistics and study trends to determine rates

• Fiduciery - one of the highest trust

Two types of life insurance

PermanentTemporary

Permanent

• Lifetime contract

• Pay a fixed premium

• Cash value

Term Insurance

• “Pure insurance”

• Limited amount of time

• Least expensive, however, older you are, higher the rates

• Does not have a cash value

Parties to an insurance policy

• Insured

• Owner

• Beneficiary

• Contingent Beneficiary

• Company

Life Insurance Contract & Clauses

• Application– Rescind– Binding coverage

• Face Amount/Face Value• Double indemnity/Accidental Death Benefit• Incontestable Clause• Guaranteed Insurability• Premium/Mode of Payments• Lapse

Life Insurance Contract & Clauses

• Grace period• Reinstate• Waiver of Premium• Conversion values

– Cashing in– Borrowing– Converting to extended term insurance– Converting to paid-up insurance– Automatic premium loan

How much?

• Final expenses• Existing debt• Survivors basic and extraordinary expenses• Years left of survivors• Social Security benefits for survivors• Inventory assets• Evaluate other realistic income• Evaluate current life insurance policies• General rule of thumb: buy life insurance equal to

5-7 times your annual gross income

Health Insurance

• Hospital

• Surgical

• Physician

Health Insurance-Why rates vary

• Gender

• Smokers

• Where you live

• Type of policy

• Actuarial Changes

• Dividend Performance

• Overall Company Performance

Major Medical Insurance Considerations

• Deductible

• Time line for deductible

• How much deductible the company will pay

• Maximum amount the company will pay

• How much expense you can afford

• How long the benefit period runs

Provisions

• Maternity benefits

• Dependents

• Waiver of Premium

• Termination

• Preexisting conditions

• Excluded or rated risks

• Renewability and Cancelability

• Grace period, lapse, and reinstatement

Other Forms of Health Insurance Protection

• HMOs

• Workers Compensation

• Medicare

• “Dread disease” insurance

Programs to protect you against loss of income

• Sick-pay plans

• Workers’ Compensation

• Social Security

• Unemployment Insurance

• Waiver of Premium Clauses

• Credit Health Insurance

Disability Income

• Waiting period

• Total and partial disability

• How much protection

Homeowners Insurance

• Actual need

• Market value - actual cash value

• Replacement cost value - costs new

• Personal liability

• Personal liability umbrella policy

• Risk management

Automobile Insurance

• Need

• What vehicles would have lower premiums?

• What factors effect auto insurance?

Most important

• Liability - required by law: 20/40/15

• Medical - takes care of people in your car

• Comprehensive - damage to own vehicle

• Can save $ by raising deductible

• No fault laws