Docstoc

Examples

Document Sample
Examples Powered By Docstoc
					INTRODUCTION TO
   INSURANCE
Nature of Insurance

   The concept of insurance
    involves risk pooling or
    spreading losses over a greater
    number of people.

   An insurance company collects
    and pools premiums from many
    individuals or businesses for the
    payment of future claims.
Risk Management

   All people take risks every day.
   Risk management is the
    process of managing one’s
    exposure to risk.
       Examples
         Using a seat belt
         Installing smoke detectors
         Driving a vehicle
         Playing sports
         Purchasing an insurance policy
Risk Management
   Options for people to manage risk include
      Transfer part of risk of financial loss to an
        insurance company
           Auto, life, health, disability, property
            insurances
      Retain (keep) the risk of financial loss using
        high deductible
      Abstain or choose not to participate in risky
        activities
           Do not drive car, buy home, play sports, etc.

   People make decisions about insurance based on
    their individual situation and risk tolerance.
ADHESION CONTRACT

   An adhesion contract is a standard form
    contract that is written primarily by one party
   Insurance policies are adhesion contracts

   Policyholder (buyer) cannot usually change:
       Policy language
       Perils covered
   Policyholder can change:
       The dollar limit of coverage
            Example- $200,000 coverage on homeowner’s
             structure
       Specific items to be covered
            Example- 1 carat diamond ring, valued at $3000
   Some adhesions contracts are found by courts
    to be unconscionable if they take advantage of
    one party
Insurance

   Planned protection provided by
    sharing economic losses
   Insurance does NOT stop the loss
    from happening
   Insurance companies provide a risk
    management service to consumers
   Insurance does indemnify or
    financially repay the insured a
    portion of the loss
   All insurance policies have a
    specified limit of coverage
Insurance – Basic Terms

   Insurance policy- A contract issued
    by the insurance company (insurer)
    for coverage of the policyholder
       An insurance policy should be kept
        in a safe place with other important
        documents.
   Policyholder- The person who buys
    or owns the policy
   Insured – The person whose life or
    property is insured, may or may not
    also be the policyholder
More Basic Terms

   Insurer- The insurance company
    that provides planned protection
    against economic losses

   Binder- A temporary document
    proving the insurance contract is
    in force until the actual policy is
    issued by the insurer
Insurable Interest

   A financial interest in property or a
    person’s life that permits someone to
    buy insurance to protect against the
    financial loss of that property or
    person’s life
   Examples:
       You can insure cars owned or leased by
        you, but not a car belonging to another
        person
       You can purchase life insurance on
        someone whose death would be a
        financial loss to you, ie spouse,
        business partner, parent, child
Premium

   The amount of money the
    policyholder must pay for insurance
    coverage
   An insurance underwriter
    determines the cost of the policy
    using risk factors and statistical data
   An agent represents the company to
    the consumer
   Equals consideration in the
    insurance contract
Non-Payment of Premium

   If the premium is not paid, the policy
    may lapse or cancel, voiding the
    contract
   If claims are made after a lapse,
    the claim is denied
   Some policies have a grace period
       Late premiums are received and
       Policies are reinstated
Claims

   The request for payment from
    an insurance company to cover
    the financial losses
   Examples:
     Automobile-car accident
     Medical-doctor’s appointment
     Life-covered person dies
     Disability-out of work for health
      reasons
     Unemployment-laid off from job
Deductibles
   Most policies have a self-insured portion of
    the cost of the claim that is paid by the
    insured.
       The insured chooses the amount of risk retained
        by choosing the deductible amount
       Deductible
            On auto coverage, the amount the insured pays
             before the insurer pays collision or
             comprehensive damage claims
            On health coverage, the amount the patient pays
             before the insurance company pays any covered
             medical expenses
       The higher the deductible chosen by the
        insured, the lower the premium for the coverage.
       100% self insurance = 100% risk retention
            means no insurance is purchased
Exclusions

   Limitations to policy coverages
   Examples:
       No coverage for flood on homeowners
        policy
       No coverage for CD player in car unless
        permanently attached to vehicle
       No coverage for self inflicted injury filed
        as worker’s compensation claim
Insurance Fraud

   False claims made to an
    insurance company
   Federal prosecution is frequent
    under mail and wire fraud
    schemes because the USPS is
    involved
Insurance Fraud

   Examples:
       Inflated cost of damage repairs
       Staging car accidents (felony)
       Arson for profit (felony)
       Faked deaths for life insurance (felony)
       Overstated health care billings or service not
        provided
       Phony workers compensation filed when hurt at
        home not work
       False statements made on an application may
        also create a voidable contract for the insurance
        company
AUTOMOBILE INSURANCE
Auto Claims

   The at fault driver of a vehicle
    that damages other property or
    injures other people is liable for
    the cost of repairs.
Bodily Injury Liability
Coverage

     Bodily Injury Liability protects the
      insured person from liability claims
      for injury to:
        People in other cars
        Passengers riding with the insured
         person


     DOES NOT cover the insured
      person (driver)
Property Damage Liability
     Property Damage Liability protects the
      insured person from liability claims for
      damage to property of others, such as:
          Personal property including vehicles,
           animals
          Business property including telephone poles
           and other utility structures
          Government property such as bridges and
           other road structures
          Real property
     Does NOT cover the insured person’s
      property
Optional Auto Coverage-
Collision
   Protects the vehicle owner against
    damage from a collision with another
    object or the vehicle turning over
   Covers the cost of:
       Repair to insured’s vehicle
   Charges points to insurance if claim
    filed
   Points make premiums increase.
   Does NOT cover injuries to people
Optional Auto Coverage-
Collision
   Although not required by financial
    responsibility law, collision is
       Usually required by a lienholder if loan
        on vehicle is not paid in full
   A lienholder is a bank, individual or
    loan company who holds a secured
    interest in the property until the loan
    is paid in full.
   Example: If car catches fire and loan
    is still outstanding, the claim dollars
    are paid to insured and lienholder.
Collision Claim Payments


   Insurance company may pay either the
       Cost to repair insured vehicle less deductible,
        or
       Actual cash value, market value or NADA
        Bluebook value of a total loss vehicle less
        deductible
   The insurance company does not consider
    the loan balance when settling a claim!
    The loan balance is an issue for the owner.
    Loan balance may be more than a
    vehicle’s value!
Comprehensive Auto
Insurance
   Protects the insured vehicle against
    damage from almost all damages except
    collision
       Fire
       Theft
       Vandalism
       Hail
       Windstorm
       Windshield damages
       Collision with wild animal including fowls
   Does NOT charge points when claim is
    filed
Uninsured/Underinsured
Motorist Coverage
   Protects policyholder against drivers
       Without insurance insurance to cover
        the loss suffered
       Without enough insurance to cover the
        loss suffered
   Examples:
       Hit and run drivers
       Drivers who let insurance policy lapse
       Drivers involved in serious accidents
        who carry low $ liability limits of
        coverage
Other Auto Coverage

   Medical payments - Covers
    anyone in vehicle or hurt by
    vehicle, even if not moving
       Ex: Broken finger by closing finger
        in door or trunk, pedestrians
   Towing Expense - Pays tow
    fees
   Rental Reimbursement -
    Covers cost of rental when
    vehicle being repaired due to
    accident
No Fault Insurance

   The insurer of each party involved in
    accident pays the insured loss
    regardless of fault
   Not required to prove fault of one
    party over the other
       Reduces time delays for claim
        settlement especially in bodily injury
        lawsuit cases
       Reduces money spent to resolve the
        claim
Cost of Insurance

   Insurance companies legally discriminate
    by using:
       Relevant statistical data and
       Risk factors related to the insurance type
   Underwriters at companies “rate” to
    determine the premium cost for the
    coverage requested.
       Standard premiums may be rated up for hazards
            Points for tickets or accidents on auto insurance
            Health issues on life/health insurance
Factors Affecting Cost of
Auto Insurance
     Type of coverage
     $ Limit of coverage
     Risk retention -Deductible amount
     Experience rating – how long driver has
      been licensed (AGE IS NOT A
      FACTOR!!)
     At fault Accidents (Points)
     Tickets (Points)
     Type of Vehicle - Value, reparability,
      engine size, style
     Geographic area- Urban, suburban,
      rural
     Use of Vehicle - Distance driven and
      purpose
     Company
LIFE INSURANCE
Life Insurance

   Provides income to dependents
    or other named beneficiaries in
    the event of the insured
    person’s death.
   Face value- the amount of
    protection stated in the policy
       Example: Marla buys a $100,000
        face value life insurance policy.
        Marla dies. Marla’ s beneficiaries
        will get $100,000 in proceeds.
Beneficiaries

   The policyholder names a
    beneficiary
   Can be an individual or business
   Beneficiary receives proceeds from
    a life insurance claim.
   Proceeds is the money paid to a
    survivor by a life insurance policy.
   Contingent beneficiaries named in
    the policy are second in line if the
    beneficiary is deceased.
Life Insurance Advantages

   Face amount is paid as
    proceeds to beneficiary
   Proceeds are NOT taxable by
    income, estate or inheritance tax
    laws.
   Proceeds are paid direct to
    beneficiaries.
   Proceeds avoid probate.
Term Life Insurance


   Term life is temporary insurance.
       Only pays if insured dies during policy
        period
       Purchased for a specific term (one year
        or multiple years)
       Usually renewable for another term
       Least expensive premium for most
        coverage
       Pure insurance, no savings add up
Whole Life Insurance

   Permanent insurance for lifetime of
    insured.
   Premium is more.
   Excess premium creates savings
    called cash value.
   Cash value can be:
       Withdrawn by policyholder as loan
       Used to buy more paid up insurance
       Used to pay current premium
Other Types of Life Insurance
Supplemental Information
   Limited pay life - stop paying after a
    specified # of years without lapse
   Universal life - blend of term and whole
   Endowment - lump sum paid in advance
   Variable life - cash value builds in
    investment chosen by policyholder
   Accidental death & dismemberment - for
    deaths due to accident or loss of limb
Cost Factors for Life
Insurance
   Type of insurance
   Age of insured
   Health of insured
   Gender (sex) of insured
   Face amount – Dollar amount of
    coverage provided by the life
    policy
   Company
PROPERTY AND CASUALTY
  & OTHER INSURANCES
Property/Casualty Insurance

   Types of policies :
     Fire policies
     Renter’s policies

     Homeowner’s policies

     *Supplemental - marine insurance
Property and Casualty
Insurance
   Covers both individual and
    business property such as:
     Real Property: Houses,
      apartments, condos, office
      buildings and other structures
     Personal property: Jewelry,
      furniture, clothing, equipment,
      artwork and other valuables
Fire Policy

   A very basic policy covering loss
    resulting directly or proximately
    from an unfriendly fire.
     Unfriendly or hostile fire is
      uncontrollable or has escaped
      from the place where it should be.
     A friendly fire is a bonfire, furnace
      fire, fire in a fireplace unless it
      gets out of control.
Fire Policy

   Owner of property rented to
    others protects investment in
    structure with a fire policy.
    Owner has insurable interest in
    the property, but not in tenant’s
    property.
   Examples:
     Apartment
     Condo

     Office building
Renter’s Insurance

   Covered under Homeowner’s 4 Form
   Person who rents real estate from
    another but has personal contents
    on premise carries renter’s insurance
    to insure:
       personal contents
       against liability risk
   Insurable Interest law applies. A
    person can only insure his own
    property, not another’s property.
Renter’s Insurance

   Protection includes:
       Personal contents of tenant in an
        apartment, condo, mobile home or
        house
       Personal liability if others sue tenant for
        injuries
   Examples:
   Lightning strikes and damages TV
    owned by tenant
   Neighbor breaks leg when he steps
    on child’s skate left on steps and
    sues tenant for negligence
Homeowner’s Policy

   Provides coverage for:
       Home - Primary structure
       Personal property - Contents
       Related structures – Outbuildings, if any
       Loss of Use - Living expenses if insured
        can not live there due to covered
        damage
       Premise personal liability – for injuries to
        others who were on your property
Homeowner’s (HO) Policy

   Riders may extend policy for
    additional coverage for items
    such as:
        Boats
        Jewelry

        Furs

        Artworks

        Antiques

        And other special collectibles owned
         by a homeowner
Homeowner’s Insurance

   Must own home to carry policy
    forms:
       HO-1 Basic - covers limited perils
       HO-2 Broad – covers extended perils
       HO-3 Special - covers most perils with
        specified exclusions
       HO-6 Condominium Owners – coverage
        like an HO-3, but for homes with
        common walls


   Peril – a cause of loss
Co-insurance

   Homeowners policies require
    the insured to carry a minimum
    of 80% of the value of the home
    (called co-insurance) to get full
    reimbursement for a claim
    made.
       Most claims are partial losses
        leading policyholders to insure a
        home for less than value since risk
        of total loss is low.
Cost Factors of Property
Insurance
   Limit of coverage for property
   Location of property – fire
    district, city, county, state
   Structural material - brick, block,
    frame
   Previous claims filed
   Company
FLOOD & EARTHQUAKE


   NOT COVERED UNDER HO
    POLICY
     Must buy separate flood insurance
      coverage
     Must buy separate earthquake
      coverage

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:0
posted:3/23/2013
language:English
pages:50
xeniawinifred zoe xeniawinifred zoe not http://
About I am optimistic girl.