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POB Objective 10 Notes

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					I: INSURANCE OBJECTIVE COMPETENCY: 10 Explain the various types of insurance and explain how each provides protection against possible loss. OBJECTIVE: 10.01 Evaluate the major types of auto insurance available and the basis of costs. I. INSURANCE TERMS A. Insurance B. Insurance Company C. Insurable Interest D. Policy E. Insured (Policyholder) F. Insurer G. Premium H. Deductible I. Claims J. Actual cash value K. Depreciation L. Financial Responsibility Law M. Compulsory Insurance Law II. TYPES of AUTOMOBILE INSURANCE and FINANCIAL LOSS COVERED by EACH A. Bodily Injury Liability B. Medical Payments C. Uninsured Motorist Protection D. Property Damage Liability E. Collision Insurance F. Comprehensive Physical Damage III. FACTORS THAT AFFECT AUTOMOBILE INSURANCE COSTS A. Age and Sex B. Driving Record C. Purpose For Use of Vehicle D. Number and Miles Traveled Per Year E. Value and Type of Vehicle F. Repair Costs for the Area G. Geographic Location H. Types of Coverage Needed I. Deductible Desired J. Marital Status or Academic Standing IV. NO-FAULT INSURANCE

INSURANCE TERMS Insurance—The planned protection provided by sharing economic losses. Insurance Company—Businesses that provide planned protection against economic loss. 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. Policy—A contract issued by the insurance company for coverage of the policyholder. Insured (Policyholder)—The person for whom the risk is assumed. Insurer—The insurance company that provides planned protection against economic losses. Premium—The amount of money the policyholder must pay for insurance coverage. Deductible—The amount of money the policyholder must pay before the insurance company will pay a claim. Claims—Requests for payment from the insurance company to cover the financial losses. Actual Cash Value—The value of a new car minus depreciation. Depreciation—The decline in value of a vehicle because of use. Financial Responsibility Law—The law says you must pay for any damage or injury you cause in an accident either with insurance, with savings, or by selling property. Compulsory Insurance Law—Legally requires drivers to have a minimum amount of car insurance. TYPES OF AUTOMOBILE INSURANCE AVAILABLE Bodily Injury Liability—Protects the insured person from injury to people in other cars, passengers riding with the insured person, and pedestrians, but does not cover the insured person Medical Payments—Covers policyholders and family members while riding in a car. Uninsured Motorist Protection—Protects policyholder against drivers without insurance. Property Damage Liability—Protects the insured person against damage by his/her car to another person’s property. Collision Insurance—Protects the car owner against damage from a collision with another object or the car turning over, but does not cover injuries to people. Comprehensive Physical Damage—Protects the insured person against almost all damage except the collision or the car turning over. FACTORS THAT DETERMINE AUTOMOBILE INSURANCE COSTS      Age and sex Marital status or academic standing Number of miles driven each year Repair costs for the area Types of Coverage needed      Driving record (tickets and accidents) Purpose for which the vehicle is used Value and type of vehicle Geographic location Deductible desired

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FACTORS THAT DETERMINE AUTOMOBILE INSURANCE COSTS Age and sex  Driving record (tickets and accidents) Marital status or academic standing  Purpose for which the vehicle is used Number of miles driven each year  Value and type of vehicle Repair costs for the area  Geographic location Types of Coverage needed  Deductible desired

OBJECTIVE: 10.02 Evaluate property insurance costs and the benefits provided to individual and businesses. I. ECONOMIC LOSS FOR WHICH INSURANCE PROVIDES COVERAGE A. Damage to Property B. Expenses Necessary to Live or Operate a Business if Property is Unusable C. Liability Losses Related to the Property II. PROPERTY INSURANCE TERMS A. Perils B. Real Property C. Personal Property D. Extended Coverage E. Homeowner’s Policy F. Renter’s Insurance G. Inventory III. FACTORS THAT DETERMINE THE PREMIUM OF PROPERTY INSURANCE A. Value of the Property B. Construction Materials Used C. Type of Policy Desired (basic, broad, or special) D. Number of Perils Covered E. Distance to the Fire Department F. Amount of the Deductible IV. BENEFITS TO INDIVIDUALS AND BUSINESSES

PROPERTY INSURANCE TERMS Perils – causes of loss Real Property – items attached to the land Personal Property – property that is not real property Extended coverage - includes more perils Homeowner’s policy – a convenient package-type insurance policy designed to fit the needs of most homeowners: 1. Basic Coverage – covers 11 perils 2. Broad Coverage – covers 18 perils 3. Special Coverage – covers all perils except those excluded from the policy. Renter’s insurance – special policies designed for individuals who are renting Inventory – a list of property including the following: Original cost; Date purchased; Expected life of the article

LOSSES COVERED BY A HOMEOWNER’S POLICY Basic:  Fire or lightning  Windstorm or hail  Vehicles  Aircraft  Vandalism or malicious mischief  Breakage of glass constituting a part of a building      

Volcanic eruption Explosion Riot or civil commotion Smoke Theft

Broad (includes the basic perils):  Falling objects  Weight of ice, snow, sleet  Collapse of building(s)  Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system or of appliances for heating water, an air-conditioning or automatic fire protective sprinkler system    Accidental discharge, leakage or overflow of water or steam from within a plumbing, heating or air-conditioning system or domestic appliance Freezing of plumbing, heating and air-conditioning systems, automatic fire protective sprinkler system and domestic appliances Sudden and accidental injury from artificially generated currents to electrical appliances, devices, fixtures and wiring

Comprehensive (includes basic and broad perils):  All perils EXCEPT earthquake, flood, war, nuclear accidents, and certain others FACTORS THAT DETERMINE THE PREMIUM OF PROPERTY INSURANCE    The value of the property  The type of policy desired (basic, broad, or  special) The distance to the nearest fire  department and water supply The construction materials used Number of perils covered The amount of the deductible

WHAT TO INCLUDE ON AN INVENTORY FOR HOMEOWNERS INSURANCE The Item: Name the item and give a detailed description of it Original Cost:: List the original cost of the item including a sales receipt if possible The Date of Purchase: Give the date the item was purchased including a sales receipt if possible Expected Life: List the expected life of the item including the warranty if possible

OBJECTIVE:

10.03 Determine the value of major types of health insurance and advantages/disadvantages of having protection through disability, accidental death, and worker’s compensation insurance.

I. TYPES OF HEALTH INSURANCE A. Hospitalization Insurance B. Surgical Insurance C. Regular Medical Insurance D. Major Medical Insurance E. Comprehensive Medical Insurance F. Dental Insurance G. Vision Insurance H. Mental Health Insurance I. Disability Income Insurance II. PROVIDERS OF HEALTH INSURANCE A. Group Health Insurance B. Individual Health Insurance C. Health Maintenance Organization D. Government Provided Insurance 1. Medicare a. Medical insurance b. Hospital insurance 2. Medicaid a. Doctor’s services b. X-rays c. Lab tests d. Nursing home care e. Diagnosis and treatment of children’s illnesses f. Home health care services TYPES OF HEALTH INSURANCE Hospitalization Insurance  Highest selling insurance  Pays the major part of the cost of a hospital stay  Covers such charges as room, food, anesthesia, X-rays, laboratory tests, and medicines Surgical Insurance  Pays for all or most of the charges for surgery and in-hospital care by physicians Regular Medical Insurance  Pays for part or all of nonsurgical care given in doctor’s office, hospital, or patient’s home Major Medical Insurance  Pays for extended and serious illnesses  Pays for all or most of all kinds of health care prescribed by a doctor  Covers the cost of treatment in and out of the hospital, special nursing care, X-rays, psychiatric care, medicine Comprehensive Medical Insurance  Combines the features of hospital, surgical, regular, and major medical insurance

Dental Insurance  Pays for normal dental care such as examinations, X-rays, cleaning, fillings, and dental injuries due to accidents Vision Insurance  Pays for eye examinations, prescription lenses, frames, and contact lenses Mental Health Insurance  Pays for psychological counseling and psychiatric care Disability Income Insurance  Pays for loss of income due to extended illness or accident HEALTH INSURANCE PROVIDERS Group Health Insurance  Most popular way to buy health insurance  Usually provided by an employer Individual Health Insurance  Most expensive method of buying health insurance  The individual pays the entire premium  Usually has a waiting period before the policy is active  Usually requires a physical examination Health Maintenance Organization  Provides health care to members usually at a medically staffed clinic for a set fee per month  Emphasis is on preventative health care Government Provided Insurance Medicare  Federal assistance for people aged 65 and over and some disabled individuals  Provides medical and hospital insurance Medicaid  Federal assistance for low-income families  Covers the cost of doctor’s services, X-rays, lab tests, nursing home care, diagnosis and treatment of children’s illnesses, and home health care services Worker’s Compensation  Provides medical and survivor benefits for people injured, disabled, or killed on the job.

OBJECTIVE:

10.04 Evaluate the various types of life insurance policies.

I. LIFE INSURANCE TERMS A. Dependent B. Proceeds C. Beneficiary D. Renewable Policy E. Cash Value F. Face Value II. TYPES OF LIFE INSURANCE A. Term Life Insurance B. Whole Life Insurance C. Variable Life Insurance D. Universal Life Insurance III. FACTORS WHICH DETERMINE THE COST OF LIFE INSURANCE A. Type of Life Insurance Purchased B. Age of Insured C. Health of Insured D. Gender (sex) of Insured E. Face Amount of the Policy F. Company Selected to Provide Insurance IV. COMPARISON OF DIFFERENT TYPES OF LIFE INSURANCE A. In Relation to Type of Coverage Provided B. In Relation to the Cost 1. Tobacco user vs. non-tobacco user 2. Health screening vs. no health screening.

LIFE INSURANCE TERMS Dependent—A person that relies on another for financial support Proceeds—Money paid to the policyholder’s survivors Beneficiary—The person named in the policy who receives the proceeds Renewable Policy—A policy which the policyholder may renew for one or more terms without proving he is a good risk Cash Value—The amount of money received if a policyholder decides to give up the policy before his death Face Value—The amount of insurance coverage originally purchased which will be paid upon the policyholder’s death Insurable Interest—A financial interest in or benefit from the continued life of a person.

FOUR TYPES OF LIFE INSURANCE

Term Life Insurance—Provides financial protection for a survivor of the policyholder for a specific period (term) of time Whole Life Insurance—Provides death benefits and savings until the policyholder dies Variable Life Insurance—Provides death benefits and savings, but allows the policyholder to determine how to invest the cash value Universal Life Insurance—Divides the premium three ways: death benefits, insurance company expenses, and investments or savings that earn a high interest rate

FACTORS WHICH DETERMINE the COST of DIFFERENT TYPES of LIFE INSURANCE    The Type Of Life Insurance Purchased The Insured’s Health Face Amount Of The Policy    The Age Of The Insured Gender (sex) of the Insured The Company Selected to Provide the Insurance Permanent Insurance Variable Life Fixed and regular Specified Period Varied with the rise or fall in value of investment account Always exceeds cash value Life insurance plus an opportunity to select different cash investments option

Premium

Payment Period

Term Insurance Begins low but increases gradually Specified number of years (5, 10, 15)

Whole Life Ordinary Life Limited Life High but usually stays constant Life of the insured Higher than ordinary but constant Specified number of years (20-30) More cash value than Ordinary Life, but less than variable Fixed

Universal Life Varies at the discretion of the policyholder Specified Period

Cash Value

None

Some cash value

Varies with the interest rate paid on the cash value Can vary at discretion of policyholder Life insurance with a fairly high rate of return on cash value

Death Benefit

Fixed

Fixed

Purposes

Protection for a specified period of time

Protection for life; some cash value for policyholder

Protection for life; some cash value for policyholder