Download
1 / 21
E N D
Chapter Five LIFE AND HEALTH INSURANCE After completing this chapter the student will be able; • Understand importance of life insurance • Describe different types of life insurance • Explain the meaning of premature death. • Explain health insurance
Cont… Underwriting life insurance The meaning of underwriting • Underwriting is a process that insurer goes through to confirm eligibility and rates for a life insurance policy. • Underwriting involves conducting research and assessing the degree of risk each applicant or entity brings to the table before assuming that risk. • This underwriting process helps to set establish appropriate premiums to adequately cover the true cost of insuring policyholders.
Cont… Life insurance underwriting • Is process to assess the risk of insuring a potential policyholder based on their age, health, lifestyle, occupation, family medical history, hobbies, and other factors determined by the underwriter. • Life insurance underwriting can result in approval along with a range of coverage amounts, prices, exclusions, and conditions.
Cont… The life insurance underwriting process helps insurer to: • Determine eligibility of applicant for a life insurance policy • Establish how much coverage applicant can buy • Finalize the price that applicant pay for the life insurance
Cont… • Life insurance is a contract between an insurer and a policy owner • A life insurance policy guarantees the insurer pays a sum of money to one or more named beneficiaries when the insured person dies in exchange for premiums paid by the policyholder during their lifetime. • The main purpose of life insurance is financial protection to dependents of insured upon the premature death of the insured.
Cont… A human life has economic value to all who depend on such as family and employer • To the family, the economic value of a human life a probably most easily measured by the value of the earning capacity of each of its members. • To the employer, the economic value of human life is measured by the contributions of an employee to the success of the business firm. Four main perils that can destroy economic value of a human life; • Premature death or early death • Loss of health • Old age • Unemployment
Cont… The risk management tool that is most appropriate for dealing with the exposure of premature death is “Life Insurance”. Every persons faces two basic contingencies concerning life; He/she may die too soon, or He/she may live too long,
Cont… Types of life insurance There are three main types of life insurance • Term life insurance • Whole life insurance • Endowment life insurance
Cont… Term life insurance • Term life insurance is a type of life insurance policy that is in effect for a limited time. Types of Term Insurance: A wide variety of term insurance products are sold today. They include the following: • Yearly renewable term • 5-,10-,15- or 20 year term • Term to Age 65 • Reentry term • Return of premium term insurance
Cont… 2. Whole life insurance In contrast to term insurance, which provides short term protection, whole life insurance is a cash-value policy that provides lifetime protection. Types of whole life insurance: • Ordinary Life Insurance • Limited – Payment Life Insurance Ordinary Life Insurance: Ordinary life insurance also called straight life and continuous premium whole life provides lifetime protection to age 100, and the death claim is a certainty. If the insured is still alive at age 100, the face amount of insurance is paid to the policy owner at that time.
Cont… Limited Payment Life Insurance: • A limited payment policy is another type of traditional whole life insurance. The insurance is permanent, and the insured has lifetime protection. • The premiums are level, but they are paid only for a certain period. For example Girma, age 35 and purchase a 20 year limited payment policy in the amount of 25,000 Birr. • After 20 years, the policy is completely paid up, and no additional premiums are required even though the coverage remains in force. • The most common limited-payment policies are for 10, 20, 25 or 30 years
Cont… Endowment life insurance • Endowment insurance is another traditional form of life insurance. • An endowment policy pays the face amount of insurance if the insured dies within a specified period; if the insured survives to the end of the endowment period, the face amount is paid to the policy owner at that time. • For example, if Stephanie, age 35, purchased a 20-year endowment policy and dies any time within the 20-year period, the face amount would be paid to her beneficiary. • If she survives to the end of the period, the face amount paid to her.
Cont…. Health insurance • Health insurance defined broadly as the type of insurance that provides indemnification for expenditure and loss of income resulting from loss health. • Health insurance is insurance against loss by sickness or bodily injury. The loss may be the loss of wages caused by sickness or accident, or it may be expenses for doctor bills, hospital bills medicine etc., Types of Health Insurance: There are two types of insurance in the generic term health insurance: 1. Disability Income Insurance and 2. Medical Expense Insurance
Cont… Disability Income Insurance: • Disability income insurance is form of health the insurance that provides periodic payment when the insured is unable to work as a result of illness or injury. • It may pay benefits only in the event of sickness or only in the event of accidental bodily injury or it may cover both contingencies in one contract. • The disability must be one that prevents the insured from carrying on the usual occupation. • Most policies continue payment of the benefits for only a specified maximum number of years, but lifetime benefits are available on some contracts.
Cont… • However, under all loss of income policies, the benefits are terminated as soon as the disability ends. • Certain types of accidents are excluded, for example, losses caused by war, suicide and intentionally caused injuries, and injuries while in military service during wartime. Medical Expense Insurance • Medical expense insurance provides for the payment of the cost of medical care that results from sickness and injury. • Its benefits help meet the expenses of physicians, hospital nursing the related services, as well as medications and supplies.
Cont… • Benefits may be in the form of reimbursement of actual expenses, up to a limit, cash payments or the direct provision of services. • The medical expense may be paid directly to the provider of the services or the insured. Medical expense insurance is divided into four major classes: 1. Hospitalization Expense Contract 2. Surgical Expense Contract 3. Regular medical Expense Contract 4. Major medical Expense Contract
Cont… Hospitalization Expense Contract: • The hospitalization contract is intended to indemnify the insured for necessary hospitalization expense, including room and board in the hospital, laboratory fees, nursing care, use of operating room, and certain medicines and supplies. Surgical expense contract; • The surgical contract provides allowances for different surgical procedures performed by duly licensed physicians. • In general, a schedule of operations is set forth together with the maximum allowance for each operation. It reimburses the policyholder according to a schedule that lists the amounts the policy will pay for a variety of operations.
Cont… Major Medical Contract: • The major medical expense insurance provides protection against the very large cost of serious or long illness or injury. • The major medical policy is most appropriate for the large medical expenses that would be financially unaffordable for the individual.
Cont… Workers' Compensation Insurance • Workers’ compensation insurance is types of insurance that covers medical expenses and a portion of lost wages for employees who become injured or ill on the job. • Coverage also includes employee rehabilitation and death benefits. • An employee can only receive benefits if their injury or illness relates to their job duties or employment.
Cont…. Personal Accident Insurance • Personal Accident Insurance policy provides complete financial protection to the insured members against uncertainties such as accidental death, accidental bodily injuries, and partial/total disabilities, permanent as well as temporary disabilities resulting from an accident. • Personal accident insurance kicks in and payouts are delivered if the policyholder is seriously and/or permanently disabled in the following circumstances: • a workplace accident or injury • criminal violence • in a road traffic accident
Cont…. Personal accident insurance typically won't cover injuries, disability, and deaths caused under the following circumstances: • self-inflicted injuries-either caused in a suicide attempt or through recklessness • injuries caused by drug use or alcohol intoxication, including road traffic accidents caused when driving under the influence of controlled substances • injuries sustained in war
