Life Insurance Policy

2. Life Insurance Policy • Protects the people who depend upon the policyholder from extreme financial losses caused by the policyholder’s death • Is given to the beneficiary of the policyholder • a beneficiary is the person who will receive the benefits of an insurance policy

3. Types of Life Insurance Policies • Include: • term life insurance • whole life insurance • universal life insurance

4. Term Life Insurance • Provides protection against loss of life for a specified period of time • Only pays benefits if an individual dies during the period in which the policy are covered • Examples include: • renewable terms • multiyear level terms • conversion terms • decreasing terms

5. Whole Life Insurance • Is a permanent policy in which the policyholder pays a specified premium each year for the duration of entire life • Premium depends on age at the time of purchase • Pays the beneficiary the sum total of the policy • Examples include: • limited payment policy • variable life policy • adjustable life policy

6. Universal Life Insurance • Has a flexible premium • Is an adjustable-benefit life insurance policy which accumulates account value • Allows policyholders to change the amount of insurance as their needs for insurance changes

7. Disability Income Insurance • Provides regular supplementary income when a person is unable to work at his or her regular employment because of accident, illness or pregnancy • Protects individuals’ earning power • Is allocated based on previous work experience

8. Sources of Disability Insurance • Include: • worker’s compensation • social security • private insurance programs

9. Worker’s Compensation • Covers workers who are injured or become ill due to workplace conditions • Varies in benefits • Depends on salary and work history

10. Social Security • Provides retirement income and disability benefits • Payments depend on salary and the number of years contributing to Social Security

11. Private Insurance Companies • Offer policies which protect individuals from loss of income due to an illness or disability • Require weekly or monthly cash payments to maintain a plan

12. Common Concepts of Disability Income Insurance • Include: • elimination period • duration of benefits • guaranteed renewability

13. Elimination Period • The period of time for which individuals wait before they can begin collecting benefits • Policies with longer elimination periods have lower premiums • Usually consists of one to six months

14. Duration of Benefits • Is the specified period of time in which benefits will be paid • Vary from policy to policy

15. Guaranteed Renewability • Allows an individual to still be covered as long as he or she pays the premium • Causes premiums to be higher

16. Home & Property Insurance • Is coverage which provides protection for an insured home and its associated financial risks • Compensates for loss of personal property associated with home

17. Types of Home Insurance Policy • Include: • HO-1 • protects against perils such as volcanic eruptions, hail, lightning, etc. • HO-2 • covers a wider range of perils including damage from snow or ice

18. Types of Home Insurance Policy • Include: • HO-3 • covers all basic and broad form risks, except those specifically excluded from the policy, such as flood, earthquake, war, nuclear accidents • HO-5 • expands the coverage of the HO-3 • includes endorsements for items such as replacement coverage

19. Personal Property • Is covered in homeowner’s insurance • policyholders are suggested to make a list of personal belongings, including the purchase date and price • Which is extremely valuable can be insured by purchasing a personal property floater A personal property floater is an additional insurance policy for a particular item which is usually extremely valuable

20. Personal Liability • Refers to the fact the policyholders are held responsible for any accident which occurs on their property • Examples include: • umbrella policy • supplements the policyholder’s personal liability coverage to protect against personal catastrophe • medical payments coverage • pays the costs of minor accidental injuries to visitors of the policyholder’s home

21. Specialized Coverage • Covers losses from floods or earthquakes • Must be purchased separately from the original policy • Can be purchased from National Flood Insurance Program or Federal Emergency Management Agency

22. Renter’s Insurance • Provides protection for a renter’s personal property • Is necessary because renters are not covered by their landlord’s policy unless the landlord is found liable for the damage • Is relatively inexpensive and provides similar protection to a homeowner’s policy

23. Types of Renter’s Insurance • Include: • HO-4 • protects the personal property listed of a renter • does not include coverage on the building or other structures • HO-6 • is specifically for condominium owners/renters • protects personal property and any additions or improvements made to the living unit

24. Factors Affecting Home Insurance Costs • Include: • location • type of structure • coverage amount • policy type

25. Location • Affects insurance rates • lower rates are offered to people whose home is closer to water hydrants, a water supply or close to a fire department • rates are higher in high crime areas • areas which have a higher chance to experience severe weather often pay more in premiums

26. Type of Structure • Affects insurance rates • brick is cheaper to insure than a wood home • an older home is more difficult to insure than a new one

27. Coverage Amount & Policy Type • Affect the premium • the greater the coverage the higher the premium • it costs more to insure a $600,000 home than a $85,000 home • by increasing the deductible the policyholder can reduce the premium