Insurance

1. , Insurance

2. What is Insurance?

3. What is an Insurance Policy? • A contract with an insurance company that spells out what losses are covered, what the policy costs, and who receives payments if a loss occurs.

4. What is basic insurance? • Insurance is a protection against possible financial loss, and gives you peace of mind.

5. Who sells Insurance • Insurance Companies sell insurance. An insurance compny, or insurer, is a risk-sharing firm that assumes financial responsibility for losses from an insured risk.

6. The Purpose of Insurance • The purpose of Insurance is to Provide Economic Protection against losses that may be incurred due to a chance happening or event, such as death, illness, or accident.

7. Life and Health Insurance Importance • Based on Risk Pooling • Individuals share the financial risks they face • Individuals “pool” the financial risks associated with death.

8. What people put into the pot • Premium: The amount that everyone puts into the pot • The size of your premium depends on the probability of death. • Actuaries: Statisticians who specialize in estimating the probability of death

9. What’s provided upon becoming deceased • Face Amount or Face of Policy: • The amount of insurance provided by the policy at death. • Owner of a policy is referred to as the “policy holder.” • Beneficiary: • Individual designated to receive the insurance policy’s proceeds upon the death of the insured.

10. Earnings Multiple Approach • Purchasing life insurance that covers from 5 to 15 times your annual gross income. • Earnings Multiple Approach: • Used to figure out exactly how much insurance this amount to.

11. Large-Loss Principle • It is wise to pay for small losses out of your own pocket and purchase insurance to cover those large losses that will ruin your financial plans. • The purpose, or the meaning of insurance is to cover financial catastrophes.

12. Computation for Life Insurance Needs Life Income stream X (1- % of family) X Earnings Multiple insurance to be replaced income spent Needs= on deceased’s needs)

13. Needs Approach • Immediate needs at the time of death • Debt Elimination Funds • Immediate Transitional Funds • Dependency Expenses • Spousal Life Income • Educational Expenses for the Children • Retirement Income

14. Two Major Types of Life Insurance: Term & Cash-Value

15. Term Insurance • A type of insurance that pays your beneficiary a specific amount of money if you die while covered by the policy. • Set amount of coverage for a set amount of years

16. Cash-Value Insurance • Two Components: • Life Insurance • Savings Plan

17. Contract Clauses Contract clauses are provisions or stipulations that appear in your insurance policy

18. Beneficiary Provision: • Beneficiary Provision: Person designated to receive death benefits when you die.

19. Coverage Grace Period: • Coverage Grace Period: Late-payment period for premiums during which time the policy stays in effect and no interest is charged. If payments still aren’t made, the policy can be cancelled after the grace period.

20. Loan Clause: • Loan Clause: A Clause that provides the right to borrow against the cash value of the policy at a guaranteed interest rate.

21. Nonforfeiture Clause: • Nonforfeiture Clause: The choices available to policyholders who miss premium payments, causing the policy to lapse. Common to exchange the policy’s cash value for a paid up policy with a reduced face value.

22. Policy Reinstatement Clause: • A clause that provides the right to restore a policy that has lapsed after the grace period has expired. Generally, reinstatement is provided for within a specified period.

23. Change of Policy Clause • Provides the right of the policyholder to change the form of the policy. • For Example • Change from a continuous-premium whole life policy to a limited-premium whole life policy.

24. Suicide Clause • Insurance company's will not pay off for suicide deaths that occur within the first two years of the contract.

25. Payment Premium Clause • Defines how you pay your premiums

26. Incontestability Clause • States the insurance company cannot dispute the validity of the contract after a specified period of time, usually two years. • Protects your beneficiary against policy cancellations due to error, concealment, or innocent misstatement made by the insured on the original application.

27. Riders • Special Provisions that may be added to your policy, often at an additional cost, to provide extra benefits or features to a policy in order to meet your specific needs.

28. Settlement or Payout Options • Alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured.

29. Insurance Costs

30. Traditional Net Cost(TNC) Method • A method of comparing insurance costs that sums up the premiums over a stated period (usually 10 or 20 years) and subtracts from this the sum of all dividends over that same period.

31. Interest-Adjusted Net Cost (IANC) Method or Surrender Cost Index • A method of comparing insurance costs that incorporates the time value of money into its calculations. • A method for comparing insurance costs.

32. Health Insurance Types of Health Insurance

33. Hospital Insurance • Insurance that covers the costs associated with a hospital stay, including room charges, nursing costs, operating room fees, and drugs supplied by the hospital.

34. Surgical Insurance • Insurance that covers the cost of surgery.

35. Physician Expense Insurance • Insurance that covers physicians fees outside of surgery.

36. Major Medical Expense Insurance • Insurance that covers medical costs beyond those covered by basic health insurance.

37. Aflac Major Medical Commercial

38. Health Care Choices • Fee For Service or Traditional Indemnity Plan • You are reimbursed for all or part of your medical expenditures, & have a good deal of freedom to choose your doctor or hospital. • Managed Health Care or Prepaid Care Plan • Most of your expenses are already covered and don’t need to be reimbursed • Limited to receiving healthcare from specific doctors, hospitals, & clinics.

39. Government Sponsored Health Care Plans Government Sponsored Plans fall into two categories: State Plans: Which provide for work related accidents & illness and Federal Plans Such as Medicare & Medicaid.

40. Workers Compensation Laws • State laws that provide payment for work-related accidents and illness.

41. Medicare • A government insurance program enacted in 1968 to provide medical benefits to the disabled and those over 65. It is divided into two parts. • Part A- Hospital Insurance • Part B- Supplemental Medical Insurance

42. Medigap Insurance Plans • Insurance sold by private insurance companies aimed at bridging gaps in Medicare coverage.

43. Medicaid • A government medical insurance plan for the needy.

44. Controlling Health Care Costs

45. Flexible Spending Accounts • A savings plan established by an employer that allows each employee to have pretax earnings deposited into a specially designated account.

46. Health Savings Accounts(HASs) • Allows individuals to pay for current health expenses and save for future qualified medical and retiree health expenses on a tax-free basis.

47. COBRA & Changing Jobs • If you decide to leave a company, or lose your job, you will be given the opportunity to continue your health insurance coverage for 18 months to 3 years after you leave the company.

48. Choosing No Coverage • Called “Opting Out” • When employees opt out they can receive a minimum of $300 in cash or other benefits for doing so.

49. Disability Insurance • Health insurance that provides payments to the insured in the event that income is interrupted by illness, sickness, or accident.

50. Long-Term Care Insurance • Insurance that’s aimed at covering the costs associated with long-term nursing home care, commonly associated with victims of stroke, chronic illness, or Alzheimer's disease, or those who can no longer manage to live on their own.