Unit B Personal Law

1. Unit BPersonal Law Essential Standard 4.00 Understand financial, credit, and insurance law BB30 Business Law 4.02 Summer 2013

2. 4.02 Understand Types and Aspects of Insurance Premiums– the fee paid to an insurance company in return for the insuring of property and casualty insurance and life and health insurance to individuals or businesses. Insurable Interest-Financial Responsibility-issaid to exist whenever the occurrence of a specific event such as fire or theft, results in a financial loss to a person organization. Risk-a risk exists whenever there is uncertainty about the outcome Peril-A peril is the cause of a loss such as a fire, flood, theft and earthquake that can cause a loss of life to property and people. Hazard-A hazard is a condition that makes a peril more likely to happen or that increases the seriousness of a loss BB30 Business Law 4.02 Summer 2013

3. Insurance Defined-Continued Loss-Loss is simply a decline in value. When there is a reduction in quantity, quality, or value of something, a loss is said to occur. Insurance- is a social and contractual device that transfers the risk of financial loss from individuals or businesses to an insurer. Insurance Policy- is a document issued by an insurance company to its policyholder that provides details about what is covered Exclusions-provision in an insurance policy eliminating coverage for certain risks or limiting coverage Claims-notice by the insured to the insurance company that a loss has occurred and demand for payment for the loss Deductibles-a portion of a covered loss that is not paid by the insurer Insured-one for whom insurance is written (named insured) Insurer-An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual BB30 Business Law 4.02 Summer 2013

4. Automobile Insurance (http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Automobile%20Insurance_CAU1.pdf) Personal Auto Policy (PAP)-introduced in 1977. Other policies prior however the PAP is written in plain language without technical terms and is easier to understand. Liability Coverage- provides protect when you are held legally responsible Coverage for Bodily Injury and Property Damage caused by an auto accident Property Damage Coverage-Physical injury to or destruction of or loss of use of tangible property such as other vehicles, buildings, telephone poles, fences etc. Collision Coverage-covers your vehicle for damage caused by impact with another vehicle or object or overturn of your vehicle. Comprehensive Coverage-Other than Collision-provides protection from theft, fire, windstorm, hail, flood, falling objects, collision with a bird or animal. (Exceptions-road damage to tires, mechanical breakdown or wear and tear on a vehicle) BB30 Business Law 4.02 Summer 2013

5. Automobile Coverage (Continued) • Medical Payment Coverage(Med Pay)-pays for medical expenses for you, • your family members and passengers in your car as a result of an accident. • Uninsured Motorist Coverage-pays if you are struck by someone who does not have insurance. Also will pay if you are a victim in a hit-and-What is run accident. • Underinsured Motorist Coverage-pays from your coverage if you are in an accident with another motorist that has lower liability coverage than your coverage. Your underinsured coverage will pay the difference. Not required in North Carolina, but it is suggested. • Miscellaneous Coverage-Towing, Rental Vehicle, Custom Coverage • This coverage is elective coverage by the insured that provides specific • coverage for incidents requiring towing of the insured vehicle(s), provides • coverage for one of a kind vehicles, classic autos or other special vehicles • Rental coverage provides coverage for covered accidents to the insured’s vehicle. Custom insurance provides for documented value of a custom auto or motorcycle or antique or one of a kind vehicles. BB30 Business Law 4.02 Summer 2013

6. Motorcycle Insurance Liability, Collision, Uninsured/Underinsured and Towing Coverage is identical to a regular automobile policy. It is important to have a special coverage for a customized motorcycle. Traditional motorcycle coverage will only cover the “stock value” not any customizations are added equipment. BB30 Business Law 4.02 Summer 2013

7. Boat Insurance • Pleasure boat policies or endorsements often state that coverage includes • "the boat and all permanently attached equipment". The policy may then • list items that are not permanently attached, but are covered as either part • of the boat's value, or as a separate limit of insurance. Items that may or • may not be considered "permanently attached" under a policy include: • Anchors • Batteries • Bilge pumps • Boat furniture • Boat and motor covers • Cook stoves • Deck chairs • Depth finders • Detachable canopies • Emergency signaling devices • Fire extinguishers • Fittings • Fuel tanks • Horns • Life preservers • Lights BB30 Business Law 4.02 Summer 2013

8. Property Insurance • Homeowners Insurance-is designed to protect the physical assets owned, leased, rented or used by individuals and families. • Coverage for Property • Coverage A-Dwelling-located on the residence premises including any attached structures. • Coverage B-Other structures (such as a detached garage, workshop, swimming pools, fences and gazebos) • Coverage C-Personal Property Coverage-is anything other than real property (land or anything attached to it). Basically clothing, furniture, televisions. Exceptions: Special items such as money, jewelry, firearms, silverware and other high value metals have loss value limits. • Coverage D-Loss of Use-Provides money for you and your family to live elsewhere when you cannot live in your home because of a covered loss. BB30 Business Law 4.02 Summer 2013

9. Homeowner’s Exclusions Earth Movement-includes earthquakes, landslides, mudslides etc. Water Damage-damage to the home from flooding. (requires a separate flood insurance policy if the home is in a flood zone) Power Failure-if a utility interruption takes place that is not at the insured’s home, coverage is not provided. Neglect-if the insured fails to use reasonable means to protect the insured property from damage, the loss would not be covered. BB30 Business Law 4.02 Summer 2013

10. Additional Types of Property Coverage Renters Insurance-offers the same protection as a homeowners policy. Roommates each must have their own renters insurance policy. Fire Insurance-Coverage for losses to insured property resulting from fire or lighting, as well as any resulting smoke or water damage . BB30 Business Law 4.02 Summer 2013

11. Health Insurance • Traditional Health Insurance (Major Medical Coverage)- Contains basic coverage if a catastrophic loss occurs. To prevent the insured from having financial ruin from a long term illness or injury. Characterized by very high deductibles as high as $10,000 and low premiums • Annual Deductible-a portion of a covered loss not paid by the insurer during the insured’s annual 12 month policy period. • Deductible amount resets each policy year period. • b) Major Exclusions for Coverage-Provision in an insurance policy eliminating coverage for certain risks or otherwise limiting the scope of coverage. • Certain causes and conditions listed in the policy that are not covered. Maternity coverage, major elective surgeries are some examples. • c) Possible lengthy waiting periods-is the time that elapses after the insured’s policy is active, before specific exclusions will be covered. (Ex. Maternity coverage) • d) Group Insurance Coverage-coverage provided by a group which is normally the insured’s employer or other inclusive group. • Coverage rates are based on the group’s “experience rating” so that each group pays according to it’s actual claim experience • Almost sixty percent of Americans have group health insurance BB30 Business Law 4.02 Summer 2013

12. Managed Health Care • 1) HMO-Heath Maintenance Organization-group managed health insurance where will need to receive most or all of your health care from a network provider. • HMOs require that you select a primary care physician (PCP) who is responsible for managing and coordinating all of your health Care • 2) PPO-preferred provider organization (PPO) is a health plan that has contracts with a network of "preferred" providers from which you can choose. You do not need to select a PCP and you do not need referrals to see other providers in the network. • 3)HMO-(POS)-The POS plan is like a combination of the HMO and PPO plans. You are required to designate an in-network physician to be your primary health care provider. You may go out-of-network if you choose, but in doing so, you will have to pay most of the cost yourself • Individual Insurance Coverage-is available from most of the same insurer’s that provide group coverage at much higher rates. Less than nine percent of Americans purchase individual health insurance. BB30 Business Law 4.02 Summer 2013

13. Supplemental Health Insurance Coverage • Cancer Insurance Coverage-Cancer insurance pays benefits only if you're diagnosed with cancer -- not for other illnesses -- and it doesn't cover all your treatment costs. It's designed to supplement, not replace health insurance • 2) Dental Insurance Coverage- available in group and individual plans. May have restrictions on certain services, such as orthodontic work. Many dental plans also have a maximum benefit of around $1,000 to $2,000 per year. May restrict coverage of pre-existing conditions • 3) Long Term Medical Coverage-provides for the daily custodial care as well as the long-term nursing care that an individual may need outside of the hospital. BB30 Business Law 4.02 Summer 2013

14. Health Insurance (Continued) Vision Insurance Coverage-optometrists and ophthalmologists in a provider network offer eye exams, eyewear and other services covered by the vision insurance plan at no charge or at discounted fees compared with doctors outside the network. Government Insurance Coverage Medicare-(Federal)-is part of the federal Social Security program. Covers most individuals that are age 65 or older.Can also pay benefits to qualified disabled individuals under age 65. Covers individuals under age 65 who need long term kidney dialisistreatment or kidney transplants Medicaid-(Federal-State)-provides health insurance coverage to low income groups. Coverage varies by each State. Medigap(Supplemental Coverage of 20%)-Medicare supplement (Medigap) insurance, sold by private companies, can help pay some of the health care costs that Original Medicare doesn't cover, like copayments, coinsurance, and deductibles. Disability Insurance Coverage-disability income insurance provides monthly benefits to a disabled wage earner to reimburse the wage earner’s income during a period of total or partial disability. BB30 Business Law 4.02 Summer 2013

15. Life Insurance-Types (How Much Do You Need?) • Term Life Insurance-provides coverage for a specific period such as 10 or 20 years. If the insured dies during the policy term, the death benefit amount is paid to the beneficiary. Benefit is lower premium that whole life, universal life policies for higher coverage. • Increasing Term Insurance-Because mortality rates increase with age, the. • likelihood of dying does too. Therefore the term insurance premiums also • increase • Decreasing Term Insurance- In the early years of a decreasing term policy, the • death benefit will be the face amount of the policy when purchased. Thereafter, as • years pass, the death benefit will decline. BB30 Business Law 4.02 Summer 2013

16. Life Insurance (continued) Level Term Insurance-has a fixed annual premium for a fixed number of years. Permanent Life Insurance a) Whole Life Insurance-provides lifetime protection, accrues a cash value and has premiums that remain unchanged during the insured’s lifetime. b) Universal Life Insurance-Similar to whole life insurance, but it has flexible premiums that can be increased or decreased based on the insured’s needs. c) Variable Life Insurance-similar to universal life insurance but the insured can control where the policy cash value is invested with any capital gains tax liability. Life Insurance Optional Rider Coverage a) Dependent Children-This type of rider will generally provide level term coverage on the life of your children. Such riders are usually offered at one premium rate and may cover newborns and adopted children who can be added to the coverage without increasing the premium you pay. BB30 Business Law 4.02 Summer 2013

17. Life Insurance (Continued) Life Insurance Optional Rider Coverage a) Dependent Children- Riders are attachments to existing policies for additional coverage for family members. This type of rider will generally provide level term coverage on the life of your children. Such riders are usually offered at one premium rate and may cover newborns and adopted children who can be added to the coverage without increasing the premium you pay. b) Spouse Rider-this type of rider will provide level term coverage on the life of the insurer’s spouse. c) Guaranteed Insurability- Guaranteed Insurability Option, often shortened to GIO, is usually added free to most term life insurance policies and means the policy can be altered without the need to reapply and prove your insurability. Accidental Death and Dismemberment Insurance-In the event of an accidental death, this insurance will pay benefits in addition to any life insurance but only up to a set amount total regardless of any other insurance held by same insurer, held by the insured. Dismemberment-Fractional amounts of the policy will be paid out if the insured loses a bodily appendage or sight because of an accident. BB30 Business Law 4.02 Summer 2013

18. Life Insurance (Continued) Beneficiaries-Contingent Beneficiaries-a beneficiary is the recipient of the proceeds of the policy when the named insured dies. Contingent Beneficiary-A contingent (or secondary) beneficiary is entitled to the policy proceeds if the primary beneficiary has predeceased the insured. If there are multiple contingent beneficiaries and proceeds are to be distributed, they are distributed equally between the contingent beneficiaries Collecting Death Benefits-Generally, a beneficiary can apply for the proceeds simply by filling out the insurance company's claim form and submitting it to the company along with a certified copy of the death certificate. BB30 Business Law 4.02 Summer 2013

19. Life Insurance (Continued) • Cost factors-Needs Approach and the Human Life Value Approach • Needs Approach-to determine the total financial requirements of the insured’s surviving dependent family. • Assets such as existing life insurance, governmental benefits and other liquid assets are applied against the total financial requirements • How much will it take for the insured’s family to live • Human Life Value Approach-objective is to determine the total amount of income that will be lost when the primary earner dies. • Insured's pay after taxes, estimated interest that could be earned over the insured’s expected working period. • How much is a person worth • Statistical Basis for Life Insurance • Mortality tables provide probabilities based on deaths per 1,000 living that are expected to die in a given year. (Ex: A 17 year old male has a life expectancy of 58.94 years or age 75.94) • Morbidity tables show the rate of disease, illness or sickness among groups of people according to age or other factors such as gender or occupation. BB30 Business Law 4.02 Summer 2013

20. Insurance Fraud-insurance comes in many forms. Some of the types that routinely occur are below. The criminal charges for this type of fraud is usually a felony classification in North Carolina. • Automobile Repair • Review all repair shop paper work carefully. Concerns noted in this area may involve one or more of the following: • • Falsely reporting lost or damaged parts • • Billing for excessive final cost • • Providing final statement containing false and/or unauthorized charges • • Charging for genuine parts when aftermarket or junkyard parts were actually used • • Charging for new parts when bonding or pounding • • Referring customers to medical or legal offices for a fee • Report any suspects acts of fraud to the NC Dept. of Insurance and your local law enforcement agency BB30 Business Law 4.02 Summer 2013

21. AUTOMOBILE ACCIDENTS • Individuals and/or organized accident “rings” that stage auto accidents involving one or more of the following: • • Sudden stops in front of you for no reason • • Disregarding or giving up right of way to cause an accident • • No real accident – occurred on paper only with phony drivers and passengers – more popular now due to less of a chance of actual injury and less likelihood of police involvement • • Claims that list drivers, passengers, witnesses who do not exist and who claim excessive injuries – especially when compared to vehicle damage • • Driver has temporary vehicle registration and there is prior damage to one or both vehicles • • Unsolicited referrals or contacts by, from or to body shops, legal offices and medical offices • • Fraudulently reporting vehicles as stolen or vandalized in order to collect insurance money • Report any incidents of suspected fraud involving auto accidents to your local law enforcement agency, the NC Highway Patrol or the NC Department of Insurance BB30 Business Law 4.02 Summer 2013

22. Billing of Medical Services • Fraudulently billing the consumer, his or her insurance company and/or public programs (Medicare, Medicaid, etc.) for: • • Treatment not provided or provided by someone other than doctor • • Alternative treatment provided • • Tests or supplies not conducted or provided • • Cancellation charge for unscheduled visits • • Charges for office visits not made • • Referral fees for services not rendered • • Unnecessary lab or other testing • Report incidents to your insurance provider, the NC Depart. Of Insurance, Medicare or Medicaid or whomever was responsible for the bill payment of insurance coverage. BB30 Business Law 4.02 Summer 2013

23. Insurance Fraud (continued) • Property Claims Adjusting • This type of fraud has been extremely prolific in North Carolina due to the recent hurricane-related concerns. • Adjusting • Fraudulent claims adjusting usually involves illegal or questionable methods such as: • • Operating as an adjuster without the required license • License Adjuster requests that his or her name be the payee of the insurance check • Adjuster requests that the payee endorse the insurance check over to him or her • Adjuster handles all business in person, has no telephone number, address or other means of contact, and avoids use of mail • Claim check larger than cost of repairs made • Invoices include charges for services not rendered or for repairs not made • Victims of this type of fraud should first contact their insurance agent to determine if the adjuster was their authorized representative, then contact local law enforcement and the NC Dept. of Insurance. BB30 Business Law 4.02 Summer 2013