Chapter 50

Insurance

A contract in which the insurance company (the insurer) promises to pay or otherwise compensate another (either the insured or the beneficiary) for particular loss. Provides compensation in the event of (1) the injury or death of the insured or another, (2) damage to the insured's property, or (3) other types of losses, like those resulting from lawsuits.

Life Insurance

A person must have a reasonable expectation of benefit from the continued life of another person's life. insurable interest must exist at the time the policy is obtained.

Agent

A person who works for the insurance company (who contracts are usually obtained through)

Risk

A prediction concerning potential loss based on known and unknown factors

Property Insurance

An insurable interest exists when the insured derives a monetary benefit from the preservation and continued existence of the property

Underwriter

An insurance company is sometimes called this

Policy

An insurance contract.

Professional Malpractice

Attorneys, physicians, architects, engineers, and other professionals often become the targets of negligence suits.

General Liability

Can encompass as many risks as the insurer agrees to cover. Can protect a business from liability for injuries arising from on-site events held after work hours. Can protect bars and liquor stores to make sure they are not liable for buyers who become intoxicated.

Life Insurance on Family Members

Close family relationships give a person an insurable interest in the life of another.

Universal Life

Combines aspects of both term insurance and whole life insurance. Payments are called "contributions." For every contribution, the issuing life insurance company makes two deductions

Premium

Consideration paid to the insurer

Automobile Insurance

Consists of liability insurance and, collision and comprehensive insurance

Type of Insurance: Malpractice

Coverage: A form of liability insurance that protects professionals (physicians, lawyers, and others) against malpractice claims brought against them by their patients or clients.

Type of Insurance: Accident

Coverage: Covers expenses, losses, and suffering incurred by the insured because of accidents causing physical injury and any consequent disability; sometimes includes a specified payment to heirs of the insured if death resulted if death results from an accident

Type of Insurance: Life

Coverage: Covers the death of the policyholder. On the death of the insured, the insurer pays the amount specified in the policy to the insured's beneficiary.

Type of Insurance: Liability

Coverage: Protects against liability imposed on the insured as a result of injuries to the person or property of another

Type of Insurance: Homeowners'

Coverage: Protects homeowners against some or all risks of loss to their residences and the residences' contents or liability arising from the use of the property.

Type of Insurance: Major Medical

Coverage: Protects the insured against major hospital, medical, or surgical expenses

Type of Insurance: Term Life

Coverage: Provides life insurance for a specified period of time (term) with no cash surrender value. It usually is renewable

Type of Insurance: Disability

Coverage: Replaces a portion of the insured's monthly income from employment in the event that illness or injury causes a short- or long-term disability. Some states require employers to provide short-term disability insurance. Benefits typically last a set period of time, such as six months for short-term coverage or five years for long-term coverage

Collision and Comprehensive Insurance

Covers damage to the insured's car in any type of collision. The price per year is relatively high because it is likely that some small repair jobs will be required each year. Most people take out deductibles of $250, $500, or $1,000, which cost substantially less than zero-deductible coverage.

Liability Insurance

Covers for bodily injury and property damage. Usually described by a series of numbers, such as 100/300/50. These numbers mean the policy will pay a maximum $100,000 for bodily injury (to one person), a maximum $300,000 for bodily injury (to more than one person), a maximum $50,000 for property damage.

Workers' Compensation

Covers payments to employees who are injured in accidents arising out of and in the course of employment.

Business Liability Insurance

General Liability, Product Liability, Professional Malpractice, and Workers' Compensation

Liability Coverage

Homeowners' policy is for personal liability in the event that someone is injured in the insured's property because of unsafe condition on the property. Also applies when the insured damages someone else's property or injures someone else.

Property Coverage

Includes the house, garage, and other private buildings on the lot; includes personal possessions and property at home, work, or while driving. The additional living expenses are covered by the policy if the home is damaged by a fire or some other covered peril.

Key-Person Life Insurance

Insurance obtained by an organization on the life of a person who is important to that organization

Risk Management

Involves the transfer of certain risks from the individual to the insurance company by a contractual agreement.

Product Liability

Manufacturers and retailers may be subject to liability for injuries resulting from the products they sell, and product liability insurance can be written to match specific products' risks.

Broker

Normally an independent contractor (does not work for the insurance company). Deals with an applicant for insurance and it the agent for that specific applicant.

Insurer

Parties to an insurance policy (the insurance company)

Term Insurance

Premiums are lower than for whole life or limited-payment life. No cash surrender value

Homeowners' Policies

Protects against a number of risks under a single policy, allowing the policyholder to avoid the cost of buying each protection separately. There are two basic types.

Insured

The person covered by the insurance companies provisions

Insurable Interest

When it is in existence, it is a primary concern in determining liability under an insurance policy

Whole Life

provides protection with an accumulated cash surrender value that can be used as collateral for a loan. Insured pays premiums during his or her entire lifetime, beneficiary receives a fixed payment on the death of the insured