FIR Module 4
This type of life insurance is usually sold in conjunction with an installment loan.
Credit life insurance
Jake had a run of bad luck. He sprained his arm, had a staph infection, and needed surgery to remove his appendix. Out-of-pocket, Jake has paid $300 for the sprain, $500 for the infection, and $1,200 for the operation. He still has medical expenses for all three incidents. his insurance company is now paying part of the expenses related to the surgery but not the other two incidents. What does Jake's responsibility for still paying all expenses for the sprain and infection represent?
Deductible
Devon owns a house in Riverside and carries two insurance policies on it. The first policy carries a policy limit of $125,000; the second carries a limit of $95,000. Given a covered loss of $6,000, the first policy will pay a maximum amount of$3,409, and the second policy will pay a maximum of$2,591.
Total Payment Made from $125,000 Policy = $125,000/($125,000+95,000)×$6,000 = $3,409 Total Payment Made from $95,000 Policy = =$95,000/($125,000+95,000)×$6,000 = $2,591
Amount added to cash value
premium- admin fee - cost of death benefit
In general, the method of calculating the basic limits specified in Parts B through D of a homeowner's policy involves multiplying Part A limit by:
10%, 50%, and 10-20%, respectively
Which statements are correct? 1. The HO-1, HO-2, HO-3, and HO-8 policies differ in the breadth of their coverages, with HO-1 offering the greatest protection and HO-3 offering the least amount of coverage. 2. Homeowner's policies provide protection and compensation for direct and indirect losses, and specified additional expenses resulting from their occurrence. 3. The HO-4 and HO-6 policies provide only personal effects coverage because the insured doesn't own the premises. 4. Acts for which the insured is negligent are often excluded from the comprehensive personal liability coverage. 5. Part F of Section II provides medical payments coverage for certain types of minor accidents involving persons other than the homeowner's family members in or around the home and off premises.
2 and 5
Three conditions must be met for you to receive compensation under Uninsured Motorists Coverage. These are as follows. Check all that apply. A. The at-fault motorist is underinsured or lacks insurance altogether. B. The only damages sustained in the accident are personal injuries; property damages are not covered. C. Another motorist must have been at fault in the accident.
A and C
This method of settling a life insurance policy requires the insurer to make a single payment to the beneficiaries.
Lump Sum payment
Continuous Premium Whole Life
Most common. Continuous premium whole life insurance requires the policyholder to pay the same amount each year to keep the policy in force. Compared to other types of whole life policies, it offers the greatest amount of permanent death protection per premium dollar but the lowest amount of savings.
This disability occurs when an insured is unable to perform the majority of the occupational duties that he or she has been trained to perform.
Own-Occupation insurance
Which of the following describes a strategy that could increase your liability coverage? Decreasing Part E limit on your policy Purchasing an earthquake or flood insurance policy Purchasing a personal liability umbrella policy
Purchasing a personal liability umbrella policy
Principle of indemnity
This concept maintains that an insured should not benefit excessively from having insurance coverage and should not be compensated for more than his or her economic loss.
The purpose of property insurance is to protect policyholders against losses to their ________________________ property due to catastrophe and calamity.
real and personal
• Collision coverage pays to repair the policyholder's vehicleregardless of who is at fault . Lenders and lessors typically require this coverage, and unless replacement cost coverage is taken, the insurance company will pay only the vehicle'sactual cash value minus the deductible .
regardless of who is as fault actual cash value minus deductible
Insurance companies can express their liability coverage using either a combined limit or split limits. If a split limit is used, such as $100,000/$300,000/$100,000, then the second term in the limit expresses the maximum dollar amount that the insurance company will pay for
the max amount paid of all persons injured in accident
This is the person who will receive a life insurance policy's death benefit after the insured dies.
Beneficiary
three major types of whole life insurance:
Continuous premium, or straight life, limited payment, and single premium
Dmitri is covered under his medical insurance policy at work and also covered under his spouse's work plan. Dmitri has some large medical bills and since both Dmitri and his spouse contribute to their plans at work, Dmitri is trying to figure out a way to collect benefits for some of the same charges under both plans.
Coordination of benefits
Multiple-of-earnings approach
This refers to a method of determining the amount of life insurance coverage needed by multiplying the insured's gross annual earning by some selected number.
Types of Homeowner's Insurance
- basic form (HO-1): covers 11 named perils. Not often recommended. Extremely limited coverage - broad form (HO-2): covers 18 named perils - special form (HO-3): most common form. Broadest coverage against the highest number of perils - renter's contents broad form (HO-4) - condominium form (HO-6) - older home form (HO-8) - recommended for older homes
• Most states allow you, as a policyholder, to seek reimbursement for your medical expenses up to the limit of your policy, even if the following are true. Check all that apply. A. You have already received compensation from your health insurance company. B. You are occupying a vehicle that is not covered by the policy. C. Your insurance company proves that someone else was at fault and you've already been paid by the other person's insurance company.
A and C
• One way to reduce your insurance premium is toraise your deductible.
raise
Qualification for Social Security disability benefits requires:
•100% disability•A disability expected to last at least one year•The inability to do any job•A waiting period of five months that is not retroactive Carl expects to disabled for 12 months. Because his disability is expected to last for at least a year, he qualifies for Social Security benefits. Since no benefit is paid for the first five months of his disability, he will receive benefits for 7 months. At $2,000 per month, his total benefit will be $14,000.
Read each of the following situations and determine if each is covered by the standard protections provided by the PAP.
1. Latasha decided to save money by reducing the amount of liability coverage provided by her policy. She carries only the state-minimum required coverage but had an accident that is expected to cost three times that limit. Will her policy cover the additional costs of the accident?Not covered The maximum amount of coverage that Latasha's insurance company will pay toward her accident is the limit stated in her liability coverage. The additional funds required to satisfy the claim will have to paid out-of-pocket by Latasha. 2. Nick carries $10,000 per person in medical payments coverage and was struck by a car while walking down the street with four friends. Can he seek reimbursement for his medical expenses under his PAP?CoveredNick's medical payments coverage will pay up to $10,000 for the injuries he suffered in the accident. He can even file a claim against this coverage if he is reimbursed by the insurance company of the driver who struck him or receives compensation from his health insurance carrier. 3. While driving drunk, Jake struck two pedestrians and damaged two cars. He was charged with several criminal offenses. Will his PAP pay for his defense against these charges?Not CoveredBecause Jake was driving drunk, his insurance company will not pay for his defense against these charges. 4. While shopping for Christmas, Rosa placed several bags of presents in the trunk and then went back into the mall. Five minutes after she walked away from the car, thieves broke into the trunk and stole the presents. Will her PAP pay to replace the presents?Not CoveredUnfortunately for Rosa, her PAP will not compensate her for the theft of the Christmas presents. She may be able to file against her off-premises coverage of her homeowner's policy if the vehicle was locked at the time of the theft.
Her home has a replacement value of $500,000, therefore she insures her home for the minimum legal requirement of ______________________ . Assuming she does not purchase any additional coverage beyond the legal minimums, complete the following table indicating the maximum dollar value of reimbursement she can receive for each of the following:
400,000 According to the replacement-cost requirement, homeowners must insure their homes for at least 80% of its replacement value. Neha's home has a replacement value of $500,000, therefore she abides by the replacement-cost requirement and insures it for (0.80 x $500,000) = $400,000. The maximum reimbursements for damages to home-related structures or property are computed as a percentage of the total insurance on the home (in this case, $400,000). The percentages and dollar values for each of the listed items are given below. Note that liability coverage is fixed for comprehensive personal liability as well as coverage for losses due to credit card fraud, forgery, and so on, regardless of the home replacement value. This is true for HO-1, HO-2, and HO-3 form policies. Damage to personal property (50%):$200,000 Medical payments to others (fixed):$1,000 Loss of Use or Additional living expenses (10%):$40,000 Comprehensive personal liability (fixed):$100,000 Detached buildings (10%) Property damage (fixed) - 500
Preadmission certificate
A preadmission certificate ensures that a patient's insurance company has approved his or her admission to a hospital for an non-emergency scheduled stay. This requirement is intended to limit an insurer's medical expenses.
Universal life insurance policies are ideal for people who are unsure of their future financial circumstances and do not wish to be locked into fixed premiums and policy values. Depending on whether Deborah continues working and whether Carlos goes back to school, they may end up wanting more or less coverage than previously anticipated. Although term policies are somewhat flexible given their short-term nature, they do not provide the desired savings component offered by universal policies.
A primary advantage of whole life insurance is that it not only provides lifelong coverage, but its yearly premiums remain fixed over the course of the policy. This allows policyholders who have a clear picture of their financial future to accurately factor life insurance payments into their budgets.
The Personal Automobile Policy (PAP) is organized into the following six parts:
A) Liability Coverage - This pays for bodily injury and/or property damage caused by an automobile accident for which you are legally responsible. B) Medical Payments Coverage - This pays for reasonable and necessary accident-related expenses for up to three years after the accident—provided that those expenses do not exceed the policy's limit. C) Uninsured Motorists Coverage - This coverage is designed to protect policyholders, including the named insured and his or her family, when they are negligently injured by hit-and-run and uninsured drivers. D) Vehicle Damage Coverage - This part in the PAP provides two types of optional protection: comprehensive coverage and collision coverage. E) Insured's Duties and Responsibilities F) Basic Policy Provisions
Actual Cash Value is sometime the full replacement cost
Actual Cash Value = Replacement Cost - Depreciation = $6,000 - $3,600 = $2,400
This legislation requires, among other things, all Americans to have or buy health insurance beginning in 2014 or pay a penalty, and requires insurers to cover people with preexisting medical conditions without limiting or setting unrealistically high insurance rates.
Affordable Care Act
Raphael has standard, personal medical insurance. After a recent accident, he visited the emergency room. One of the questions on the admission form asked if the accident occurred at work.
Coordination of benefits
This type of nursing home care provides assistance in the normal activities of daily living but does not include medical attention or supervision.
Custodial Care
What is the term used to describe the dollar amount of a physical damage claim paid by the policyholder?
Deductible
Neha recently went online to review her auto insurance policy. Her policy is a Personal Automobile Policy and provides liability coverage with limits of $15/30/15, no medical payment insurance, and uninsured and underinsured motorist coverage with limits of $1/2. She has collision and comprehensive auto insurance, and both have a $100 deductible. Switch from limits of $15/30/15 to $250/500/250 Increase collision and comprehensive deductible to $1,000 Increase Coverage C
Effect on premium: increase worth it: yes Effect on premium: Decrease worth it: yes Increases premium and worth it
Neha is the owner of a 2-year-old home, and is looking to buy a homeowner's insurance policy. She is primarily concerned with protection from standard property damaging perils that she has no way of preventing, such as those due to fire, vandalism, windstorms, and so on, and less concerned about those that she feels she can prevent through frequent maintenance (such as damage caused by malfunctioning of internal structures like air conditioning or plumbing). Based on the peril coverage it offers, she purchases an __________ insurance policy.
HO-1
Neha's parents own a condominium that they fully insured for the replacement value of $300,000. Last year a portion of their roof collapsed due to the weight of snow after a severe storm, rendering the condo uninhabitable for the month that it took to complete repairs. Based on the coverage details of their condominium form __________________ insurance policy, the additional living expenses they incur as a result of the damage (such as the cost of staying in a hotel during the repairs)___________________________
HO-6 will be reimbursed up to 40% of the personal property insurance
Valerie's parents live in the home a Victorian style home built in the late 1800s. Although the house is still standing, it has fallen into disrepair, and the cost of rebuilding it with the original style and quality would be extremely high. If their home were destroyed, Valerie's parents would choose to rebuild a much more modest structure rather than try to restore it to it's original state, therefore they purchase aHO-8 form policy to provideactual-cash-value protection.
HO-8 Actual cash value
Hospitalization insurance
Hospitalization insurance usually pays a portion of a hospital's daily semiprivate room rate (including meals, nursing care, and other routine services) and the cost of related services, such as lab tests, images, and medications.
Valerie's son, Shen, is a college student living in an off-campus apartment where he resides year round. He owns an expensive computer and wants to make sure the full value is insured. Which of the following statements regarding Shen's insurance needs are true? Check all that apply. Shen should purchase an HO-2 broad form insurance policy because he is not covered under his parents' policy. His computer is covered under his parents' policy If he purchases an HO-4 policy, he can choose the value of the property he wishes to insure
If he purchases an HO-4 policy, he can choose the value of the property he wishes to insure
Well, I'd like my beneficiaries to receive payments until my wife's Social Security benefits kick in.
In that case, I recommend a fixed-period settlement option
Indemnity vs Managed Care
Indemnity Health Insurance- I'd rather have the flexibility of either having the insurance company reimburse me or directly paying the health care provider.Traditional health insurance tends to allow insureds more flexibility when choosing providers. This could be especially important if unusual medical problems arise that require highly skilled or experienced specialists. Managed Care Insurance- Cost is my most important consideration.- I'd rather receive my health care from a group of pre-screened providers who meet specific selection standards.The fundamental approach of HMOs is to catch medical problems as early as possible (when they are relatively minor) to prevent the higher costs of treatments later on (when trouble is discovered). This practice contributes to lower costs for the HMO and, in turn, the subscriber.
Out-of-pocket costs generally include the plan's deductible and 20% of the plan's covered medical expensesInsureds are subject to an annual deductible The insurer pays the care provider or reimburses the patient for covered expenses once the deductible has been metAn annual deductible is incurred My family history strongly suggests I'll suffer serious and perhaps unique illnesses as I age. I prefer the flexibility of increasing or decreasing the size of my deductible to influence the cost of my health care insurance.
Indemnity plan
Which of the following could potentially reduce the annual premium on your homeowner's policy.
Install smoke and burglar alarms
Frances had routine surgery performed at her local hospital. All charges were within the reasonable and customary costs in she area.
Internal limits
Coverage A provides liability coverage; that is, it reimburses the insured when he or she is responsible for damage to others. Liability coverage is generally quoted as split liability limits, such as $50/100/50, where each number represents a multiple of $1,000. The first number refers to the maximum liability claim reimbursement for injury caused to any one individual. That is, the insurance company will pay Lucia's medical bills up to the individual maximum of $50,000. The second number refers to the maximum liability claim reimbursement for all bodily injury for which the driver is liable but does not cover injuries suffered by the insured. Coverage B, or medical payment insurance, applies to the medical bills of the driver—but in this case, Kenji's policy does not carry any medical payments coverage. He'll have to pay all of his medical costs out of his own pocket.
Kenji has a Personal Automobile Policy (PAP) that provides liability coverage with limits of $50/100/50, no medical payment insurance, and uninsured and underinsured motorist coverage with limits of $100/300. He has collision and comprehensive coverage, both of which have a $500 deductible. Suppose one day Kenji fails to notice a red light, causing him to blindside another car crossing the intersection. Fortunately, he is not badly injured, but the medical bill for his hospital examination nonetheless amounts to $1,938. The driver of the other car, a woman named Lucia, suffered severe injuries from the direct impact of the accident, requiring an initial surgery, an extended hospital stay, and additional physical therapy procedures for several subsequent months. The total of her medical bills, plus compensation for being unable to work for nearly a month, totaled $135,947. Lucia's insurance company successfully filed a claim against Kenji by exercising subrogation rights. Coverage A of Kenji's plan will reimburse him for$50,000 of Lucia's medical bills. Kenji's medical billsare not covered by his policy
Part of figuring out what kind of overall health care plan is best for you includes knowing the costs that health care insurance covers. In the event of an illness or accident, health care insurance protection is designed to cover which of the following costs? C
Loss of income rehab medical care loss of household services
An example of this behavior is speeding and driving erratically during a rainstorm or having a swimming pool that is not surrounded by a lockable fence or other protective device. This insurance specialist investigates claims on behalf of an insurance company. An example of this term is a fire, an act of vandalism, or a windstorm. This value is calculated as the difference between the insured asset's replacement cost and the value of its physical depreciation.
Negligence Claims adjustor Peril Actual Cash value
Clue #1: I can receive medical services from both in-network and out-of-network doctors and hospitals.Clue #2: I will incur 100% of the costs of any medical services obtained from out-of-network providers.Clue #3: I am interested in purchasing some form of a managed care plan.
Notice that an EPO differs from a PPO in the extent to which out-of-network services are compensated. A PPO allows for the use of out-of-network doctors and professionals—but at a cost that is greater than that for in-network doctors. In contrast, an EPO doesn't cover out-of-network services—and if you use them, you will pay 100% of their cos
Kristen Kristen is enrolled in the Medicare program. After a lengthy hospital stay, she spent 35 days in a nursing facility before returning to her home. Which part of Medicare paid for all or part of Kristen's nursing facility expenses? Part D—Prescription drug coverage Part B—Supplementary medical coverage Part A—Basic hospital coverage
Part A
Hillary Hillary is enrolled in the Medicare program. Her pharmacy is a participating Medicare provide Which part of Medicare pays for all or part of Hillary's pharmacy expenses? Part B—Supplementary medical coverage Part D—Prescription drug coverage Part A—Basic hospital coverage
Part D
Rajiv's been hospitalized for an illness. His insurance company has started paying 90% of covered medical expenses. What does the 10% of expenses Rajiv will have to pay out of his pocket represent?
Participation (coinsurance)
insurance
Persons and places covered: If your named-insured policy states only your name for coverage, you are most likely single with no dependents. With the enactment of the health reform act, young adults can remain on their parents' insurance until they are 26 years old. Cancellation: The most protective plan is one that does not allow an insurer to cancel your coverage as long as you pay the premiums protects you from discrimination based on your claims history Preexisting conditions: If you need a new insurance plan and have a chronic condition, try to get into a group plan. If the group plan you find has any preexisting limitations, they will probably be less stringent than any you'll find in an individual plan. The most recent health reform act does away with preexisting conditions terms. Pregnancy and abortion: Terms for pregnancy and abortion vary across a wide range: •Liberal coverage provides for all medical expenses related to pregnancy and abortion, including sick-leave pay•Moderate coverage provides for medical costs arising from pregnancy or an abortion but not the routine procedures•Restrictive coverage provides for no costs associated with pregnancy or abortion Mental illness: Because hospitalizations for mental illness are at the top of the list of long-term illnesses, many health insurance policies provide less coverage. Two restrictions are to pay for only half the charges or limit in-patient care to 30 days. Rehabilitation coverage: Rehabilitation coverage can include mental and emotional counseling and occupational therapy, and even perhaps job training for a person who has physically healed but is disabled as a result of a serious injury. Physical therapy is also part of this coverage. Continuation of group coverage (COBRA): Unless you're fired for gross misconduct, you can stay on your work plan for up to 18 months, as long as you make timely premium payments to your former employer. The great value of this provision is that it helps keep your premium costs down and saves you from having to find new health care insurance just when you'll probably be in a financial pinch. When the COBRA term expires, in most states, you have the opportunity to convert the group plan to an individual plan. You can't be denied due to current health.
I want a large amount of coverage but can only pay a small amount in the near future.
Term Life insurance
Alternatively, the Lacostes could have estimated their life insurance needs using the multiple-of-earnings method, a less complicated but less accurate method than the needs analysis.
True
________________________ is administered by each state and covers people who are hurt on the job or become sick due to work-related causes.• _____________________ was designed primarily to help people aged 65 and above , regardless of their financial position, pay their health care costs.• ____________________ is a state-run public assistance program that provides medical benefits to people who are unable to pay for health care. More than ________________ million people across the United States are covered by the program.
Workers' compensation Medicare Medicaid 65
Underinsured motorists coverage is also available, and protects you, a policyholder, against damages caused by an at-fault or underinsured driver. If the at-fault driver causes more damage than the limit of his or her liability coverage, then your company will make up the difference, up tothe limit of your policy , and then subrogates with the negligent driver.
more the limit of your policy
• Comprehensive coverage pays to repair damage to an insured's vehicle caused by perilsother than collision. This part of the PAP protects the vehicle but normally does not covertheft of personal property from the vehicle
other than theft of personal property
limited-payment life insurance
provides lifelong coverage, but the premium payments are structured such that the policyholder stops paying after a certain age, at which point the policy is paid up. A person who has sufficient life insurance already can use a limited payment plan as part of a savings or retirement plan, as it builds cash value faster than a continuous premium plan.
Larry is a 42-year-old lawyer who has taken out a universal life insurance policy to protect his two children (ages 13 and 16) in the event of death. Each year, Larry chooses how much would like to contribute to the policy, as shown by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit (t_____________________portion of the policy) then puts the remainder into the cash value (or _____________) portion of the policy. This money earns interest at a ___________________ rate of return. Based on the given information, calculate the amount that is added to the cash value portion of the policy in each of the first three years.
the pure insurance savings Market-based
Suppose your garage and gardening were recently damaged by a thunderstorm. The buildings were built 4 years ago for $9,000, were expected to have a useful life of 12 years, and if built today would cost $12,000. Actual cash value, rather than, replacement cost coverage is carried on the structures, and the insured carries a $0 deductible. What is the maximum compensation available under your homeowner's policy for this loss?
9000
Part B of this federal program is voluntary and available to anyone age 65 or older can enroll—provided they are willing to pay the premiums for the coverage. This program provides health insurance benefits to those who are unable to pay for their health care. This program is managed and operated by each state, but is mandated by the federal government.
Medicare Medicaid Workers' comp
Okay, and in the event that your primary beneficiary does not outlive you, the benefits will be distributed among your ____________________beneficiaries
contingent
Under this federal law, if you've already been covered by a health insurance plan without a break in coverage of more than 63 days and you apply for new insurance, insurers cannot turn you down, charge you higher premiums, or impose an exclusionary period due to your health status.
health insurance portibility and accountability act
After it has paid a claim, the right of the__________________________ to request reimbursement from either the person who caused the loss or that person's insurance company. This is called the right of____________________________ .•The requirement of__________________, which_________________________ a policyholder to buy insurance in an amount equal to a specified percentage of the ___________________cost of the property.•The__________________clause, which states that if a person has more than one insurance policy, then each company is liable for ______________ a proportional amount of the loss based on its proportion of the total insurance covering the property.
insurance company subrogation co-insurance requires replacement other-insurance only
Neha's son, Lorenzo, is a college student living in a campus dormitory. He drives a car that she parks on the street and wants to make sure the full value is insured. Which of the following statements regarding Lorenzo's insurance needs are true? Check all that apply. His property is covered up to 10% of the coverage on the home Lorenzo should purchase an HO-4 broad form insurance policy because he is not covered under his parents' policy. He should tell the insurance agency that he parks in a garage to save money on premiums
His property is covered up to 10% of the coverage of the home
Upon the cancellation of a whole life insurance policy, this provision of the contract entitles the policyholder to claim the portion of assets that were set aside to provide payment for the contract's future death benefit.
Nonforfeiture right
These contracts require policyholders to identify and describe the property that is covered and to specify the causes of loss, called ______________ , for which a policyholder will be compensated in the event of loss.
perils
Kenji's car was relatively unharmed by the collision but required 1,200 in minor repairs. Lucia's car was destroyed, making Kenji liable for paying the $10,400 replacement value. Lucia's car was pushed up onto a nearby sidewalk on impact, destroying a nearby lawn and causing additional damage to a parked car. This damage totaled $8,693. Kenji's liability coverage also will reimburse him for up to $50,000 worth of property damage. Therefore, he is responsible for paying$0 out-of-pocket in property liability damages. Which of the following is true regarding the damage to his own car? It will be reimbursed fully, minus the $500 deductible. It will be reimbursed up to the difference between his liability coverage and the damage to other property. It is not covered under his policy.
The final number in the liability coverage quote ($50/100/50) refers to the limits on property damage reimbursement. Kenji is liable for the property damage to Lucia's car as well as the other parked car and the lawn. Therefore, his total property liability is equal to $19,093, or ($10,400 + $8,693). Because Kenji's policy covers up to $50,000 in property damage per accident, he must pay $0. Just as Kenji's own injuries are not covered under the liability (Coverage A) portion of his policy, neither is the damage to his car covered under this section. Instead, the damage to his car is completely covered by his collision insurance, requiring him to pay only the $500 deductible.
True or False: Rates can vary substantially across policies with identical coverage; therefore, Neha should consider switching to the cheaper company.
True
ACV FORMULA
Use the actual cash value (AVC) formula to calculate the value of an item based on its replacement cost (RC), the purchase price of the property (P), the current age in years (CA), and the life expectancy (LE), as follows: ACV=RC−CA×(P/LE) $1,900−(4×$1,77010)$1,900−4×$1,77010 = = $1,900−(4×$177)$1,900−4×$177 = = $1,900− $708$1,900− $708 = = $1,192
Universal life insurance combines elements from term life insurance and whole life insurance. Term policies provide a death benefit___________________ component, whole life policies provide a death benefit _______________________ component, and universal policies provide a death benefit _____________________component. To understand how universal premiums are allocated, consider the following example.
and no savings component bundled with a savings component and a separate savings component
Caroline has been hospitalized for an illness. Her insurance company has started paying 80% of covered medical expenses.
Participation (co-insurance)
This type of insurance provides families with weekly or monthly payments to replace income when the insured is unable to work because of a covered illness, injury, or disease.
Disability income insurance
Regarding basic homeowners insurance coverage, identify policy modifications that could provide better protection during periods of inflation. Check all that apply. Increase the coverage on your scheduled personal property Increase the coverage on your home computer equipment Increase the coverage on the dwelling to 100% of its replacement cost Add an inflation rider Add flood coverage Add earthquake coverage
Increase the coverage on the dwelling to 100% of its replacement cost Add an inflation rider
Differences between policiies
The major difference between the Broad Form (HO-2) or Special Form (HO-3) and the Renter's Form (HO-4) is the absence of the Section I Part A (Dwelling) and Part B (Other Structures) coverage in the renter's policy. The major difference between HO-2 or HO-3 and the Condominium Form (HO-6) is the latter's lack of Part B (Other Structures) coverage and reduced Part A (Dwelling) coverage. As with the HO-1 to HO-3 policies, both the HO-4 and the HO-6 policies offer personal property (Part C) as well as Loss of Use (Part D), Personal Liability (Part E), and Medical Payments to Others (Part F) coverages.
Reimbusement formula
This formula is a function of the loss (L), deductible (D), amount of insurance actually carried (I), and replacement value of the dwelling (RV). ReimbursementReimbursement = = (L−D)×I/RV×0.80= ($124,800−0)×$156,000/$260,000×0.80=$124,800×$156,000$208,000$124,800×$156,000$208,000 = = $124,800×0.75$124,800×0.75 = = $93,600
Guarenteed Purchase Option
This is an optional provision in a life insurance policy that gives the policyholder the right to purchase additional coverage at specified time intervals without providing additional evidence of insurability.
True or False: Under the terms of a standard universal policy, if Larry stops paying his premiums, then the administrative fee and cost of death benefit will be deducted from the savings portion of his policy (assuming sufficient cash value accumulation,) and the policy will remain active.
True
I want to use my life insurance as a savings vehicle as well.
Whole and Universal life insurance
If I decide to cancel my policy while I'm still alive, I want access to the cash value.
Whole and universal life insurance
Felix has determined that a $200,000 whole life insurance policy would best suit his needs. he consulted with one insurance broker, Hans Honestman, who quoted him a monthly rate of $300. he remembers learning in his personal finance course that it is___________________________similar policies from different insurance agencies, so he plans to _______________________ from other companies as well . Before doing anything else, he decides to consult his aunt Rina, an attorney, about the features of her life insurance policy. She tells Felix that she has a 10 year, $100,000, level term life policy.
extremely important to compare collect quotes
CLIENT: Well, I'd like my beneficiaries to receive regular payments until the policy runs out. AGENT: In that case, I recommend a fixed-amount settlement option.
fixed amount settlement option
Property insurance policies are based on the principle of________________ , which maintains that an insured_______________________ be enriched beyond his or her original financial condition as the result of a loss. This means that a policyholder cannot expect to receive_______________ in compensation from the insurance company than _______________________. Points: 1 / 1 As a result of this principle, property insurance policies often limit their reimbursement to the_____________________of the damaged or destroyed property, which is calculated by subtracting the value of the item's_________________________from its current______________________. This depreciation is usually the result of_______________________ .
indemnification should not more his or her economic loss actual cash value physical depreciation current replacement cost wear and tear
Tim does not text and drive. Tim pays lower premiums for a higher deductible. Tim does not consume alcohol.
loss prevention and control risk assumption risk avoidance
The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with ________ life insurance policies.
term
I want flexibility in the amount I pay in premiums in each month.
term and universal life insurance
An individual who owns an extensive art collection or furs or fine art that is worth more than the traditional coverage provided by Part C of the homeowner's policy receives better protection using which of the following insurance products?
A scheduled personal property floater
Section 2 perils
Also known as Comprehensive personal liability coverage is provided under Section II of the homeowner's policy. Although it protects against nearly any source of liability resulting from negligence, there are exclusions, including incidents involving the following: Libel, slander, or defamation of character, contractual wrongdoing Does cover negligence The cost of defending the insured homeowner The reasonable expense incurred by the homeowner in assisting in the insurance company's defense
This is the statistical information used by an insurance company's underwriters to estimate the risk of loss faced by the company's population of insured policyholders.
Actuarial Data
Which of the following are appropriate next steps for Felix? Check all that apply.
Find out whether Hans Honestman has a professional designation, such as Certified Financial Planner® (CFP®). Ask Rina if she can recommend a good agent, since attorneys tend to be good sources. Investigate the investment performance and dividend history of other insurance companies.
Part E (Personal liability)
The purpose of Part E (Personal Liability) coverage in the homeowner's policy is to protect the insured against their negligent acts. Remember, these acts can include things that the insured reasonably should or should not have done, including protecting others from harm.
nonforfeiture right
Whole life insurance policies come with a nonforfeiture right. That is, if the policy is cancelled before the policyholder dies, the holder forfeits the death benefits, but is entitled to the cash value of the policy
Shen has a $56,000 HO-1 form insurance policy. No additional endorsements or floaters have been added to the policy. Therefore, the actual cash value (ACV) of his propertyis not covered under this policy and the replacement cost of his propertyis not covered. Alex has a $56,000 HO-1 form insurance policy. No additional endorsements or floaters have been added to the policy. Therefore, the actual cash value (ACV) of his propertyis covered under this policy and the replacement cost of his propertyis not covered.
is not is not
CLIENT: Well, I'd like my beneficiaries to receive payments for the rest of my wife's life. AGENT: In that case, I recommend a life income settlement option.
life income settlement
Part F (Medical Payments to others)
Part F of homeowner's policies (Medical Payments to Others) is designed to provide a limited amount of medical coverage—regardless of negligence or fault—for persons other than the homeowner's family members in the event of certain types of minor accidents on the insured's property.
Megan had a horrible accident that required a year of treatments and rehabilitation. Fortunately, Megan's policy has a stop-loss provision that limits how much out-of-pocket expense she has to pay.
Participation (co insurance)
Under this program, employers who file the most claims pay the highest rates, and the rates can vary from state to state. Each state determines its eligibility standards and the types of coverage provided. Part C of the program, which provides vision, hearing, dental, general checkup and wellness benefits, is frequently paid for by both the federal government and the premiums paid by members.
Workers' comp medicaid medicare
Single Premium Whole Life
provides lifelong coverage but is purchased with a single payment. This type of policy provides instant cash value and thus makes a more attractive savings vehicle than the other types of whole life.
Cancelation clause
The clause in many health insurance contracts that allows the insurer to cancel a policy at any time is called a cancellation clause.
About _____________ of the United States population is covered by a government health insurance program. The three main government health care plans are: Medicare, Medicaid, and workers' compensation insurance
34%
Which of the following are typical causes of loss that are usually limited or excluded from most homeowner's or automobile insurance policies?
Earthquake War Nuclear radiation Mysterious disappearance
More likely to cover preventative and routine careUsually lower premiumsThe premium represents a prepayment for one's own health care Insureds create contract with, and make monthly payments, to the care providerA PPO plan is a one exampleService providers must meet specific selection standards I'd prefer to pay a small copay rather than a larger deductible.
Managed Care plan
Section 1 Perils
The protection offered under Section I of homeowner's policies is designed to provide compensation for three types of property-related losses: (1) the direct loss of property, (2) indirect losses resulting from the loss of damaged property, and (3) additional expenses that result from these direct and indirect losses.
Group Life Insurance
This is life insurance that provides a master policy for a group of eligible members, and for which the premium is based on the characteristics of the entire group rather than on the attributes of an individual member.
Fixed Period Settlement
This method of settling a life insurance policy requires the insurer to disburse the face amount of policy and any interest earned to the beneficiaries over a fixed time period.
Property's Physical Depreciation
Property's Physical Depreciation = Physical Depreciation Percentage×Replacement Cost = 6 years/10years×$6,000 = 0.60×$6,0000= $3,600
The coordination of benefits provision of many health insurance policies is a cost-containment provision that is intended to prevent an insured from collecting more than 100% of covered charges by owning and filing claims with more than one policy.
The coordination of benefits provision
whole life insurance
This is life insurance that is designed to offer insurance coverage over an insured's entire life, and which offers both a death benefit and a saving function.
