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

BB30 Business Law 4.02Summer 2013

Unit BPersonal Law

Essential Standard 4.00 Understand financial, credit, and insurance law


4.02 Understand Types and Aspects of Insurance

A. Insurance Defined

Premiums 1. What are premiums? 2. What type of insurance types have them?

Insurable Interest-Financial Responsibility 1. What determines whether there is an insurable interest?

Risk- What is risk and how does it affect


Insurance Defined-Continued

Exclusions 1. What does exclusion mean? 2. How does exclusion apply to insurance? 3. Why do insurance companies put exclusions in their policies?

Claims 1. What is a claim in regards to insurance? 2. How does a policy holder enter a claim?


Insurance Defined (Continued)

Deductibles 1. What are deductibles? 2. What is the purpose of a deductible for the policy holder?

Insured 1. What or who is the insured 2. Is the insured always the policy holder or not?

Insurer 1. Who is an insurer? 2. Is the insurer a business/corporation or an individual?


Automobile Insurance(http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Automobile%20Insurance_CAU1.pdf)

a. Personal Auto Policy (PAP)a. Why have a PAP?b. What does it protect you from?

b. Liability Coverage-a. What are the two types?b. What does it protect you from?

c. Property Damage Coveragea. What does it protect you from?b. What is an example of this type of coverage?

d. Collision Coveragea. What does it protect you from?b. What is an example of this type of coverage?

e. Comprehensive Coverage-Other than Collisiona. What does it protect you from?b. What is an example of this type of coverage?c. How is this different from collision?

http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Automobile%20Insurance_CAU1.pdf

http://www.ncdoi.com/_Publications/Consumer%20Guide%20to%20Automobile%20Insurance_CAU1.pdf


Automobile Coverage (Continued)

f. Medical Payment Coverage(Med Pay) 1. What is medical Payment Coverage? 2. Whom does this coverage pay for in the case of a covered accident? g. Uninsured Motorist Coverage 1. What is uninsured motorist coverage? 2. What are two types of losses that this type of coverage will cover?

h. Underinsured Motorist Coverage 1. What is underinsured motorist coverage? 2. Is this coverage mandatory in North Carolina?

i. Miscellaneous Coverage-Towing, Rental Vehicle, Custom Coverage 1. Are these types of coverage mandatory for automobile insurance? 2. What does towing coverage provide? 3. What does rental coverage provide? 4. What does custom insurance provide?


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.


Boat Insurance

Pleasure boat policies or endorsements often state that coverage includes"the boat and all permanently attached equipment". The policy may thenlist items that are not permanently attached, but are covered as either partof the boat's value, or as a separate limit of insurance. Items that may ormay 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


Property Insurance

a. Homeowners Insurance Designed to protect the physical assets owned, leased, rented or used by individuals and families. b. Coverage for Property 1. There are (4) basic coverage types within a homeowners policy.

2. Coverage A is for dwelling - located on the residence premises including any attached structures.

3. Coverage B is for other structures - such as a detached garage, workshop, swimming pools, fences and gazebos.

4. Coverage C is Personal Property - 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.

5. Coverage D is for 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.


Homeowner’s Exclusions

a. Earth Movement

Includes earthquakes, landslides, mudslides etc.

b. Water Damage

Damage to the home from flooding (requires a separate flood insurance

policy if the home is in a flood zone)

c. Power Failure

If a utility interruption takes place that is not at the insured’s home, coverage

is not provided.

d. Neglect

If the insured fails to use reasonable means to protect the insured property

from damage, the loss would not be covered.


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 lightening, as well

as any resulting smoke or water damage.

.

Additional Types of Property Coverage


Health Insurance

Traditional Health Insurance (Major Medical Coverage)• Contains basic coverage if a catastrophic loss occurs.• To prevent the insured from 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.

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.


Health Insurance

Possible lengthy waiting periods• Time that elapses after the insured’s policy is active, before specific exclusions

will be covered. (Ex. Maternity coverage)

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


Managed Health Care 1) HMO• Health Maintenance Organization-group managed health insurance where will need to receive most or all of your health care from a provider. • HMOs require that you select a primary care physician (PCP) who is responsible for managing and coordinating all of your health care

2) PPOPreferred 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

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.


Supplemental Health Insurance Coverage

a. 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.

b. 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

c. 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.


Health Insurance (Continued)

d. 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 CoverageMedicare(Federal)

• 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 dialysis

treatment 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.Ex. - AFLAC


Life Insurance-Types (How Much Do You Need?)

Term Insurance• Provides coverage for a specific period. • If the insured dies during the policy term, death benefit paid to beneficiary. • Lower premium than whole life, universal life policies for higher coverage.

Increasing Term InsuranceBecause mortality rates increase with age, the

likelihood of dying does too. Therefore the term insurance premiums also increase

Decreasing Term InsuranceIn the early years of a decreasing term policy, the

death benefit will be the face amount of the policy when purchased. As years pass, the death benefit will decline.


Life Insurance (continued)

Level Term Insurance 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 (Continued)

Life Insurance Optional Rider CoverageRiders are attachments to existing policies for additional coverage for

family members (spouses/dependent children).

Guaranteed InsurabilityUsually 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

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.

Dismemberment - Fractional amounts of the policy will be paid out if the insured loses a bodily appendage or sight because of an accident.



BeneficiariesRecipient of the proceeds of the policy when the named insured dies.

Contingent BeneficiaryContingent (or secondary) beneficiary is entitled to the policy proceeds if the primary beneficiary has predeceased the insured.

Collecting Death BenefitsApply 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.



Cost factorsNeeds Approach - Determine the total financial requirements of

the insured’s surviving dependent family. 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.

How much is a person worth

Statistical Basis for Life InsuranceMortality 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.


Insurance Fraud

Automobile Repair

Billing of Medical Services

Automobile Accidents

Property Claims Adjusting

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

Documents

coverage b

type of coverage

automobile coverage

collision coverage

towing coverage

coverage c

liability coverage

special coverage