Analysis and Evaluation of Risk Exposures (Slides) Flashcards
Health Insurance Mortality vs Morbidity
Mortality Rate: the number of deaths per thousand among a group of people
Morbidity Rate: the ratio of the occurrence of sickness to the number of healthy persons among a group of people over a given period of time
7 Risks Associated with Owned Property
- Negligence
- Acting as a childcare provider
- Renting property to others
- Employing household workers directly
- Engaging in business activities
- Engaging hobbies that have the potential to cause harm to others
- Owning pets
4 Factors that Increase the Need for Disability Insurance
- Excess body weight
- Tobacco use
- Participation in high-risk activities
- Chronic health conditions (i.e. diabetes, drugs, depression)
Difference Between Strict and Absolute Liabilities
Strict Liability: refers to the accountability of a firm when a product or service is used by consumers
Absolute Liability: arises from a client’s dangerous activities
- most states have attractive nuisance laws based on Absolute Liability
Attractive nuisance: something owned by a client that may attract children to the person’s property and requires the client to use special care to protect trespassers from harm caused by the property
6 Risk Factors for Auto Insurance
- Gender
- Age
- Marital status
- Credit history
- Car’s make and model
- City and neighborhood where housed
5 Types of Auto Insurance Coverage
- Liability coverage
- Uninsured motorist coverage
- Collision coverage
- Underinsured motorist coverage
- Comprehensive coverage
8 Types of Homeowners Policies
- Basic Homeowner’s Policy (HO-1)
- Broad Form Policy (HO-2)
- Special Form Policy (HO-3)
- Tenants and Cooperative Policies (HO-4)
- Comprehensive Form Policy (HO-5)
- Condominium Policies (HO-6)
- Market Value Policy (HO-8)
- Farm and Ranch Policies
Elements Associated with a Typical Homeowners Policy
Declarations
Names of the insureds
Policy number
Inception/issue date
Current policy period (typically one year)
Effective dates for changes or endorsements
Agent / Insurer contact information
List of all properties covered by the policy
Type of policy
Deductible amount
Coverage on the home’s physical structure and the premium
Coverage for other structures
Clarification on the replacement or actual cash value coverage
Living expenses if the home is uninhabitable due to a covered loss
Personal liability limit
Medical expense limit if a person is injured on the property
Definitions
Insurance agreement listing covered perils
Conditions (what the client must do to main coverage)
Exclusions
Modifications and credits
Lender information
Hurrican coverage details
Inflation endorsement
Flood Form endorsement
2 Concepts Insurance Companies Use to Price
EMPL: estimated maximum possible loss (worst-case scenario for a single risk
EPL: estimated probable loss (estiate of a realistic loss, assuming that the insured has and will continue to take steps to avoid losses)
10 Common Exclusions to Special Form Policy (HO-3)
- Termites
- Flood
- Earthquakes
- Landslides
- Ordinance of Law
- Damage from Water
- War
- Power Failure
- Intentional Damage
- Neglect
Homeowners / Renter’s Contract Specifications
Specifies what the insurance company agrees to do in exchange for the premium the client pays
Describes
- the client responsibilities
- terms of the coverage
An insured may not assign a homeowner’s policy to another person or entity
Types of Coverage Within a Homeowners Policy
Dwelling Coverage (Coverage A)
Appurtenant Structures Coverage (Coverage B)
Personal Property / Content Coverage (Coverage C)
Additional Living Expenses Coverage (Coverage D)
Liability Coverage (Coverage E)
Medical Payments Coverage (Coverage F)
Property of Other Coverage (Coverage G)
Approaches Used by Insurance Companies to Settle
- Replacement cost
- Repair cost
- Actual cash value
11 Supplemental Coverage (can be purchased)
- Additional replacement cost coverage
- Tree removal coverage
- Trees, shrubs and other plants coverage
- Fire department service charge coverage
- Credit card, fund transfer card forgery and counterfeit money charge
- Ordinance and law coverage
- Personal property endorsement coverage
- Water backup and sump pump overflow coverage
- Earthquake insurance coverage
- Flood insurance coverage
- Watercraft endorsement coverage
8 Underwriting Factors
- Amount and type of coverage
- A home’s age and condition
- A client’s claim history
- Construction material
- Availability of local fire protection
- Availability of law enforcement or crime prevention services
- Location
- The cost to rebuild a client’s home
Homeowners Policy Discounts
- Paid-in-full discount
- Older homeowner discount
- Claim-free discount
- Non-smoker discount
- New home discount
- Credit-score insurance discount
- Multi-policy discount
- Protective devices discount (smoke detectors, fire extinguishers, burglar alarms, heavy duty locks, etc.)
3 Ways Insurance Companies View the Value of a Home
- Market Value: what the property would sell for on the open market
- Actual Cash Value: what the property is worth today after adjusting for normal wear and tear
- Replacement Cost: the cost to rebuild if destroyed
80% HomeOwner Rule
A homeowner must maintain coverage equal to 80% of the home’s replacement value
* if the coverage falls below this threshold, the insurance company will pay a proportional amount of the total claim
Amt of Coverage / Replacement Value x 80% x (loss - deductible)
6 Elements Typically Found in Personal Automobile Policy
Part A: Liability Limits
Part B: Medical Payments and Exclusions
Part C: Uninsured Motorists Coverage
Part D: Collision Coverage - payment for damage to an inanimate objective
Comprehensive Coverage - payment for damage to client’s vehicle
Part E: Duties After an Accident of Loss
Part F: General Provisions and Exclusions
PAP Liability (Personal Automobile Policies) from Part A of Auto Insurance
Bodily injury liability insurance
Property damage liability insurance
Uninsured motorist’s insurance
Optimal Coverage for Additional Premium for Auto
Accidental death benefit Auto replacement coverage Comprehensive coverage Customer / Non-factory Equipment Gap coverage for leased or financed vehicles Medical payments Physical damage / Repair / Replace coverage Rental reimbursement Towing Uninsured motorist property damage
Split Limit Auto Coverage
25 / 50 / 10
$25,000 is the maximum bodily injury liability payment under the policy for injury (or deaths) to one person involved in a single accident
$50,000 is the maximum bodily injury liability payment that can be made for injuries (or death) to all persons involved in a single accident
$10,000 is the maximum property damage liability payment that can be made under the policy for damages to another person’s property from a single accident
8 Factors That May Affect a Client’s Auto Insurance Premium
- Age, gender and marital status
- Coverage limits
- Driving record
- Household driving information
- Location
- Type of vehicle
- Use of vehicle; how far a client drives to work and annual mileage
- Credit history
PAP (Personal Auto Policy) Discounts
Anti-theft devices Auto club memberships Auto / home packages Car pool College student away from home Defensive driver Good driver Good student Low annual mileage Mature driver credit Multiple vehidles Safety devices
5 Strategies to Reduce Auto Insurance Costs
- Elect the highest deductible they can afford
- Consolidate insurance needs
- Maintain a good driving record
- Choose a client’s vehicle carefully
- Maintain a good credit history
PUP (Personal Umbrella liability Policy) Definition and 2Types of Damages Coverages
Also known as Excess Liability policy
Extend a client’s coverage above the limits of the liability coverage from the homeowners and auto insurance policies
- Compensatory Damages: financial losses suffered by the injured party and future losses they may suffer resulting from an injury they claim in the lawsuit.
- General Damages: non-monetary losses suffered by the injured party, such as pain and suffering or mental anguish
Professional Liability Insurance (Errors and Omissions)
Coverage is for wrongful practices by professional service providers
- Malpractice is a specific type of professional liability police that protects physicians and other licensed professionals from liability associated with body injury, medical expenses, and property damage, as well as the cost of defending lawsuits related to such claims
Workers’ Compensation Insurance
Protects a client who owns a business from claims by employees who suffer a work-related injury or illness
Health Savings Accounts
An HSA allows clients to pay for current health expenses and save for future qualified medical expenses on a pretax basis.
A health savings account (HSA) generally is available to those who enroll in an HDHP
- Under current law, an insured person must be covered under an HDHP to open an HSA
Contributions to HSAs are limited to $3,600 for individuals and $7,200 for families in 2021.
- Those aged 55 or older may increase their contribution by $1,000. Funds deposited into an HSA are not taxed.
The balance of an HSA account grows tax-free, and any amounts held in the account are available on a tax-free basis to pay medical costs.. Additionally, an insured person cannot be eligible for Medicare or covered by another plan that is not an HDHP, or a general-purpose healthcare flexible spending account (HCFSA), or be a dependent on another person’s tax return.
HSA monies must be used to pay qualified medical expenses. Examples include:
- Unreimbursed medical expenses, such as deductibles and copayments
- Long-term-care insurance premiums
- Health insurance premiums associated with a termination of service through the Consolidated Omnibus Budget Reconciliation Act (COBRA)
- funds may not be used for elective cosmetic surgery or over-the-counter drugs in order to be considered a tax-free distribution,
Distributions that are used for any other purpose are subject to a 20% penalty and income taxation. The penalty is waived if the client is 65 years of age or older, disabled, or deceased.
HSA accounts can have a named beneficiary. If a spouse is the named beneficiary, due to the tax-free nature of the account, the surviving spouse may roll over the balance into their own HSA.-
- If the beneficiary is a non-spouse, the balance in the account must be distributed and taxed. If no beneficiary is named, the account balance will be taxed to the account owner’s estate.
- It is also possible to use IRA account balances to fund an HSA. The IRS allows clients to transfer funds from an IRA to an HSA one time during their lives. The amount of the transfer is limited to the annual HSA contribution limit.
Examples of Intentional Torts
Assault and battery
Slander
Trespassing
Being convicted of fraud
Definition off Negligent, and 4 Features Needed to Exist
The failure to use a degree of care that an ordinary person of reasonable prudence would use under a given or similar circumstance
- The client must have a duty to act
- The client must engage in a break of the duty to act
- The client must cause injury or damage due to the breach of duty to act
- The injury or damage must be a direct result of the negligence
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