Definitions Flashcards
3 Types of Hazards?
Moral, Morale, Physical
Moral Hazard
Character Flaw, filing a false claim
Morale Hazard
Being careless b/c you have insurance
Physical Hazard
Tangible condition that increases chance of a peril occurring (icy road, poor lighting)
Adverse Selection
People w/ higher risks to buy or renew insurance policies. Managed through underwriting, denying insurance, or raising premiums
Requisite for Insurable Risk (6 of them)
- Large # of similar exposure units
- Losses must be accidental
- Losses must be measurable
- Losses must not pose catastrophic risk for insurer
- Insurer can’t give coverage that would cause it to become financially insolvent
- Premiums must be affordable
Elements of Valid Contract
- Legal competency of all parties
- Legal consideration (money, services, property)
- promise to pay (insurer) & payment of premium (insured) - Must have lawful purpose
Principle of Indemnity
Can’t profit from insurance contract
Subrogation Clause
Insurance company can sue person who injured you to recoup their loss
Participating Dividends options in Whole Life
CRAPO
- Cash
- Reduce future premium
- Accumulate @ interest
- Paid up permanent additions
- One - year term ins additions
HSA non-qualified Distribution Penalty & Age
- Income taxed and 20% penalty before 65
- Only income tax at 65 or older
Non-Cancelable Health Ins
- Guaranteeing insured can renew until specific age or stated # of years
- Premium is FIXED
- Continuous
Guaranteed Renewable Health Ins
- Right to renew is guaranteed
- Insurance company can adjust (increase) premiums
COBRA Eligibility
- Death of covered employee
- Voluntary/involuntary termination
- Reduction in hours to part time
- Separation of covered employee from spouse
- Employee eligible for Medicare
- Dependent child is no longer eligible for coverage (age, left school)
Employer may charge 2% for admin exp. (Total cost to employee is 102%)
When does employer have to offer COBRA?
- offer group health plan and have at lease 20 FT employees
(2 PT = 1 FT employee) - Employee has 60 days to make COBRA election
COBRA Employer Coverage for:
- 18 months = reduction in hours or normal termination
- 36 months for death, divorce, Medicare eligible
- 36 months for loss of dependency status by kids of employee
- 29 months if meets SS definition of disabled
Long Term Care Eligibility
- Chronically ill: can’t perform 2 of 6 ADL’s for at least 90 days
- Substantial cognitive impairment (Behavior threatens own/others health/safety
Activities of Daily Living
Eating
Bathing
Dressing
Transferring (from bed to chair, using toilet)
Continence
“BED To Chair”
Disability Income Insurance ( Any Occupation)
Can’t perform “any occupation”
Less expensive premium
Disability Income Insurance (Own Occupation)
Can’t do duties of “Own occupation”
More expensive, ideal for specialized high paying fields
Modified Any Occupation Disability Insurance
Disabled if can’t do duties you’re fitted by education, experience, training, and prior economic status
Split Definition Disability Insurance
- Begins with Own Occupation, then moves into Modified Any Occupation
- Pays for certain period of time, then would need to find job based on education, experience etc.
How long should Elimination Period be for Disability Insurance?
Tie it to their Emergency Fund
Disability Insurance and its Integration w/ SS Disability Income
- May reduce premiums
- If you qualify for SS Disability, the insurance company would pay you less since SS is kicking in some, therefore lowering your premiums to Insurance company
Disability Insurance Premiums Tax Status: If Employee pays
- Premiums are NOT deductible
- Benefits are Tax-Free
Disability Insurance Premiums: If Employer pays Premium
- Premiums are deductible to Employer
- Benefits to employee are TAXED
Disability Insurance Premiums: If Employee pays w/ Pre-tax $$ (cafeteria plan)
- Benefits to employee are TAXED
HO Insurance: Section 1 Coverages
A = Dwelling
B = Other Stuctures
C = Personal Property
D = Loss of Use
HO Insurance: Section 2 Coverages
E = Personal Liability
F = Medical payments to others
Basic named Perils HO Insurance
Fire
Vehicles
Lightning
Smoke
Windstorm
Vandalism
Hail
Explosion
Riot
Theft
Aircraft
Volcano
Open Peril Policy
Protects all perils, except those specifically excluded
Best to have this one rather than Named Peril policy
Excluded Perils
- Neglect (termite damage)
- Flood
- Earthquakes
- Ordinance of Law (Loss from regulations regarding construction or demolition)
- War or Nuclear Hazard
- Power Failure (power plant failure that causes a loss)
- Intentional Act (burn your house down)
HO Coverage A: Dwelling
- Covers repair or replacement of house, attached structures and building materials on premises
- Buy amount equal to replacement cost
- Must carry at least 80% of replacement cost
HO Coverage B: Other Structures
- Detached Garages, storage buildings, etc
- Limit is usually 10% of coverage A
- Other structures won’t be covered if used for business purposes
HO Coverage C: Personal Property
- Furniture, clothing, etc
- Coverage still effective regardless where property is located at time of loss
- Actual Cash Value, need endorsement for replacement cost
- Limits are placed on Cash, coin collections ($200), Jewelry ($1,500)
- Exclusions for property of roomers/renters, or property in apartment rented to others
HO Coverage D: Loss of Use
- Loss resulting from living in hotel because home is damaged/being repaired
- Loss of rental income if property is damaged
HO Coverage E: Personal Liability
- Protects you from getting sued by people getting hurt on your property
- Covers the damage and costs of any legal defense
HO Coverage F: Medical Payments to Others
- Pays medical costs to others for injuries where insured isn’t liable for injury
- Does NOT apply to the insured or family members
- It’s NOT based on fault
- Can be used when insured injures someone while away from home (injuring someone on ski slopes)
- Can be used if Animal owned by insured injures someone off the premises
HO- 3 Special Form
- Covers dwelling and other structures on Open Peril basis
- Personal Property is on Named Peril basis
HO- 4
- Designed for renters
- Civers tenants furniture, clothes, personal property same as HO2 Broad Form
HO-5 Comprehensive Form
Dwelling and Personal Property covered on Open Peril basis
HO-1 Basic Form:
Covers basic named perils (1-12)
HO-2 Broad Form
Basic and Broad named Perils (1-18)
HO - 6
For Condo Owners
HO - 8
- Historical Property
- Covers repair rather than replacement
- Covers where replacement cost exceeds market price for home
Personal Auto Policy Parts
A: Liability
B: Medical Payments
C: Uninsured Motorist
D: Covers damage to your car
E: Duties after accident or loss
F: General Provisions
Auto Policy Part A
- Liability Coverage (if you get sued)
- Split Limits (50/100/25)
(Body damage per person, body damage per occurrence, Property damage per occurrence)
