Gitman PPT Student Ch8
description
Transcript of Gitman PPT Student Ch8
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8 - 1COPYRIGHT 2008 by Nelson, a division of Thomson Canada Ltd
Chapter 8Insuring Your Life andHealth
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8 - 2Chapter 8 - Insuring Your Life and Health
Chapter 8 - Learning Goals
LG 1 - Explain the concept of risk and the basics of insuranceunderwriting.
LG 2 - Discuss the primary reasons for life insurance and identifythose who need coverage.
LG 3 - Calculate how much life insurance you need.
LG 4 - Differentiate among the various types of life insurancepolicies and describe their advantages and disadvantages.LG 5 - Choose the best life insurance policy for your needs at the
lowest cost.LG 6 - Become familiar with the key features of life insurance
policies.LG 7 - Discuss why having adequate health insurance is important,
and explain the basic coverage and policy provisions ofhealth insurance plans.
LG 8 - Assess the need for and features of long-term careinsurance and disability insurance.
Learning
Goals
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8 - 3Chapter 8 - Insuring Your Life and Health
Internet Links and On-Line Resources
Manulife Financials Insure Right Calculator
Survivor Benefits under the Canada Pension Plan
Find your life expectancy at Dinkytown.net
Find out more about various life insurance products and
policy types at the Canadian Life and Health Insurance
Association website.
Get quotes on term life policies at Term Life Insurance
Canada.
Get details of coverage provided through CompCorp.
Web Links
http://www.manulife.ca/canada/ulcalcs.nsf/lrcaclc?readformhttp://www.sdc.gc.ca/en/isp/cpp/cpptoc.shtmlhttp://www.dinkytown.net/http://www.clhia.ca/http://www.clhia.ca/http://www.termcanada.ca/http://www.termcanada.ca/http://www.compcorp.ca/http://www.compcorp.ca/http://www.termcanada.ca/http://www.termcanada.ca/http://www.clhia.ca/http://www.clhia.ca/http://www.dinkytown.net/http://www.sdc.gc.ca/en/isp/cpp/cpptoc.shtmlhttp://www.manulife.ca/canada/ulcalcs.nsf/lrcaclc?readform -
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8 - 4Chapter 8 - Insuring Your Life and Health
Key Chapter Terms and Definitions
Risk avoidance
Loss prevention Loss control Risk assumption Insurance policy Underwriting Multiple-of-earnings method Needs analysis method
Canada Pension survivors benefits Term life insurance Straight- or level-term policy Decreasing-term policy Renewability Convertibility provision Whole life insurance Cash value
Nonforfeiture right Universal life insurance Group life insurance Credit life insurance Mortgage life insurance
Beneficiary
Policy loan Accidental death or multiple indemnity
clause Disability clause Guaranteed insurability or purchase
option Participating policy Group health insurance Workers compensation insurance Medical reimbursement account Deductible Participating (coinsurance) clause Internal limits Coordination of benefits provision Preexisting condition clause
Long-term care Waiting (elimination) period Guaranteed renewability Optional renewability Disability insurance
Terms
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DefinitionsRisk Avoidance
Avoidance of an act that would create a risk.
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8 - 6Chapter 8 - Insuring Your Life and Health
DefinitionsLoss prevention
Any activity that reduces the probability that a losswill occur.
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8 - 7Chapter 8 - Insuring Your Life and Health
DefinitionsLoss control
Any activity that lessens the severity of loss onceit occurs.
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8 - 8Chapter 8 - Insuring Your Life and Health
DefinitionsRisk assumption
The choice to accept and bear the risk of loss.
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8 - 9Chapter 8 - Insuring Your Life and Health
DefinitionsInsurance policy
A contract between the insured and the insurerunder which the insurer agrees to reimburse the
insured for any losses suffered according tospecified terms.
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8 - 10Chapter 8 - Insuring Your Life and Health
DefinitionsUnderwriting
The process used by insurers to decide who theywill insure and to determine applicable rates they
will charge for premiums.
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8 - 11Chapter 8 - Insuring Your Life and Health
DefinitionsMultiple-of-earnings method
A method of determining the amount of lifeinsurance coverage needed by multiplying gross
annual earnings by some selected (often arbitrary)number.
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DefinitionsNeeds analysis method
A method of determining the amount of lifeinsurance coverage needed by considering the
persons financial obligations and his or heravailable financial resources in addition to lifeinsurance.
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DefinitionsCanada Pension survivors benefits
Benefits included under provision of the CanadaPension Plan that are intended to provide support
to families faced with the loss of their principalwage earners.
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DefinitionsTerm life insurance
Insurance that provides only death benefits, for aspecified period, and does not provide for the
accumulation of cash value.
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DefinitionsStraight- or level-term policy
A term insurance policy that is written for a givennumber of years, with coverage remaining
unchanged throughout the effective period.
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DefinitionsDecreasing - term policy
A term insurance policy that maintains a levelpremium throughout all periods of coverage, but
decreases the amount of protection.
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DefinitionsRenewability
A term life policy provision that allows the insuredto renew his or her policy at the end of its term
without having to show evidence of insurability.
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DefinitionsConvertibility provision
A term life policy provision that allows the insuredto convert the policy to a comparable whole life
policy.
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DefinitionsWhole life insurance
Life insurance designed to offer ongoing insurancecoverage over the course of an insureds entire
life; it provides stated death benefits and allowsfor the accumulation of cash value.
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DefinitionsCash value
The accumulated refundable value of an insurancepolicy; results from the investment earnings on
paid-in insurance premiums.
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DefinitionsNonforfeiture right
A life insurance feature that gives the whole lifepolicyholder, on policy cancellation, the portion of
those assets that had been set aside to providepayment for the future death claim.
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DefinitionsUniversal life insurance
A form of permanent cash value insurance thatcombines term insurance (death benefits) with a
tax-sheltered savings/investment account thatpays interest at competitive money market rates.
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DefinitionsGroup life insurance
A type of life insurance that provides a masterpolicy for a group and each eligible member of the
group receives a certificate of insurance.
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DefinitionsCredit life insurance
A type of life insurance sold in conjunction withinstallment loans; usually a term policy of less
than five years, with a face value that correspondsto the outstanding balance on a loan.
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DefinitionsMortgage life insurance
A term policy designed to pay off the mortgagebalance in the event of the borrowers death.
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DefinitionsBeneficiary
A person who receives the death benefits of a lifeinsurance policy on the insureds death.
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DefinitionsPolicy loan
An advance, secured by the cash value of a wholelife insurance policy, made by an insurer to the
policyholder.
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DefinitionsAccidental death or multiple indemnity clause
A clause in a life insurance policy that typicallydoubles or triples the policys face amount in the
event the insured dies in an accident.
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DefinitionsDisability clause
A clause in a life insurance contract containing awaiver-of-premium benefit alone or coupled with
disability income.
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DefinitionsGuaranteed insurability or purchase option
An option in a life insurance contract giving thepolicyholder the right to purchase additional
coverage at stipulated intervals without providingevidence of insurability.
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DefinitionsParticipating policy
A life insurance policy that pays policy dividendsthat reflect the difference between the premiums
that are charged and the amount of premiumnecessary to fund the actual mortality experienceof the company.
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DefinitionsGroup health insurance
A type of health insurance consisting of contractswritten between a group (for example, employer,
union, or other organization) and a privateinsurance company.
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DefinitionsWorkers compensation insurance
A type of insurance required by provincial andterritorial governments and paid for by employers
that compensates workers for job-related illness orinjury.
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DefinitionsMedical reimbursement account
An account into which employers placecontributions that employees can use to pay for
medical expenses. Usually combined with a high-deductible health insurance policy.
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DefinitionsDeductible
The initial amount NOTcovered by an insurancepolicy and therefore the responsibility of the
insured; it is usually determined on a calendar-year or on a per-illness or per-occurrence basis.
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DefinitionsParticipation (coinsurance) clause
A provision in many health insurance policiesstipulating that the insurer will pay some portion
of the amount of the covered cost in excess of thedeductible.
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DefinitionsInternal limits
A feature commonly found in health insurancepolicies that places a constraint on the amounts
that will be paid for certain specified expenseseven if the overall policy limits are notexceededby the claim.
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DefinitionsCoordination of benefits provision
A provision often included in health insurancepolicies to prevent the insured from collecting
more than 100 percent of covered charges; itrequires that benefit payments be coordinated inthe event the insured is eligible for benefits undermore than one policy.
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Chapter 8 - Insuring Your Life and Health
DefinitionsPreexisting condition clause
A clause included in most individual healthinsurance policies that permits permanent or
temporary exclusion of coverage for any physicalor mental problems the insured had at the timethe policy was purchased; this clause, if includedat all, is much less restrictive in group policies.
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Chapter 8 - Insuring Your Life and Health
DefinitionsLong-term care
The delivery of medical and personal care, otherthan hospital care, to persons with chronic medical
conditions resulting from either illness or frailty.
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Chapter 8 - Insuring Your Life and Health
DefinitionsWaiting (elimination) period
The period, after the insured meets the policyseligibility requirements, during which he or she
must pay long-term care expenses; after thewaiting period expires, the insured will begin toreceive benefits for the duration of the policy aslong as its eligibility requirements continue to be
met.
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Chapter 8 - Insuring Your Life and Health
DefinitionsGuaranteed renewability
Policy provisions ensuring continued insurancecoverage for the insureds life-time as long as he
or she continues to pay the premiums. Theinsurer may raise the premiums in the future,however, if the claims experience for the insuredspeer group of policyholders is unfavourable.
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Chapter 8 - Insuring Your Life and Health
DefinitionsOptional renewability
Contractual clause allowing the insured tocontinue insurance only at the option of the
insurer.
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Chapter 8 - Insuring Your Life and Health
DefinitionsDisability insurance
Insurance that provides a weekly or monthlypayment to replace income when the insured is
unable to work as a result of a covered illness,injury, or disease.
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THE END!