Gitman PPT Student Ch8

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COPYRIGHT 2008 by Nelson, a division of Thomson Canada Ltd

Chapter 8 Insuring Your Life and
Health
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Chapter 8 - Insuring Your Life and Health
Chapter 8 - Learning Goals
LG 1 - Explain the concept of risk and the basics of insurance
underwriting.
LG 2 - Discuss the primary reasons for life insurance and identify
those who need coverage.
LG 3 - Calculate how much life insurance you need.
LG 4 - Differentiate among the various types of life insurance
policies 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 of
health insurance plans.
LG 8 - Assess the need for and features of long-term care
insurance and disability insurance.
Learning
Goals
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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
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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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Definitions
Risk Avoidance
Avoidance of an act that would create a risk.
Terms
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Definitions
Loss prevention
Any activity that reduces the probability that a loss
will occur.
Terms
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Definitions
Loss control
Any activity that lessens the severity of loss once
it occurs.
Terms
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Definitions
Risk assumption
The choice to accept and bear the risk of loss.
Terms
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Definitions
Insurance policy
A contract between the insured and the insurer
under which the insurer agrees to reimburse the
insured for any losses suffered according to
specified terms.
Terms
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Definitions
Underwriting
The process used by insurers to decide who they
will insure and to determine applicable rates they
will charge for premiums.
Terms
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Definitions
Multiple-of-earnings method
A method of determining the amount of life
insurance coverage needed by multiplying gross
annual earnings by some selected (often arbitrary)
number.
Terms
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Definitions
Needs analysis method
A method of determining the amount of life
insurance coverage needed by considering the
persons financial obligations and his or her
available financial resources in addition to life
insurance.
Terms
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Definitions
Canada Pension survivors benefits
Benefits included under provision of the Canada
Pension Plan that are intended to provide support
to families faced with the loss of their principal
wage earners.
Terms
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Definitions
Term life insurance
Insurance that provides only death benefits, for a
specified period, and does not provide for the
accumulation of cash value.
Terms
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Definitions
Straight- or level-term policy
A term insurance policy that is written for a given
number of years, with coverage remaining
unchanged throughout the effective period.
Terms
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Definitions
Decreasing - term policy
A term insurance policy that maintains a level
premium throughout all periods of coverage, but
decreases the amount of protection.
Terms
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Definitions
Renewability
A term life policy provision that allows the insured
to renew his or her policy at the end of its term
without having to show evidence of insurability.
Terms
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Definitions
Convertibility provision
A term life policy provision that allows the insured
to convert the policy to a comparable whole life
policy.
Terms
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Definitions
Whole life insurance
Life insurance designed to offer ongoing insurance
coverage over the course of an insureds entire
life; it provides stated death benefits and allows
for the accumulation of cash value.
Terms
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Definitions
Cash value
The accumulated refundable value of an insurance
policy; results from the investment earnings on
paid-in insurance premiums.
Terms
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Definitions
Nonforfeiture right
A life insurance feature that gives the whole life
policyholder, on policy cancellation, the portion of
those assets that had been set aside to provide
payment for the future death claim.
Terms
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Definitions
Universal life insurance
A form of permanent cash value insurance that
combines term insurance (death benefits) with a
tax-sheltered savings/investment account that
pays interest at competitive money market rates.
Terms
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Definitions
Group life insurance
A type of life insurance that provides a master
policy for a group and each eligible member of the
group receives a certificate of insurance.
Terms
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Definitions
Credit life insurance
A type of life insurance sold in conjunction with
installment loans; usually a term policy of less
than five years, with a face value that corresponds
to the outstanding balance on a loan.
Terms
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Definitions
Mortgage life insurance
A term policy designed to pay off the mortgage
balance in the event of the borrowers death.
Terms
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Definitions
Beneficiary
A person who receives the death benefits of a life
insurance policy on the insureds death.
Terms
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Definitions
Policy loan
An advance, secured by the cash value of a whole
life insurance policy, made by an insurer to the
policyholder.
Terms
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Definitions
Accidental death or multiple indemnity clause
A clause in a life insurance policy that typically
doubles or triples the policys face amount in the
event the insured dies in an accident.
Terms
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Definitions
Disability clause
A clause in a life insurance contract containing a
waiver-of-premium benefit alone or coupled with
disability income.
Terms
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Definitions
Guaranteed insurability or purchase option
An option in a life insurance contract giving the
policyholder the right to purchase additional
coverage at stipulated intervals without providing
evidence of insurability.
Terms
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Definitions
Participating policy
A life insurance policy that pays policy dividends
that reflect the difference between the premiums
that are charged and the amount of premium
necessary to fund the actual mortality experience
of the company.
Terms
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Definitions
Group health insurance
A type of health insurance consisting of contracts
written between a group (for example, employer,
union, or other organization) and a private
insurance company.
Terms
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Definitions
Workers compensation insurance
A type of insurance required by provincial and
territorial governments and paid for by employers
that compensates workers for job-related illness or
injury.
Terms
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Definitions
Medical reimbursement account
An account into which employers place
contributions that employees can use to pay for
medical expenses. Usually combined with a high-
deductible health insurance policy.
Terms
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Definitions
Deductible
The initial amount NOT covered by an insurance
policy and therefore the responsibility of the
insured; it is usually determined on a calendar-
year or on a per-illness or per-occurrence basis.
Terms
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Definitions
Participation (coinsurance) clause
A provision in many health insurance policies
stipulating that the insurer will pay some portion
of the amount of the covered cost in excess of the
deductible.
Terms
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Definitions
Internal limits
A feature commonly found in health insurance
policies that places a constraint on the amounts
that will be paid for certain specified expenses
even if the overall policy limits are not exceeded
by the claim.
Terms
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Definitions
Coordination of benefits provision
A provision often included in health insurance
policies to prevent the insured from collecting
more than 100 percent of covered charges; it
requires that benefit payments be coordinated in
the event the insured is eligible for benefits under
more than one policy.
Terms
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Definitions
Preexisting condition clause
A clause included in most individual health
insurance policies that permits permanent or
temporary exclusion of coverage for any physical
or mental problems the insured had at the time
the policy was purchased; this clause, if included
at all, is much less restrictive in group policies.
Terms
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Definitions
Long-term care
The delivery of medical and personal care, other
than hospital care, to persons with chronic medical
conditions resulting from either illness or frailty.
Terms
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Definitions
Waiting (elimination) period
The period, after the insured meets the policys
eligibility requirements, during which he or she
must pay long-term care expenses; after the
waiting period expires, the insured will begin to
receive benefits for the duration of the policy as
long as its eligibility requirements continue to be
met.
Terms
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Definitions
Guaranteed renewability
Policy provisions ensuring continued insurance
coverage for the insureds life-time as long as he
or she continues to pay the premiums. The
insurer may raise the premiums in the future,
however, if the claims experience for the insureds
peer group of policyholders is unfavourable.
Terms
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Definitions
Optional renewability
Contractual clause allowing the insured to
continue insurance only at the option of the
insurer.
Terms
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Definitions
Disability insurance
Insurance that provides a weekly or monthly
payment to replace income when the insured is
unable to work as a result of a covered illness,
injury, or disease.
Terms
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THE END!

Gitman PPT Student Ch8

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COPYRIGHT 2008 by Nelson, a division of Thomson Canada Ltd

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