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Insurance

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Quote of the Day 'If you can make one heap of all your winnings ... An insurance contract is not valid unless the owner has an insurable ... Health Insurance ... – PowerPoint PPT presentation

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Title: Insurance


1
CHAPTER 50
Insurance
2
Quote of the Day
  • If you can make one heap of all your winnings
  • And risk it on one turn of pitch-and-toss,
  • And lose, and start again at your beginnings
  • And never breathe a word about your loss....
  • Rudyard Kipling,
  • English novelist and poet,
  • In the poem If (ends youll be a man, my
    son.)

3
Insurance Contract
  • An insurance policy must meet all the common law
    requirements for a contract.
  • Offer and Acceptance
  • The purchase of a policy makes an offer by
    delivering an application and a premium to the
    insurer.
  • It can be accepted by oral notice, by written
    notice, or by delivery of the policy.
  • It also has a fourth option-a written binder,
    which is a temporary acceptance.

4
Insurable Interest
  • An insurance contract is not valid unless the
    owner has an insurable interest in the subject
    matter of the policy.
  • This means you must have some financial stake in
    the subject of the insurance policy.
  • The insurable interest must exist at the time of
    loss, and cannot be for more than the amount of
    loss.

5
Insurers Rights
  • Insurers have the right to void a policy if,
    during the application process, the insured makes
    a material misstatement or conceals a material
    fact.
  • Insurers have the right to void a policy if the
    insured violates a warranty.

6
Co-Payments
  • Deductibles
  • Deductible provision that requires the insured to
    pay a certain amount of the claim herself.
  • Co-insurance
  • Co-insurance means that the insured must pay some
    percentage of the entire loss.
  • Pro Rata Provisions
  • A pro rata clause prevents an insured from
    collecting more than the actual damage suffered.

7
Taking on Rights and Duties
  • Subrogation
  • If an insurance company pays a claim, it is
    subrogated to the rights of the insured, meaning
    that the company acquires whatever rights the
    insured has against any third parties.
  • Suretyship
  • In suretyship, the insurance company succeeds to
    the obligations of the insured.

8
Bad Faith by the Insurer
  • Insurance policies often contain a covenant of
    good faith and fair dealing, which may be
    violated by
  • Fraud
  • Refusing to Pay a Valid Claim
  • Wrongfully Refusing to Accept a Settlement Offer

9
Property Insurance
  • Property insurance (also known as casualty
    insurance) typically does not cover
  • Earthquakes and floods (unless a special rider is
    added)
  • Friendly fire (fire that stays where it is
    supposed to be)
  • Employee theft or embezzlement
  • Merchandise lost or damaged in transportation

10
Life Insurance
  • Term Insurance simple, cheap covers a
    particular time period
  • Whole Life Insurance (straight life) more
    expensive, but forces policyholder to save part
    of premium goes into a savings, giving the policy
    cash value.
  • Universal Life a hybrid of term and whole life
    premiums may be adjusted some.

11
Life Insurance (contd)
  • Annuities are the reverse of life insurance-they
    make payments until death whereas life insurance
    pays after death.
  • Accidental Death policy may have a double
    indemnity clause, doubling the value of the
    policy if the death is accidental.

12
Health Insurance
  • In a pay for service plan, the insurer pays for
    almost any treatment ordered by almost any
    doctor.
  • In managed care plans, patient and doctor choice
    is limited, in order to limit costs.

13
Disability Insurance
  • Disability insurance replaces the insureds
    income if he becomes unable to work because of
    illness or injury.

14
Liability Insurance
  • The purpose of liability insurance is to
    reimburse the insured for any liability she
    incurs by (accidentally) harming someone else.
  • Liability insurance covers
  • Injuries sustained on the insureds property
  • Injuries to anothers property caused by the
    insured
  • Professional malpractice
  • Product liability

15
Automobile Insurance
  • Collision pays to repair or replace a car
    damaged in an accident.
  • Comprehensive covers fire, theft and vandalism.
  • Liability covers harm to other people or other
    property (usually required).
  • Uninsured Motorist covers the insured and all
    passengers who are injured by another driver who
    does not have insurance.

16
Life is risky. Insurance provides a financial
buffer against risk. But purchasing insurance
without understanding its law creates its own
risk.
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