CHAPTER 1: INTRODUCTION TO INSURANCE INTRODUCTION. 2 HISTORY OF INSURANCE. 3 INSURANCE INDUSTRY. 6 PERSPECTIVE OF THE TEXT.

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1 Pure and Speculative Risk Subjective and Objective Risk Fundamental and Particular Risk Non-financial and Financial Risk Probability of Loss Law of Large Numbers Determining the Objectives of the Risk Management Program Identifying the Risks to Which the Individual is Exposed Evaluating the Identified Risks for the Probability and the Severity of the Loss Determining and Selecting the Best Risk Management Alternative Implementing the Risk Management Plan Selected Periodically Evaluating and Reviewing the Risk Management Program... 19

2 Perils Hazards Large Number of Homogeneous Exposures Insured Losses Must be Accidental Loss Must be Measurable and Determinable Loss Must Not be Financially Catastrophic to the Insurer Premium Must be Reasonable Mutual Consent Offer and Acceptance...26 Performance or Delivery Lawful Purpose Legal Competence of All Parties Principle of Indemnity...28 Principle of Insurable Interest Principle of Utmost Good Faith Adhesion Aleatory Unilateral Conditional Personal Express Authority Implied Authority Apparent Authority Waiver Estoppel Types of Insurance Companies Agents and Brokers Reinsurance Policy Provisions Riders and Endorsements Deductibles and Copayments Coinsurance... 40

3 chapter chapter Actual Cash Value Replacement Cost Appraised or Agreed Upon Value Legislative Judicial Executive or State Insurance Commissioner National Association of Insurance Commissioners (NAIC) Insurance Rate Regulation Prior Approval Law File and Use Law Use and File Law Open Competition...46 Eligibility Features of Group Health Insurance Need for Coverage Cost of Individual Policies...66 Eligibility Types of Individual Policies Indemnity Health Insurance Managed Care Insurance... 69

4 Preexisting Conditions...72 Incontestability Clause Grace Period Reinstatement Clause...73 Time Limit Clause Renewability Clause Eligibility High Deductible Health Insurance Plans Contribution Limitations Distributions Risk Exposures from Dying Early Measuring the Life Insurance Need Term Insurance Universal Life Insurance Whole Life Insurance Variable Life Insurance Modified Endowment Contracts (MECs) Group-Term Insurance Protection Other Types of Group Life Insurance

5 chapter chapter Grace Period Incontestability Misstatement of Age or Gender Suicide Reinstatement Policy Loan Provisions Beneficiary Designations Survivorship Clauses Simultaneous Death Provisions Assignment Aviation Exclusion War Exclusion Lump-Sum Payment Interest Only Annuity Payments from Life Insurance Premium Payments Death Benefit Taxation Taxation of Lifetime Benefits Section 1035 Policy Exchanges Transfer for Value Viatical Settlements Accelerated Benefits Provision or Rider Entity (Redemption) Agreements Cross-Purchase Agreements Wait-and-See Buy-Sell Agreements Life Insurance is the Perfect Hedge for a Buy-Sell Agreement Triggered at Death

6 Amount of Coverage Term of Coverage Definition of Disability Elimination Period Benefit Period Other Disability Policy Provisions Incontestability Clause Renewability Long-Term Care Services The Cost of Long-Term Care Services Paying for Long-Term Care Services Population Statistics for the United States Factors that Influence the Need for Long-Term Care Insurance Long-Term Care Premium Factors Long-Term Care Features and Benefits Long-Term Care Benefit Periods (Benefit Multiplier) Tax-Qualified Long-Term Care Contracts Conditions that Trigger Long-Term Care Benefits Selection of Long-Term Care Policy The Period of Coverage (Benefits)

7 chapter chapter The Inflation Adjustment Elimination (Deductible) Period Services Included and Excluded How Benefits are Paid Inflation Adjustments What is an Annuity? Parties to an Annuity Contract Annuity Payout Period Immediate vs. Deferred Flexible Premium vs. Single Premium Earnings Single Life Annuities Joint and Survivor Life Annuities Fixed Annuity Variable Annuity Equity-Indexed Annuities Advantages of Annuity Contracts Disadvantages of Annuity Contracts Income Taxation Section 1035 Exchanges Estate Taxation

8 Use of Annuity Contracts Use of Annuities in Retirement Planning Longevity Insurance Social Security Structured Settlements and the Secondary Market Regulation of Annuity Contracts The Importance of Company Credit Rating What Happens if an Insurance Company Fails? Forms of Coverage Liability Insurance Coverage in Homeowners Policies Homeowners (HO) Insurance Policy Forms Financial Planning Applications & Homeowners Insurance The Duties of an Insured after a Loss & Contractual Limitations Introduction to Liability Coverage Part A: Liability Coverage (Bodily Injury and Property Damage) Part B: Medical Payments Coverage Part C: Coverage for Uninsured or Under-Insured Motorists Part D: Damage to Insured s Automobile Part E: Duties After An Accident Or Loss Coverage for GAP Insurance Public Policy Issues Coverage for Personal Injury Protection (PIP) Exclusions to the Auto Policy Coverage in Other States, Canada, and Mexico Premiums

9 chapter chapter Risk of loss of assets and liability insurance Professionals Products Liability Insurance History of Consumer Lending Secured vs. Unsecured Loans Credit Reports Credit Scores Establishing Credit Debit Cards vs. Credit Cards Charge Cards Sources of Identity Theft Avoid Becoming a Victim of Identity Theft

10 Additional Medicare Taxes Beginning in Trust Funds Covered Workers and Insured Status Social Security Beneficiaries Social Security Retirement Benefits A Closer Look The Retirement Benefit Calculation Disability Benefits and Disability Insured Family Benefits Survivors Benefits Medicare Part D Subsidy Other Medicare Health Plan Choices Effect of Marriage or Divorce on Benefits Change of Name Leaving the United States