Pure and Speculative Risk... 11 Subjective and Objective Risk... 12 Fundamental and Particular Risk... 12 Non-financial and Financial Risk... 13 Probability of Loss... 13 Law of Large Numbers... 13 Determining the Objectives of the Risk Management Program... 14 Identifying the Risks to Which the Individual is Exposed... 15 Evaluating the Identified Risks for the Probability and the Severity of the Loss... 16 Determining and Selecting the Best Risk Management Alternative... 16 Implementing the Risk Management Plan Selected... 19 Periodically Evaluating and Reviewing the Risk Management Program... 19
Perils... 20 Hazards... 20 Large Number of Homogeneous Exposures... 22 Insured Losses Must be Accidental... 23 Loss Must be Measurable and Determinable... 24 Loss Must Not be Financially Catastrophic to the Insurer... 25 Premium Must be Reasonable... 25 Mutual Consent... 26 Offer and Acceptance...26 Performance or Delivery... 27 Lawful Purpose... 27 Legal Competence of All Parties... 27 Principle of Indemnity...28 Principle of Insurable Interest... 28 Principle of Utmost Good Faith... 29 Adhesion... 31 Aleatory... 31 Unilateral... 32 Conditional... 32 Personal... 32 Express Authority... 33 Implied Authority... 33 Apparent Authority... 33 Waiver... 34 Estoppel... 34 Types of Insurance Companies... 35 Agents and Brokers... 35 Reinsurance... 36 Policy Provisions... 36 Riders and Endorsements... 38 Deductibles and Copayments... 39 Coinsurance... 40
chapter chapter Actual Cash Value... 42 Replacement Cost... 43 Appraised or Agreed Upon Value... 43 Legislative... 44 Judicial... 44 Executive or State Insurance Commissioner... 44 National Association of Insurance Commissioners (NAIC)... 44 Insurance Rate Regulation... 45 Prior Approval Law... 45 File and Use Law... 46 Use and File Law... 46 Open Competition...46 Eligibility... 63 Features of Group Health Insurance... 63 Need for Coverage... 65 Cost of Individual Policies...66 Eligibility... 66 Types of Individual Policies... 66 Indemnity Health Insurance... 69 Managed Care Insurance... 69
Preexisting Conditions...72 Incontestability Clause... 72 Grace Period... 72 Reinstatement Clause...73 Time Limit Clause... 73 Renewability Clause... 73 Eligibility... 78 High Deductible Health Insurance Plans... 78 Contribution Limitations... 79 Distributions... 79...91 Risk Exposures from Dying Early... 93 Measuring the Life Insurance Need... 95 Term Insurance... 103 Universal Life Insurance... 107 Whole Life Insurance... 109 Variable Life Insurance... 114 Modified Endowment Contracts (MECs)... 117 Group-Term Insurance... 118 Protection... 119 Other Types of Group Life Insurance... 120
chapter chapter Grace Period... 121 Incontestability... 121 Misstatement of Age or Gender... 121 Suicide... 122 Reinstatement... 123 Policy Loan Provisions... 123 Beneficiary Designations... 123 Survivorship Clauses... 124 Simultaneous Death Provisions... 124 Assignment... 124 Aviation Exclusion... 125 War Exclusion... 125 Lump-Sum Payment... 125 Interest Only... 125 Annuity Payments from Life Insurance... 126 Premium Payments... 128 Death Benefit Taxation... 129 Taxation of Lifetime Benefits... 129 Section 1035 Policy Exchanges... 131 Transfer for Value... 132 Viatical Settlements... 132 Accelerated Benefits Provision or Rider... 134 Entity (Redemption) Agreements... 135 Cross-Purchase Agreements... 136 Wait-and-See Buy-Sell Agreements... 138 Life Insurance is the Perfect Hedge for a Buy-Sell Agreement Triggered at Death... 139
Amount of Coverage... 154 Term of Coverage... 155 Definition of Disability... 156 Elimination Period... 159 Benefit Period... 160 Other Disability Policy Provisions... 161 Incontestability Clause... 162 Renewability... 162 Long-Term Care Services... 177 The Cost of Long-Term Care Services... 178 Paying for Long-Term Care Services... 178 Population Statistics for the United States... 185 Factors that Influence the Need for Long-Term Care Insurance... 187 Long-Term Care Premium Factors... 190 Long-Term Care Features and Benefits... 191 Long-Term Care Benefit Periods (Benefit Multiplier)... 197 Tax-Qualified Long-Term Care Contracts... 197 Conditions that Trigger Long-Term Care Benefits... 198 Selection of Long-Term Care Policy... 200 The Period of Coverage (Benefits)... 200
chapter chapter The Inflation Adjustment... 201 Elimination (Deductible) Period... 202 Services Included and Excluded... 202 How Benefits are Paid... 202 Inflation Adjustments... 208 What is an Annuity?... 221 Parties to an Annuity Contract... 224 Annuity Payout Period... 224 Immediate vs. Deferred... 225 Flexible Premium vs. Single Premium... 226 Earnings... 226 Single Life Annuities... 227 Joint and Survivor Life Annuities... 229 Fixed Annuity... 232 Variable Annuity... 232 Equity-Indexed Annuities... 237 Advantages of Annuity Contracts... 241 Disadvantages of Annuity Contracts... 242 Income Taxation... 244 Section 1035 Exchanges... 248 Estate Taxation... 248
Use of Annuity Contracts... 250 Use of Annuities in Retirement Planning... 251 Longevity Insurance... 252 Social Security... 254 Structured Settlements and the Secondary Market... 254 Regulation of Annuity Contracts... 257 The Importance of Company Credit Rating... 258 What Happens if an Insurance Company Fails?... 258 Forms of Coverage... 273 Liability Insurance Coverage in Homeowners Policies... 282 Homeowners (HO) Insurance Policy Forms... 286 Financial Planning Applications & Homeowners Insurance... 288 The Duties of an Insured after a Loss & Contractual Limitations... 290 Introduction to Liability Coverage... 295 Part A: Liability Coverage (Bodily Injury and Property Damage)... 297 Part B: Medical Payments Coverage... 297 Part C: Coverage for Uninsured or Under-Insured Motorists... 298 Part D: Damage to Insured s Automobile... 298 Part E: Duties After An Accident Or Loss... 300 Coverage for GAP Insurance... 301 Public Policy Issues... 301 Coverage for Personal Injury Protection (PIP)... 302 Exclusions to the Auto Policy... 302 Coverage in Other States, Canada, and Mexico... 302 Premiums... 303
chapter chapter Risk of loss of assets and liability insurance... 314 Professionals... 314 Products Liability Insurance... 314 History of Consumer Lending... 324 Secured vs. Unsecured Loans... 326 Credit Reports... 326 Credit Scores... 330 Establishing Credit... 338 Debit Cards vs. Credit Cards... 342 Charge Cards... 344 Sources of Identity Theft... 348 Avoid Becoming a Victim of Identity Theft... 350
Additional Medicare Taxes Beginning in 2013... 367 Trust Funds... 370 Covered Workers and Insured Status... 372 Social Security Beneficiaries... 373 Social Security Retirement Benefits A Closer Look... 376 The Retirement Benefit Calculation... 376 Disability Benefits and Disability Insured... 394 Family Benefits... 395 Survivors Benefits... 396 Medicare Part D Subsidy... 405 Other Medicare Health Plan Choices... 406 Effect of Marriage or Divorce on Benefits... 407 Change of Name... 408 Leaving the United States... 409