Week number2 PDF

-The United States of America is a federal republic compromising 50 states a federal district. -Capital: Washington DC -Government: Federal presidential constitutional republic -Economy: One of the largest and most technologically advanced economies in the world, with a mixed economy dominated F...

-The United States of America is a federal republic compromising 50 states a federal district. -Capital: Washington DC -Government: Federal presidential constitutional republic -Economy: One of the largest and most technologically advanced economies in the world, with a mixed economy dominated Facts about USA 1. Almost 10 million km2 it's the most large 2. 334 million live in USA 3^rd^ largest population in world 3. Texas California Florida and new york 4. New York is the largest city 5. Capital of USA is Washington dc but not in Washington dc 6. Washington DC is where the USA president lives 7. 63 national parks in usa 8. USA officially founded 4th July 1776 9. 4^th^ of July 1776 known as independence day every year 10. The US flag have 50 stars (state) and 13 stripes (13 colonies) 11. 5.5 million native American live in USA 12. American bald eagle is national symbol 13. Statue of Liberty one of the national and holds book in hand that states July 4^th^ 14. No official language but most used is English and Spanish Different Time Zones in US 1. Eastern Time 2. Central Time 3. Mountain Time 4. Pacific Time 5. Hawaii Time 6. Alaska Time Risk = uncertainty that anything can happen What is Life insurance **Type of Life insurance:** Term life insurance -- Permanent life insurance Importance of Life insurance -- The best way to protect your loved ones -Benefit 1 peace of mind for your family's financial future even after death -Tax saving purposes -Tool for forced savings for extra money and investment -Ensure financial security for you and family (medical bills or hospital bills) **Types of Personal Risk** -pre-mature death = [life insurance] -falling health = [health insurance and healthcare plans] -outliving financial resources = [annuities and retirement solutions] Understanding the need for diverse Life Insurance Products **Key life insurance products and their purpose** **Universal Life Insurance** **Whole Life Insurance** **Variable Life Insurance** **Funding Mechanisms** The way in which a group insurance plan\'s claim costs and administrative expenses are paid is known as the plan\'s funding mechanism Fully insured plan: a plan for which the group policyholder makes periodic premium payments to an insurance company, and the insurance company bears the responsibility for all claim payments Self-insured plan: a plan for which the group policyholder-usually an employer-takes complete responsibility for paying all claim payments and related expenses The way in which a group insurance plan\'s claim costs and administrative expenses are paid is known as the plan\'s funding mechanism Fully insured plan: a plan for which the group policyholder makes periodic premium payments to an insurance company, and the insurance company bears the responsibility for all claim payments Self-insured plan: a plan for which the group policyholder- usually an employer-takes complete responsibility for paying all claim payments and related expenses **Group Insurance Billing** Most of the insurers offer various billing options for various Group Insurance plans. The following options are available as per the payment method chosen: -EFT (Electronic Funds transfer) -Direct Bill \- Payroll Deduction Applicants for group insurance have the option of enrolling on the Insurer\'s website or even submit a paper application indicating the choice of their billing method **Electronic Fund Transfer (EFT)** This occurs between the Insurer and the Insured\'s Financial Institution, using the information provided by the group insured in the application On a specified agreed date (say, the 7th or 15th) of every month, premium is deducted from the group insured\'s bank account and applied to his/her coverage Even though, an EFT is the easiest payment method, it\'s the least chosen option **Types of Life Insurance Policies** Types of Life Insurance Life Insurance policy is one under which the insurer promises to pay a benefit upon the death of a named person. Life insurance policies cover the risk of premature death. Following are their types: -Term Life Insurance: It provides policy benefit if the insured dies during a specified period of time -Cash Value Life Insurance: It provides life insurance coverage throughout the insured\'s life time & also provides a savings element -Endowment Insurance: It provides policy benefits either when the insured dies or on a stated date if the insured lives until then & it also provides a savings element Term Life Insurance Term Life insurance, the most popular form of life insurance in the US, provides coverage for a specified period of time, known as the policy term The policy benefit is payable only if:- The insured dies during the specified term The policy is in force when the insured dies At the end of the policy term, the policy owner may continue the coverage by renewing it, otherwise the policy expires A key feature of a term policy is that it only provides security and generates no earnings or cash value **Types of Life Insurance Policies** Length of the Term The length of the policy term could vary from a few hours to as long as 40 years The ways a team duration may be specified are: -By defining a set number of years-say, 1 year, 5 years, 10 years, etc. \- By specifying the age of the insured at the end of the term. Therefore, a term to age 65 policy would cover an insured up to the age of 65 **Cash Value Life Insurance Policies** A cash value life insurance policy offers a savings element or earnings on the policy. Two primary characteristics which distinguish it from term life policies are: \- Term Life insurance provides protection only for a certain period of time and provides no benefits once the period ends. However, a cash value policy provides protection for the entire lifetime of the insured, as long as the policy is kept active \- Term life insurance provides only protection and no earnings. A cash value policy, however, also builds a cash value which provides an earning element along with security **Universal Whole Life Policy** A universal whole life policy features: -A flexible premiums -A flexible face amounts -An unbundling of the pricing factors The policy owner can choose within certain limits the coverage and the premium he/she would like to pay for the policy Each of the factors the insurer applies while calculating the premium are specified in the policy. These factors are: -The mortality charges applied by the insurer -The interest rate credited to the cash value -The expense charges the insurer would apply **Types of Life Insurance Policies** Life Insurance policy is one under which the insurer promises to pay a benefit upon the death of a named person. Life insurance policies cover the risk of premature death. Following are their types: -Term Life Insurance: It provides policy benefit if the insured dies during a specified period of time -Cash Value Life Insurance: It provides life insurance coverage throughout the insured\'s life time & also provides a savings element \- Endowment Insurance: It provides policy benefits either when the insured dies or on a stated date if the insured lives until then & it also provides a savings element **Cash Value Life Insurance Policies** [Variable Life Insurance] A variable life insurance is a policy in which the premiums are fixed, however, the face amount and cash value may vary as per the performance of the investment subaccounts The decision of where to have the premium invested lies with the policy owner. If the options chosen by the policy owner do well, the death benefit and the cash value will increase and vice-versa Thus, the entire financial responsibility for the performance of the investments lies with the policy owner [Variable Universal Life Insurance] Variable universal life (VUL) insurance (also called universal life II and flexible-premium variable life insurance); a form of cash value life insurance that combines the premium and death benefit flexibility of universal life insurance with the investment flexibility and risk of variable life insurance Working of a Variable Universal Life Insurance Policy: Like a universal life policy, a variable universal life policy allows the policy owner to choose the premium amount and face amount **Endowment Insurance** An Endowment policy provides a specified benefit whether the insured lives to the end of the coverage or dies during the term. It thus is a combination of the features of a term policy and a whole life policy The policy specifies a maturity date, which is the date when the insurer would pay the policy\'s face amount to the policy owner if the insured is still living. The maturity date is reached either: -At the end of a stated term or -When the insured reaches a certain specified age **Group Creditor Life Insurance** Group creditor life insurance: insurance issued to a creditor, such as a bank, to insure the lives of the creditor\'s current and future debtors Unlike other group life insurance policies, group creditor life policies designate the policyholder-the creditor-as the beneficiary The amount of insurance on each insured equals the amount of the outstanding debt the person owes to the policyholder- creditor at any given time In some jurisdictions, the amount of insurance and the duration of a covered loan may be subject to limits The premium usually is paid by the debtor -In many jurisdictions, laws set limits on the premiums that debtors may be charged. Often, the limit is expressed in terms of a stated maximum premium amount per \$1,000 of insurance coverage **Riders** A policy rider is a provision or modification to an existing insurance policy that provides additional coverage to an insurance policy Riders are also known as attachments or amendments to an insurance policy that adds to the coverage in the policy Riders supplement an existing life insurance policy with more coverage Some of the most important life insurance riders include: -The Waiver of Premium for Disability Rider, -The Accidental Death Benefit Rider, -The Dismemberment Benefit Rider, and -The Accelerated Death Benefit Rider Waiver of Premium for Disability Waiver of premium for disability rider, helps the policy to be kept in force by the company if the insured becomes totally disabled Premiums which are waived are actually being paid by the insurance company. Thus, if the policy was a cash value policy, it would keep earning a cash value as it would have if the policy owner paid the premium Accidental Death & Dismemberment Insurance Accidental death and dismemberment (AD&D) benefits may be included as part of a group life or group health policy, or may be issued under a separate group policy The low cost of AD&D benefits makes them an attractive addition to group insurance plans When AD&D benefits are added to a group term life plan, the accidental death benefit amount is usually equal to the life amount Many AD&D plans also provide an additional travel accident benefit that covers accidents occurring while the employee is traveling for the employer **Group Insurance Premiums** An insurer evaluates each group and establishes a premium rate that will be adequate to pay the group\'s claims and will be equitable to the policy holder To establish the premium rates, the insurer must determine the costs it will incur in Providing the benefits promised by the group policy Administering the group insurance plan The premium rates for group policies usually is recalculated every year that the policy remains in force The premium rate may be changed at the policy anniversary every year, but the changes will be done only once during the policy period **Group Savings and Retirement Plans** Individual annuities are not the only source of retirement income Often, people receive retirement income from various government programs and from private retirement plans-group retirement plans sponsored by employers and unions Life insurance companies are involved in the funding and administration of many private retirement plans Private retirement plans are also subject to government regulation and some are granted special income tax benefits Employers and unions usually want to ensure that the plan qualifies for favorable income tax treatment and insurance companies design their product to suit this need Components of a Retirement Plan- Benefit Formulas A retirement plan\'s benefit formula describes the calculation of the plan sponsor\'s financial obligation to plan participants. Two types of benefit formulas are common -Defined benefit formulas: Specify the amount of retirement benefit a plan sponsor promises to provide to each plan participant. A plan structured according to this formula is a defined benefit plan -Defined contribution formula: Specifies the level of contributions that the plan sponsor promises to make the plan. A retirement plan structured according to this formula is called a defined contribution plan The benefit that a participant will receive is not determined in advance and depends on the investment performance of the funds in the plan. Savings plans, profit sharing plans, and stock bonus plans are defined contribution plans Group Life Policy Provisions The parties to a group insurance contract are the insurer and the group policyholder-the person or organization that decides what types of coverage to purchase for group members The provisions included in the written policy set forth the terms of the parties agreement, including the rights and obligations of the parties Provisions included in the policies and the wording of those provisions are often subject to regulatory requirement All group life and health insurance policies include standard policy provisions that describe -The requirements group members must satisfy to be eligible for coverage -The length of the policy\'s grace period \--When the group policy and an insured group member\'s coverage become incontestable When the group policy and an insured group member\'s coverage terminate **Various Policy Provisions** Grace Period Provision The grace period provision specifies the amount of time-usually 31 days after a premium payment is due during which the premium can be paid Insurance coverage remains in force during the grace period If the group policyholder does not submit the premium by the end of the grace period, the group policy terminates Incontestability Provision The incontestability provision in a group insurance policy limits the period during which the insurer may contest the contract to two years from the date of the issue If a group insured member makes material misrepresentation about his insurability in a written application, the insurer can contest the group insured\'s coverage on the ground of material misrepresentation in the application Termination Provisions A group member\'s coverage terminates when the master group policy terminates A group insurance policy can be terminated by -The policyholder: Coverage can be terminated at any time by notifying the insurer, in writing, of the policyholder\'s intent to terminate the policy -The insurer: Coverage can be terminated on any premium due date if conditions specified in the policy are not met An insured group member\'s coverage also may terminate if the group insured -Ceases to be a member of an eligible class of employees -Terminates employment or group membership -Fails to make a required premium contribution (under a contributory plan) Additional Provisions in Group Insurance Group life and health insurance policies, typically include provisions that concern eligibility requirements, grace periods, incontestability, and the conditions under which the policy terminates and under which a group insured\'s coverage terminates A number of other provisions typically are included in group life insurance policies which are very similar to provisions found in individual life insurance policies Following are some additional provisions that typically are included in group life insurance policies. These provisions relate to: \- Benefit Amounts -Beneficiary Designation -Conversion -Misstatement of Age -Settlement Options **Group Health Insurance Policy Provisions** Coordination of Benefits Provision A provision that is designed to prevent a group member who is insured under more than one group medical expense insurance policy from receiving benefit amounts that are greater than the amount of medical expenses the insured actually incurred The COB provision prevents duplication of benefits -The primary plan is responsible for paying the total amount of the insured\'s allowable expenses promised by the plan -The secondary plan is responsible for paying benefits to cover any remaining expenses according to the terms of the COB provision COBRA Continuation Coverage The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires group health plans to offer continuation coverage to covered employees, former employees, spouses, former spouses, and dependent children when group health coverage would otherwise be lost due to certain specific events like -Termination or reduction in hours of employment of the covered employee; -The death of a covered employee -divorce or legal separation of a covered employee and spouse, and -a child\'s loss of dependent status (and therefore coverage) under the plan **Types of Health Insurance** An individual, family or business can use risk management to counter the risks they face More than 85% of U.S. citizens have health insurance in some form through: -Their employer, -Private insurance companies, -Government programs The two major forms of health insurance coverage are: -Medical Expenses Coverage -Disability Income Coverage **Traditional Medical Expense Coverage** Traditional Medical Expenses Insurance offers indemnity benefits, i.e. it offers a reimbursement based upon the actual amount of financial loss The insured is reimbursed for the medical expenses he/she incurs The insured receives treatment for an illness or injury and pays the medical care provider. He/she then files a claim with the insurance company for reimbursements Traditional medical expense insurance offers three types of coverage: -Basic Medical Expense -Major Medical Expense \- Supplemental Medical Expense **COMPREHENSIVE MAJOR MEDICAL POLICY** They cover practically all medical expenses, including hospital, physicians, surgical, nursing, drugs, and laboratory tests. Basic Medical Expense Coverage Basic Medical Expense Coverage Basic Medical Expense coverage consist of separate benefits for each of the following type of coverage: Hospital Expenses: It includes charge for inpatient and outpatient hospital services such as: -Room -Medication -Laboratory Services etc. -Surgical Expenses: It includes inpatient and outpatient surgical procedures Physicians Expenses: It includes charge associated with physicians visit both in & out of the hospital Major Medical Expense Coverage Major Medical Expense coverage provides substantial benefits for: -Hospital expense -Surgical expense -Physicians expense \- Medical services related to illness or injuries -Preventive care Supplemental Medical Expense Coverage Supplemental Medical Expense coverage provide benefits that exceed the benefit levels covered by major medical expense policies or for expenses that are not covered under those policies The coverage that are most commonly offered are: -Dental Expense \- \- Accidental Death & Dismemberment benefit \- Prescription Drug -Vision Care \- Dread Disease \- Critical Illness \- Long-term Care \- Medical supplement coverage -Hospital Indemnity Coverage **Dental Expense Coverage** Dental Expense coverage includes: Routine dental examinations Preventive work Dental procedures needed to treat tooth decay and diseases of the teeth and jaw Most policies also provide different levels of coverage for different types of treatment: \- Basic \- Standard \- Premier **Prescription Drug Coverage** This coverage provides benefits for the purchase of drugs and medicines that are prescribed by a physician and are not available over the counter **Vision Care Coverage** This coverage provides the insured with benefits for expenses incurred in obtaining eye-examinations and corrective lenses Generally provides benefits to cover one routine eye-examination per year **Dread Disease Coverage** This coverage provides benefits for medical expenses incurred by an insured who has contracted a specified disease The most commonly offered form of coverage is cancer insurance **Critical Illness Coverage** As an alternative to dread disease coverage, this coverage pays a lump-sum benefit if the insured is diagnosed with a critical illness while the policy is in force Conditions specified under critical illness include \- Heart attack \- Stroke \- Life-threatening cancer \- Renal Failure -Major Organ transplant -Coronary Artery Bypass Surgery **Long Term care (LTC) Coverage** This coverage provides benefits for medical and other services needed by insureds, who because of their advanced age or the effects of a serious illness or injury, need constant care in their own homes or in a qualified nursing facility **Hospital Indemnity Coverage** The hospital indemnity policy provides cash benefits to cover out- of pocket and uncovered expenses, while hospitalized for injury or illness Depending on the type of plan, benefits can be just for hospitalization or may also include diagnostic procedures, outpatient surgery and ambulance transportation Benefits are predetermined and paid regardless of any other existing insurance coverage **Government Sponsored Medical Coverage** Medicare & Medicaid \- The U.S. government provides medical expense insurance benefits through several government programs, however, such programs provide coverage only to specified individuals. The most important of these programs are: \- Medicare - A federal government program established by the Old Age, Survivors, Disability and Health Insurance (OASDHI) Act that provides medical expense to elderly and disabled persons \- Medicaid- A joint federal and state program that provides basic medical expense and nursing home coverage to the low-income population and certain aged and disabled individuals Medicare Medicare is federal health insurance primarily for people 65 or older, as well as individuals under 65 with certain disabilities or conditions Medicare has uniform standards for costs and coverage across all states People with Medicare contribute to costs through monthly premiums, deductibles, and coinsurance Medicare covers a wide range of medical services, including hospital stays, doctor visits, and prescription drugs Medicaid Medicaid is a joint federal and state program that assists with medical costs for individuals with limited income and resources Each state runs its own Medicaid program, leading to varying eligibility requirements and benefits Medicaid offers benefits not normally covered by Medicare, such as nursing home care and personal care services People with Medicaid usually pay little or nothing but copay may apply for some services