19.3

Life and Social Insurance

• Life insurance—contractual arrangement under which an insurer promises to pay an agreed upon amount of money to a named party upon the death of a particular person

• Exemptions—the insurer is liable for return of the premiums paid or cash value instead of the proceeds– examples: death caused by the crash of private

plane, or act of terrorism, or during military service

• Incontestability clause—prohibits the insurer from refusing to perform due to misrepresentation or fraud after the policy has been in effect for a specified period of time (1-2 years)

• Grace period—period of time during which overdue premiums can be paid to keep the policy in force– Normal grace period= one month

• Double indemnity provision—the insurer pays twice the face amount of the policy if the death of the insured is accidental

• Disability coverage –protection against the effects of total permanent disability by cancelling the requirement for payment of policy premiums while the insured is diabled

• Social Security Act—primary source for social insurance coverage in this country– Coverage under act• RSDI—Retirement, Survivor’s, Disability, and Health

Insurance• Unemployment compensation—lessens financial

hardship of losing one’s job—controlled by state government

• Retirement Insurance—supplemental income for retired individuals– Eligible person may elect to receive social security

retirement as early as age 62

• Survivor’s Insurance– Survivors of a person eligible for benefits under

the system may receive benefits if they are:• Widow or widower or ex-spouse (if married for at least

10 years) minimum age= 60• A widow or widower of any age if caring for a child

under age 16 or a child disabled• Dependent children under 18, or 19 if still in high

school• Dependent parents 62 or older

• Disability Insurance– A severe, long lasting disability– one that prevents the

eligible person from being able to do “any substantial work”– Must be predicted to last INDEFINITELY– Examples of disability:

• Loss of both arms or legs• Loss of leg and arm• Heart and lung disease that cause pain, fatique• Brain damage • Loss of vision• Deafness

• Health Insurance– Indemnifies against the cost of medical care

necessary to regain physical well being after an illness

– Medicare—provides health coverage for those age 65 and older• Hospital insurance—hospital expenses and follow up

treatment• Medical insurance—x-rays, radium treatments, ambulance

services, lab tests, casts, therapies

Word Bank

• No fault• Term• Coinsurance• Underinsured motorist• Exclusion• Policy• Indemnifying• Marine• Beneficiary• Uninsured motorists