Insurance Law explained – Insurance Law Part 2

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Welcome back to this series of classes on insurance law. My name is Shane Irvine and this is part 2.1 of a 5 part series.

Business Insurance can take a number of different forms such as the various kinds of professional liability insurance also called professional indemnity (P.I.) which are discussed below under that name and the business owners policy (BOP) which packages into one policy many of the kinds of coverage that a business owner needs in a way analogies to how homeowners insurance packages the coverage is that a homeowner’s needs.

Okay, auto insurance. You’ve got to have it. Auto insurance protects the policyholder against financial loss in the event of an incident involving a vehicle they own, such as in a traffic collision. Coverage typically includes property coverage for damage to or theft of the car, liability coverage for the legal responsibility to others, for bodily injury, or property damage.

Medical coverage for the cost of treating injuries, rehabilitation, and sometimes lost wages, and hopefully not, for funeral expenses.

Gap Insurance. Gap Insurance covers the excess amount on your auto loan In an instance where your insurance company does not cover the entire loan. Depending on the company’s specific policies it might or might not cover the deductible as well.

This coverage is marketed for those who put low down payments or have high-interest rates on their loans and those with 60 months or longer terms. Gap insurance is typically offered by a finance company when their vehicle owner purchases their vehicle.

But, many auto insurance companies offer this coverage to consumers as well. Health insurance. Health insurance policies cover the cost of medical treatments. Dental insurance, like medical insurance, protects policyholders for dental costs.

In most developed countries all citizens receive some health coverage from their governments paid through taxation.

In most countries health insurance is often part of an employer’s benefits. Income protection insurance, worker’s compensation or employer’s Liability insurance is compulsory in some countries. Disability insurance policies provide financial support in the event of the policyholder becoming unable to work because of disability, disabling illness, or injury.

It provides monthly support to help pay such obligations as mortgage loans and credit cards. Short-term and long-term disability policies are available to individuals. But, considering the expense, long-term policies are generally obtained only by those with a with at least a six figure income such as doctors or lawyers etc.

Short term disability insurance covers a person for a period typically up to six months, paying a stipend and each month to cover medical bills and other necessities. Long term disability insurance covers an individual’s expenses for the long term up until such time as they are considered permanently disabled and thereafter.

Insurance companies will often try to encourage the person back into employment in preference to and before declaring them unable to work at all and therefore totally disabled. Overhead insurance allows business owners to cover the overhead expenses of their business while they’re unable to work.

Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance. Worker’s compensation insurance replaces all or part of a worker’s wages lost and accompany medical expenses incurred because of a job related injury.

Casualty insurance. Casualty insurance insures against accidents not necessarily tied to any specific property. It is a broad spectrum of insurance that a number of other types of insurance could be classified such as auto insurance, worker’s compensation, and some liability insurances. Crime Insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties.

For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement. Terrorism insurance.

It’s kind of a new one. Terrorism insurance provides protection against any loss or damage caused by terrorist activities. In the United States in the wake of 9/11, the Terrorism Risk Insurance Act 2002 (TRIA) set up a federal program providing a transparent system of shared public and private compensation for insured losses resulting from acts of terrorism.

The program was extended until the end of 2014 by the Terrorism Risk Insurance Program Reauthorization Act of 2007 TRI/TRA Kidnap and ransom insurance is designed to protect individuals and corporations operating in high-risk areas around the world against the perils of kidnap, extortion, wrongful detention, and hijacking.

Potential risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions could result in a loss.

Life insurance. Life insurance provides a monetary benefit to a decedent’s family or other designated beneficiary and may specifically provide for income to an insured person’s family, burial, funeral and other final expenses.

Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most states a person cannot purchase a policy on another person without their knowledge. Annuities provide a stream of payments and are generally classified as insurance because they’re issued

by insurance companies, are regulated as insurance, and require the same kinds of actuarial and investment management expert expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources.

In that sense, they are the complement of life insurance and from an underwriting perspective are they a mirror image of life insurance. Certain life insurance contracts accumulate cash values which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies such as annuities and endowment policies are financial instruments to accumulate or liquidate wealth when it is needed.

In many countries, such as the United States and the United Kingdom, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax efficient method of saving as well as protection in the event of early death.

In the United States, the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases, the benefit deferred from tax deferral may be offset by a lower return. This depends on the insurance company, the type of policy, and other variables, mortality, market return etc. Moreover, other income tax saving vehicles,that is IRAs, 401-K plans, Roth IRAs… may be better alternatives for value accumulation. Burial insurance. Burial insurance is a very old type of life insurance which is paid out upon death to cover final expenses such as the cost of the funeral.

The Greeks and Romans introduced burial insurance around 600 B.C., when they organized guilds called benevolent societies, which cared for the surviving families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose as did friendly societies during Victorian times.

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