Business Math -Insurance
Prepared by Johnny Howard © 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
Auto Insurance Categories
- Auto liability and property damage insurance protects the insured against claims resulting from personal injuries and property damage.
- Auto comprehensive insurance protects the vehicle of the insured against water, theft, vandalism, falling objects, and other damage not caused by collision.
- Auto collision insurance protects the vehicle of the insured against collision damage.
T E R M S
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Automobile Insurance
- Premium is the payment for an insurance policy.
- Deductible clause stipulates that the insured will pay the first portion of collision damage.
- No-fault insurance describes an auto insurance system that requires drivers to carry insurance for their own protection and that limits their ability to sue other drivers for damages.
T E R M S
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Auto Insurance
- Low-risk driver is a driver with a clear record of long standing.
- High-risk driver is a driver with a record of numerous citations or accidents.
T E R M S
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Auto Insurance (cont’d)
- Short rates are rates charged for less than a full term of insurance.
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Property Losses
- Property insurance is insurance against loss of or damage to property. A policy can be written to protect the insured against loss from fire, casualty, liability, and theft.
T E R M S
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to Determine the Owner’s Share of Property Loss Under Coinsurance
- Compute the amount of insurance required by multiplying the entire value of the property by the percentage of coinsurance specified.
- Compute the recovery amount, the maximum amount the insurance company will pay, by using the formula
- Compare the recovery amount with the amount of the insurance policy.
- If the recovery amount is greater than the amount of the policy, the insurance company will limit its payment to the amount of the policy.
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to Determine the Owner’s Share of Property Loss Under Coinsurance (cont’d)
- If the recovery amount is less than the amount of the policy, the insurance company will pay the recovery amount.
Note: The insurance company will never pay more than the amount of the loss.
- Determine the owner’s share of the property loss by subtracting the amount the insurance company will pay from the loss amount.
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© 2015 South-Western, a part of Cengage Learning
Types of Life Insurance Policies
- Term insurance is payable only in case of death of the insured during the specified time period, or term.
- Straight (ordinary) life insurance coverage, a certain premium, or fee, is paid every year until the death of the insured.
- Limited-payment life insurance requires the payment of a specified premium each year for a certain number of years or until the death of the insured, whichever comes first.
T E R M S
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Types of Life Insurance Policies (cont’d)
- Endowment insurance provides insurance payable on the insured’s death if it occurs within a specified period.
- Annuity insurance pays a certain sum of money to the insured every year after the insured reaches a specified age, until the insured’s death.
- An additional death benefit (ADB), sometimes referred to as an accidental death benefit, accompanies some policies.
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Figure 12.1 Insurance Premium per $1,000
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© 2015 South-Western, a part of Cengage Learning
Cash Surrender and Loan Values
- Cash surrender value is the amount of cash that the company will pay the insured on the surrender, or “cashing in,” of the policy.
- Loan value of a policy is the amount that the insured may borrow on the policy from the insurance company.
T E R M S
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Figure 12.2 Insurance Values per $1,000
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Medical Insurance
- Group insurance plans provide medical insurance coverage to large numbers of people at lower premium rates than individuals could obtain separately.
- Health maintenance organization (HMO)
- Preferred provider organization (PPO).
T E R M S
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© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
Chapter Terms for Review
additional death benefit (ADB)
affordable care act (ACA)
annuity insurance
auto collision insurance
auto comprehensive insurance
auto liability and property damage insurance
beneficiary
cash surrender value
coinsurance clause
deductible clause
endowment insurance
group insurance
health maintenance organization (HMO)
high-risk driver
insured
limited-payment life insurance
loan value
low-risk driver
no-fault insurance
preferred provider organization (PPO)
premium
property insurance
recovery amount
short rates
straight (ordinary) life insurance
term insurance
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.1: Auto Insurance
A
Solve the following problems.
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.1: Auto Insurance
A
Solve the following problems. (cont’d)
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.1: Auto Insurance
A
Solve the following problems. (cont’d)
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.1: Auto Insurance
B
Solve the following problems. (cont’d)
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.1: Auto Insurance
B
Solve the following problems. (cont’d)
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.2: Property Insurance
A
Solve the following problems.
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.2: Property Insurance
A
Solve the following problems. (cont’d)
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Assignment 12.2: Property Insurance
B
Solve the following problems.
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.2: Property Insurance
B
Solve the following problems. (cont’d)
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Assignment 12.3: Life and Medical Insurance
A
Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long.
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.3: Life and Medical Insurance
A
Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long. (cont’d)
© 2015 South-Western, a part of Cengage Learning
12–*
© 2015 South-Western, a part of Cengage Learning
Assignment 12.3: Life and Medical Insurance
A
Refer to Figures 12-1 and 12-2 in solving the following problems. Assume that every year is a full 12 months long. (cont’d)
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.3: Life and Medical Insurance
B
Solve the following problems.
© 2015 South-Western, a part of Cengage Learning
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© 2015 South-Western, a part of Cengage Learning
Assignment 12.3: Life and Medical Insurance
B
Solve the Following Problems Contd.
© 2015 South-Western, a part of Cengage Learning