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Lecture Risk management and insurance - Lecture No 24: Life insurance contractual provisions

This chapter’s objectives are to: Evaluation of insurance methods, employment covered, income provisions, survivor benefits, medical benefits, rehabilitation benefits, experience rating, retrospective rating. | Life Insurance Contractual Provisions Lecture No. 24 1 2 Evaluation of Insurance Methods Data from National Academy of Social Insurance show that Private insurers incurred 55 percent Self-insurers 23 percent Federal and state funds 22 percent of the cost of workers’ compensation in 2001 Private insurers are preferred by most employers in states where they’re permitted to operate Offer the employer an opportunity to insure in one contract all the liabilities likely for damages arising from work-connected injuries Private insurers offer more certainty in handling out-of-state risks While the expenses of state funds are somewhat lower than those of private insurers The difference is not as great as rough comparisons often lead one to believe Self-insurance has the handicap that it is necessary for the insured to enter the insurance business Which is essentially unrelated to the insured’s main operations Also, contributions to a self-insurance fund are often not tax deductible Experience | Life Insurance Contractual Provisions Lecture No. 24 1 2 Evaluation of Insurance Methods Data from National Academy of Social Insurance show that Private insurers incurred 55 percent Self-insurers 23 percent Federal and state funds 22 percent of the cost of workers’ compensation in 2001 Private insurers are preferred by most employers in states where they’re permitted to operate Offer the employer an opportunity to insure in one contract all the liabilities likely for damages arising from work-connected injuries Private insurers offer more certainty in handling out-of-state risks While the expenses of state funds are somewhat lower than those of private insurers The difference is not as great as rough comparisons often lead one to believe Self-insurance has the handicap that it is necessary for the insured to enter the insurance business Which is essentially unrelated to the insured’s main operations Also, contributions to a self-insurance fund are often not tax deductible Experience rating and retrospective rate plans enable large firm to use a private insurer’s facility in transferring as much or as little of the risk as is desired at a modest cost 3 Employment Covered Compensation laws do not cover all workers For example, domestic labor and farm labor are often excluded Employers with only a few employees are excluded under compulsory laws Only about 9 out of 10 workers are covered Liability suits are necessary if an excluded worker is to recover anything Even though a basic purpose of compensation legislation was to eliminate this condition as a prerequisite for employee recoveries It is a small employer who is excluded from compensation laws and who is most likely to be the object of such suits This often means that A successful suit will bankrupt the employer If the employer is more or less judgment-proof, the injured worker will recover nothing 4 Income Provisions Compensation laws recognize four types of disability for which income benefits may be paid .