Term lesson 18 Componential analysis Term insurance.

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1 Term lesson 18 Componential analysis Term insurance

2 Term Life Insurance Term life insurance is the most simplified of the life insurance types. The basic concept for term life is that the policyholder pays a premium for a specified amount of coverage for a limited period of time (aka "term"). If the insured should happen to die before the end of the term, the beneficiary would be paid the face value of the policy. If the insured does not die before the policy period expires, no benefit is paid out.

3 Term insurance: premiums A term life insurance policy has no cash value [surrender value] and the coverage period is very specific. The premium is intended to cover only the cost of the insurance itself and usually for fairly short period of time. The premiums are based mainly on the age of the policyholder and with the increase of age there is the more likelihood of death. The most common of the term policies is the one-year policy written with level benefits. These policies renew annually until a certain age (average 65-70) and the premiums fluctuate according to gender and by specific underwriting guidelines. Some medical testing (i.e., blood, urine, saliva, etc.) maybe required at a certain age or under certain medical conditions. Premiums are apt to be more expensive at older ages and most insurance companies offer policies with increments of 5, 10, 15, 20, or 30-year guarantees, with premium levels based on the insured's age at the time the policy was purchased, and on the length of the guaranteed premium level.

4 Types of term insurance Level Term Decreasing Term Increasing Term Renewable Term Convertible Term

5 level term  Level Term is a death benefit contract, which remains level throughout the policy term. The premium can increase at confirmed intervals over the years or it may remain the same, but the death benefit will remain the same. This type of term insurance is sold in yearly terms of one, five, ten, twenty, or until the age of 65.

6 decreasing term  Decreasing Term is a death benefit contract, in which levels decrease over time, but premium remains the same throughout the policy period. The most common use for this type of policy is to cover a mortgage. As the mortgage amount decreases of over time, so does the amount of insurance needed. A term life policy is used cover the policyholder’s financial obligations.

7 increasing term  Increasing Term is a death benefit contract, in which levels and premium increase over time. This coverage is usually written as a rider to a policy and written for the purpose of providing the policyholder with increasing death benefits until the policy terminates. One reason for obtaining this type of coverage could be that the insured needs his/or hers benefits increased while their children are attending college.

8 renewable term  Renewable Term is a death benefit, which provides levels throughout the policy period. In addition, this coverage provides for automatic renewal without having to provide proof of insurability. The premium is adjusted according to the age of the policyholder upon renewal of the policy. If the insured experiences ill health/terminal conditions, the insurance company cannot non-renew or cancel the policy. The maximum number of times a policy can be renewed is specified by the insurer.

9 convertible term Convertible Term is a death benefit, which provides levels throughout the policy period. In addition, this coverage provides the option to change the policy to a permanent (whole life) policy without having to prove evidence of insurability. An additional premium is required for this special feature. If the insured experiences poor health/terminal conditions, the insurance company cannot non-renew or cancel the policy

10 Criteria ? Which criteria/features help to distinguish between the sorts of term insurance? –the premium –the benefits (i.e. pay-out) –renewal –convertibility to permanent life

11 These can be incorporated directly into the definitions level term insurance : term insurance providing level death cover over time and requiring payment of level or rising premiums decreasing term insurance : term insurance providing decreasing death cover over time and requiring the payment of level premiums increasing term insurance : term insurance providing rising death cover over time and requiring the payment of rising premiums renewable term insurance : term insurance which can be renewed automatically without proof of insurability convertible term insurance : term insurance which can be changed into a whole of life policy without proof of insurability

12 Homeowners Policies There are six different types of homeowner's insurance, the most popular of which is called HO-3. HO-4 and HO-6 are not traditional homeowner's policies, they are renter's and condominium/co-op owners insurance, respectively. The other homeowner's policies (HO-1, HO-2, and HO-5) offer varying degrees of coverage - the smaller the number, the fewer types of damage the policy covers (and the lower the premium). HO-1 and HO-2 coverage do not insure the policy-owners' personal belongings, and only protect against damages specifically listed on the policy. HO-3 coverage protects against all types of damage, except for those specifically excluded by the policy. HO-3 also protects personal belongings, but only for specific types of damage (typically at the HO-2 level). HO-5 offers the same coverage as HO-3, but extends full protection to all personal belongings. HO-5 is more expensive than HO-3, but experts recommend paying the higher premium. Some insurance companies do not offer HO-5, in which case riders can be added to the policy to provide greater protection of personal belongings. HO-4 and HO-6 only cover belongings, and only for the types of damage specifically listed on the policy. In a condo or co-op, the buildings will be covered by the insurance the board purchases for the entire complex. http://www.investorguide.com/igu-article-345-insurance-basics-understanding-homeowners-insurance- policies.html http://www.investorguide.com/igu-article-345-insurance-basics-understanding-homeowners-insurance- policies.html

13 Types of homeowner’s insurance There are six different types of homeowner's insurance, the most popular of which is called HO-3. HO-4 and HO-6 are not traditional homeowner's policies, they are renter's and condominium/co-op owners insurance, respectively.

14 HO-1 HO-2 HO-5 The other homeowner's policies (HO-1, HO-2, and HO-5) offer varying degrees of coverage - the smaller the number, the fewer types of damage the policy covers (and the lower the premium).

15 HO-1 HO-2 HO-1 and HO-2 coverage do not insure the policy-owners' personal belongings, and only protect against damages specifically listed on the policy.

16 HO - 3 HO-3 coverage protects against all types of damage, except for those specifically excluded by the policy. HO-3 also protects personal belongings, but only for specific types of damage (typically at the HO-2 level).

17 HO - 5 HO-5 offers the same coverage as HO-3, but extends full protection to all personal belongings. HO-5 is more expensive than HO-3, but experts recommend paying the higher premium. Some insurance companies do not offer HO-5, in which case riders can be added to the policy to provide greater protection of personal belongings.

18 HO-4 HO-6 HO-4 and HO-6 only cover belongings, and only for the types of damage specifically listed on the policy. In a condo or co-op, the buildings will be covered by the insurance the board purchases for the entire complex.

19 Conseil préliminaire bien lire le texte, le remettre dans un contexte plus large Le texte comporte du non-dit. Certains éléments sont supposés connus, en particulier ce à quoi sert l’assurance habitation. Comme son nom l’indique, homeowner insurance assure le propriétaire contre les risques relatifs à son habitation (si l’on « déballe » le terme, on obtient la glose suivante : insures the owner for his/her home). Les risques spécifiques éventuellement précisés dans le contrat relèvent donc de la garantie concernant l’habitation. D’autres éléments sont soit absents, soit biaisés dans leur présentation, car le texte est rédigé du point de vue de l’assureur et non du futur assuré, ce qui constitue une faute technique en rédaction technique. On sait que l’on rédige du point de vue du récepteur et non de l’émetteur. Mais c’est un texte du monde réel ! C’est ainsi que l’on nomme homeowners insurance des types d’assurance issus de l’assurance propriétaire, mais en fait destinés soit aux locataires (renters) soit aux copropriétaires (condominium). Il est donc nécessaire, du point de vue de l’utilisateur, de bien préciser qui bénéficie de la garantie : le propriétaire, le locataire ou le copropriétaire. Ceci constitue donc le premier critère.

20 Deux autres critères Il serait logique de s’interroger sur la garantie habitation. Celle-ci semble s’exprimer par degré : plus ou moins de risques sont couverts, mais pas explicités (on imagine que le risque incendie, dégât des eaux etc. constituent le socle de ce type d’assurance), d’où le problème de représentation, car l’analyse componentielle présuppose des valeurs discrètes (trait présent, trait absent). Le troisième critère que l’on découvre en lisant le prospectus est la garantie des objets personnels, qui vient donc en plus de la garantie habitation. Elle est présente ou absente, mais au premier cas, son étendue est variable – d’où un problème de représentation proche de celui constaté pour la garantie habitation.

21 Critères non discriminants Les autres critères qui figurent dans le texte ne sont guère discriminants. Le montant de la prime est fonction de la garantie : plus la garantie est étendue, plus la prime est élevée. Cette information est utile, mais ne fait pas partie de la définition, car non discriminante. De même, savoir qu’une garantie est courante, proposée par de nombreux assureurs ou au contraire par peu d’assureurs est sans doute intéressant, mais encore une fois non discriminant. –Certains problèmes demeurent pour la rédaction des définitions, à commencer par le choix de l’incluant. Normalement celui-ci doit être le concept superordonné le plus proche. Insurance, dans cette hypothèse, est trop éloigné. On serait tenté d’employer homeowners insurance, car c’est la dénomination retenue par la profession (« traditional »). Mais nous avons vu que cette dénomination est trompeuse, car le concept englobe des garanties pour d’autres assurés, notamment des locataires et des copropriétaires. On peut donc remonter d’un cran et proposer property insurance, sachant qu’ en anglais, property sans autre précision renvoie à la propriété immobilière.

22 Definitions HO1 property insurance covering a very limited number of risks to the home owner’s dwelling only HO2 property insurance covering a moderate number of risks to the homeowner’s dwelling only HO3 property insurance covering risks to the homeowner’s dwelling and also to a limited number of personal belongings HO4 property insurance covering a limited number of risks to a renter’s personal belongings HO5 property insurance covering risks to the homeowner’s dwelling and to all personal belongings HO6 property insurance covering a limited number of risks to condominium or co-op owner’s personal property