Risk Management and Insurance Group Project The health and ✓ Solved

The health and mortality implications of the recent coronavirus pandemic have propelled many of your coworkers to think critically about having proper health insurance, retirement, and estate plans. As a student completing the Risk Management and Insurance course, your co-workers have requested a presentation on “Risk Management Application for Life, Health and Income Exposures.”

In preparing for your presentation, you identified the following areas that would be vital to aid their understanding:

• Distinguish among the various forms of health insurance policies (basic health insurance, major medical insurance, and miscellaneous insurance coverages).
• Explain the mandatory and allowable provisions in individual health insurance with respect to grace periods, reinstatement, claim procedures, occupational issues, the misstatement of age when applying for coverage, and the existence of more than one policy covering the same loss.
• Differentiating between Term insurance and Whole Life insurance policy.
• Outline the contract provisions as it relates to the incontestability clause, suicide clause, and non-forfeiture option.
• Describe the three common structures of pension plans, eligibility, and qualifications for retirement.
• Describe the use of wills, life insurance, trusts, and gifts as basic tools in estate planning.

Paper For Above Instructions

Introduction

The COVID-19 pandemic has illuminated the critical importance of robust health insurance, retirement, and estate planning. Professionals across various sectors are increasingly recognizing the necessity of comprehensive risk management strategies to mitigate health, financial, and mortality risks. This paper provides an overview of risk management applications concerning life, health, and income exposures, with detailed discussions on insurance types, contract provisions, pension plans, and estate planning tools.

Health Insurance Policies

Health insurance in various forms aims to provide financial coverage for medical expenses incurred due to illness, injury, or preventive care. The primary types of health insurance policies are:

• Basic Health Insurance: Covers essential health care services such as doctor visits, hospitalization, and routine diagnostic tests. However, it may not include comprehensive preventive care.
• Major Medical Insurance: Offers extensive coverage for significant healthcare expenses, covering a wider range of medical services, including catastrophic events. These policies generally involve high deductibles and co-payments.
• Miscellaneous Insurance Coverages: This category includes various specialized insurances, such as dental, vision, and critical illness insurance. These policies help cover expenses not typically included in basic or major medical plans.

Mandatory and Allowable Provisions in Individual Health Insurance

Understanding health insurance provisions is crucial for insured individuals. Mandatory provisions include:

• Grace Periods: The time allowed for premium payment before a policy lapses. Typically, a 30-day grace period is standard.
• Reinstatement: Policies may allow for reinstatement after lapsing due to non-payment, subject to certain conditions.
• Claim Procedures: Insurers are obligated to provide clear claim procedures, ensuring timely reimbursements of medical expenses.
• Occupational Issues: Provisions addressing how certain occupations may affect eligibility or coverage levels.
• Misstatement of Age: In case of an age discrepancy during application, adjustments can be made to benefits.
• Multiple Policies: Guidelines on how to handle situations where an individual has multiple policies covering the same loss.

Term vs. Whole Life Insurance

Two principal types of life insurance policies are Term and Whole Life insurance:

• Term Insurance: Provides coverage for a specified duration (e.g., 10, 20, or 30 years). If the insured passes away during this term, beneficiaries receive the death benefit. However, no value accumulates if the term ends without a claim.
• Whole Life Insurance: Offers lifelong coverage with a cash value component that grows over time, making it a blend of insurance and savings. While premiums are higher than term policies, they provide life-long protection and the potential for cash accumulation.

Contract Provisions

Some essential contract provisions to note include:

• Incontestability Clause: Prevents the insurer from voiding a policy after it has been in force for a certain period, typically two years, even if misstatements were made during application.
• Suicide Clause: Generally, insurance policies exclude claims resulting from suicide within a specified period after the policy is bought.
• Non-forfeiture Option: Provides options for the policyholder to retain some benefits if they stop paying premiums, often translating to a reduced paid-up insurance benefit.

Pension Plans Structures

Pension plans serve to support individuals post-retirement, with three common structures:

• Defined Benefit Plans: Offers a predetermined payout upon retirement, based on a formula involving salary history and years of service.
• Defined Contribution Plans: Contributions are made by employees and possibly employers, with retirement benefits depending on investment performance and accumulated contributions.
• Hybrid Plans: Combines features of both defined benefit and defined contribution plans to offer flexibility.

Eligibility for retirement plans often involves age, years of service, and job role. Understanding these structures enables individuals to plan more effectively for their future.

Estate Planning Tools

Effective estate planning is essential to ensure an individual's wishes are honored after passing. Critical tools encompass:

• Wills: Legal documents outlining the distribution of assets and care for dependents after death.
• Life Insurance: Provides financial support to beneficiaries upon death, contributing to estate liquidity.
• Trusts: Legal arrangements to manage assets on behalf of beneficiaries, enabling greater control over distribution.
• Gifts: During one's lifetime, gifts can be used as an effective tool for estate reduction and tax implications.

Conclusion

In light of the recent pandemic, the significance of risk management in life, health, and income exposures is underscored. Understanding various health and life insurance options, contractual obligations, pension plans, and effective estate planning strategies equips individuals to navigate and mitigate risks in both personal and professional contexts.

References

• American Council of Life Insurers. (2021). Life Insurance Basics. Retrieved from www.acli.com
• Centers for Medicare & Medicaid Services. (2020). Health Insurance Types. Retrieved from www.cms.gov
• Employee Benefit Research Institute. (2020). Pension Plans. Retrieved from www.ebri.org
• National Association of Insurance Commissioners. (2021). Understanding Health Insurance. Retrieved from www.naic.org
• National Institute on Aging. (2020). Estate Planning. Retrieved from www.nia.nih.gov
• U.S. Department of Labor. (2021). Understanding Retirement Plans. Retrieved from www.dol.gov
• World Health Organization. (2020). Health Insurance and COVID-19 Response. Retrieved from www.who.int
• Crane, T. (2022). The Basics of Life Insurance. New York, NY: Financial Press.
• Pew Research Center. (2021). Trends in Estate Planning. Retrieved from www.pewresearch.org
• Smith, J. (2021). Retirement Planning: Key Considerations. Boston, MA: Wealth Management Publishing.