Personal Finance Test #3

What is life insurance

• take care of those who are dependent on you. Should be used to protect against potentially catastrophic events. It should cover losses that could derail your family’s future.

Risk

the chance of economic loss

Risk avoidance

avoiding an act that would create a risk

Loss prevention

• any activity that reduces the probability that a loss will occur

Loss control

• any activity that lessens the severity of loss once it occurs 

Risk assumption

- the choice to accept and bear the risk of loss

Insurance policy

• a contract between the insured and the insurer under which the insurer agrees to reimburse the insured for losses suffered according to specified terms.

Why buy life insurance?

•  To protect your dependents from financial loss in the event of your untimely death.

What are the benefits of Benefits of life insurance 

Financial Protection for dependents 

Protection from creditors 

Tax benefits 

Savings vehicle.

Term life insurance

• provides death benefits for a specified period.

Straight term policy

• Coverage remains unchanged throughout the effective period.

Beneficiary clause

• all life insurance policies should have one or more beneficiaries.

Policy loan

• Advance secured by the cash value of a whole life insurance policy. 

Suicide clause

• it wont payout w/in first year or two 

Viatical Settlement

• the sale of a policy owner’s existing life insurance policy to a third party for more than its cash surrender value, but less than its net death benefit.

Private health insurance plans

• contracts written between a group and the health care provider. 

Indemnity

 a fee for service plan

Co-pay

•  a flat fee that you pay on the spot each time you go to your doctor or fill a prescription.

Deductible

• is the amount you pay each year for most eligible medical services or medications before your health plan begins to share in the costs of covered services.

Most common type of health plans

Manage care plans/HMO/PPO

Medicare

•  a federal program that provides health coverage if you are 65+ or under 65 and have a disability, no matter your income. (Part A) basic hospital insurance (Part B) Supplementary medical insurance (Part D) Prescription drugs

Workers’ compensation insurance

• required by state, job related illness or injury.

HIPPA

•  health insurance portability and accountability act. A federal law that required the creation of national standards to protect patient health information.

COBRA

•  keeps coverage after you leave a job.

Disability Income Insurance

• Disability Income Insurance - provides families with weekly or monthly payments to replace income when the insured is unable to work because of: Covered illness, injury, disease.

PPO

•  provider choice no referral higher costs.

Perils

•  the cause of loss or setbacks.

Renters policy

 covers your belongings if they’re stolen or destroyed. But it doesn't cover flooding or earthquakes.

An agent might refer to this as

•  25/50/25, and as a whole, it’s an abbreviated way to express liability amounts in car insurance. The first 25 is the limit that your insurance company will pay for  bodily injury. The second number 50 is the limit the company will pay for all people in an accident.

Uninsured motorists coverage

• serves the victims of accidents injured by uninsured, underinsured, or hit and run motorists.

Captive agent

represents a single insurance company and its employee

Independent agent

•  Places coverage with any company with which he or she has an agency relationship. 

Claims adjustor

•  insurance specialists who works for the insurance company or for an adjustment bureau