Annuities, IRAs, and Personal Auto Policy Practice Flashcards

A set of vocabulary flashcards covering the key concepts of annuities, retirement plans, employee benefits, and personal auto insurance policies as outlined in the lecture notes.

Annuity

A contract with an insurance company designed to provide income, usually during retirement, which acts as a replacement for a work paycheck.

Deferred Annuity

An annuity where payments begin sometime in the future and money grows tax-deferred until withdrawals begin; typically used for retirement savings.

Immediate Annuity

An annuity, often purchased with a lump sum, where payments begin almost immediately, usually within one year.

Life Annuity

A type of annuity that pays income for as long as the annuitant lives, but payments stop immediately when the individual dies, leaving nothing for beneficiaries.

Life Annuity with Guaranteed Payments

An annuity that pays for life but guarantees payments for a minimum period, such as $10$ or $20$ years, to beneficiaries if the annuitant dies early.

Joint and Survivor Annuity

An annuity covering two people, usually spouses, where payments continue to the survivor after one person dies.

Early Withdrawal Penalty

A $10\%$ federal penalty that may apply if funds are withdrawn from an annuity or IRA before the owner reaches age $59\frac{1}{2}$.

Traditional IRA

An individual retirement account where contributions may be tax-deductible and investments grow tax-deferred, but taxes are paid when money is withdrawn.

Roth IRA

An individual retirement account where contributions are NOT tax-deductible, but qualified withdrawals and investment growth are tax-free.

Defined Contribution Plan

A retirement plan, such as a $401(k)$ or $403(b)$, where the contribution amount is known but the retirement total is unknown, and the employee bears the investment risk.

Defined Benefit Plan

A retirement plan where benefits are determined by a formula based on years worked and salary level, and the employer bears the investment risk.

Part A: Liability Coverage

The portion of a Personal Auto Policy that pays for injuries and property damage to others, but does not cover the insured's own vehicle.

Part B: Medical Payments Coverage

The portion of a Personal Auto Policy that pays medical expenses for the insured, family members, and passengers regardless of fault.

Part C: Uninsured Motorists Coverage

Coverage that pays for medical expenses and damages when the at-fault driver has no insurance, is a hit-and-run driver, or has an insolvent insurance company.

Part D: Damage to Your Auto

The portion of a Personal Auto Policy that includes both Collision and Other-than-collision (Comprehensive) coverage for the insured's vehicle.

Collision Coverage

Coverage that pays when a vehicle collides with another object, such as another car, a pole, a tree, or a guard rail.

Other-than-collision Coverage

Also called Comprehensive coverage, it pays for damage caused by nature or criminals, including fire, theft, hail, flood, animal strikes, and vandalism.

Split Limits

An insurance limit format, such as $100/300/50$, representing $100,000$ bodily injury per person, $300,000$ bodily injury per accident, and $50,000$ property damage.

Other Insurance Clause

A policy provision that determines which insurance policy pays first; generally, the owner's policy is primary.

Policy Territory

The geographic area where PAP coverage applies, specifically the United States, Puerto Rico, and Canada.