Introduction to Personal Finance: Risk Management and Insurance

A collection of key vocabulary terms and definitions related to the concepts of risk management and insurance in personal finance.

Human Capital

Encompasses your ability and willingness to work, learn, earn, and make wise decisions about how to save and invest money; considered one of your most valuable assets.

Risk Matrix

A tool used to evaluate and manage risks based on the probability of an event occurring and its severity.

Premium

The cost of the insurance that a policyholder pays to the insurance company.

Deductible

The amount that the insured must pay on a claim before insurance begins to cover any costs.

Copayment

A flat fee that the insured person must pay to receive healthcare services.

Out-of-Pocket Maximum

A cap on the total amount of deductibles and coinsurance a person must pay, beyond which the health insurance covers expenses in full.

Preferred Provider Organization (PPO)

A flexible fee-for-service health insurance plan that allows insured individuals to use different hospitals and doctors without prior permission.

Health Savings Account (HSA)

A tax-advantaged savings account that can be used to pay for out-of-pocket eligible healthcare expenses.

Flexible Spending Account (FSA)

An account that allows employees to set aside money on a pretax basis to pay for eligible medical expenses within the plan year.

Disability Insurance

Insurance that provides financial support to individuals who cannot work due to a disability, with policies typically covering short-term or long-term financial needs.

Workers’ Compensation Insurance

Insurance that provides benefits for employees who are injured or become ill as a result of their job.

Split Limit Requirements

Legal minimums that dictate the maximum amount an insurance company will pay for various expenses under a personal automobile policy.

Homeowner’s Insurance

Insurance that protects against risks to a home and its contents, typically covering dwelling replacement, personal property, liability, and medical payments for injuries.