Personal Finance Exam 3 Harding

Peril

Cause of Loss

Steps to Financial Plan Process

Term Life Insurance

Temporary, for a specified period (~30 years), less pricy

Whole Life Insurance

A type of permanent life insurance that provides coverage for the insured's lifetime, combining a death benefit with a cash value component that grows over time.

Uninsured Motorist Coverage

component of an automobile insurance policy that pays for medical expenses and property damage if you are involved in an accident caused by an at-fault driver who does not carry liability insurance, or in a hit-and-run incident.

Collision Insurance

covers damage to your vehicle resulting from impact with another vehicle or object (e.g., hitting a guardrail, rollover, or at-fault accident), regardless of who is at fault. More expensive than comprehensive insurance.

Comprehensive Insurance

covers damage from non-collision events such as theft, vandalism, fire, hail, flooding, falling objects, or hitting an animal.

Viatical Settlement

The sale of an existing life insurance policy by a terminally or chronically ill policyholder to a third party for an immediate lump-sum cash payment that is less than the policy's death benefit but more than its cash surrender value.

Beneficiaries

Individuals, trusts, or entities designated by a policyholder to receive the proceeds or death benefit of an insurance policy or financial account.

Deductible

Amount you pay each year before the plan takes effect

Copay

Flat fee, amount you pay each time

25-50-25

• $25,000 Bodily Injury per Person: Maximum payout for injuries to a single individual in an at-fault accident.

• $50,000 Bodily Injury per Accident: Total maximum payout for all injuries combined in a single accident.

• $25,000 Property Damage per Accident: Maximum payout for damage to other vehicles or property.

Negligence

failure to take reasonable action or exercise the level of care that a prudent person would in similar circumstances, resulting in damage, injury, or loss to a person or property

Workers Comp

Hurt on the job, employer required to play medical expenses

Disability Income

Prolonged leaving of work because of accident/disabling accident

Captive vs. Individual Agent

Captive Agents

Representation: Work for a single company (e.g., State Farm, Allstate).

Pros: Receive structured training, brand recognition, and often a base salary with benefits.

Cons: Limited to one company’s products and pricing; typically do not own their book of business.

Independent Agents

Representation: Work with dozens of carriers to shop for the best fit.

Pros: Higher commission potential, greater autonomy, and ownership of their book of business.

Cons: Responsible for their own overhead and lead generation; income is more volatile in the first few years.

Liability Insurance

inancial protection product that covers the costs if you are held legally responsible for injuring someone else or damaging their property

HMO vs PPO

HMO plans offer lower costs but require a designated primary care physician (PCP) to coordinate care and provide referrals for specialists, limiting coverage to in-network providers only.

PPO plans provide greater flexibility by allowing direct access to specialists without referrals and offering coverage for out-of-network providers, but come with higher premiums and out-of-pocket costs.

Managed Care Plan

Users contract with the provider organization, which uses a designated group of providers meeting specific selection standards to furnish health care services for a monthly fee

COBRA

Insurance that protects you between jobs, have old insurance up for a limited time (~18 months)

HIPPA

A federal law that required the creation of national standards to

protect sensitive patient health information from being disclosed

without the patient’s consent or knowledge.

Medicare

A federal program that provides health coverage if you are 65+ or under 65 and have a disability, no matter your income.

Medicaid

for low income workers (state and fed program)

Renters Insurance

Covers property stolen or destroyed in rented property

Group Health Insurance

Contracts written between a group and the health care provider

Suicide Clause

It won’t pay out life insurance benefits within the first year or two

Principle of Indemnity

Insured may not be compensated with an amount exceeding the insured’s economic loss