Key Terms in Insurance, Taxes, Budgeting, and Careers

Collision Coverage

Insurance that helps cover repair costs if your car is damaged in an accident with another vehicle.

PPO (Preferred Provider Organization)

A type of health plan with a group of preferred providers that doesn't require a primary care physician.

Disability Insurance

Provides income replacement if you're unable to work due to illness or injury.

Risk Pooling

Distributing financial risk across a large group of policyholders to make insurance affordable.

Out-of-Pocket Maximum

The most you'll pay for healthcare in a year before insurance pays 100% of covered costs.

Life Insurance

Offers financial support to beneficiaries when the policyholder dies.

Homeowners Insurance

Protects your home and belongings from damage or theft; often required by mortgage lenders.

Comprehensive Coverage

Covers vehicle damage from non-collision events, like hail or theft.

Claim

A request to an insurance company for payment for a covered loss.

Medicaid

A government health insurance program for individuals and families with low income.

Premium

The amount you pay regularly to maintain your insurance policy.

Deductible

The amount you pay out-of-pocket before your insurance starts paying.

Copay

A fixed amount paid for medical services, usually at the time of care.

Coverage Limit

The maximum amount an insurer will pay for a covered loss.

Coinsurance

A percentage of the cost of services you pay after meeting your deductible.

HMO (Health Maintenance Organization)

A health plan that requires you to choose a primary doctor and get referrals for specialists.

Renters Insurance

Covers your personal property and liability in a rented home.

Liability Coverage

Pays for damage or injury you cause to others in an accident.

Uninsured/Underinsured Coverage

Pays your expenses if the at-fault driver has no or insufficient insurance.

Underwriter

An individual or company that evaluates insurance applications and decides coverage terms.

W-4

A form you complete when starting a job to set your tax withholding preferences.

I-9

Verifies employment eligibility in the U.S.

Refund

Money returned to you if you overpaid your taxes.

Pre-tax Deduction

Contributions (like 401k) taken from gross income before taxes.

Unearned Income

Income not from work, like gifts, dividends, or unemployment benefits.

Social Security

A program providing financial benefits to retirees, disabled people, and survivors.

Mandatory Government Spending

Required by law; includes Social Security and Medicare.

Withholding

The amount taken out of your paycheck for taxes.

Self-Employed

Working for yourself, such as freelance or contract work.

1099 Form

Reports non-wage income, like freelance earnings.

1040 Form

Standard federal income tax form used to file taxes.

Dependent

Someone you support financially and may claim on your tax return.

Gross Pay (Taxes)

Earnings before deductions, used to calculate your taxable income.

Net Pay

Your take-home pay after deductions.

FICA

Federal Insurance Contributions Act; payroll taxes for Social Security and Medicare.

Budget

A plan for how to spend and save your income.

Zero-Based Budget

Budgeting method where every dollar is assigned a purpose.

Deficit

Spending more money than you earn.

Surplus

Earning more than you spend.

Fixed Expense

Costs that stay the same each month (e.g., rent).

Variable Expense

Costs that change month to month (e.g., groceries).

Utilities

Essential services like water, gas, and electricity.

Pay Yourself First

Saving a portion of your income before any other expenses.

Unit Price

Cost per unit of a product, used for price comparisons.

Needs

Essential expenses required to live and work.

Wants

Non-essential items that are nice to have.

Cost of Living

Total expenses needed to live in a particular area.

Residential Lease

A contract between a landlord and tenant outlining rent terms.

Public Transportation

Shared transit systems such as buses and trains.

Emergency Fund

Savings set aside for unexpected expenses.

Cash Envelope Budget

A strategy where you pay expenses using pre-labeled envelopes of cash.

50/30/20 Budget

Strategy that allocates 50% of income to needs, 30% to wants, and 20% to savings/debt repayment.

Salary

A fixed annual amount of pay, not based on hours worked.

Down Payment

Initial payment made when buying expensive items like a car or home.

FAFSA (Free Application for Federal Student Aid)

The form required to apply for federal financial aid.

Net Price

The actual cost of college after subtracting grants and scholarships from the sticker price.

Sticker Price

The advertised cost of college before any financial aid is applied.

Student Aid Index (SAI)

A number used to determine financial aid eligibility; the lower your SAI, the more aid you qualify for.

FAFSA Submission Summary

A document showing your FAFSA results; does not include your high school GPA.

Cover Letter

A document that introduces you to an employer and highlights your strengths and interest in the job.

Resume

A document that outlines your work experience, education, and qualifications.

Soft Skills

Personal attributes like time management and communication that help you work well with others.

Hard Skills

Specific, teachable abilities like typing speed or programming.

Dependent Student

A student who relies on parents for financial support and must report parental income on the FAFSA.

Work Experience

Prior employment history, typically highlighted on a resume.

Job Application

The formal process of applying for a job, often requiring a resume and cover letter.

On average, do high school graduates or college graduates earn more?

On average, college graduates earn more over their lifetime than high school graduates.

Saving for College

Using earnings, like from a summer job, to reduce future student loan debt.

Gross Pay (Budgeting)

Total pay before taxes and expenses, used to build a budget.

Salary

A fixed annual amount of pay, not based on hours worked.