Personal Finance, Insurance, and Business Principles

Vocabulary flashcards focusing on personal insurance, business insurance, personal finance, financial industry designations, and fundamental investment and tax terms based on lecture notes.

Premium

The amount paid for insurance coverage on a monthly, quarterly, semi-annual, or annual basis.

Deductible

The out-of-pocket amount an insured person pays when a claim occurs before insurance coverage kicks in.

Actuaries

Professionals who calculate premiums, probability, and risk, similar to CPAs.

Captive Agent

An insurance agent who represents only one specific insurance company, such as State Farm or Farm Bureau.

Independent Agent

An insurance agent who represents multiple companies and can shop across carriers to find the best coverage and price.

Personal Lines

Insurance policies designed for individuals, including home, renters, auto, boat, motorcycle, life, health, umbrella, disability, long-term care, and trip insurance.

Commercial Lines

Insurance products designed for businesses, including workers' compensation, business overhead insurance, and business continuation insurance.

Workers' Compensation

A mandatory commercial insurance line required for businesses that have employees.

Business Overhead Insurance (BOE/BOI)

A commercial policy that covers business expenses such as rent, contents, and flood damage.

Business Continuation Insurance

Commercial coverage that pays lost income to a business owner while the business is temporarily closed, such as after a fire.

Key Man Insurance

A life insurance policy taken out by a business on a critical employee that pays a lump sum to the business owner if that employee dies.

Homeowners Insurance

Personal insurance that covers both property contents and the structural rebuilding cost of a destroyed home.

Renters Insurance

Personal insurance that covers the contents inside a rented residence, but does not cover the physical building.

Umbrella Policy

Liability coverage that sits on top of standard policies to protect against lawsuits resulting from negligence, typically with limits of $1\text{--}2\,\text{million}$.

Disability Insurance

An insurance policy that replaces a portion of monthly income if the policyholder becomes unable to work.

Scheduled Items

Valuable personal property, such as jewelry or antiques, that must be individually listed on an insurance policy for complete coverage.

Long-Term Care Insurance

Coverage designed to pay for assisted living, in-home care services, or nursing home stays.

Term Insurance

Pure life insurance coverage active for a set period, such as 10, 15, or 20 years, before expiring without building cash value.

Self-Insurance

The practice of foregoing an insurance policy and personally absorbing all financial risk for potential losses.

Balance Sheet

A financial statement listing total assets and total liabilities to determine net worth.

Assets

Items of value owned by an individual or business, including homes, vehicles, furniture, jewelry, and business equipment.

Liabilities

Financial obligations or debts owed to others, such as mortgages, car loans, and credit balances.

Net Worth

The difference between total assets and total liabilities, calculated as $\text{Net Worth} = \text{Assets} - \text{Liabilities}$.

Income Statement

A financial document tracking incoming income against outgoing expenses over a monthly or annual period.

Discretionary Income

The remaining income calculated after subtracting all necessary expenses from total income.

Budget

A financial discipline tool designed to align spending habits with income and categorize needs versus wants.

Amortization

The schedule of loan payments where early monthly payments consist predominantly of interest rather than principal reduction.

Home Equity

The financial value of a home minus any remaining mortgage balance owed on it.

HELOC (Home Equity Line of Credit)

A line of credit secured by home equity that allows borrowing up to $80\%$ of the home's total value.

Good Debt

Debt that carries an interest rate lower than your expected investment return rate.

Bad Debt

High-interest debt, such as credit card debt at $10\text{--}18\%$, that costs more in interest than reasonable investment returns.

Wholesaler

A representative in the financial industry who promotes specific investment products or services directly to financial professionals.

CPA (Certified Public Accountant)

A accounting designation requiring a college degree, a multi-day exam, and practice hours, primarily focused on preparing tax returns and financial statements.

CFP (Certified Financial Planner)

A professional designation requiring a college degree, a 6-part exam, 100 hours of practice, and 40 hours of continuing education every 2 years.

CFA (Chartered Financial Analyst)

A credential focused on evaluating and analyzing companies and stocks to assess investment value.

CLU (Chartered Life Underwriter)

A professional insurance designation focused on life insurance, disability, and long-term care, requiring completion of a 10-part exam.

RHU (Registered Health Underwriter)

A credential demonstrating broad proficiency in health-related insurance products.

CFS (Certified Fund Specialist)

A designation obtained by passing a 3-part exam that equips professionals to analyze mutual funds and ETFs.

RFC (Registered Financial Consultant)

A financial consulting credential similar to the CFP requiring a 3-part examination.

Consumer Price Index (CPI)

An economic indicator that measures price changes over time for individual consumers.

Producer Price Index (PPI)

An economic indicator that tracks price changes over time at the business and producer level.

Rule of 72

A shortcut formula used to estimate how long an investment takes to double at a given return rate, calculated as $72 \div \text{rate} = \text{years to double}$.

why is it good to have a budget?

It’s good to write down what is actually happening in your life financially and create a plan for managing income and expenses. A budget helps in tracking spending, saving, and achieving financial goals. It allows you to prioritize your expenses, avoid overspending, and ensure you allocate funds for savings and emergencies.

What is equity?

Equity refers to the ownership value in an asset after all liabilities or debts associated with that asset have been subtracted. In the context of personal finance, it often pertains to the value of ownership in a property or investment.

what does sales consist of?

product training, behavioral training, systems

Three main types of taxes

federal income, state income, and sales tax

Indiana state income tax

3.4%

Florida state income tax

0%

What is the “hidden tax”

inflation- erodes your purchasing power