ECN chapter 10

What are the 4 Risk management methods

1. Risk avoidance 2. Risk Reduction 3.Risk Assumption 4. Risk Shifting

Automobile insurance premium factors: name the 3 main

1. vechile type 2. rating territory 3. Drivers classification

studies show you can save more than ____ % on homeowners insurance by comparing companies

30%

personal property such as household belonging, furniture, appliances and clothing are coverage for damage or loss up to a portion of the insure value of the home usually ____,____ or ____%

55, 70, or 75 %

what ways can you reduce home insurance

Home insurance discounts - companies offer incentives to reduce home insurance costs premium maybe lower if you have smoke detectors or fire extinguisher

What is an example of a deductible

a tree falls on your car you pay $200 toward repairs insurance company will pay the remaining amount

insurance coverage needed for your home and property should be based on the amount need to _______ your house not the amount you

amount need to rebuild or repair not the amount you paid for it

liability is legal responsibility for the financial cost of

another person's losses or injuries

claim settlements can be based on what is called the ACV or the actual cash value method which means the payment you receive is based on the current _____ cost of a damage or lost item less depreciation

based on current replacement cost of a damaged or lost item less depreciation

what two main coverages provided by automobile insurance fall into two categories: _____ ____ coverages and _____ ______ coverages

bodily injury coverages and property damage coverages

the main bodily injury coverages are _____ injury liability, ____ payment coverage, and uninsured _______ protection

bodily injury liability, medial payment coverage, and uninsured motorist protection

factors that affect home insurance costs: Type of structure is the type of home and the ________ materials that influence the costs of insurance coverage

construction materials and type of structure eg. brick house over a house made of wood

Collision insurance covers

damage to the vehicle of the insured person no matter who is at fault

Risk Shifting means

dealing with risk its common to transfer it to an insurance company or some other organization

______ is a combination of risk assumption and risk shifting

deductible

Risk manage is an organized strategy for protecting assets and people. It helps reduce financial losses caused by

destructive events

financial responsibly law is state legislation that requires _______ to prove their ability to cover the cost of damage or injury caused by an automobile accident

drivers

_______ _____ is a category based on the driver's age, sex, marital status, driving record, and driving habits that set your automobile insurance premium

drivers classification

name some factors that influence the goals you set and the insurance you buy

family size, lifestyle, experience, and responsibilities

what law is a state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident

financial responsibly law

Towing and road service coverage pays for the cost of

getting the vechile to the station or for starting it when it breaks down on the highway

Potential property losses include physical damaged caused by

hazards such as fire, wind, water, and smoke

Life insurance replaces

income that would be lost if the policyholder died

Hazards

increase chance of loss or make loss more severe for peril ie defective house wiring is a hazard that increases the likelihood of the peril of fire

collision insurance is limited to the ______ ____ value of the automobile at the time of the accident

limited to the cash value

factors that affect home insurance

location of home type of structure coverage amount and policy type

deductibles help keep insurance premiums _____ by reducing the number of small claim companies pay

lower

fire, wind storms, explosions, robbery, accidents, and premature death These are all examples of

peril

automobile insurance helps cover ______ & _____ damages caused by the policyholder's car

personal & property damages

Home insurance covers the policyholder's place of _____ and its associated _______ _____ such as damage to personal property and injuries to others

place of residence and its associated financial risks

insurance is protection against

possible financial loss

insurance company assume the risk for a fee which is called the

premium

you should not select a company on the basis of ___ alone

price

______ accounts or cash should be available as emergency funds for unexpected financial problems

savings

most speculative risks such as gambling are _______

uninsurable

Risk Management can reduce your financial losses and thereby improve your chances for economic, social, physical, and emotional ____-_____

well being

what are the two main potential PROPERTY losses

1. physical damage 2. loss of use

what are the 2 main types of risks related to home and an automobile are

1. property damage or loss 2. your responsibility for injuries or damage to the property of OTHERS

What is the 4 steps of setting your personal insurance program

1. set insurance goals 2.develop a plan to reach your goals 3. put your plan to action 4 check your results

This is what Risk management method: when it makes sense to assume risk when the potential loss is small, when risk management has reduced the risk, when insurance coverage is expensive and when there is no other way to obtain protection

Risk Assumption

risk management is

an organized strategy for protecting assets and people

wage loss insurance will reimburse you for any salary or income lost due to injury in an ______ accident

automobile accident

Risk management needs ______ at various points in their lives

change

homeowner's policy provides coverage for the house and other _____, addition ______ expenses, _____ property, personal _________ and related coverages and specialized coverages

coverage for the house and other structures, additional living expenses, personal property, personal liability and related coverages, and specialized coverages

Protection against what financial loss is the main component of renters insurance

damage or loss of personal property

what are some ways to lower automobile premiums

establish a safe driving record installing security devices increasing the amount of deductibles

the best risk management plans have ________

flexibility

Homeowners insurance usually does not cover losses from _____ and _____ (natural disasters)

flood and earthquakes

the location of the residence affects insurance rates. If more claims have been filed in an area, home insurance rates for people living their will be

higher

the umbrella policy adds additional protection for personal injury claims as well as increases ______ injury and _____ damage coverages

increases bodily injuries and property damage coverages

Risk reduction actions would be

install smoke alarms wear a seat belt eating healthy to reduce risk of illness

since most home owners have a mortgage on their property, their lending institutions usually require

insurance

the insurance company is also known as the (________) is a r_____ s_______ firm that agrees to assume financial responsibility for losses that may result from an insured risk

insurance company (insurer) is a risk-sharing firm

A person joins the risk -sharing group ( the _________ _____) by purchasing a _______ (contract)

insurance company by purchasing a policy

bodily injury liability

insurance that covers physical injuries caused by a vehicle accident for which you were responsible for

Liability risks

involve the possibility of being held legally liable for bodily injury or property damage to someone else

potential property loss include loss of use which means

loss of use to robbery, burglary, vandalism, or arson

deductible amount affect cost of insurance- if you increase the amount of your deductible your premium will be _______ why?

lower since the company will pay out less in claims

Health insurance helps meet _____ expenses when the policy holder becomes______

meet medical expenses when the policy holder becomes ill

Self- insurance is the process of establishing a ________ fund to cover the cost of a loss

monetary fund as it only provides means for covering losses

what is an example of Risk Assumption

not purchasing collision insurance on an older car

How often should you evaluate your insurance plan

periodically at least every 2 or 3 years or whenever your family circumstances change

household inventory is a list or other documentation of personal belonging with what 2 pieces of information

personal belonging, with purchase dates and cost information

umbrella policy or personal catastrophe policy supplements your basic personal liability coverage. This added protection covers you for ______ _____ claims such as slander and defamation of character.

personal injury claims

renters insurance: for people who rent, home insurance coverages include personal ________ protection, additional _____ expenses coverage, and personal ______ and related coverage

personal property protection, additional living expenses coverage, and personal liability and related coverages

insurable risk or pure risk cover what 3 types of risk

personal risk, property risks, and liability risks

In managing risks your goals are to minimize _______,______,_____ risks

personal, property, and liability risks. define what the basic risks present in your life

insurance is based on the principle of _________ risks, in which thousands of policyholders pay a small sum (________) into a central pool. The pool is large enough to then meet the expenses of the small number of people who actually suffer

pooling risks (premium)

The basic risk management plan must set goals to reduce:

potential loss of income due to premature death or illness additional expenses due to injury potential loss of real or personal property potential loss of income, saving, and property due to personal liability

______ _____ is the place of residence used to determine your automobile insurance premium. Various geographic locations have different costs due to difference in the number of claims made is what factor of automobile insurance premiums

rating territory

towing and road service pays for the cost of getting the vehicle to the station NOT the cost of

repairs

Risk avoidance is risk you can ______ give example

risk you can avoid such as not smoking or walking through high-crime neighborhoods

deductible is the ___ amount that the policyholder must pay per loss on an insurance policy

set

personal property floater covers the damage or loss of a

specific item of high value

A peril is defined as:

the cause of a possible loss - buy policies for financial protection against perils such as fire, wind storms, explosions, robbery, accidents, and premature death

additional living expenses in a homeowners policy covers what

the cost of living in a temporary location while your home is being repaired - some policy limit the living expense coverage swell as limit payments

when you pay a fee (the premium) that person is now ( ________ or the ______) who pays periodically

the person is now insured or the policyholder pays periodically

factors that affect home insurance costs: Coverage amount and Policy type affect the insurance cost how

the policy you select and the financial limits of coverage affect the premium you pay your deductible amount also affects the cost of insurance - if you increase the amount of your deductible your premium will be lower since the company will pay out less in claims

Personal risks are

the uncertainties surrounding loss of income or life due to premature death, illness, disability, old age, unemployment

many types of insurance exist what are all one thing they have in common

they give you peace of mind knowing that money will be available to meet the needs of your survivors

Negligence is failure

to take ordinary or reasonable care - doing something in a careless manner

insurance can provide protection against many risks of financial ______ and _____ loses

uncertainties and unexpected loses

Property risks

uncertainties of direct or indirect losses to personal or real property due to fire, windstorms, accidents, theft, and other hazards

risk is

uncertainty or lack of predictability, it refers to the uncertainty as to loss that a person or a property covered by insurance faces

uninsured motorist protection covers the cost of injuries to you and your family if you are in an accident caused by a person

without insurance