FIN 2100 Midterm 2

point

1% of a mortgage; represents "prepaid" interest at closing (in exchange for a lower interest rate)

second mortgage

A cash advance based on the paid-up value of a home; also called a home equity loan.

actual cash value (ACV)

A claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item, less depreciation.

replacement value

A claim settlement method in which the insured receives the full cost of repairing or replacing a damaged or lost item.

small claims court

A court that settles legal differences involving amounts below a set limit and employs a process in which the litigants usually do not use a lawyer.

deed

A document that transfers ownership of property from one party to another.

hazard

A factor that increases the likelihood of loss through some peril.

conventional mortgage

A fixed-rate, fixed-payment home loan with equal payments over 15, 20, or 30 years.

cooperative housing

A form of housing in which a building containing a number of housing units is owned by a non profit organization whose members rent the units.

preferred provider organization (PPO)

A group of doctors and hospitals that agree to provide health care at rates approved by the insurer.

health maintenance organization (HMO)

A health insurance plan that provides a wide range of health care services for a fixed, prepaid monthly premium

growing-equity mortgage

A home loan agreement that provides for payment increases to allow the amount owed to be paid off more quickly.

adjustable-rate mortgage (ARM)

A home loan with an interest rate that can change during the mortgage term due to changes in market interest rates; also called a flexible-rate mortgage or a variable-rate mortgage.

balloon mortgage

A home loan with fixed monthly payments and a large final payment, usually after 3, 5 or 7 years.

manufactured home

A housing unit that is fully or partially assembled in a factory before being moved to the living site.

class-action suit

A legal action taken by a few individuals on behalf of all the people who have suffered the same alleged injustice.

lease

A legal document that defines the conditions of a rental agreement.

rate cap

A limit on the increases and decreases in the interest rate charged on an adjustable-rate mortgage.

payment cap

A limit on the payment increases for an adjustable-rate mortage.

household inventory

A list or other documentation of personal belongings, with purchase dates and cost information.

reverse mortgage

A loan based on the equity in a home, that provides elderly homeowners with tax-free income and is paid back with interest when the home is sold or the homeowner dies.

mortgage

A long-term loan on a specific piece of property such as a home or other real estate

coordination of benefits (COB)

A method of integrating the benefits payable under more than one health insurance plan.

point-of-service plan (POS)

A network of selected contracted, participating providers; also called an HMO-PPO hybrid or open-ended HMO

insured

A person covered by an insurance policy.

beneficiary

A person designated to receive something, such as life insurance proceeds, from the insured.

policyholder

A person who owns an insurance policy.

coinsurance clause

A policy provision that requires a homeowner to pay for part of the losses if the property is not insured for the specified percentage of the replacement value.

earnest money

A portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer.

stop-loss

A provision under which an insured pays a certain amount, after which the insurance company pays 100 percent of the remaining covered expenses.

coinsurance

A provision under which both the insured and the insurer share the covered losses.

copayment

A provision under which the insured pays a flat dollar amount each time a covered medical service is received after the deductible has been met.

speculative risk

A risk in which there is a chance of either loss or gain.

pure risk

A risk in which there is only a chance of loss; also called insurable risk.

insurance company

A risk-sharing firm that assumes financial responsibility for losses that may result from an insured risk.

vicarious liability

A situation in which a person is held legally responsible for the actions of another person.

strict liability

A situation in which a person is held responsible for intentional or unintentional actions.

comprehensive major medical insurance

A type of major medical insurance that has a very low deductible and is offered without a separate basic plan.

universal life

A whole life policy that combines term insurance and investment elements.

policy

A written contract for insurance.

warranty

A written guarantee from the manufacturer or distributor of a product that specifies the conditions under which the product can be returned, replaced, or repaired.

personal property floater

Additional property insurance to cover the damage or loss of a specific item of high value.

endorsement

An addition of coverage to a standard insurance policy.

service contract

An agreement between a business and a consumer to cover the repair costs of a product.

deductible

An amount the insured must pay before benefits become payable by the insurance company.

no-fault system

An automobile insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

appraisal

An estimate of the current value of a property.

Blue Cross

An independent, nonprofit membership corporation that provides protection against the cost of hospital care.

Blue Shield

An independent, nonprofit membership corporation that provides protection against the cost of surgical and medical care.

condominium

An individually owned housing unit in a building with several such units.

insurer

An insurance company.

whole life policy

An insurance plan in which the policyholder pays a specified premium each year for as long as he or she lives; also called a straight life policy, cash-value life policy, or ordinary life policy.

buy-down

An interest rate subsidy from a home builder, a real estate developer or by the buyer that reduces a home buyer's mortgage payments during the first few year of the loan.

uninsured motorist's protection

Automobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver with inadequate insurance or by a hit-and-run driver.

property damage liability

Automobile insurance coverage that protects a person against financial loss when that person damages the property of others.

medical payments coverage

Automobile insurance that covers medical expenses for people injured in one's car or as a pedestrian.

collision

Automobile insurance that pays for damage to the insured's car when it is involved in an accident.

risk

Chance or uncertainty of loss; also used to mean "the insured".

basic health insurance coverage

Combination of hospital expense insurance, surgical expense insurance, and physician expense insurance.

bodily injury liability

Coverage for the risk of financial loss due to legal expenses, medical costs, lost wages, and other expenses associated with injuries caused by an automobile accident for which the insured was responsible.

negligence

Failure to take ordinary or reasonable care in a situation.

closing costs

Fees and charges paid when a real estate transaction is completed; also called settlement costs.

medical payments coverage

Home insurance that pays the cost of minor accidental injuries on one's property.

title insurance

Insurance that, during the mortgage term, protects the owner or the lender against financial loss resulting from future defects in the title and from other unforeseen property claims not excluded by the policy.

liability

Legal responsibility for the financial cost of another person's losses or injuries.

term insurance

Life insurance protection for a specified period of time; sometimes called temporary life insurance.

nonparticipating policy

Life insurance that does not provide policy dividents; also called a nonpar policy

participating policy

Life insurance that provides policy dividents; also called a par policy.

escrow account

Money, usually deposited with the lending financial institution, for the payment of property taxes and homeowner's insurance

legal aid society

One of a network of publicly supported community law offices that provide legal assistance to consumers who cannot afford their own attorney.

major medical expense insurance

Pays most of the costs exceeding those covered by the hospital, surgical, and physician expense policies.

hospital expense insurance

Pays part or all of hospital bills for room, board, and other charges.

surgical expense insurance

Pays part or all of the surgeon's fees for an operation.

hospital indemnity policy

Pays stipulated daily, weekly, or monthly cash benefits during hospital confinement

managed care

Prepaid health plans that provide comprehensive health care to members.

insurance

Protection against possible financial loss.

physician expense insurance

Provides benefits for doctors' fees for nonsurgical care, X rays, and lab tests.

long-term care insurance (LTC)

Provides day-in, day-out care for long-term illness or disability.

disability income insurance

Provides payments to replace income when an insured person is unable to work.

exclusive provider organization (EPO)

Renders medical care from affiliated health care providers.

zoning laws

Restrictions on how the property in an area can be used.

financial responsibility law

State legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident.

umbrella policy

Supplementary personal liability coverage; also called a personal catastrophe policy.

medigap (MedSup) insurance

Supplements Medicare by filling the gap between Medicare payments and medical costs not covered by Medicare.

premium

The amount of money a policyholder is charged for an insurance policy.

cash value

The amount received after giving up a life insurance policy.

meditation

The attempt by an impartial third party to resolve a difference between two parties through discussion and negotiation.

peril

The cause of a possible loss.

self-insurance

The process of establishing a monetary fund to cover the cost of a loss.

amortization

The reduction of a loan balance through payments made over a period of time.

arbitration

The settlement of a difference by a third party whose decision is legally binding.

unit pricing

The use of a standard unit of measurement to compare the prices of packages of different sizes.

Medicaid

Title XIX of the Social Security Act established in 1965 into federal law. Medicaid provides medical assistance to certain low-income individuals and families.

impulse buying

Unplanned Buying. Can result in financial problems

cooperative

a non-profit organization whose member-owners may save money on certain products or services

rebate

a partial refund of the price of a product.

homeowner's insurance

coverage for your home and its associated financial risks (damages to personal property/injuries)

open dating

information about freshness or shelf life found on the package of a perishable product.

refinance

obtaining a new mortgage on a home to get a lower interest rate.

Disability

the inability to do your regular work.