Personal Finance Chapter 21

Physical Damage Theft/Vandalism Liability

3 Basic Types of property insurance coverage

Personal Property Liability

3 Major Types of Risk

Increase Deductible Comparison Shop Look for discount opportunities Payment Schedules Group Health Insurance

5 Ways to save money on insurance

Art Cameras Collectons Jewelry Musical Instruments Tools

6 things to put personal property floaters on

Car age Car model Driving record Location Distance Driven Purpose of Driving Part time driver age

7 Factors that determine the cost of automobile insurance

Speculative Risk

A _________ may result in either gain or loss

C

A _________ risk may involve damages to your car A. personal B. speculative C. property D. liability

Insurable Risk

A _____________ is a pure risk that is faced by a large number of people and for which the amount of the loss can be predicted

Deductible

A ______________ is the specified amount of a loss that the insured must pay

Insurable Interest

A _______________ is any interest in life or property such that, if it were lost or harmed, the insured would suffer financially

Liability Risk

A _______________ is the chance of loss that may occur when your errors or actions result in injuries to others or damages to their property

Premium

A fee, called the ___________ is paid at regular intervals by the insurance policy holder

B

A fire, storm, explosion, and robbery are examples of A. losses B. perils C. hazards D. exclusions

D

A policyholder's request for reimbursement for a loss is called a A. Deductible B. Premium C. Peril D. Claim

True

Accepting a higher deductible will reduce your insurance premium

Risk Management

An organized strategy for controlling financial loss from pure risks is called _________________

False

An unearned premium is not refunded to the policyholder when the policy is cancelled

D

Buying insurance is an example of A. risk avoidance B. risk reduction C. risk assumption D. risk shifting

B

Defective wiring in a house is an example of A. a peril B. a hazard C. a loss D. an exclusion

Renters policy protects your possessions while kept on premises of someone else's property Homeowner's policy includes structure and liability that start at $300,000

Difference between renter's policy and homeowner's policy

True

Exclusions are specified losses not covered by an insurance policy

Identify Risk Assess Risk Handle Risk

Explain the 3 step risk management process

True

Insurance companies collect premiums with the expectation that only a few policyholders will have financial losses at any given time

True

Insurance companies set premiums based on statistical probability

False

Insuring more than one vehicle with the same company can result in a multi-line discount

Hedging

Making an investment to help offset against loss is called _________________

False

Premiums for individual plans are usually much lower than for group plans

Allows you to compare the value of an item now and as you bought it Easier to reclaim lost/stolen items with serial numbers

Purpose for a personal property inventory

False

Speculative risks are random, meaning they can happen to anyone

C

The amount of money payable to a policyholder upon discontinuation of a life insurance policy is called A. benefits B. the face amount C. cash value D. the unearned premium

Property Risk

The chance of loss or harm to personal or real property is called _______________

A

The first step of the risk management process is to A. identify potential risks B. assess the seriousness of risks C. handle risks D. prioritize risks

False

The higher the probability of loss occurring, the lower the premium for insuring against it

B

Those who self-insure are engaging in A. Risk shifting B. Risk assumption C. Risk avoidance D. Risk reduction

Temporary Life insurance-protection for a specific period of time Permanent Life insurance-cash it in at any time for cash value or borrow on cash value

Two types of life insurance

True

Uncertainty is the likelihood that something will or will not happen

250,000 per person, 500,000 total accident, 100,000 property damage

What does 250/500/100 mean?

Medical expenses Hospital coverage Surgical coverage

What is covered by basic health coverage

Provides protection against large and catastrophic expenses of a serious injury or illness

What is covered by major medical coverage

Group-more common, lower premium, have to have a referral to a specialist Individual-high premium, go to a specialist without consultation

What is the differences between group health and individual coverage

Age Coverage Gender Health Occupation Policy Desired

What risk factors determine life insurance premiums

A

Which of the following can be used to help offset speculative losses A. hedging B. risk shifting C. self-insuring D. none of these

C

Which of the following is not a major insurable risk A. Liability risk B. Personal risk C. Economic risk D. Property risk

So that other people can't make money off the insurance company within 2 years

Why do insurance policies have suicide clauses

Pay off mortgage/debts including funeral Support/provide for needs of children Charitable bequests after death Provides retirement income

Why does a person need life insurance

You only get what the house was worth

Why is it wise not to over insure your $100,000 house for $500,000 and hope it burns down

Risk Management Plan

With a ________________, you identify risks, assess their finanicial impacts, and list the techniques that you plan to use to manage each risk

Indemnification

___________ is the process of putting the policyholder back in the same financial condition he or she was in before the loss occurred

Risk Reduction

___________ lowers the chances of loss by taking measures to lessen the frequency or severity of losses that may occur

Risk

____________ is a state of uncertainty where certain situations may result in loss or another undesirable outcome

Personal Risk

_____________ is the chance of loss involving income and the standard of living

Pure Risk

______________ is a chance of loss with no chance for gain

Economic Risk

______________ may result in gain or loss because of changing economic conditions

Risk Assumption

________________ is the process of accepting the consequences of risk

Risk Avoidance

________________ lowers the chance for loss by not engaging in the activity that could result in the loss

Uncertainty

_________________ is the likelihood that something will or will not happen

Insurance

is a method of spreading individual risk among a large group of people to make losses more affordable for all