Advanced Economics chapter 6

What is the main difference between whole life insurance and limited-pay life insurance?

With a whole life policy (also known as straight life or ordinary life), the insured pays fixed premiums as long as the policy is in effect. With a limited-pay life policy, the insured pays premiums for a specific number of years or until age 65

How can you be prepared in case you need to file an insurance claim for the loss of property due to theft or fire?

create a home inventory

What is the purpose of "no-fault" insurance?

to avoid the years of legal battling required to settle a case and determine fault.

​Explain how un-managed care plans differ from managed care plans. Identify two common types of managed care plans

An unmanaged care plan allows patients to choose any doctor or other provider for medical services. A managed care plan relies on a network of health care providers. health maintenance organization (HMO) preferred provider organization (PPO)

Aside from changing your driving habits, discuss four strategies for reducing the cost of your automobile insurance.

Higher Deductibles, Discounts, Decrease Coverage, Payment Options, Comparison Shop, Buy Insurance Online, Piggybacking

What happens if a loan taken out against the cash value of a life insurance policy is not repaid before the insured's death?

If the loan is not paid back before the insured person's death, the loan amount plus any interest owed is subtracted from the amount the beneficiaries are set to receive from the death benefit

List and differentiate the five main types of coverage provided by a full-coverage automobile insurance policy.

Liability coverage protects the insured against loss as a result of injury to another person or damage to that person's property. Collision coverage protects against damage to your own vehicle if you hit another car or lose control and roll over. Protection against damages to your car from causes other than collision or rolling over is provided by comprehensive coverage. Personal injury protection (PIP) pays for medical, hospital, and funeral costs of the insured and passengers in the insured's car in the event of an accident, regardless of who is at fault. Uninsured/underinsured motorist coverage provides protection against damages caused by a motorist who is at fault and does not have insurance to pay for your damages.

Identify four steps that a person might take to minimize health care costs.

Make sure that medicines and treatments will be covered by insurance before filling prescriptions. Use generic drugs when possible. Choose a high-deductible plan. Use an FSA or HSA Stay healthy

List and define the four strategies for managing risk and provide an example of each.

Risk reduction involves finding ways to lower your chance of incurring a loss. For example, when you go snow skiing, you are taking a risk of personal injury. To reduce that risk, you can take skiing lessons and/or choose the least hazardous slopes. With risk avoidance, you stop the behavior or avoid the situation that leads to the risk. For example, instead of snow skiing, you can choose to go ice skating or snowshoeing Risk transfer, also called risk shifting, passes risk to another party. An example is when you buy insurance to cover financial losses from damaging events, such as auto accidents, fire, theft, and injury. The price you pay for insurance coverage is called a premium. The premium is based on the possible amount of loss to the insurance company. The more risk the insurer takes, the higher the premium. By making insurance premium payments, you shift the risk of financial loss to the insurance company. Risk assumption involves accepting the consequences of risk. One method of assuming risk is to self-insure, which involves setting aside money to be used in the event of injury or loss of assets.

Provide five reasons why people buy life insurance.

To provide cash to pay for a funeral To pay off a home mortgage and other debts at the time of death To provide money for a spouse and children to maintain their lifestyle To pay for education for children To make charitable bequests at death To accumulate savings To pay inheritance and estate taxes To provide cash value that can be borrowed