Personal Finance Chapters 25-26
Policy
A written insurance contract
Risk assumption
Accepting the consequences of risk
Grace period
Additional time after premium due date, allows policyholder to make payment w/o penalty
Deductible
Amount of loss that a policyholder pays before the insurer is obligated to pay anything
Insurable interest
Any financial interest in life/property that the insured would suffer financially
Personal injury protection
Automobile insurance, pays for medical, hospital and funeral costs of the insured
Risk shifting
Buy insurance to cover financial losses caused by events, premium payments shift risk of major financial loss to the insurance company
Investment risk
Chance of financial loss from a decline in an investment's value
Personal risk
Chance of loss involving your income and standard of living ex. Life, health, disability insurance
Property risk
Chance of loss or harm to personal or real property ex. Car, home
Liability risk
Chance of loss that may occur when your errors or actions result in injury or damages to their property
Pure risk
Chance of loss with no chance for gain ex. Accidents, Illnesses, Acts of nature
Liability
Cost of another person's losses for injuries at your property
Replacement value
Cost of replacing an item regardless of its actual market value
Attractive nuisance
Dangerous place, condition, object that is particularly attractive to children
Claims adjusters
Determine value of property destroyed
No-fault insurance
Drivers receive reimbursement for their expenses no matter who caused it
Economic risk
Gain or loss because of changing economic condictions
Reducing insurance costs
Higher deductibles=lower premiums, purchase group insurance, payment options
Premium
Identified risk for fee, payed at intervals
3 steps of risk assesment
Identify risk of loss, assess seriousness of risks, handle risks
Insurer
Insurance company who provides insurance coverage for a policy holder
Personal property floater
Insurance coverage for the insured's movable property wherever it may be located
Collision coverage
Insurance that protects your own car against damage from accidents/ overturning
Renters policy
Insurance, protects renters from property and liability risks. Protects from damage to personal property, injuries for your guests
Risk avoidance
Lowers change loss by not doing the activity that could result in the loss
Hedging
Making an investment to help offset against loss
Speculative risk
May result in either loss or gain. Not random/accentual. ex.
Insurance
Method for spreading individual risk among a large group of people to make losses more affordable for all.
Driving record
Number and type of traffic tickets you've received for driving infractions and misdemeanors
Risk management
Organized strategy for controlling financial loss from pure risks and insurable risks
Decline/Recession
Period of time when economy is slowing, jobs lost, people pessimistic. Company layoff.
Recovery/Growth
Period of time where economy is growing, jobs created, optimistic.
Trough
Period when economy has hit bottom, things are as slow as they can, many businesses fail.
Peak
Period when economy has hit the top, people can't pay more for products; limit.
Beneficiary
Person named on an insurance policy to receive benefits from the policy
Insured
Person or company protected against loss
Major insurable risks
Personal, property, liability
Uninvited guest
Presumed to have permission to be on your property
Liability coverage
Protect against bodily injury to another person or damage to another person's property
Comprehensive coverage
Protects for reasons other than accidents
Homeowner's policy
Protects property owners from property and liability risks. Includes coverage for building and personal possessions
Co-insurance clause
Provision requiring policyholders to insure their building for a stated percentage of its replacement value in order to receive full reimbursement for a loss
Insurable risk
Pure risk faced by a large number of people which the amount of loss can be predicted
Indemnification
Putting policyholder back in same financial condition he/she was in before the loss occured
Package policies
Several types of coverage in a single contract with a lower premium
Exclusions
Specified losses that the insurance policy does not cover
Risk
State of uncertainty where some of the possibilities may result in loss or another undesirable outcome
Umbrella liability insurance
Supplements basic auto and property liability coverage, expands limits includes more risks
Risk reduction
Taking measures to lessen frequency/severity of losses that may occur
Risk assesment
Understanding types of risk you will face and their potential consequences
Endorsement
Written amendment to an insurance policy