Personal Finance-Chapter 8

Actual cash value

A claim settlement method in which the insured recieves payment based onthe current replacement cost of a damaged or lost item, less depriciation

deductible

COMBO OF ASSUMPTION AND SHIFTING. you must pay a fee before the insurance covers the rest

hazard

a factor that increases the likelihood of loss through some peril

insured

a person covered by an insurance policy

policyholder

a person who own an insurance policy

insurance company

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

policy

a written contract for insurance

personal property floater

additional property insurance to cover the damage or loss of a specific item of high-value requires appraisal

endorsement

an addition of coverage to a std insurance policy

Types of bodily injury coverage for auto

bodily injury liability, medical payments coverage, uninsured motorists protection

two forms of renters insurance

broad or comprehensive

speculative risks

carries a chance of either a loss or a gain, i.e. starting a business NOT INSURABLE

risk

chance or uncertainty of loss, also used to mean "the insured"

Replacement value

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

comprehensive

comp physical damage coverage protects you if your vehicle is damaged in a non-accident situation, like fire, theft, falling objects etc

assigned risk pool

consists of people who are unable to obtain auto insurance due to poor driving or accident records and must obtain coverage at high rates through a state program that requires insurance companies to accept some of them

Homeowner's insurance

coverage for a place of residence and it's associated financial risks Covers: building in which you live and any other structures on the property(even trees, shrubs and plants!!) additional living expenses (pays for things like a hotel if you are displaced) personal property(household belongings, things you take to college even things you rent that are in your home, computer data backup) personal liability and related coverage (does not include employees at your house like a cook, they get workers comp) specialized coverage (flood or earthquake)

bodily injury liability

covers physical injuries in accidents for which you are responsible. expressed by three numbers, i.e. 100/300/50 100,000 max amt that the insurance company will pay for the injuries of any one person in any one accident 300,000 max amt the company will pay for the insurance to any parties involved (a party is two or more people) 50,000 for property

no-fault insurance

drivers who are involved in accidents collect money from their own insurance companies

negligence

failure to take ordinary or reasonable care in a situation

medical payments coverage

home insurance that pays the cost of minor accidental injuries to visitors on one's property, or away from home

insurer

insurance company

collision

insurance covers damage to your vehicle when it is involved in an accident, collect money no matter who is at fault

medical payments coverage

insurance that applies to the medical expenses of anyone who is injured in your vehicle, including you

uninsured motorists protection

insurance that covers you and your family members if you are involved in an accident with an uninsured driver or hit-and-run driver

self-insurance

keeping money in the bank in case of a loss instead of having an insurance policy. alternative to policy, esp for those who insurance won't accept

Financial responsibility law

law that requires drivers to prove that they can pay for damage or injury caused by an auto accident

liability

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

household inventory

list or other documentation of personal belongings with purchase dates and cost info

personal risks

loss of income or life due to illness, disability, old age, or unemployment

property risks

loss to property caused by perils, such as fire or theft, and hazards

liability risks

losses caused by negligence that leads to injury or property damage

property damage liability

motor vehicle insurance that applies when you damage the property of others

renter's insurance points

normally only pay the cash value of your losses. replacement cost coverage is an extra premium fully covers your personal property at home, not wholly during travel (only a %) automatically provide liability coverage if someone is injured on your premises may duplicate other coverages

risk reduction

not avoiding a risk completely, but decrease the chance that they will cause you harm. i.e. driving, but wearing a seatbelt. fire extinguishers. eating healthy.

Risk management

organized plan for protecting yourself, your family, and your property. long range. helps reduce financial loss.

rental reimbursement coverage

pays for a rental car if your vehicle is stolen or being repaired

wage loss insurance

pays for any salary or income you might have lost because of being injured in a vehicle accident

towing and emergency road service coverage

pays for mechanical assistance in the event that your vehicle breaks down, but you have to pay the repair bill once they tow your car to the mechanic

Types of pure (insurable) risks

personal, property, liability; accidental and unintentional

Two main types of risk

potential property losses and liability

types of motor vehicle property damage coverage

property damage liability collision comprehensive physical damage

insurance

protection against possible financial loss

underinsured motorists coverage

protects you when another driver has some insurance but not enough

claim

request for payment to cover insurance losses

Four techniques of risk management

risk avoidance, risk reduction, risk assumption, risk shifting

umbrella policy

supplementary personal liability coverage, also called a personal catastrophe policy

risk assumption

taking responsibility for the negative results of a risk. assume a risk if you know that the possible loss will be small.

premium

the amt of money a policyholder is charged for an insurance policy

peril

the cause of a possible loss

coverage

the protection provided by the terms of insurance in the insurance policy

risk shifting

transfer it to an insurance company you pay deductible, they pay the rest

risk avoidance

usually require a trade off, i.e. if you don't drive you won't be in an accident but you have to walk to work, but sometimes not a tradeoff,i.e. taking precautions in a high-risk crime area