FINA 369 Exam 2

activities of daily living

"Activities of Daily Living" -Such as feeding yourself, dressing, bathing, toileting, transferring. -Dementia trumps everything.

COBRA

"Consolidated Omnibus Budget Reconciliation Act" --Passed by congress in 1986, an employee who leaves the insured group voluntarily or involuntarily (except in the case of gross misconduct) may elect to continue coverage for up to 18 months by paying premiums to his or her former employer on time (up to 102% of the company cost) --The employee maintains all the benefits previously available, except for disability income coverage. --Lasts for 18 months, or until they become eligible for Medicare, whichever occurs first. --An employee's dependents may be covered for up to 36 months under COBA under special circumstances, such as divorce or death of the employee. --After COBRA coverage expires, most states provide for conversion of the group coverage to an individual policy regardless of the insured's current health and without evidence of insurability. **Use cobra as a last resort. **Only get this if you cannot pay for health insurance

FSA

"Flexible Spending Account" Def: A type of savings account available in the United States that provides the account holder with specific tax advantages. Set up by an employer for an employee, the account allows employees to contribute a portion of their regular earnings to pay for qualified expenses, such as medical expenses or dependent care expenses. --One of the key benefits of a flexible spending account is that the funds contributed to the account are deducted from the employee's earnings before they are made subject to payroll taxes. As such, regular contributions to an FSA can significantly lower an employee's annual tax liabilities. --There are limits to how much can be contributed to an FSA account per year. For medical expense FSA accounts, the limit is set by the employer, while the specified limit for dependent care accounts is $5,000 per year **Pretax savings account. **Use or lose the money.

HMO

"Health Maintenance Organization" Def: An organization of hospitals, physicians, and other health care providers who have joined to provide comprehensive health care services to its members, who pay a monthly fee. --When you go to the right doctor, it is very inexpensive. --Very expensive, but inexpensive every time you go. **Advantages: Lack of deductibles, few or no exclusions, and not having to file insurance claims. **Disadvantages: You can't always choose your physician, and you might face limitations on care outside of the geographic area of the HMO. 2 Main Types of HMO: (1) Group HMO - employs a group of doctors to provide health care services to members from a central facility. More prevalent in larger cities. (2) Individual Practice Association (IPA) - The most popular type of HMO, IPA members receive medical care from individual physicians practicing from their own offices and from community hospitals that are affiliated with the IPA.

HSA

"Health Savings Account" Def: A tax-free savings account, funded by employees, employer, or both, to spend on routine medical costs. Usually combined with a high deductible policy to pay for catastrophic care. --Pretax savings account. --The money you put in there is always yours. You can accumulate it and keep it forever.

definitions of disability

"own occupation", social security disability, educated or trained for. Residual benefit option- : One is paid partial benefits if you can only work part-time or at a lower salary. **Long term disability is very inexpensive to buy at work (premium is rounded up because it must be an even amount)

negligence

"reasonable person doctrine" Failing to act in a reasonable manner or to take necessary steps to protect others from harm. -Causes loss exposures to result from negligence. -Even if you're never negligent and always prudent, someone might believe you are the cause of a loss and bring a costly lawsuit against you. -Fortunately, liability insurance protects you against losses resulting from these risks, including the high legal fees required to defend yourself against lawsuits. -It is important to obtain adequate liability insurance through your homeowner's and automobile policies or through a separate umbrella policy.

escrow account

"someone else's holding money" "when they hold your money to pay your taxes" when you pay your property taxes and your homeowners insurance as part of your mortgage payment. take property taxes and homeowners insurance and divide by 12. then as 1/12 to your payment

persons insured

(1) Coverage under an automobile medical payments insurance policy applies to the named insured and to family members who are injured while occupying an automobile (whether owned by the named insured or not) or when stuck by an automobile or trailer of any time. (2) Also applies to any other person occupying a covered automobile

settlement options

(1) Lump Sum: (The most common settlement option chosen by more than 95% of policyholders.) The entire death benefit is paid in a single amount, allowing beneficiaries to use or invest the proceeds soon after death occurs. (2) Interest Only: The insurance company keeps policy proceeds for a specified time, the beneficiary receives interest payments, usually at some guaranteed below-market rate. -Used when there's no current need for the principal. (3) Fixed Period: The face amount of the policy, along with interest earned, is paid to the beneficiary over a fixed time period. (4) Fixed Amount: The beneficiary receives policy proceeds in regular payments of a fixed amount until the proceeds run out.

"own occupation" disability

(1) OWN Occupation Definition: Benefits are paid if you are unable to perform the duties of your customary occupation. Own occupation clause- can't do material duties that were previously performed Ex.) Professor who lost voice could participate in research and still receive full benefits because he couldn't perform the primary function of his job

automobile premium discounts

(1) Safe-Driving discounts - accident free (2) Driver's training discount - lower rates for youth who have completed driver's safety course. Only helps you until you are 25 (3) Good Student discount - for maintaining a B average or making the dean's list (4) Multi-car discount - offered to families who have 2+ automobiles insured by the same company (5) Antitheft devices - offered if an antitheft device is installed in the car (6) Nonsmoker and nondrinker discount (7) Raise your deductibles (8) More selective acceptance of persons - Example only teachers or executives or gov. employees. (9) multi-policy (10) child away at school

Any occupation disability

(2) Any Occupation Definition: Benefits are paid only if you can engage in no gainful employment at all. Considerably less expensive because it gives the insurer more leeway in determining whether the insured should receive benefits.

whole life insurance

(CASH VALUE) sold as insurance and an investment • Life insurance designed to offer ongoing insurance coverage over the course of your life • If they think they need insurance when they are older and will be using it for safe planning • 3 types: o limited payment o continuous premium o single premium • Advantages: o Permanent coverage o Savings vehicle o Some tax advantages on accumulated earnings • Disadvantages o Cost; provides less death protection per premium dollar than term o Often provides lower yields than other investment vehicles o Sales commissions and marketing expenses can increase costs of fully loaded policy. • Very expensive when young, and premiums do not increase with age • Builds cash value

coinsurance

(Co-Pay) Def: (Also called a participation clause) A provision in many health insurance policies stipulating that the insurer will pay some portion of the amount of the covered loss in excess of the deductible rather than the entire amount. --Helps reduce the possibility that policyholders will fake illness and discourages them from incurring unnecessary medical expenses. --Many major medical plans also have a stop-loss provision that places a cap on the amount of participation required. --Often such provisions limit the insured's participation to less than $10,000 and sometimes to as little as $2,000.

multiple earnings method

(Method 1 of 2)- lazy method, because situations vary from family to family • A method of determining the amount of life insurance coverage needed by multiplying gross annual earnings by some selected number • Rule of thumb: is life insurance should equal 5 to 10 times your current income • Fails to consider your financial obligations and resources so it should be considered approximation of life insurance needs

needs analysis method

(Method 2 of 2)- calculating how much you need based on personal situation • A method of determining the amount of life insurance coverage needed by considering a person's financial obligations and available financial resources in addition to life insurance • Step 1- assess your family's total economic needs • Step 2- determine what financial resources will be available after death • Step 3- subtract resources from Needs to Calculate how much life insurance you require

term life insurance

(NO CASH VALUE) pure protection, if you die it pays, if you don't die it is not doing anything Maximum coverage for cheap, doesn't last into old age. Inexpensive when young • Provides a specified amount of insurance protection for a set period, is the simple type of insurance policy • If you die while the policy is in force, your beneficiaries will receive the full amount specified in your policy • Can be bought for many different time increments 5 years, 10 years, every 30 years • Premiums can be paid annually, semiannually, or quarterly • Very in-expensive when you, but premiums increase with age • When would you not want this? o When you live a long time and for-see needing it when very old (whole life insurance) • Advantages: o Low initial premiums o Simple, easy to buy • Disadvantages o Temporary coverage for a set period o May have to pay higher premiums when policy is renewed

Major medical

(THIS IS ALL YOU WANT) Def: An insurance plan designed to supplement the basic coverage of hospitalization, surgical, and physician's expenses; used to finance more catastrophic medical costs resulting from either illnesses or accidents. --The amounts that can be collected under this coverage are relatively large, and some policies have no limits at all. --Many people buy major medical with a high deductible to protect against a catastrophic illness.

optional coverage under auto policies

+ Gap insurance - or loan/lease insurance - can protect you if your vehicle is financed or leased. If your vehicle is totaled, this coverage may pay the difference between the actual cash value of the vehicle and the unpaid balance of the loan or lease. + Towing and labor pays for covered towing and labor costs if your vehicle is disabled, up to your policy limits. + Rental reimbursement or extended transportation expenses coverage can pay for a rental car if your car is damaged in a covered accident and your car is out of commission for more than 24 hours. + Car rental insurance + Car towing service These include: Death Indemnity Coverage, Lease/Loan Gap Coverage, Rental Reimbursement, Towing and Labor Costs, Passenger Medical, High Risk Auto Insurance, Sound System Coverage, Insurance for Sports Cars, and Tape/CD Coverage. -- There are a number of car insurance policies, which may be appropriate for your situation that are slightly less common.

risk avoidance

- avoiding the possible risk by not doing it • Avoiding an act that would create a risk • Attractive when the cost of avoidance is less than the cost of handling it some other way

risk assumption

- something you choose not to insure, assuming the risk personally (having just in case money as back up for these) • The choice to accept and bear the risk of loss • Effective way to handle small exposures to loss when insurance is too expensive

premium factors

--Cost of car insurance depends on many things, including your age, where you live, the car you drive, your driving record, the coverage you have, and the amount of your deductible. --Consequently, car insurance premiums vary as well... -Factors that influence how auto insurance premiums are set include: (1) Rating territory - Rates are higher in geographic areas where accident rates, number of claims filed, and average cost of clams paid are higher. Rates reflect auto repair costs, hospital and medical expenses, jury awards, and theft and vandalism in the area. -------------------------------------------------------------------------------------------------------------------------------- (2) Amount of use - Rates are lower if the insured automobile isn't usually driven to work or is driven less than 3 miles one way. Premiums rise slightly if you drive more than 3 but fewer than 15 miles to work and increase if your commute exceeds 15 miles each way. --------------------------------------------------------------------------------------------------------------------------------(3) Personal characteristics of the driver - The insured's age, sex, marital status can affect automobile insurance premiums. Insurance companies base their premium differentials on the number of accidnewts involving certain ageg groups. Ex. 1) Drivers aged 25 and under make up only about 15% of the total driving population, but they are involved in nearly 30% of auto accidents and in 26% of all fatal accidents. Ex. 2) Male drivers are involved in a larger percentage of fatal crashes, so unmarried males under the age of 30 (and married males under age 25) pay higher premiums than do older individuals. Ex. 3) Females over the age of 24, as well as married female of any age, are exempt from the youthful operator classification and pay lower premiums. --------------------------------------------------------------------------------------------------------------------------------(4) Type of automobile - Insurance companies charge higher rates for automoiles classified as intermediate-personamce, high-performance, and sports vehicles and also for rear-engine models. Some states even rate four-door cars differently from two-door models. Ex.) Corvettes and Porches would have higher insurance premiums --------------------------------------------------------------------------------------------------------------------------------(5) Insured's driving record - Driving records, traffic violations and accidents, of those insured and the people who live with them affect premium levels. More severe traffic convictions, DIO, leaving the scene of an accident, homicide or assault arising from the operation of a motor vehicle, and driving with a revoked or suspended license, result in higher insurance premiums. Any conviction for a moving traffic violation that results in the accumulation of points under a state point system also may incur a premium surcharge. In most states, accidents determined to be the insured's fault also incur points and a premium surcharge.

medical payments coverage (automobile)

--Medical payments coverage insures a covered individual for reasonable and necessary medical expenses incurred within 3 years of an automobile accident in an amount not to exceed the policy limits. --It provides for reimbursement even if other sources of recovery, such as health or accident insurance, also make payments. --In some states, the insurer reimburses the insured for medical payments even if the insured proves that another person was negligent in the accident and receives compensation from that party's liability insurer. --A person need not be occupying an automobile when the accidental injury occurs to be eligible for benefits. --Injuries sustained as a pedestrian, or on a bicycle in traffic accidents are also covered. (Motorcycle accidents are usually not covered) ** Part B insurance also pays on an excess basis **You can collect (up to the amount of your policy limits) from your insurer the amount exceeding what the other medical payments provide.

change of policy

-A change of policy provision allows changes in their policies from one form to another without penalty. -When policyholders change from higher- to lower-premium policies, they may need to prove insurability

policy reinstatement

-As long as a whole life policy is under the reduced paid-up insurance option or the extended term insurance option, the policyholder can reinstate the original policy, usually within 3-5 years of its lapsing, by paying all back premiums plus interest at a stated rate and by providing evidence that he or she can pass a physical examination and meet any other insurability requirements. -Revives the original contractual relationship between the company and the policyholder. -Before reinstating a policy, the policyholder should determine whether buying a new policy would be less costly.

second options

-Insurance company sometimes requires a second opinion. -It is completely covered.

other insurance clause

-Nearly all property and liability insurance contracts have an other-insurance clause, which normally states that if a person has more than one insurance policy on a property, each company is liable for only a portion of the total insurance covering the property. -Without this provision, insured persons could use duplicate property insurance policies to collect from multiple companies and actually profit from their losses.

internal limits

-Only covers certain items, doesn't cover furs, antiques, jewels, artwork, and other expensive things. -Need personal articles floater to cover these items.

medical payments coverage (homeowners)

-Only visitors to the home are covered under homeowner's insurance, if you are injured in your own home, it would be covered by your health insurance.

purpose of insurance

-To protect you and your dependents from the financial consequences of losing assets or income when an accident, illness, or death occurs. -By anticipating potential risks to which your assets and income could be exposed and by leaving insurance protection into your financial plant, you lend a degree of certainty to your financial future.

Estimating your disability insurance needs

1. Calculate take home pay 2. Estimate the monthly amounts of disability benefits from government or employer programs. 3. Add up your existing monthly disability benefits 4. Subtract your existing monthly disability benefits from your current monthly take-home pay.

decreasing term policy (often mortgage life)

: A term policy designed to pay off the mortgage balance in the event of the borrower's death. -Expensive form of life insurance

bodily injury liability losses

A PAP provision that protects the insured against claims made for bodily injury. Ex.) If you have a policy that is $250,000/$500,000, the maximum amount any one person negligently injured in an accident could receive from the insurance company would be $250,000. But if the total amount the insurer would pay to all injured victims in one accident would not exceed $500,000. -This can sometimes mean loss of home, cars, bank accounts, and other assets if a jury awards a claimant more than the policy limits. -If the value of these assets is too little to satisfy a claim, then defendant's wages may be garnished.

property damage liability losses

A PAP provision that protects the insured against claims made for damage to property. -The policy limits available to cover property damage liability losses are typically $10,000, $25,000, $50,000, and $100,000. -Stated as a per-accident limit, without specifying limits applicable on a per-item or per-person basis.

disability clause

A clause in a life insurance contract containing a waivering-of-premium benefit alone or coupled with disability income. (1) Waivering-of-Premium benefit: Excuses the payment of premiums in the life insurance policy if the insured becomes totally and permanently disabled prior to age 60. (2) Disability income portion: The insured not only is granted a waiver of premium but also receives a monthly income equal to $5 or $10 per $1,000 of policy face value. **If you become permanently and totally disabled, you don't have to pay the premiums anymore and you can keep the policy.

multiple indemnity clause

A clause in a life insurance policy that typically doubles or triples the policy's face amount if the insured dies in an accident. -Benefit is usually offered to the policyholder at a small, additional cost.

pre-existing condition clause

A clause included in most individual health insurance polocies permitting permanent or temporary exclusion of coverage for any physical or mental problems the insured had at the time the policy was purchased. -The Patient Protection and Affordable Care Act of 2010 outlawed such exclusions. HIPAA ( Health Insurance Portability and Accountability Act) is a Federal law that protects people's ability to obtain continued health insurance after they leave a job or retire, even if they have a serious health problem. (Implemented in 1996)

internal limits

A feature commonly found in health insurance policies that limits the amounts that will be paid for certain specified expenses, even if the claim does not exceed overall policy limits. Ex.) Charges commonly subject to internal limits are hospital room and board, surgical fees, mental and nervous conditions, and nursing services. (Electronics, furs, silver, etc. )

coordination of benefits

A provision often included in health insurance policies to prevent the insured from collecting more than 100% of covered charges; it requires that benefit payments be coordinated if the insured is eligible for benefits under more than one policy. -The insured can collect multiple payments for the same illness or accident unless health insurance policies include a coordination of benefits provision. -Prevents you from collecting more than 100% of covered charges by collecting benefits from more than one policy. **Using policies with coordination of benefits clauses can help you prevent coverage overlaps and, ideally, reduce your premiums.

convertibility

A term life policy provision allowing the insured to convert the policy to a comparable whole life policy. -Standard on most term policies. -Useful if you need a large amount of relatively low-cost, short-term protection immediately but in the future expect you have greater income that will allow you to purchase permanent insurance

renewability

A term life policy provision allowing the insured to renew the policy at the end of its term without having to show evidence of insurability. -Premium increases with age -Renewable at the end of each term until the insured

actual cash value

Actual cash value is defined as replacement cost less depreciation. A value assigned to an insured property that is determined by subtracting the amount of physical depreciation from its replacement cost. -The principle of indemnity limits the amount an insured may collect to the actual cash value of the property. -Used to make sure the insurance company does not compensate the insured for an amount exceeding the insured's economic loss

policy loan

An advance, secured by the cash value of a whole life insurance policy, made by an insurer to the policyholder. -The loan is subtracted from the proceeds of the policy at the time of the insured's death. -Such loans are subject to tax penalties by the IRS since they treat them as withdrawals.

personal articles floater

An insurance policy normally used to insure certain scheduled personal property on an all-risks basis. --The policy is particularly appropriate for property that receives limited coverage under the homeowner's forms, such as furs, priceless artwork, expensive jewelry, silverware, cameras, musical instruments, stamp and coin collections, and similar property. --Such a policy affords higher coverage limits and protects against the causes of loss not covered on a homeowner's policy. --The term "floater" means just that; the policy "floats" or travels with your items of value. --Many personal articles floater insurance program provide worldwide coverage, which means that items listed in the insurance policy can be covered wherever they are in the world

personal liability umbrella policy

An insurance policy providing excess liability coverage for homeowner's and automobile insurance as well as additional coverage not provided by either policy. -Ideal for persons with moderate to high levels of income and net worth -Provides added liability coverage for homeowner's and automobile insurance. -Often include limits of $1 million or more. -Some also provided added amounts of coverage for a family's major medical insurance. -Premiums are usually quite reasonable for the broad coverage offered, $150 - $300 a year for as much as $1 million in coverage. -The insured party must have a relatively high liability limit ($100,000- $300,000) on their homeowner's and auto coverage in order to purchase a personal liability umbrella. "Whose fault was it???"

principle of indemnity

An insurance principle stating that an insured may not be compensated by the insurance company in an amount exceeding the insured's economic loss. (This principle does not apply to life and health insurance) Related to several important concepts: (1) Actual Cash Value vs. Replacement Cost - Limits the amount an insured may collect to the actual cash value of the property: the replacement cost less the value of physical depreciation. (2) Right of Subrogation - After an insurance company pays a claim, its right of subrogation allows it to request reimbursement from either the person who caused the loss or that person's insurance company. (3) Other-Insurance Clause - Nearly all property and liability insurance contracts have an other-insurance clause, which normally states that if a person has more than one insurance policy on a property, each company is liable for only a portion of the total insurance covering the property.

claim adujstors

An insurance specialist who works for the insurance company, as an independent adjustor, or for an adjustment bureau to investigate claims. (They investigate claims and look out for the company's interests) -They must diligently question and investigate while at the same time offering service to minimize settlement delays and financial hardship. -To promote your own interest in the claim, cooperate with your adjustor and answer inquires honestly, keeping in mind that the insurance company signs the adjustor's paycheck.

guaranteed purchase option

An option in a life insurance contract giving the policyholder the right to purchase additional coverage at stipulated intervals without providing evidence of insurability. -Frequently offered to buyers of a whole life policy who are under the age of 40. -Increases in coverage usually can be purchased every 3, 4, or 5 years in sums equal to the amount of the original policy or $10,000, whichever is lower. -Attractive to those whose life insurance needs and abilities to pay are expected to increase over a 5- 15-year period. -Very expensive, if you think you may want to purchase insurance later but may not be healthy enough to buy it, you can pay this and then buy it later without proving you are still healthy. The right to buy more insurance without proving you are healthy.

collision insurance

Automobile insurance that pays for collision damage to an insured automobile regardless of who is at fault. -The amount of insurance payable is the actual cash value of the loss in excess of your deductible. Actual cash value is defined as replacement cost less depreciation. -Avoid buying automobile insurance from car dealers or finance companies

social security disability

Cannot be capable of doing any kind of wok at all. They will look for things that you can do.

comprehensive automobile insurance

Coverage that protects against loss to an insured automobile caused by any peril (with a few exceptions) other than collision. -The maximum compensation offered under this coverage is the actual cash value of the automobile. -Coverage includes, but is not limited to, damage caused by fire, theft, glass breakage, falling objects, malicious mischief, vandalism, riot, and earthquake. -This normally does not cover theft of personal property left in the insured vehicle; instead this may be covered by the off-premises coverage of the homeowner's policy if the auto was locked when the theft occurred.

Long term care insurance

Def: The delivery of medical and person care, other than hospital care, to persons with chronic medical conditions resulting from either illness or frailty. --Most long term care insurance is purchased through AARP (American Association of Retired Persons) or directly through more than 100 insurance companies that offer them. A.) Do you need long-term care insurance? Do you have many assets to preserve for your dependents? Can you afford the premiums? Is there a family history is disabling disease? What is your gender? Do you have family who can care for you? B.) Long-term care Insurance Provisions and Costs Type of Care Eligibility Requirements Services Covered Daily Benefits Benefit Duration Waiting Period Renewability Preexisting Conditions Inflation Protection Premium Levels C.) How to buy long-term care insurance (1) Buy the policy when you're healthy (2) Buy the right types of coverage, but don't buy more coverage than you need. (3) Understand what the policy covers and when it pays benefits

deductible

Def: The initial amount not covered by an insurance policy and this the insured's responsibility; it's usually determined on a calendar-year basis or on a per-illness or per-accident basis. -Usually $100 or less. -Some plans offer a carryover provision, whereby any part of the deductible that occurs during the final 3 months of the year can be applied to the current year's deductible and can also be applied to the following calendar year's deductible.

HO policies

Factors Affecting Home Insurance Costs: (1) Type of structure - The construction materials used as well as the style and age of your home affect the cost of insuring it. Ex.) A brick home costs less to insure than an identical home made of wood. Yet considering earthquake insurance, the opposite is true and the brick homes are more expensive to insure. (2) Location of home - Local crime rates, weather, and proximity to a fire hydrant all affect your home's insurance premium costs. If many claims are filed from your area, insurance premiums for all the homeowners there will be higher. (3) Other factors - If you have a swimming pool, trampoline, large dog, or other potentially hazardous risk factors on your property, your homeowner's premiums will be higher. Deductibles and the type and amount of coverage also affect the cost. • HO-1- basic form • HO-2- broad form • HO-3- special form- most people buy this • Minimum coverage- 80% of cost to rebuild ($ per square foot) o $100,000 to rebuild, $80,000 required at a minimum o you chose to pay half at $40,000 o co-insurance provision o after deduction it's a $10,000 loss, however since you only paid half of the minimum $80,000, they will only pay $5,000 of your loss dwelling coverage- actual building and any of its attachments detached structures- you get 10% coverage

workers compensation

Health insurance required by state and federal governments and paid nearly in full by employers in most states; it compensates workers for job-related illness or injury. -Premiums based on historical usage; employers who file the most claims pay the highest rates. -Typical compensation benefits include medical and rehabilitation expenses, disability income, and scheduled lump-sum amounts for death and certain injuries such as dismemberment

Automobile Leasing considerations

If company you work for pays for lease or if your job depends on what kind of car you drive (real estate) rising new car prices, non deductibility of consumer loan interest, lower monthly payments, driving a more expensive car, minimizing down payment to reserve cash

property insurance

Insurance coverage that protects real and personal property from catastrophic losses caused by a variety of perils, such as fire, theft, vandalism, windstorms, and other calamities. -Such coverage protects the assets you've already acquired and safeguards your progress toward financial goals.

group term life insurance

Life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance. -Employers often provide group term insurance. -Nearly always term insurance, premium is based on the group's characteristics. -Accounts for 1/3 of life insurance in the US, one of the fastest growing areas of insurance -if you are not employed anymore, you lose this insurance

policy limits

Medical payments insurance usually has per-person limits of $1,000, $2,000, $3,000, $5,000, or $10,000. -Usually suggested that families with health insurance available have a higher limit available, since they cant be sure their passengers are as well protected,

liability coverage

Most states require you to buy at least a minimum amount of liability insurance. Under the typical PAP, the insurer agrees to: (1) Pay damages for bodily injury and-or property damage for which you are legally responsible as a result of an automobile accident. (2) Settle or defend any claim or suit asking for such damages. --Does not cover defense of criminal charges against the insured due to an accident (such as a drunk driver who's involved in an accident) --Also provides for certain supplemental payments (not restricted by the applicable policy limits) for expenses incurred in settling the claim, reimbursement of premiums for appeal bonds, bonds to release attachments of the insured's property, and bail bonds required as a result of an accident.

incontestibility period

Period of time, generally two years, during which an insurance company can declare a life insurance contract void because of misrepresentation or concealment by the insured in obtaining the policy. -Once this period has elapsed, the company cannot cancel the policy or refuse to pay claims for any reason other than nonpayment of premiums

mortgage insurance (PMI)

Private mortgage insurance. Insurance policy that protects the mortgage lender from loss in the event the borrower defaults on the loan: typically required by lenders when the down payment is less than 20%. • $ amount payed at closing (when you sign all papers, pay down payment and closing costs) and amount paid monthly until you reach 78% LTV is tax deductible • How do you get to 78% LTV? o Extreme example: if value of your house goes up dramatically you can get a re-appraisal

replacement cost

The amount necessary to repair, rebuild, or replace an asset at today's prices. -When replacement-cost coverage is in effect, a homeowner's reimbursement for damage to a house or accompanying structures is based on the cost of repairing or replacing those structures, without taking any dedictions for depreciation. -However, for homeowners to be eligible for reimbursement on a full replacement-cost basis, they must keep their homes insured for at least 80% of the amount it would cost to build them today, not including the value of the land. -Can purchase inflation protection to make sure coverage doesn't fall below the 80% req. -Without this, maximum compensation for losses would be based on a specified percentage of loss.

right of subrogation

The right of an insurer, who has paid an insured's claim, to request reimbursement from either the person who caused the loss or that person's insurer. Ex.) If you are in an automobile accident in which the other party damages your car, you may collect the amount of the loss from your insurer or from the at-fault party's insurer but not from both. -Collecting from both would violate the principle of indemnity by leaving your better off after the loss than before it.

dental insurance

Two insurances and they work together. (Expenses for accidental damage to natural teeth are normally covered under standard surgical expense and major medical policies.) -Covers necessary dental care and some dental injuries sustained through accidents. -Covered services may include examinations, X-rays, dental cleanings, fillings, extractions, dentures, root canal therapy, orthodontics, and oral surgery. -The maximum coverage under most dental policies is often low $1,000 to $2,500 per patient, so these plants don't fully protect against high dental work costs.

Underinsured motorist coverage

Underinsured motorists coverage: Optional automobile insurance coverage available in some states, that protects the insured against damages caused by being in an accident with an underinsured motorist who is found liable. -Becoming more increasingly popular. -Can be purchased for both bodily injury and property damage. -If an at-fault driver causes more damage to you than the limit of her liability, your insurance company makes up the difference (up to the limits of your coverage) and then goes after the negligent driver for the deficiency.

uninsured motorist coverage

Uninsured motorists coverage: Automobile insurance designed to meet the needs of "innocent" victims of accidents who are negligently injured by uninsured, underinsured, or hit-and-run motorists. (Says that an insured is legally entitled to collect an amount equal to the sum that could have been collected from the negligent motorist's liability insurance, had such coverage been available, up to a maximum amount equal to the policy's stated uninsured motorists limit.) a. Three points must be met: (1) another motorist must be at fault (2) the motorist has no available insurance or is underinsured (3) damages were incurred b. Policy Limits: Fairly low in cost, drivers should purchase at least its minimum available limits. c. Persons Injured: Uninsured motorists protection covers the named insured, family members, and any other person occupying a covered auto.

adjustable rate

a mortgage on which the rate of interest and therefore the size of the monthly payment is adjusted based on market interest rate investments (set for 5 years and then can change after a year)

Down payment on house

a portion of the full purchase price provided by the purchaser when a house or other major asset is purchased. often called equity. Use loan to value ratio to determine down payment • 2005- you could get in with no down payment • than it turned into 10% down payment • Magic of 20% down payment—> avoid mortgage insurance • Gets you the ability to pay less than ??

Closing cost

all expenses (including mortgage points) that borrowers ordinarily pay when a mortgage loan is closed and they receive title to the purchased property• Lean- debt cost attached to the property, must be paid off before you get the property • Also pay for survey-shows set-backs, what part of the city it actually owns

elimination period

amount of time you have to be disabled before your disability policy will pay after you have become disabled. The period, after an insured meets the policy's eligibility requirements, during which he or she must pay expenses out of pocket; when the waiting period expires, the insured begins to receive benefits. (A time deductible) --It is a waiting period before disability payments kick in, you can use sick days and vacation days before this. --Typical waiting periods are 90 to 100 days.

prepayment penalties

an additional charge you may owe if you decide to pay off your loan prior to maturity

educated or trained for disability

can do other things, and not be considered disabled

collision and comprehensive

collision- your car colliding with things. Comprehensive- anything else happening to your car. --> Your car required by lender if you have a loan, and after that it is optional.

refinancing considerations

consider comparing the terms of the old and new mortgages, the anticipated number of years you expect to stay in the home, any prepayment penalty on the old mortgage, and the closing cost associated with the new mortgage.

discount points

fees charged by lenders at the time that they grant a mortgage loan. (1 point equals 1% of the amount borrowed) These points are related to the lenders supply of loanable funds and the demand for mortgages

types of mortgages

fixed rate, adjustable rate, negative amortation

risk transfer

insure that risk, transfer that risk to someone else • The purchase of insurance is a common form of the risk management technique of risk transfer

loan to value ratio

maximum percentage of the value of the property that the lender is willing to loan. • 100% LTV is very risky

earnest money

money pledged by a buyer to show good faith when making an offer to buy a home. money put down with the contract of a house, can be any amount of money if you back out for no reason, seller gets to keep this money if you accept contract this money goes into your down payment

home affordability ratios

monthly mortgage payments and total monthly installment payment loans (including the monthly mortgage payment and monthly payments on auto, furniture, and other consumer installment loans) to monthly borrower gross income. Monthly mortgage payments can not exceed 25-30% of the borrower's monthly gross (before tax) income and the borrower's total monthly installment loan payments (including the mortgage payments) cannot exceed 33-38% of monthly gross income. maximum amount you can borrow. standard in the industry

home related tax deductions

mortgage interest, pmi, discount points, property taxes

what is not covered under car insurance

nuclear/biochemical anything, exclude something, if you intentionally cause injury or property damage, property damage to property owned by you, bodily injury for anyone residing in your household, driving uber or delivery service, competing in a race, organizing race or speed contest, loaning your car to a car sharing service, catastrophic events, personal items in your car

fixed rate

traditional type of mortgage in which both the rate of interest and the monthly mortgage payment are fixed over the full term of the loan (rate never changes)

negative amortization

when the principle balance on a mortgage loan increases because the monthly loan payments is lower than the amount of monthly interest being charged. some ARMs are subject to this undesirable condition.

real estate agents commision

who pays it??--> the seller

nonforfeiture rights

your rights to the whole cash value of whole life insurance policy

participating policy

• A life insurance policy that pays policy dividends reflecting the difference between the premiums that are charged and the amount of premium necessary to find the actual morality experience of the company • Pays a dividend

beneficiary

• A person who receives the death benefits of life insurance policy after the insurer's death • All life insurance policies should have one or more beneficiaries • All insured should name a primary beneficiary, and several contingent beneficiaries • Irrevocable beneficiary- the beneficiary cannot be changed at any time • who you are intending to leave this insurance too, if you are married you must put your spouse, unless you have them sign something stating otherwise (for at work) 1. Primary beneficiary- receives the entire death benefit if he is surviving when the insured dies 2. If primary beneficiary does not survive the insured, the insurer will distribute the death benefits to the contingent beneficiaries 3. If neither primary or contingent beneficiary are living at the time of death, the death benefits are passed the insured's estate and are distributed by the probate court according to the insured's will, or if no will exists, according to state law

Surgeries that aren't covered you could travel somewhere else to get done:

• Lasics • Hearing aids • TMJ • Over-the counter • Infertility • Weight loss treatment • Wigs • Acupuncture • Cosmetic • Anything self inflicted • abortions

variable life insurance

• Life insurance in which the benefits are a function of the returns being generated on the investments selected by the policyholder • Type of whole life investment and insurance, you get to choose how the money is invested • Advantages o Investment vehicle- insurance decides how cash value will be invested • Disadvantages o Higher risk

credit life insurance

• Life insurance sold in conjunction with installment loans sold by banks, finance companies and other lenders

universal life insurance

• Premium cash value insurance that combines term insurance (death benefits) with a tax sheltered savings/investment account that pays interest, usually at competitive money market rates • Type of whole life insurance, investment and insurance, the company chooses how the investments are made • Advantages o Permanent coverage o Flexible o Savings vehicle o Savings and death protection identified separately • Disadvantages o Temporary coverage for a set period o May have to pay higher premiums when policy is renewed

face value

• Refers to the death benefit that is paid to the beneficiaries upon the death of the insured. • What they would pay off if you died

cash value

• The accumulated refundable value of an insurance policy, results from the investment earnings on paid-in insurance premiums • Feature of whole life insurance • Considered a savings feature

contingent beneficiary

• The beneficiary who receives the death benefits of a life insurance policy after the insurer's death if the primary beneficiary is not surviving when the insured dies

why buy life insurance

• To protect your dependents from financial loss in the event of your untimely death • To protect the assets you've accumulated during your life • To provide funds to help your family reach important financial goals even after death. Benefits of Life Insurance • Financial protection for dependents • Protection from creditors • Tax benefits • Vehicle for savings Life insurance needs are not static, life insurance programs should be reviewed and adjusted at least every 5 years or after any major family changes

Affordable Care Act

• Used to decide whether to insure you based on if you have previously purchased health care • Can't base premiums on health care Can't base coverage on previous health conditions

renters policy

• Your stuff is covered • Sold in $ amounts • Document the stuff you have so you can come up with an estimated value of what it is worth. • They will offer you replacement cost coverage or Actual Cash Value • Covers no matter where your stuff is - theft, destruction etc. • There will be a deductible