Finance Chapter 9 Flashcards

Questions and Answers

What is a deductible?

Amount you must pay before you begin receiving any benefits from your insurance company.

What is a policy in insurance?

Describes the type of coverage in an insurance agreement.

What is a claim?

Paperwork filed with an insurance company to cover a loss.

What is a premium in insurance?

Amount you pay monthly, quarterly, semiannually or annually to purchase various types of insurance. Signup and view all the answers

What does liability refer to in insurance?

The state of being obligated according to law or equity. Signup and view all the answers

What is coverage in an insurance context?

Applies to the amount of protection you have through an insurance company. Signup and view all the answers

What is an out-of-pocket expense?

Specific amount of money that you pay when insurance only covers a portion of costs. Signup and view all the answers

Raising your deductible may be a good option to lower your premium, but it's important to do a break-even analysis before making that decision.

True Signup and view all the answers

Financially, it makes sense to stay on your parents' auto insurance policy through college if possible.

True Signup and view all the answers

What is not considered a financial risk?

A lost cell phone. Signup and view all the answers

What is the time between the disabling event and the beginning of payments in your disability coverage called?

Elimination period. Signup and view all the answers

What is a life insurance policy that covers a specific period called?

Term insurance. Signup and view all the answers

What does it mean to 'transfer risk'?

By paying a small, affordable premium. Signup and view all the answers

What is the importance of liability protection?

To protect you in the event of a lawsuit due to injury on one's personal property. Signup and view all the answers

Why should life insurance not be used as an investment?

Cash value policies are typically more expensive than term insurance. Signup and view all the answers

How do you become self-insured?

By saving, investing, and staying out of debt. Signup and view all the answers

What are some unnecessary types of insurance?

Cash value policies because they are more expensive and typically intended for life. Signup and view all the answers

Study Notes

Insurance Terminology

Deductible: The initial amount paid out by the insured before benefits kick in from the insurance company.
Policy: A detailed agreement outlining the specific insurance coverage provided.
Claim: Formal documentation submitted to an insurance company to request compensation for an insured loss.
Premium: Regular payments made (monthly, quarterly, semiannually, or annually) for maintaining insurance coverage.
Liability: Legal obligation to compensate for damage or loss incurred.
Coverage: Extent and type of protection provided by an insurance policy against potential losses.
Out-of-Pocket Expense: Costs that must be covered directly by the insured when the insurance reimburses only part of the total.

Important Insights

Raising deductibles can decrease insurance premiums, but a break-even analysis is crucial before making such adjustments.
Staying on parents' auto insurance during college can be financially beneficial.

Misconceptions and Clarifications

A lost cell phone is not categorized as a financial risk in the insurance context.
The waiting period before disability payments commence is known as the elimination period.
Life insurance providing coverage for a predetermined time frame is termed a term policy.

Risk Management and Protection

Risk can be transferred through the payment of a small, manageable insurance premium.
Liability protection is vital for defense against lawsuits related to personal property injuries.
Life insurance should not be regarded as an investment due to the higher costs associated with cash value policies compared to term insurance.

Personal Financial Strategies

Achieving self-insured status involves strategic saving, prudent investing, and avoiding debt.
Certain insurance types, like cash value policies, are often unnecessary due to their high expense and lifelong commitment.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Description

Test your knowledge with these flashcards covering essential terms from Chapter 9 of your finance study material. Learn about key insurance concepts such as deductible, policy, claim, and premium. Perfect for revising important financial terminology effectively.