Insurance Concepts Flashcards

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Questions and Answers

What is a deductible?

Money that you have to pay before the insurance kicks in.

Explain the relationship between premiums and deductibles.

A premium is what you pay to get the insurance. The lower the deductible, the higher the premium and vice versa.

Explain how insurance works including the concept of shared risk.

A policy in a group where everyone pays something, but if one needs to claim, the collector pays for that one claim.

_______ insurance coverage pays a portion of your salary when you are unable to work due to an injury that did not happen at work.

Disability Signup and view all the answers

Explain a preferred provider organization (PPO).

You can go in-network or out-of-network, but out-of-network has higher coinsurance. Signup and view all the answers

Explain a Health Maintenance Organization (HMO).

A HMO has a list of in-network doctors, requires a primary care physician, and is generally the cheapest health insurance. Signup and view all the answers

Explain worker's compensation.

This covers you when you get injured at work, paid for by the employer. Signup and view all the answers

How do a deductible and coinsurance determine how much you pay for a medical procedure?

If a deductible is $200, in-network pays 80% and you pay 20%, out-of-network pays 70% and you pay 30%. Signup and view all the answers

List the three forms of social security benefits (excluding Medicare and Medicaid).

Retirement, Disability, Survivor benefits. Signup and view all the answers

Explain what happens to the social security taxes deducted from your paycheck.

The money taken out goes to someone else who is currently receiving social security. Signup and view all the answers

Is the retirement benefit of social security a primary source of income?

False (B) Signup and view all the answers

What is the difference between Medicare and Medicaid?

Medicare helps the elderly and disabled, while Medicaid helps those who are impoverished. Signup and view all the answers

What does renter's insurance cover?

Covers damage to your personal property. Signup and view all the answers

Explain and give an example of home liability insurance coverage.

It covers medical bills and lawsuits if someone gets injured on your property. Signup and view all the answers

What is a home insurance floater policy?

Covers easily movable items like jewelry. Signup and view all the answers

What is the difference between replacement cost coverage and actual cash value coverage?

Replacement cost covers the item's original cost, while actual cash value incorporates depreciation. Signup and view all the answers

What is a beneficiary in life insurance?

The person who receives the money from life insurance if you die. Signup and view all the answers

Should everyone buy individual life insurance? Why or why not?

Not everyone should have it; it depends on individual circumstances. Signup and view all the answers

What factors should be considered in determining how much life insurance to purchase?

Gender, number of dependants, children's education costs, current debts, savings, and funeral costs. Signup and view all the answers

What is term life insurance?

Provides death benefits to the beneficiary if you die within a specified time period. Signup and view all the answers

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Study Notes

Insurance Basics

Deductible: Amount paid out-of-pocket before insurance coverage starts.
Premiums vs. Deductibles: Higher premiums correlate with lower deductibles and vice versa.

Shared Risk Concept

Insurances pool funds from many individuals, covering claims for members in need.
Pricing based on risk assessment; higher risk leads to higher premiums.

Types of Insurance

Disability Insurance: Offers partial salary coverage for non-work-related injuries.

Health Insurance Models

Preferred Provider Organization (PPO): Flexibility to choose between in-network or out-of-network providers, with higher costs for out-of-network services.
Health Maintenance Organization (HMO): In-network coverage requiring a primary care physician's referral for specialists; typically costs less with set copays.

Worker's Compensation

Insurance covering work-related injuries, funded by employers.

Medical Costs

Deductibles and coinsurance determine out-of-pocket expenses for procedures.

Three forms: Retirement benefits, Disability benefits, Survivor benefits.
Social security taxes fund current beneficiaries from the worker's paycheck.
Retirement benefits are supplementary; additional income sources are typically necessary.

Medicare vs. Medicaid

Medicare: Health insurance for the elderly and disabled (65+ years); covers 80% of expenses, requiring supplemental insurance for remaining costs.
Medicaid: Health insurance for low-income individuals, covering total medical costs.

Property Insurance

Renter's Insurance: Covers personal property damages; affordable insurance option.
Home Liability Insurance: Covers medical bills and legal fees if someone is injured on your property.
Home Insurance Floater Policy: Covers valuable movable items, such as jewelry or collectibles.

Coverage Types

Replacement Cost Coverage: Reimburses the full cost of replacing items without depreciation deductions.
Actual Cash Value Coverage: Considers depreciation, providing less than original purchase cost.

Life Insurance

Beneficiary: Individual designated to receive life insurance proceeds upon the policyholder's death (can be primary or secondary).
Individual vs. Group Life Insurance: Group plans are employer-sponsored, while individual plans are personally purchased. Not everyone needs individual life insurance based on personal circumstances.
Factors to consider for life insurance needs: gender, dependents, debts, savings, college costs, and funeral expenses.
Term Life Insurance: Provides benefits only if death occurs within a specified period; premiums increase with age.