Personal Finance Chapter 9 Flashcards

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Questions and Answers

What is the purpose of insurance?

transfer risk

What are the basic types of coverage needed?

homeowners (renters), auto, health, disability, long term care, identity theft, life

The best way to keep premiums down is to ____.

raise your deductible

What do you have to pay out of pocket before the insurance company kicks in any money?

deductible Signup and view all the answers

Who is the recipient of assets passed on from the death of a friend or relative?

beneficiary Signup and view all the answers

What is the paperwork filed with an insurance company to cover a loss?

claim Signup and view all the answers

What does the amount of protection you have through an insurance company in the event of a loss refer to?

coverage Signup and view all the answers

What is the state or quality of being obligated according to law or equity?

liability Signup and view all the answers

What is the specific amount of money that you pay when insurance only covers a portion of costs?

out of pocket expense Signup and view all the answers

What describes the type of coverage in an insurance agreement?

policy Signup and view all the answers

What is the amount you pay monthly, quarterly, semiannually, or annually to purchase insurance?

premium Signup and view all the answers

What is a legally enforceable declaration of how a person wishes their property to be distributed after death?

will Signup and view all the answers

What pays for all accident-related medical costs incurred by you or your family members within three years of an accident?

medical payment coverage Signup and view all the answers

What covers damage to your car if it is hit by another car or object?

collision insurance Signup and view all the answers

What takes care of damage to your car not caused by a collision?

comprehensive coverage Signup and view all the answers

How can you get a good deal on car insurance as a teen driver?

Good grades, drivers class, shop around, stay on parents policy through college Signup and view all the answers

What covers the contents of the renter's apartment in case of fire, theft, or storm?

Renter's insurance Signup and view all the answers

What covers the cost of medical expenses due to injury or illness?

health insurance Signup and view all the answers

What is an employee benefit plan that provides medical care for participants and their dependents?

group health plan Signup and view all the answers

What is the amount of money you pay to help cover a portion of your medical costs?

co-payment Signup and view all the answers

What type of insurance covers nursing homes and assisted living facilities?

long term care insurance Signup and view all the answers

What is used to replace income lost due to a short-term or permanent disability?

disability insurance Signup and view all the answers

What type of insurance provides an income if you are unable to perform the job you were trained to do?

occupational disability Signup and view all the answers

What protection includes restoration services and assigning a counselor to clean up after identity theft?

Identity theft protection Signup and view all the answers

What are the two types of life insurance?

term insurance, cash value insurance Signup and view all the answers

What insurance is specified for a period, cheaper, and easy to understand?

term insurance Signup and view all the answers

What type of insurance is normally for life and more expensive because of a savings plan?

cash value Signup and view all the answers

What pays the same amount for the entire term of the policy?

level term Signup and view all the answers

What are considered bad ideas in the insurance world?

credit life/disability, credit card protection, cancer, accidental death, any insurance with cash value, investments or refunds, prepaid burial policies, mortgage life insurance Signup and view all the answers

Study Notes

Insurance Concepts and Definitions

Transfer Risk: The primary purpose of insurance is to transfer the risk of loss from the individual to the insurance provider.
Types of Coverage: Essential types of insurance include homeowners (or renters), auto, health, disability, long-term care, identity theft, and life insurance.
Deductibles: Raising your deductible is an effective strategy to lower insurance premiums.
Deductible Explained: This is the amount you are required to pay out-of-pocket before your insurance company starts covering costs.
Beneficiary: A person designated to receive assets following the death of an individual.
Claims Process: A claim is the paperwork submitted to an insurance provider to request coverage for a loss.
Coverage: Refers to the scope of protection provided by an insurance policy.
Liability: The state of being legally responsible for something, often concerning financial obligations.
Out-of-Pocket Expenses: Costs that the insured must cover themselves when insurance only partially covers a loss.
Insurance Policy: A document outlining the terms, conditions, and coverage details of an insurance agreement.
Premiums: Regular payments made (monthly, quarterly, annually) to maintain insurance coverage.

Estate Planning

Will: A legally enforceable document that specifies how a person's assets should be distributed after their death.

Medical Insurance Types

Medical Payment Coverage: Covers accident-related medical expenses for you and family members for three years post-accident.
Collision Insurance: Offers protection against damages to your vehicle resulting from a collision with another vehicle or object.
Comprehensive Coverage: Covers damages not involving a collision, such as theft or natural disasters.
Teen Driver Savings: Good grades, completing a driver's education course, shopping for the best rates, and remaining on a parent's policy during college can help secure lower car insurance rates.

Property and Health Insurance

Renter's Insurance: Protects personal possessions in a rental property against theft, fire, or storms.
Health Insurance: Crucial for covering medical expenses due to injury or illness.
Group Health Plan: An employer-sponsored plan providing insurance coverage to employees and their dependents, often keeping premiums low by spreading risk among members.
Co-Payment: A set fee or percentage you pay towards medical expenses in addition to what insurance covers.

Long-Term and Disability Insurance

Long-Term Care Insurance: Covers services in nursing homes or in-home care, generally purchased when individuals are 60 or older.
Disability Insurance: Replaces income lost during a temporary or permanent disability.
Occupational Disability: Provides income if the insured cannot perform their trained job due to disability.

Identity Theft and Life Insurance

Identity Theft Protection: Effective protection includes restoration services and counseling to manage aftermath of identity theft.
Types of Life Insurance: Main types include term insurance and cash value insurance.
Term Insurance: Covers a specified period; it is more affordable and straightforward, focusing on death benefit without savings.
Cash Value Insurance: Offers lifelong coverage and accumulates cash value over time but is generally more expensive.

Insurance Practices to Avoid

Poor Insurance Choices: Avoid unnecessary policies like credit life/disability insurance, prepaid burial policies, and mortgage life insurance, as they often provide poor value or excessive costs.

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Description

Test your knowledge of insurance concepts with these flashcards from Chapter 9 of Personal Finance. Learn key terms such as transfer risk, types of coverage, and deductibles to improve your financial literacy. Perfect for preparing for exams or refreshing your knowledge in personal finance.