24 Financial Risk Flashcards
What is auto insurance?
Required under state law to insure against the damage of another vehicle or injury or death of another person
Auto insurance ensures financial protection for drivers in case of accidents or damages caused to others.
What does disability insurance provide?
Protects against loss by providing supplemental income if unable to work due to illness
Disability insurance is crucial for individuals who may face long-term health issues affecting their ability to earn income.
What is Guaranteed Auto Protection (GAP) insurance?
Covers the monetary gap between the amount a vehicle is worth and the amount a client owes on it
GAP insurance is particularly useful when a vehicle is totaled and the insurance payout is less than the loan balance.
Define hazard in the context of insurance.
Any condition that increases the probability that a peril will occur
Understanding hazards is essential for risk assessment in insurance.
What does health insurance cover?
Ensures the client can see a doctor in case of illness or routine checkups or purchase medication
Health insurance is fundamental for managing medical expenses and maintaining health.
What is homeowner’s or renter’s insurance?
Protects belongings in the event of a fire, burglary, weather event, or other disasters
This insurance is vital for safeguarding personal property against unforeseen events.
What is an insurance policy?
A contract between the insured and the insurer
Insurance policies outline the terms, coverage, and obligations of both parties.
What does the large-loss principle in risk management encourage?
Insure the risks that cannot be afforded and retain the risks that can be reasonably afforded
This principle helps individuals prioritize their insurance needs based on financial capability.
What is the purpose of life insurance?
Makes the lives of loved ones easier financially in the event of a client’s death
Life insurance provides financial support to beneficiaries after the policyholder’s death.
What is loss control?
Designing specific mechanisms to reduce loss frequency and loss severity
Effective loss control strategies can significantly minimize financial impact from risks.
Define peril in insurance terms.
Any event that can cause a financial loss
Understanding perils is crucial for determining coverage needs in insurance.
What does pet insurance help with?
Control the cost of medications and surgeries for pets
Pet insurance is becoming increasingly popular as pet healthcare costs rise.
Define risk in the context of insurance.
Uncertainty about the outcome of a situation or event
Assessing risk is a foundational aspect of insurance underwriting.
What is risk management?
The process of identifying and evaluating purely risky situations to determine and implement appropriate management
Effective risk management strategies can help minimize potential losses.
What is risk reduction?
Includes mechanisms that reduce the overall uncertainty about the magnitude of loss
Risk reduction strategies are essential for maintaining financial stability.
What does risk retention mean?
Accepting that some risks arise in life and consciously retaining that risk
Risk retention is a strategy where individuals decide to bear certain risks instead of transferring them through insurance.
What is supplemental insurance?
A type of policy that bridges shortfalls from traditional insurance plans
Supplemental insurance can cover additional costs not included in primary insurance policies.
What does travel insurance cover?
Replacing lost or stolen luggage, covering medical expenses abroad, or rebooking transportation due to canceled or changed travel plans
Travel insurance is important for mitigating risks associated with traveling.
What is whole life insurance?
Covers the client over their entire life and can also be borrowed against
Whole life insurance is a form of permanent insurance that builds cash value over time.
