A&S INSURANCE FINANCIAL PROTECTION (Chapter 1) Flashcards
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A&S Terminology
Brokerage General Agent
Independent firm or contractor working for an insurance company
A&S Terminology
Policyholder
The person who owns the insurance policy
A&S Terminology
Morbidity rate
- The rate at which an illness or disease occurs within a population.
- Used in actuarial professions to determine the premiums to charge customers.
A&S Terminology
Indemnity
Insurance compensation paid for damage or loss
A&S Terminology
Business Overhead Expense (BOE)
Insurance policy designed to pay specified ongoing business expenses while the business owner is disabled and unable to generate revenue for the business.
A&S Terminology
Business risk (Unsystematic risk)
Factors relating to a specific business that could impact profitability, or survival, of the business.
A&S Terminology
Extended Health Insurance
A form of A&S insurance, to protect the financial impact of risks by providing needed cash to replace lost income or pay medical bills.
A&S Terminology
Longevity Risk
The chance that life expectancies and actual survival rates exceed expectations.
CHAPTER 1 – Financial protection provided by A&S insurance
Define accident & sickness insurance (Canada)
- Benefits for loss resulting from accidental bodily injury, sickness or disability;
- Refund of expenses incurred due to medical treatment, sickness or accidental bodily injury suffered by the life insured;
What is the primary role of A&S insurance ?
To protect the finances of individuals and their families during times of medical or health crisis.
TRUE OR FALSE?
Families need to generate income and set aside savings to meet individual and business needs.
FALSE
- Families need to generate income and set aside savings to meet ongoing family needs.
[Ref. 1.1.1.3]
Meeting family goals is primarily dependent upon clients’ ability to generate sufficient income and savings over time.
Unfortunately, there are a number of risks that could disrupt those plans, (name at least three)
- Unexpected expenses;
- Loss of income or savings;
- Lower standard of living;
- Inflation;
- Longevity;
- Debt.
What are 3 health risks that could derail peoples financial security ?
- Likelihood of disability
- Loss of independence
- Costs of long-term care
There are needs that need to be met by employees, self-employed & business owners so they purchase A&S insurance to protect those needs.
Name the needs that need to be met.
The needs met by A&S insurance for individuals include protection for:
- Income
- Savings
- Assets
[Ref 1.1.4]
TRUE OR FALSE?
One of the most common forms of A&S coverage is life insurance.
FALSE
One of the most common forms of A&S coverage is disability income protection. (Protection for income)
Explain the protection of income process with A&S insurance.
- After a suitable waiting period following the onset of disability, (during which no benefits are payable) the insured will receive a monthly income payment from the insurer.
- The benefits will be payable for a prescribed benefit period or until the disabled insured is able to return to work, whichever comes first
How does critical illness and long term care benefit seniors and individuals?
By protecting their assets and providing benefits to offset retirement expense (vision, dental care etc… ), permitting seniors to maintain the value of their estate.
All owners of private businesses have similar goals. The goals for the business/business owner translate directly into individual goals, what are they ?
- Business profitability (income protection);
- Business succession (capital protection);
- Sale at fair market value (protection of estate value).
CHAPTER 1 – Financial protection provided by A&S insurance
There are two management risks for business owners, what are they?
- Self Funding
- Insurance
Explain self-funding (risk management)
A form of risk retention, assumption of the cost of the risk by the business owner.
What are the 3 options of an individual who wishes to self-fund the cost of a loss associated with a risk?
- Pay the cost out of current cash flow;
- Borrow to acquire funds to pay the cost;
- Erode savings or sell assets.
[Ref 1.2.3.1]
Which of the following is considered a common goal for most families?
- a) Education for their children
- b) Upgrading their automobile every three years
- c) The sale of their parent’s family home
- d) Making charitable donations
a) Education for their children
- Family goals center around the same priorities. Their goals focus on retirement income, wealth accumulation, and family needs such as education for children or a child’s wedding.
[Ref. 1.1.1]
