Chapter 23 Risk Management for Individuals Flashcards
CFA I Ch23 Flashcards
Disability income insurance
A type of insurance designed to mitigate earnings risk as a result of a disability in which an individual becomes less than fully employed.
Earnings risk
The risk associated with the earning potential of an individual.
Economic net worth
The difference between an individual’s assets and liabilities; extends traditional financial assets and liabilities to include human capital and future consumption needs.
Health insurance
A type of insurance used to cover health care and medical costs.
Health risk
The risk associated with illness or injury.
Holistic balance sheet
Economic balance sheet A balance sheet that provides an individual’s total wealth portfolio, supplementing traditional balance sheet assets with human capital and pension wealth, and expanding liabilities to include consumption and bequest goals. Also known as holistic balance sheet.
Liability insurance
A type of insurance used to manage liability risk.
Liability risk
The possibility that an individual or household may be held legally liable for the financial costs associated with property damage or physical injury.
Life-cycle finance
A concept in finance that recognizes as an investor ages, the fundamental nature of wealth and risk evolves.
Life insurance
A type of insurance that protects against the loss of human capital for those who depend on an individual’s future earnings.
Permanent life insurance
A type of life insurance that provides lifetime coverage.
Premature death risk
The risk of an individual dying earlier than anticipated; sometimes referred to as mortality risk.
Property insurance
A type of insurance used by individuals to manage property risk.
Property risk
The possibility that a person’s property may be damaged, destroyed, stolen, or lost.
Temporary life insurance
A type of life insurance that covers a certain period of time, specified at purchase. Commonly referred to as “term” life insurance.
