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Personal financial planning > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

What is property insurance

A

Ensures that any damages to your auto and home are covered and that your personal assets are protected from any liability

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2
Q

What is health insurance

A

Covers health care needs, e,g. dental

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3
Q

What is disability insurance

A

Ensures that your monthly income will continue if you are unable to work because of any injury or illness

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4
Q

Define critical illness insurance

A

Ensures that you have access to lump sum benefits if you suffer a critical illness

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5
Q

What is long term insurance

A

Ensures that you have access to benefits that will help you to cover added living costs, such as in home nursing care, when unable to take care of yourself due to injury or illness

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6
Q

Define life insurance

A

Ensures financial support for dependants, other individuals, charities when you die

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7
Q

What is the primary function of insurance

A

to maintain your existing level of wealth by protecting against financial losses or liability due to unexpected events

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8
Q

List the steps for risk Management

A
  1. recognize the risk to which you are exposed
  2. decide whether to protect against those risk
  3. decide on the amount of coverage you need, and the policy provisions you require
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9
Q

List the alternatives to risk management

A
  1. avoid risk
  2. reduce risk
  3. Accept risk
  4. Share risk
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10
Q

define the term premium

A
  • The cost of obtaining insurance
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11
Q

T OR F? insurance companies pool together several insurance policies based on the type of insurance purchased and the characteristics of a group of policy owners

A

True

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12
Q

What is the relationship between insurance company claims and premiums

A

Profit = (premiums + investment earnings) - (claims + business expenses)

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13
Q

Would premium be relatively low or high for an event that is unlikely and cause minor damage

A

Relatively low

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14
Q

Would premium be relatively low or high for an event likely and could cause major damage

A

Relatively high

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15
Q

what does a high insurance premium suggest?

A

that there is a good chance you may use the insurance coverage provided

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16
Q

Who are insurance underwriters?

A

Employees of an insurance company who calculate the risk of specific insurance policies and decide what policies to offer and what premiums to charge

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17
Q

who is an insurance agent

A

Someone who represents one or more insurance companies and recommends insurance policies that fit customers needs

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18
Q

Mention what auto insurance insures against

A

the legal liability that may arise from causing death/injury to others
The expense associated with providing treatment to you, your passengers and other persons outside your vehicle
the cost associated with damage to your vehicle

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19
Q

Define the term insurance policy

A

Contract between an insurance company and policy owner

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20
Q

What is an auto insurance policy?

A

specified coverage provided by an insurance company for a particular individual and vehicle

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21
Q

Mention the three sections associated with an auto insurance policy

A

Third party liability coverage
accident benefits
loss or damage to the insured automobile

22
Q

What is third person liability?

A

a legal term that describes the persons who have experienced loss because of the insured

23
Q

What are two key components in a third party liability coverage

A

Bodily injury liability

property damage liability

24
Q

What liability coverage under third-person coverage offers medical bills, pain, suffering, and economic loss and protects you from liability associated with injuries you or family listen on the policy caused to others

A

Bodily injury liability coverage

25
Q

What does the property damage liability coverage cover?

A

covers another persons property damage caused by the policy owner. Does not cover your own car or other property that you own.

26
Q

T OR F? you should purchase minimum required for property damage liability coverage because if it less than likely you cause damage to another person or their vehicle

A

False! you should always purchase more than the minimum amount

27
Q

Explain Section B: Accidental benefits

A

Insures against the cost of medical care for you and other passengers in the car. It also applies if you are in an accident caused by a hit and run driver or a driver who is at fault but their insurance company goes bankrupt

28
Q

What is collision insurance

A

Insures against costs of damage to your car resulting from an accident in which the driver of your car is at fault

29
Q

what is comprehensive coverage

A

insures you against damage to your car that results from something other than collision. e.g. floods, theft, hail etc

30
Q

What section under the insurance policy can Collision insurance and comprehensive insurance be found

A

Section C: Loss of or damage to insured automobile

31
Q

define the term deductible?

A

A set of dollar amount that you are responsible for paying before any coverage is provided by your insurer

32
Q

what is facility association

A

Ensures that drivers unable to obtain insurance with an individual company can obtain the coverage they need to operate their vehicles legally (applies to higher risk drivers)

33
Q

explain the no-fault auto insurance

A

Allows policy owners in all provinces to receive immediate medical payments through their own insurance policy, regardless of who is at fault for causing the accident

34
Q

Explain the pure no-fault system

A

You are unable to sue the at fault driver for pain and suffering and economic loss

35
Q

What are exclusions?

A

A term appearing in insurance contracts or policies that describes items or circumstances that are specifically excluded from insurance coverage

35
Q

What are exclusions?

A

A term appearing in insurance contracts or policies that describes items or circumstances that are specifically excluded from insurance coverage

36
Q

List some other optional coverages

A

Loss of vehicle use (cost of rental car)
towing
damage to non owned automobile
family protection coverage

37
Q

Mention factors that affect your auto insurance premiums

A 
the likelihood that you will submit claims 
estimated cost to cover these claims 
amount of liability coverage 
amount of deductible 
Value of car 
repair record of car 
location 
driving training/record 
age + sex (for some provinces) 
driving distance (for some provinces)
38
Q

if you are in an accident when should u call the police?

A

Call the police if:
someone sustained injury
significant property damage
you think other driver is guilty of a criminal code offence

39
Q

if you are in an auto accident what should be done?

A

File a claim with insurance company
if the other driver is at fault, your insurance company should seek damage from other driver insurance
if other driver is not insured, ur insurance company will pay accident benefits up to limit

40
Q

define the term homeowners insurance

A

provides insurance in the event of property damage, theft, or personal and third party liability relating to home ownership

41
Q

What are the types of Perils covered by homeowners insurance

A

All perils coverage

Named perils coverage

42
Q

explain cash value policy

A

pays you the value of the damaged property after considering its depreciation

43
Q

explain replacement cost policy

A

pays you the cost of replacing the damaged property with an item of similar brand and quality

44
Q

What is home inventory

A

contains detailed info about your personal property that can be used when filing a claim

45
Q

List factors that affect homeowners insurance premiums

A 
Value of insured home 
deductible 
location 
degree of protection 
discounts
46
Q

What are ways to reduce your homeowner’s insurance premiums

A 
increase deductible 
improve protection 
use one insurer for all types of insurance 
stay with the same insurance company 
shop around
47
Q

explain tenant insurance

A

An insurance policy that protects your possessions within a house, condo or apt that you are renting
- does not insure the structure itself
cover personal assets and living expenses

47
Q

explain tenant insurance

A

An insurance policy that protects your possessions within a house, condo or apt that you are renting
- does not insure the structure itself
cover personal assets and living expenses

48
Q

what is umbrella personal liability policy

A

A supplement to auto and homeowners insurance that provided additional personal liability coverage

Personal financial planning (9 decks)

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