Chapter 8: Insuring Your Life Flashcards
insurance that helps to replace lost income if premature death occurs.
life insurance
insurance that covers medical costs.
health insurance
insurance that reimburses you if your property is damaged or destroyed.
property insurance
what is the primary risk that is mitigated by insurance?
change of economic loss
- risk avoidance
- loss prevention and loss control
- risk assumption
- insurance
These are all methods of combating…
risk.
avoiding situations that may cause loss.
risk avoidance
risk avoidance is attractive when the cost of avoidance is less than the cost of handling a situation another way.
true
activities that reduce the chance that loss will occur.
loss prevention
activities that lessen the severity of the loss once it has occured.
loss control
involves bearing the risk of loss.
risk assumption
a contract between the insured and an insurance company that agrees to reimburse you for losses according to specified terms.
insurance
what must the insured pay to obtain insurance?
insurance premium
statistical information and loss experiences analyzed by the insurance company is referred to as…
actuarial data.
process of deciding who the insurance company insures and the premium amounts charged.
underwriting
occurs when a high-risk client obtains insurance coverage.
adverse selection
- financial protection for dependents
- protection from creditors
- tax benefits
- savings vehicle
These are the benefits of…
life insurance.
what type of people need life insurance?
only those who have dependents (through marriage, with kids, etc.)
method of assessing how much insurance one needs by multiplying gross annual earnings by some selected number to arrive at the estimated coverage.
multiple-of-earnings method
method of assessing how much insurance one needs by assessing total economic needs, determining financial resources, and assigning life insurance accordingly.
needs analysis method
amount of money needed to maintain lifestyle, extra expenses, special needs, debt liquidation, and liquidity.
economic needs
list all money sources to determine,,,
financial resources.
economic needs - financial resources =
life insurance needed
benefit that provides basic support to families.
social security survivor’s benefits
what 2 things make it harder for an individual to obtain insurance and, if they do, it costs more?
- health problems
- risky behaviors/occupation
What are the 5 different types of insurance policies?
- term
- whole
- universal
- variable
- group
policy that provides specified amount of coverage for set period, is the simplest life insurance policy, grants beneficiaries full amount after death, has 5-30 year periods, and premiums are paid on annual, semiannual, or quarterly basis.
term life insurance
what are the 2 types of term life insurance policies?
- straight
- decreasing
type of term life insurance that is written for a set number of years during which coverage remains the same and premium can be either on an annual renewable term policy or a level premium term policy.
straight term life insurance
type of term life insurance where the amount of protection decreases over the policies life and has higher premiums.
decreasing term life insurance
term life insurance has lower premiums, temporary coverage (that’s not renewable), has a convertibility provision, and is a longer term policy.
true
3 types of whole life insurance policies??
- continuous premium
- limited payment
- single premium (SPLI)
type of insurance provides permanent coverage during the individual’s life, has cash value, a return on investment, and a nonforfeiture right.
whole life insurance
type of whole life insurance that pays a level premium annual and offers the greatest amount of permanent death protection and least savings.
continuous premium
type of whole life insurance where the premium is based on a specified period during which a level premium is charged
limited payment
type of whole life insurance that is purchased w/ 1 cash premium payment @ inception of contract for rest of life, is a tax-sheltered investment vehicle, and contains a modified endowment contract (MEC).
single premium (SPLI)
whole life insurance payments contribute toward building an estate, has nonforfeiture option, policy reinstatement option, and a participating policy.
true
a policy where dividends are paid in cash, premium reductions, dividend accumulation, and/or paid-up additions.
participation policy