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Chapter 9 test > Chapter 9 Test > Flashcards

Chapter 9 Test Flashcards

1
Q

An essential financial planning tool.

A

Insurance

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2
Q

What is the purpose of insurance?

A

To transfer risk

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3
Q

What can happen without proper insurance?

A

Certain losses can bankrupt you.

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4
Q

What does Conventional wisdom say?

A

That you should transfer risk.

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5
Q

What is Break-Even Analysis?

A

Method used to evaluate the wisdom of a financial decision by determining the length of time it will take for the cost of the decision to be recouped

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6
Q

What does raising your deductibles do?

A

Keeps your premiums down.

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7
Q

What should you do if you have a full emergency fun?

A

Raise your deductible.

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8
Q

T/F you should carry adequate liability?

A

True

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9
Q

What should you consider on older cars?

A

Dropping collision.

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10
Q

What is Collision?

A

Portion of auto insurance that covers losses due to vehicle damage in an accident

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11
Q

What is Comprehensive?

A

Pays for damage to your car that is not a result of an accident.

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12
Q

What kind of homeowner’s insurance should you have?

A

Guaranteed replacement cost.

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13
Q

What is a good buy once you have some assets?

A

Umbrella liability policies

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14
Q

What is Umbrella Liability Insurance?

A

High-limit insurance policy that acts as a protective covering over your home and car insurance against liability caused by an accident

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15
Q

What is Renter’s Insurance?

A

Type of insurance that provides coverage for accidents, damages and losses in a rental (apartment or house) or dormitory

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16
Q

T/F Increase your deductible and/or coinsurance amount?

A

True

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17
Q

Increase your stop-loss, but never decrease your maximum pay?

A

True

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18
Q

What is the HSA?

A

Health Savings Account, is a tax-sheltered savings account for medical expenses that works with a high deductible insurance policy.

19
Q

What is Stop-Loss?

A

Total out-of-pocket expense for health insurance; once reached, the insurance company will pay 100%

20
Q

What is maximum payment?

A

The amount an insurance company will pay before you are dropped from coverage (with health insurance keep at least a $1 million maximum pay)

21
Q

What percent of the population is disabled?

A

18% or 51 million

22
Q

What is disability income designed to do?

A

Replace income lost due to a short-term or permanent disability.

23
Q

T/F Try to buy disability insurance that pays if you cannot perform the job that your were educated or trained to do.

A

True

24
Q

What is occupational Disability?

A

Type of insurance that provides an income in case the insured becomes unable to perform the job he/she was educated or trained to do.

25
Q

T/F Beware of short-term policies covering less than 5 years?

A

True

26
Q

What percentage should your coverage be of your income?

A

65%

27
Q

What is the elimination period?

A

The time between the disabling event and when the payments actually begin.

28
Q

T/F A longer elimination period will lower your premium cost?

A

True

29
Q

What is Long-Term Care Insurance?

A

Policy that covers the cost of nursing home or in-home care; recommended for everyone over age 60.

30
Q

What percentage of people over the age of 65 will require long-term care at some point in their lives?

A

69%

31
Q

T/F Don’t buy identity theft protection that only provides credit report monitoring?

A

True

32
Q

What are Restoration Services?

A

Part of identity theft insurance that assigns a counselor to clean up the mess made when your identity was stolen.

33
Q

Life insurance is to replace lost income due to what?

A

Death

34
Q

T/F Most people have no idea what kind of life insurance they own?

A

True

35
Q

What is Term Insurance?

A

Life insurance coverage for a specified period of time.

36
Q

What is Cash Value Insurance?

A

Also known as whole life, universal life, variable life or permanent life insurance; premiums include a death benefit and a plan to build savings within the policy; significantly more expensive than term life insurance.

37
Q

What is a Beneficiary?

A

The recipient of assets passed on from the death of a friend or relative.

38
Q

What is the most common insurance myth?

A

The need for life insurance is a permanent situation.

39
Q

Why not life insurance as an investment?

A
  1. returns are historically low 2. when you die with cash value, the insurance company keeps the cash value 3. the fees deducted from your return are extremely high
40
Q

What is self-insured?

A

Condition of wealth at which time on no longer needs an outside insurance policy to cover a loss.

41
Q

What is a level term?

A

you pay the same amount for the entire term of the policy.

42
Q

T/F Stay away from fancy options?

A

True

43
Q

Children only need enough insurance for what?

A

Burial expenses

Chapter 9 test (1 decks)

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