Financial literacy part II

Question 1

Credit

Answer 1

when you borrow funds to bou goods in the present with the promise to pay them in the future

Question 2

installment credit

Answer 2

when you buy a large durable good on credit and pay the same amount each month for a certain amount of months

Question 3

revolving credit

Answer 3

is a line of credit where the customer pays a commitment fee to a financial institution to borrow money and is then allowed to use the funds when needed.

Question 4

credit rating / score

Answer 4

risk involved in lending money to you
- lenders check your credit history
above 700 low risk
below 600 high risk

Question 5

credit cards

Answer 5

• insured by bank

- allows u to purchase goods using a line of credit

Question 6

credit score range

Answer 6

300 - 850 general range

Question 7

5 factors that make up credit score

Answer 7

35% payment history 
30% how much you owe 
15% length of credit history 
10% new credit 
10% mixed credit

Question 8

hard vs soft inquiries

Answer 8

hard - can lower score, stays on report for 2 years

soft- company can’t check score without your permission

Question 9

APR

Answer 9

annual percentage rate

Question 10

Insurance

Answer 10

contact that transfers risk of financial loss from an individual or business to an insurance company

Question 11

risk pooling

Answer 11

company collects small amounts of money from it’s clients and pools that money together to pay for losses

Question 12

risk

Answer 12

uncertain about the income

Question 13

claim

Answer 13

paperwork submitted to insurance organization describing the accidentness or inquiry

Question 14

coverage

Answer 14

the risk covered and amount of money paid for losses under and insurance

Question 15

peril

Answer 15

the cause of a loss

Question 16

hazard

Answer 16

condition that makes a peril more likely to happen or that increases the seriousness of a loss

Question 17

loss

Answer 17

simple decline in value costs that are not obvious - indirect

Question 18

deductible

Answer 18

amount of money paid out of pocket due to policy holder before the insurance coverage begins

Question 19

premium

Answer 19

money paid to purchase the policy

Question 20

insurable interest

Answer 20

exist whenever occurance of a certain event

- will result in a financial loss

Question 21

bankruptcy

Answer 21

when someone is so deep in debt there is no other way to solve the problem

Question 22

what is not forgiven from bankruptcy

Answer 22

• child support
• student loans
• fines and penalties
• taxes
• cosigner obligations
• credit purchases of luxury

Question 23

snowball effect

Answer 23

lists debts in order from smallest to largest

Question 24

financial responsibility law

Answer 24

require drivers to be prepared for damages caused to others

Question 25

liability insurance

Answer 25

covers you at fault for causing an accident to pay damages you caused to other persons property 25/50/25

Question 26

medical

Answer 26

health care providers that work together

Question 27

uninsured

Answer 27

provides protection from damages caused by a motorist who is at fault and does not not have insurance or means to pay for your damages.

Question 28

underinsured

Answer 28

provides for damages to your car if the motorist has insurance but with insufficient coverage to pay for extent of your damages.

Question 29

comprehensive

Answer 29

pays for damage to your vehicle caused by something other than a collision with another car or object

Question 30

collision

Answer 30

pays when you are at fault to fix ur car

Question 31

principle of indemnity

Answer 31

insurance company is the one that determines how much you can collect

Question 32

health insurance

Answer 32

helps people pay for medical expenses | eye/dentist/ major medical

Question 33

ppo

Answer 33

go to any health care professional you want | high premium

Question 34

hmo

Answer 34

low premium

Question 35

why do you need credit

Answer 35

so you can afford things like a house and get loans.

Question 36

why is it bad to practice to only pay the minimum balance on your credit card statement monthly

Answer 36

you will be paying the balance for a longer time, causing it to gain more interest, will save you money the quicker you pay it off

Question 37

why is bankruptcy the last resort option

Answer 37

- drops credit by 200 points - stays on credit card history for 10 yrs - anyone who can lend you money can see it

Question 38

explain why ur grandma needs to have life insurance

Answer 38

so the dependents can maintain their standard of living when she dies

Question 39

what is the relationship between deductibles and premiums

Answer 39

premium - amount paid to purchase policy | deductible - amount paid out of pocket before insurance coverage begins.