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FIN 3030 > Insurance > Flashcards

Insurance Flashcards

1
Q

What are the 7 basic types of insurance?

A

car insurance, renter’s/home insurance, health insurance, disability insurance, long-term care insurance, identity theft protection, life insurance

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2
Q

What kinds of insurance do college students need?

A

car insurance, renter’s insurance, health insurance, life insurance, identity theft protection

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3
Q

How much coverage should you get on liability insurance?

A

At least $500,000

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4
Q

What is the difference between comprehensive and liability insurance?

A

Liability insurance only covers the other person if you get into an accident and it’s your fault while comprehensive covers both you and the other person

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5
Q

What is one way to ensure a good deal on car insurance?

A

Work with an independent agent who represents multiple agents

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6
Q

True or False: You must have a good credit score to get a good deal on insurance.

A

False; credit score is a factor. You can still get a competitive rate without a credit score.

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7
Q

What is collision insurance?

A

Collision insurance covers the cost of your car if you damage it; good value on a higher value vehicle.

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8
Q

What is the purpose of insurance?

A

To transfer risk away from a potentially very costly incident

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9
Q

How much can you save if you get an anti-theft device on your car?

A

Some insurance companies may give you up to 20% off your premium

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10
Q

When should you submit an insurance claim?

A

Weigh the deductible versus the claim amount; insurance underwriters consider both claim frequency and claim severity. They are more likely to drop someone who makes several small claims for $100 or $200 rather than someone who has only made one large claim ($20,000).

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11
Q

What should homeowner’s coverage have?

A

Guaranteed Replacement Coverage; most name-brand companies have gone away from Guaranteed Replacement Coverage

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12
Q

What is Extended Replacement Coverage?

A

Coverage is extended to a certain percentage
e.g. For 20% on a $200,000 policy, the insurance company will only replace up to $240,000 even if your house is worth more (originally bought for $200,000)

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13
Q

What do you have to do with Extended Replacement Coverage?

A

Have your house appraised every single year and then have the policy updated

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14
Q

What does renter’s insurance cover?

A

The contents of the renter’s apartment for fire or theft

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15
Q

What is an umbrella liability policy do?

A

It picks up where your car and home/renter’s insurances left off.

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16
Q

How many workers have health insurance provided by their employer?

A

59%

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17
Q

How does co-insurance work?

A

After the deductible, I pay a percentage of a claim and the insurance company pays the rest.
e.g. In 80/20, I pay 20% and the insurance company pays 80%.

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18
Q

What is the #1 cause of bankruptcy in America?

A

Medical expenses not covered by health insurance

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19
Q

What is Stop-Loss?

A

Maximum out of pocket cost; after the deductible and the copay, up to the Stop-Loss
e.g. If Stop-Loss is $10,000 then I will pay no more $10,000 after the deductible and copay

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20
Q

What is Maximum Pay?

A

The maximum amount the insurance company will pay; should be at least $1,000,000

21
Q

What is a HSA?

A

Health Savings Account; tax-sheltered savings account for medical costs for people with a high deductible (thousands of dollars)

22
Q

What is Life Insurance for?

A

To replace income lost from dying

23
Q

What percentage of the public do not have life insurance?

A

22%

24
Q

What are types of life insurance?

A

Term life insurance and cash value (usually for life)/permanent

25
Q

What is term life insurance?

A

Insurance for a specific amount of time that is generally cheaper because there is no savings plan built in.

26
Q

Does life insurance have to be permanent?

A

No. If you build enough wealth, then you ensure yourself through your savings and wealth.

27
Q

What is the average cost of cash value life insurance?

A

$145/month for $125,000 (savings plan built in)

28
Q

What is the average cost of 20-year term life insurance?

A

$10/month for $400,000

29
Q

What is the average return on the stock market?

A

11.8%

30
Q

What is the average return on mutual funds?

A

12%

31
Q

What is the average return on cash value life insurance?

A

2.6%

32
Q

What is the return of premium?

A

Pay an extra fee to receive premium if policy is not used; unnecessary because that fee could be invested in a mutual fund and you would get more back

33
Q

What is a waiver of premium?

A

A feature that pays your premium if you become disabled. This is unnecessary because the emergency fund should be able to take care of that.

34
Q

How much should your life insurance policy be?

A

Ten times your yearly income

35
Q

What is a big mistake that people make with insurance?

A

They tie too much emotion into it. If people have the appropriate emergency fund, they can absorb the costs of smaller unexpected things without needing to impulsively buy insurance.

36
Q

What is disability insurance?

A

Insurance designed to replace your income if you become disabled short-term or long-term

37
Q

What is likelihood that you will become disabled for 6 months or more at some time in your life?

A

1 in 3

38
Q

What is occupational disability?

A

Insurance that replaces your income for a job that you a trained to do

39
Q

Why shouldn’t you buy short-term disability insurance?

A

Because short-term disability should be covered by your emergency fund and savings

40
Q

What is the price of long-term disability insurance based on?

A

Type of occupation; labor jobs have higher premiums than desk jobs

41
Q

How much should your disability insurance be?

A

65% of your current income; use tax-free dollars

42
Q

What is the elimination period?

A

The time between you were disabled and when you start to receive money. The longer the elimination period, the more risk you carry, the smaller your premium.

43
Q

What is long-term care insurance?

A

Insurance for care in an extended care facility, and for some facilities, in-home care

44
Q

When should you buy long-term care insurance?

A

When you turn 60

45
Q

What percentage of people will need some type of long-term care after 65?

A

69%

46
Q

True or False: The last 6 months of your life may be more expensive than any decade of your life.

A

True

47
Q

What can a spouse keep before qualifying for Medicaid?

A

$79,000, a house, and a car

48
Q

What is the purpose of Medicaid?

A

To pay for medical and nursing home expenses for retirees who are unable to afford it

49
Q

True or False: 1 in 4 consumers has had their personal information compromised by a data breach.

A

True

FIN 3030 (9 decks)

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