Personal Finance Quiz Ch.10-13 Flashcards
How does property insurance work?
It works as a financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft (fire, auto accident, burglary).
what are named perils?
it is a type of insurance that covers a specific set of perils. Perils not named are not covered.
what is an open peril?
A type of insurance that covers all perils except those specifically noted as excluded.
what does HO-1 provide and cover?
It provides such very narrow coverage that it isn’t available in most states. covers A-F
What is HO-2 and what does it cover? What are its costs?
It is a named perils form of insurance. That is, it covers a set named of perils. It covers A-F. It typically costs 5-10% more than HO-1 coverage.
What does HO-4 provide and cover for?
For renters or tenants, it covers personal belongings but does not include liability insurance. It covers A-F. covers same perils for personal property as HO-2
What does HO-3 cover and and what are its costs?
It covers all direct physical losses to your home. It offers open perils protection, but excluded specific perils such as floods, earthquake, war, and nuclear accident. IT costs 10-15% more than an HO-1 policy. Covers A-F.
What does HO-6 cover and provide?
It provides personal property and liability insurance for co-op or condominium owners. Covers same perils for personal property as HO-2 and covers A-F
What does HO-8 provide and cover ?
Designed for older homes, insuring them for repair costs or actual cash value rather than replacement cost. Covers A-F and covers same perils as HO-1
What are the 4 Property Coverages?
Coverage A: Dwelling
Coverage B: Other structures
Coverage C: Personal property
Coverage D: Loss of use
What is Dwelling Coverage A?
the part of your homeowners insurance policy that may help pay for the rebuilding or the repair of the physical structure of your home if it’s damaged by a covered hazard.
What is Coverage B: Other structures?
the part of a homeowners insurance policy that helps pay to repair or replace structures other than your home, such as a fence, if they are damaged by a covered risk.
What is Coverage C: Personal property?
provides protection for the contents of your home and other personal belongings owned by you and other family members who live with you.
What is coverage D: Loss of use?
This coverage will help with additional living expenses if your home is damaged by a peril insured against to the extent that you cannot live in your home. These expenses include, but are not limited to, housing, meals and warehouse storage.
What is renters insurance and what does it cover?
It is a group of coverages designed to help protect renters living in a house or apartment. It covers Personal Property, Liability, and Additional living expenses.
What is a long vs short term capital gain?
if you hold the asset for more than one year before you dispose of it, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term
What is a stock?
It is a fractional ownership in a. corporation.
What is a bond?
It is a debt instrument with a promise to pay back the money with interest.
what is a claim adjuster?
They inspect property damage to determine how much the company should pay for the loss.
what is a nominal rate of return?
it is the rate of return earned on an investment without any adjustment for inflation.
What is the “real” rate of return?
It is the nominal rate of return after you’ve taken out inflation.
How and why does inflation affect bonds?
A rise in either interest rates or the inflation rate will tend to cause bond prices to drop. This is because inflation erodes the purchasing power of a bonds future cash flow.
What is diversification?
It is the elimination of risk by investing in different assets.
What is the difference between a primary and secondary market?
In a primary market, newly issued securities are traded while in a secondary market, previously issued securities are traded.
