Prelim #3 Flashcards
What is pure risk?
Exposure to risks of loss only, which can be insured.
What are examples of pure risk?
- car accident
- Fire (Ex: house fire)
- Typically very random
- Accidental, unintentional
What is speculative risk?
Exposure to risks of loss and gain. These risks are uninsurable.
What is risk?
Uncertainty or lack of predictability. Some risks are in your control like getting cancer from smoking while some risks are out of your control like inflation.
What is a peril?
The cause of a possible loss such as a fire, windstorms, explosions, robbery, accidents, and premature death
What is a hazard?
A factor that increases the likelihood of loss through some peril such as defective house wiring or drunk driving.
What is risk management
Organized, planned strategy to protect your assets and family.
What are risk exposures?
- Dying
- Getting sick or injured
- Becoming disabled
- Victim of a crime
- Professional malpractice
- Running out of money
- Auto
- Home
- Personal Property
What are some risk management techniques?
- Risk Avoidance
- Risk Shifting
- Risk Assumption
- Risk Reduction
What is risk avoidance?
Not exposing yourself to the risk.
What is risk reduction?
Take action to reduce the frequency or severity of risk.
Examples:
-clear your sidewalks of snow (frequency)
-wear seatbelts (severity)
What is risk assumption?
Retain the risk and plan to pay the costs if the loss occurs.
What is risk shifting?
Transfering the risk or contractually pass the risk on to another.
Examples:
-Health insurance deductible
-Hold harmless agreement
What is rider?
Any document attached to the insurance policy that modifies its coverage by adding or excluding specified conditions or altering its benefits. Ex: A whole life insurance policy may include a waiver of premium disability benefit, an accidental benefit, or both.
What are riders of insurance contracts?
- Waiver of premium disability benefit
- Accidental Death Benefit
- Guaranteed Insurance Option
- Cost-of-Living Protection
- Accelerated Benefits
- Second to die Option
What are the provisions of a life insurance contract?
- Naming your beneficiary
- The Grace Period
- Policy Reinstatement
- Nonforfeiture clause
- Incontestability clause
- Suicide clause
- Automatic premium clause
- Misstatement of age provision
- Policy loan provision
- Riders to life insurance policies
What is umbrella insurance?
- Also called a personal catastrophe policy
- Supplements your liability
- Protects against libel, slander, defamation of character
- Increases bodily injury and property damage coverages
III. The 500 in 200/500/50 refers to
The limit of all bodily injury claims for a single accident.
Example:
-200k paid to one person in an accident
-500k paid to all persons in an accident
-50k paid for damage of property to others
Healthcare policy for disease with a notoriously poor value.
Cancer health care policy
Most young and healthy people don’t think about what?
Disability insurance
What are common ways life insurance is used?
- Charitable gift
- Equalize inheritances
- Pay for funeral expenses
- Pay for college education
Generally speaking how much life insurance should you get?
7x your income + 70% of your income
What is the riskiest type of life insurance policy for the insured?
Variable life insurance policy
