Topic 4: Dealing With Long-term Risks Flashcards
Accident, sickness and unemployment (ASU) insurance
A policy that provides cover to the insured party in the event of an accident or sickness that prevents them from working or if they become involuntarily unemployed
Beneficiary
In relation to trusts, it’s a person whose property is held as a part of a trust and looked after by a trustee.
Child Trust Fund
Long term savings account available for kids born between 01/01/2002 and 02/01/2011. Was set up by the government to encourage people to build up savings. Was replaced by junior ISAs
Civil partnership
Legal union between same sex couples
Credit rating
An assessment of an individual’s creditworthiness- their eligibility to borrow money- based on their record of money borrowed and repaid
Critical illness insurance
Insurance that pays out a guaranteed cash lump sum if the insured person dies or is diagnosed with a specific critical illness
Estate
The sum of a person’s assets minus all debts and obligations, known as net worth
Financial Services Compensation Scheme (FSCS)
Compensation Scheme that pays Compensation to account holders of up to a certain amount per provider if the provider is in default (cannot pay account holders money they have in their accounts)
Impact of risk
Effect on someone’s life of sustaining loss or damage
Income protection insurance
A policy that allows people to manage the risk of loss of earnings over a long term. It pays out a monthly income to insured people who have suffered an accidental injury or long-term illness and who are unable to work
Inheritance tax
Tax that may be payable on the estate (the assets after debts have been paid off) left by someone when they die
Interest
Money either paid to an account holder by the provider or charged to the account holder by the provider. It’s paid on savings accounts and some current accounts and charged on borrowing, such as an overdraft. Each provider decides the rate of interest it will pay or charge, depending on the type of account and in some cases, the credit history of the individual account holder
Intestate
Term used to describe so.eone who died without making a will. In this situation, intestacy laws set out what happens to the person’s possessions (their estate)
Legal guardian
A person who has legal authority and duty to care for another person, known as a ward. A ward is usually a child under 18 but can also be incapacitated or disabled who isn’t able to make decisions themselves
Life assurance
Insurance policy that pays out a sum of money if the insured person dies
Pandemic
An infectious disease spreads rapidly to many people across a large region
Premium
The price of an insurance policy, based on factors including how
likely an event is to occur, the amount of money needed to
rectify the situation should the event happen, the length of time
the policy will be in force, and how the premium is paid
Premium bond
A lottery bond, issued by NS&I, entered into a monthly prize
draw with tax-free prizes or ‘premiums’. Bonds must be held for
a full calendar month after the month in which they were
purchased, and retain an equal chance of winning until cashed
in
Probability of risk
The likelihood of a damaging or harmful event happening
Prudential Regulation Authority (PRA)
One of the main regulations of financial Services in the UK
Risk
The possibility that something harmful or damaging could
occur
Risk averse
Reluctant to take any kind of risk
Risk/reward relationship
Notion that people will be prepared to take greater risk if doing so may bring them a greater reward. Conversely, people who seek greater security (such as lower risk) will receive a lower level of reward
Risk tolerant
Willing to take risks
