Unit 2: Credit/ Insurance Flashcards
hazard
Anything that increases the likelihood of loss through peril. An example is defective electrical wiring in a house increasing the risk of a fire.
What is risk
The chance of loss or injury
What is peril
An event that causes loss or injury. Examples include fire or robbery
What is a premium
A premium is the money you pay simply to have insurance. It is often collected on a monthly basis.
Risk Pooling
forms of risk management mostly practiced by insurance companies. Under this system, insurance companies come together to form a pool, which can provide protection to insurance companies against catastrophic risks such as floods, earthquakes etc.
-Loss -indirect loss
-decline in value -payments that occur because of the direct loss( house burning down) that is not the house itself. For example, now you have to buy a hotel room/ breakfast etc.
Insurable Interest
basic requirement for an insurance company to issue a policy. Entities not subject to financial loss from an event do not have an insurable interest and cannot purchase an insurance policy to cover that event.
Indemnity
insurance rule, cant make money on claims. Tells you how much you can claim
PPO health insurance
network of independent providers that are paid per service and work together to provide health services
HMO Health Insurance
full-service organization with its own facilities and caregivers on staff. A group plan that provides medical care to its members
HSA health insurance plan
health spending accounts, allow people to set aside money to pay for qualified medical expenses. Taking out of paycheck
Long term disability insurance
2-5 years, or until retirement. pay s percent of regular pay (60%) comes after short term.
short term disability insurance
temporary unable to work due to injury or illness. starts after 1-14 days of non working. 6 months-2 years can use. Pay portion of paycheck (60%)
workers compensation
if injured at work or become ill because of work doing, work provides compensation.
Credit
The receiving of funds (money) directly or indirectly to buy goods in the present with the promise to pay for them in the future.
Why you need credit
You need credit so you can show that you have a good (or bad but hopefully good) history of borrowing money or funds and then repaying them back on time so you can get loans to help purchase bigger items. *GOOD CREDIT HELPS BUILD YOUR WEALTH**
Revolving credit VS installment credit
revolving- each month get the same amount of money you can spend, only need to pay the minimum installment- you get one loan and pay the same amount each month to pay it off
Credit score range
300-850
Good credit is what range?
700 or above
5 factors that make up your credit are:
- 35% Payment History: Late payments, bankruptcies, and other negative items can hurt your credit score, but a solid record of on-time payments helps you score.
- 30% How Much You Owe: Credit scores look at the amounts you owe on all your accounts, the number of accounts with balances, and how much of your available credit you are using. The closer you are to your credit limit, the lower your score will be (Remember magic number 30% on borrowing).
- 15% Length of Credit History: A longer history of using credit responsibly will increase your score. However, you can get a high score with a short credit history if you made all of your payments on time, or paid off your credit cards quickly. -
10% New Credit: If you recently applied for or opened new credit accounts, your credit score will weigh this fact against the rest of your credit history.
-10% Mix of credit
APR
APR or annual percentage rate is the yearly interest rate charged on outstanding credit card balances.
Chapter 7 bankruptcy
- erases most of your debt, you must be unemployed, - a court-appointed trustee takes possession of your nonexempt property, arranges for its sale or liquidation and is responsible for paying as many of your debts as possible with the proceeds, - offers a financial fresh start, -file only once every eight years.
What is not forgiven from bankruptcy
Child support/alimony, debts from divorce, student loans, fines and penalties imposed for law violations, taxes, cosigner obligations, credit purchases of $1,150 or more for luxury items or services made within 60 days of your bankruptcy filing, and criminal restitution resulting from illegal activities such as embezzlement, larceny, fraud, along with willful or malicious injury to another person or another person’s property.
Snowball effect
where you pay off the smallest outstanding debt and then moved onto the next one slowly getting bigger as you finished off one.
