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personal finance

"driving a car is the largest single exposure to catastrophic losses for most americans

...

Auto insurance provides liability and property coverage

...

True or false, it is illegal to operate a motor vehicle without auto insurance

True

What is liability insurance?

Covers the insured if they are deemed responsible

Automobile bodily injury liability

covers bodily injury suffered by others

Automobile property damage liability

covers damage to the property of others. includes damage to other cars, buildings, signs, etc.

What is medical payment coverage?

covers bodily harm of insured driver and passengers. medical losses and bills within 1 yr of accident

what is physical damage coverage?

protection against loss or damage to one's car

what is collision insurance?

covers losses from collision with another car or object

What is comprehensive insurance?

covers collision, rollover, fire, theft, vandalism, wind, hail, etc

What is hmo health insurance?

payment in advance for health care coverage

Traditional health insurance

reimbursement for medical expenses, patient makes choice of where to receive care.

what is ppo health insurance?

group of health care providers, have contract with insurance company, discounted services

what is psn health insurance?

health care providers and hospitals, offer a health insurance contract, work as a group

Health savings accounts (HAS)

tax deductible savings account, individuals and employers deposit into it, used to pay medical bills and deductibles

Health reimbursement arrangements (HRA)

funds contributed by employers, funded solely by employers

What are the two primary risks of buying health insurance?

1. risk of living too long
2. risk of dying too soon

Why buy life insurance?

protects family from your financial burdens when you die

policy (term)

Contract between issuer and policy holder stating terms and dollar amounts

Death benefit (term)

amount that will be paid to beneficiary

policy holder (term)

owner of policy who retains all rights given by policy

Beneficiary (term)

person(s) who are designated to receive the death benefit

face amount (term)

the amount of coverage given in the event of the policy holder's death

premium (term)

charge to the policy holder for insurance coverage. monthly, quarterly, or annually

term insurance

pure protection against early death, face amount, pays benefits only if the insured dies

term insurance types

1. guaranteed renewable return
2. level-premium term
3. decreasing term
4. convertible term
5. group term

guaranteed renewable return

typical for term, protects against becoming uninsured

level-premium term

avoid increasing premiums with age, premiums set an average rate over time, can cover from 5-20 years

decreasing term

face amount of coverage declines. premiums remain constant. closely matches coverage with needs

convertible term

option of converting to cash value

group term

employer plan, based on health of whole group

cash value insurance

pays benefits at death and includes a savings/investment element

cash value insurance types

1. limited-pay insurance
2. adjustable insurance
3. universal insurance
4. variable insurance
5. variable-universal insurance

limited-pay insurance

premiums paid for a period of time, protected for life

adjustable insurance

allowed to adjust premiums, face amount, and cash value accumulation

universal insurance

pure protection (term), cash-value, variability of face value, premiums, and a rate of return

variable insurance

you choose your investments, face value and cash value may vary

variable-universal insurance

choice in investments, higher returns, most popular, higher commissions, annual fees

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