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Basic Insurance Concepts
Terms in this set (28)
What is risk?
The chance of loss or injury
Why is insurance important?
Risk is everywhere! When accidents occur they can change lives forever. Insurance provides financial security and peace of mind.
What are the different sources for insurance?
What is negligence?
Failure to take ordinary or reasonable care to prevent accidents from happening.
What is the basic concept of risk avoidance?
Completely avoiding an activity to lower the probability of loss or injury...i.e. "I'm not doing it". Example: Not driving a car to avoid traffic accidents.
What are the four steps in planning an insurance program?
1. Set Goals
2. Develop a Plan
3. Put Your Plan into Action
4. Review Results
Who is a beneficiary?
A person named to receive benefits from a life insurance policy.
What is the second step in planning an insurance program?
Developing the plan. In this step you align the goals you established in step one with tangible insurance policies.
What is long-term care insurance?
Insurance that provides payment for extending nursing care accidents, illness, or old age.
What is a deductible?
A deductible is the money you must pay AFTER an accident occurs BEFORE your insurance coverage begins.
What is the basic concept of risk reduction?
Doing or not doing a specific activity to lower a related risk....i.e. "I'll do this to lower that". Example: Exercising daily to lower the chances of heart disease.
What is the basic concept of risk shifting
Taking one person's risk and sharing it with others....i.e. "Take my risk!" Example: Insurance
What is an insurance policy?
The contract between the policyholder and the insurance company.
How are premiums and deductibles related?
If you opt to have a higher premium deductible it will lower your premium.
What is the first step in planning an insurance program?
Setting goals for insurance. In this step it is important to consider what is important to you at this stage in your life.
Why do different insurance policies/coverages exist?
People have different needs, wants, and resources. Perhaps they NEED flood coverage for their home because of where they live. Maybe they WANT extra protection for a particular item. Finally they simply may not have the RESOURCES (i.e. money) to purchase coverages they need or want.
What is peril?
An event that causes loss or injury. Examples include fire or robbery
Who is the policyholder?
The person who takes out the insurance/is covered by the insurance.
What is risk management?
An organized plan for protecting yourself, your family and your property.
What is the third step in planning an insurance program?
Putting your plan into action. After aligning your goals with tangible policies you will actual go and purchase the needed insurance policies.
What is a 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 the fourth step in planning an insurance program?
Reviewing your results. Take a look at your risk management plan every 2-3 years or as family circumstances change (i.e. arrival of a baby or moving into a house).
What is disability insurance?
Insurance that provides payment to replace earnings when workers cannot work due to illness or injury.
How are disability insurance and long-term care similar? How are they different?
They are similar in the sense that they help people who have been injured recoup some of the financial loss they have suffered. One of the ways they differ is the length of the coverage. Disability insurance is shorter in length.
What is a premium?
A premium is the money you pay simply to have insurance. It is often collected on a monthly basis.
Why is an insurance policy important?
It defines and details all coverages you have. It can answer any question you may have regarding your coverage.
What is insurance?
It is a product that transfers risk from an individual to a larger pool (an insurance organization). It provides protection from possible financial loss.
What is the basic concept of risk assumption?
Understanding there is a risk and simply accepting it.....i.e. "I understand the risk but I got this". Example: Not putting comprehensive coverage on an old car.
THIS SET IS OFTEN IN FOLDERS WITH...
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