Copy of Insurance Wise Review Study Guide

Economics and Personal Finance WISE Test Review Insurance Insurance: ● concept of transferring or sharing risk ● diversifies the risk by selling policies to thousands of people ● transfer funds from a large group of people to relatively few few who suffer losses ● all policyholders share the cost of losses Insurance policy ● describes the type of coverage in an insurance agreement Claim ● paperwork filed with an insurance company in order to get them to cover a loss for someone they insure Premiums: ● the amount you pay for insurance ● paid monthly, quarterly, semiannually, or annually ● your degree of risk influences the cost of your premiums ● the higher your risk factors, the higher the cost of your premiums Deductible: ● the amount you pay before you begin receiving any benefits from your insurance company ● if you increase your deductible, your premiums will decrease ● if you reduce your deductible, your premiums will increase Liability insurance ● covers medical costs and property damage of the other driver if you are found to be at fault in an accident Collision coverage ● pays for damage to your car caused by colliding with another car or object ● If you owe on your car the lien holder will require collision coverage ● consumers may terminate collision coverage when their car is older--when you may pay more in premiums each year than the car is worth Comprehensive auto insurance ● covers damage to your car not caused by a collision(hail, fire, flood, etc.) How to reduce the cost of auto insurance: ● your driving record - no accidents or tickets ● being a good student ● taking a driver’s education course ● having safety features on your car (airbags, anti-lock brakes, anti-theft devices) ● increasing your deductible ● shopping around for policies ● staying on your parents’ insurance policy. Assigned Risk Pool: ● state program for drivers of a motor vehicle who has been denied coverage for too many tickets or accidents ● they will get insurance coverage at a higher cost ● helps keep down the number of uninsured motorists in the state Term life insurance ● life insurance that pays a death benefit if the policyholder dies within a specific time period ● has no remaining value at the end of this time period - no cash value Whole life insurance ● coverage lasts throughout the policyholder’s life ● you can choose to receive dividends from the earnings of your cash-value account ● you can choose to apply the dividends to your premiums ● you can borrow against the cash value ● also be called cash value insurance Health insurance ● HMO (health maintenance organization) ○ requires a primary care physician (PCP) who acts as " gatekeeper" ○ managed care plan that charges a set amount for each member each year ○ covers most medical services at no extra cost or for a small co-payment ● PPO ( “preferred provider organization”) ○ “ Preferred” in-network of providers in your area ○ do not need to select a primary care physician ○ do not need referral to see a specialist ● POS ("point of service”) - hybrid of an HMO and PPO ○ need a referral from your PCP to see a specialist ○ pay less if you use doctors, hospitals, and other healthcare providers in the plan’s network ○ have access to out-of-network providers at an increased cost Co- Payments ● Specific amount you pay for particular services, regardless of the cost of those services. ● Example, you might pay $20 each time you visit the doctor or $15 for each prescription Pre- Existing condition ● health problem that existed before you applied for a health insurance policy ● law requires insurance companies to cover these where previously it did not. Disability insurance ● a policy that insures a worker in the event of an occupational mishap resulting in disability ● compensates the injured worker for lost wages. Elimination period ● the amount of time that lapses after a disabling event before the insurance company begins to pay benefits ● the longer the elimination period, the lower the cost for the coverage Renter’s insurance ● insurance that provides coverage for accidents, damages, and losses in a rental apartment or house ● provides coverage for personal belongings and liability that may occur from an accident in the insured home Floater or Rider ● additional insurance coverage at additional cost to cover items not covered by your regular insurance policy ● examples – expensive expensive electronics or jewels Regulatory Agencies SEC - Securities and Exchange Commission ● government agency responsible for supervising and regulating companies to protect investors ● enforces federal laws concerning the trading of stocks and bonds, oversees brokers and investment advisors ● has final authority on matters of financial reporting by corporations Federal Reserve (the Fed) ● government agency responsible for creating and tracking all of the money in the U.S ● it is the monetary authority in the U.S. and is governed by the Federal Reserve Board in Washington, D.C. ● It includes 12 federal reserve banks ● is authorized to regulate monetary policy ● it supervises and regulates banks FDIC – Federal Deposit Insurance Corporation ● government agency that provides insurance for your deposits (up to $250,000) at member financial institutions. CFPB – Consumer Financial Protection Bureau ● government regulatory agency that oversees financial products and services offered to consumers ● The first government regulatory agency that can make federal rules for non-bank entities (payday lenders, debt collectors, etc). ● Regulates and supervises bank and non-bank entities and provides consumer education.