Risk ManagementRisk ManagementReviewReview

Personal FinancePersonal Finance

33A method for spreading A method for spreading

individual risk among a large individual risk among a large group of people to make group of people to make losses more affordable for all. losses more affordable for all.

Insurance Insurance

66The insurance policyholder The insurance policyholder

should be put back in the should be put back in the same financial condition he same financial condition he was in before the loss was in before the loss occurred. occurred.

Indemnification Indemnification

77Government sponsored Government sponsored

health insurance for people health insurance for people currently age 65 or older. currently age 65 or older.

MedicareMedicare

88Eliminate the chance for loss Eliminate the chance for loss

by never doing the activity.by never doing the activity.Risk avoidance Risk avoidance

99Pay premiums throughout Pay premiums throughout

your entire life and your entire life and beneficiaries receive a stated beneficiaries receive a stated benefit at death. (permanent benefit at death. (permanent life insurance)life insurance)

Straight life Straight life

1010Chances of loss involving Chances of loss involving

your income and standard your income and standard of living. of living.

Personal risks Personal risks

1111Wearing a seatbelt is an Wearing a seatbelt is an

example of this type of example of this type of strategy for dealing with strategy for dealing with risks.risks.

Risk reduction Risk reduction

1212Allows the insured to stop Allows the insured to stop

paying premiums if they paying premiums if they become disabled, but keep become disabled, but keep the policy. (life insurance)the policy. (life insurance)

Waiver of premium Waiver of premium

1313Another name for term Another name for term life.life.

Temporary Temporary

1414Establish a fund and Establish a fund and

assume financial assume financial responsibility for all losses.responsibility for all losses.

Risk assumption Risk assumption

1616Group plan offering Group plan offering

prepaid medical care to its prepaid medical care to its members. members.

Health maintenance Health maintenance organization (HMO)organization (HMO)

1717Once the policy has been in Once the policy has been in

place a stated length of time, place a stated length of time, the insurer can no longer the insurer can no longer question items on the question items on the application to deny coverage. application to deny coverage. (life insurance provision)(life insurance provision)

Incontestable clause Incontestable clause

1818List a way to save on List a way to save on

insurance premiums.insurance premiums. Increase deductiblesIncrease deductibles Purchase group insurancePurchase group insurance Consider payment options Consider payment options

– Paying monthly is usually more expensivePaying monthly is usually more expensive Look for discount opportunitiesLook for discount opportunities Comparison shop Comparison shop

1919Chances of loss or harm to Chances of loss or harm to

personal or real property. personal or real property. Property risks Property risks

2020Makes regular payments to Makes regular payments to

replace lost income when replace lost income when illness or injury prevents illness or injury prevents the insured from working. the insured from working.

Disability insurance Disability insurance

2121 A company collects premiums from A company collects premiums from

employees to pay medical benefits. employees to pay medical benefits. Based on mathematical probability. Based on mathematical probability. Assumes only a very few employees Assumes only a very few employees

will need extensive medical will need extensive medical services. services.

Self-Insurance PlansSelf-Insurance Plans

2222Renting a house instead of Renting a house instead of

buying one is an example buying one is an example of this type of strategy for of this type of strategy for dealing with risk.dealing with risk.

Risk avoidance Risk avoidance

2323Government-sponsored Government-sponsored

health insurance for health insurance for people with low incomes people with low incomes and limited resources. and limited resources.

Medicaid Medicaid

2424Chances of loss that may Chances of loss that may

occur when your errors or occur when your errors or inappropriate actions result in inappropriate actions result in bodily injury to someone else bodily injury to someone else or damage to someone else’s or damage to someone else’s property.property.

Liability risks Liability risks

2525Gambling is this type of Gambling is this type of risk.risk.

Speculative risk Speculative risk

2626Plan for sharing the risk of Plan for sharing the risk of

high medical costs high medical costs resulting from injury or resulting from injury or illness. illness.

Health insurance Health insurance

2727Why are group policies less Why are group policies less

expensive?expensive?Spread the risk among Spread the risk among

many people. many people.

2828An organized strategy for An organized strategy for

controlling financial loss controlling financial loss from pure risks. from pure risks.

Risk management Risk management

2929A chance of loss with no A chance of loss with no

chance for gain. This type chance for gain. This type of risk is insurable. of risk is insurable.

Pure risk Pure risk

3030Beneficiary is paid twice Beneficiary is paid twice

the face amount. (life the face amount. (life insurance)insurance)

Double indemnityDouble indemnity

3131What is COBRA insurance?What is COBRA insurance?Allows people who leave Allows people who leave

employment to continue their employment to continue their health insurance under the health insurance under the company plan for a limited company plan for a limited period of time (usually 18 period of time (usually 18 months). months).

3232Protects renters from Protects renters from

property and liability risks. property and liability risks. Renter’s insurance Renter’s insurance

3333Provision that specifies Provision that specifies

how the insurers will share how the insurers will share the cost when more than the cost when more than one policy covers a claim. one policy covers a claim.

Coordination of BenefitsCoordination of Benefits

3434Person who determines the Person who determines the

value of the property value of the property destroyed.destroyed.

Claims adjustors Claims adjustors

3535Take measures to lessen Take measures to lessen

the frequency or severity the frequency or severity of losses that may occur.of losses that may occur.

Risk reduction Risk reduction

3636A group of healthcare A group of healthcare

providers who band providers who band together to provide health together to provide health services for set fees. services for set fees.

Preferred provider Preferred provider organization (PPO)organization (PPO)

3737Small insurance policy that Small insurance policy that

modifies the coverage of modifies the coverage of the main policy. the main policy.

Rider Rider

3838 Must prove you are disabled. Must prove you are disabled. Must have a physical or mental Must have a physical or mental

condition that prevents you from condition that prevents you from working. working.

Condition must be expected to last 12 Condition must be expected to last 12 months or lead to death. months or lead to death.

Benefits determined by your pay and Benefits determined by your pay and the number or years you have been the number or years you have been covered under Social Security. covered under Social Security.

Social Security disability Social Security disability

3939People who look for People who look for

evidence of destroyed or evidence of destroyed or damaged property. damaged property.

Insurance investigators Insurance investigators

4141Covers your expenses if Covers your expenses if

your injury or illness your injury or illness resulted from your job. resulted from your job.

Worker’s compensation Worker’s compensation insurance insurance

4242Investing in the stock Investing in the stock

market is an example of market is an example of this type of risk. this type of risk.

Speculative risk Speculative risk

4343Predict the probability of Predict the probability of

death at different ages. death at different ages. Premiums are based on Premiums are based on these tables. these tables.

Mortality tables Mortality tables

4444A(n) ___________ is a A(n) ___________ is a

written amendment to an written amendment to an insurance policy.insurance policy.

Endorsement Endorsement

4545Coverage for the insured’s Coverage for the insured’s

moveable property moveable property wherever it may be wherever it may be located. located.

Personal property floaterPersonal property floater

4848This coverage covers This coverage covers

property when it is in your property when it is in your home or when it is with home or when it is with you away from home. you away from home.

Theft and vandalism Theft and vandalism coveragecoverage

4949A risk that may result in a A risk that may result in a

loss or gain.loss or gain.Speculative risk Speculative risk

5050This type of coverage pays This type of coverage pays

for temporary housing for temporary housing while the house is being while the house is being repaired or rebuilt. repaired or rebuilt.

Physical damage coveragePhysical damage coverage

5151Requires policyholders to Requires policyholders to

insure their building for a insure their building for a certain percentage of its certain percentage of its replacement value in order replacement value in order to receive full to receive full reimbursement for a loss. reimbursement for a loss.

Co-insurance clauseCo-insurance clause

5252Driving a car is an example Driving a car is an example

of this type of risk.of this type of risk.Pure risk Pure risk

5353Covers claims for bodily Covers claims for bodily

injury to another person or injury to another person or damage to another damage to another person’s property. person’s property.

Liability coverage Liability coverage

5454Protection provided by the Protection provided by the

terms of an insurance terms of an insurance policy. policy.

Coverage Coverage

5555The portion of a paid The portion of a paid

premium that the insurer premium that the insurer has not yet earned has not yet earned because the policy term because the policy term has not ended. has not ended.

Unearned premium Unearned premium

5656A table of premium rates A table of premium rates

based on ages and life based on ages and life expectancies. expectancies.

Actuarial table Actuarial table

5757A specialist in insurance A specialist in insurance

calculations and statistics. calculations and statistics. Actuary Actuary

5858A policyholder’s request A policyholder’s request

for reimbursement for a for reimbursement for a loss under the terms of an loss under the terms of an insurance policy. insurance policy.

Claim Claim

5959The specified amount of a The specified amount of a

loss that a policyholder loss that a policyholder pays before the insurer is pays before the insurer is obligated to pay anything. obligated to pay anything.

Deductible Deductible

6060The amount of money The amount of money

payable to a policyholder payable to a policyholder upon discontinuation of a upon discontinuation of a life insurance policy. life insurance policy.

Cash value Cash value

6161Sums of money to be paid Sums of money to be paid

for specific types of losses for specific types of losses under the terms of an under the terms of an insurance policy. insurance policy.

Benefits Benefits

6262The additional time after The additional time after

the premium due date that the premium due date that the insurer allows the the insurer allows the policyholder to make the policyholder to make the payment without penalty. payment without penalty.

Grace period Grace period

6363Person named on an Person named on an

insurance policy to receive insurance policy to receive the benefits from the the benefits from the policy.policy.

Beneficiary Beneficiary

6464A professional insurance A professional insurance

salesperson who acts for salesperson who acts for the insurer in negotiating, the insurer in negotiating, servicing, or writing an servicing, or writing an insurance policy. insurance policy.

Insurance agent Insurance agent

6565The amount stated in a life The amount stated in a life

insurance policy to be paid insurance policy to be paid upon death. upon death.

Face amount Face amount

6666An unexpected reduction An unexpected reduction

in value of the insured’s in value of the insured’s property caused by a property caused by a covered peril. covered peril.

Loss Loss

6767A condition that creates or A condition that creates or

increases the likelihood of increases the likelihood of some loss. some loss.

Hazard Hazard

6868The person or company The person or company

protected against loss. protected against loss. Insured Insured

6969Specified losses that the Specified losses that the

insurance policy does not insurance policy does not cover. cover.

Exclusions Exclusions

7070The written verification of The written verification of

the amount of a loss that the amount of a loss that must be provided by the must be provided by the insured to the insurer before insured to the insurer before a claim can be settled. a claim can be settled.

Proof of lossProof of loss

7171The contract form that has The contract form that has

been adopted by many been adopted by many insurers, approved by insurers, approved by state insurance divisions, state insurance divisions, or prescribed by law. or prescribed by law.

Standard policy Standard policy

7272An event whose An event whose

occurrence can cause a occurrence can cause a loss. loss.

Peril Peril

Final QuestionFinal QuestionExplain the concept of Explain the concept of

indemnification. indemnification. The insured should be put The insured should be put

back in the same financial back in the same financial condition that they were condition that they were in prior to the loss. in prior to the loss.