FBLA- Insurance and Risk Management – Flashcards
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Term Life Insurance
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affordable and flexible, provides coverage for a specified length or term
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Permanent Life Insurance
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provides coverage for the duration of your life
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Whole Life Insurance
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permanent insurance, where premiums remain the same through the life of the policy with a portion invested
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Universal Life Insurance
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similar to whole life, but more flexible with amount of premiums and death benefit adjustment
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Variable Life Insurance
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allows you to make decisions about where money gets invested
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Variable Universal Life Insurance
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allows you to adjust amount of death benefit, premium, and investment choices
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Survivorship Life Insurance
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insures both you and your spouse under one policy, with the proceeds payable after the second death
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Joint Life Insurance
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covers both spouses or multiple business partners. It pays out when the first person on the policy dies (which is where its alternative name of "first to die life insurance" comes from)
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Convertible Life Insurance
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allows you to convert to a different policy at the end of the term
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No Medical Exam Life Insurance
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policy does not require a medical exam for approval; not for people with serious health issues
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Child Life Insurance
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a policy specifically for a child
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Senior life Insurance
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a policy specific to senior coverage
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Group Life Insurance
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specific to business providing life insurance coverage for their employees
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Military Life Insurance
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learn about the options available to a retired military personnel and veterans
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Key Man Life Insurance
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find out how you can protect your business with a life insurance policy
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Risk
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uncertainty concerning the occurrence of a loss
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Objective Risk (degree of risk)
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the relative variation of actual loss from expected loss, declines as the number of exposures increases
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Subjective Risk
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uncertainty based on a person's mental condition or state of mind
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Chance of Loss
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the probability that an event will occur
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Law of Large Numbers
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states that as the number of exposure units increases, the more closely the actual loss experience will approach the expected loss experience
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Subjective
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when you use your own opinion
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Objective
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uses data
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Peril
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the cause of loss financially (house burns down, fire is the...)
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Hazard
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a condition that creates or increases the chance of loss
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4 Types of Hazard
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physical, moral, morale, legal
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Physical Hazard
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a physical condition that increases the chance of loss (icy roads, defective wiring)
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Moral Hazard
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dishonesty or character defects in an individual that increases the frequency or severity of loss (faking an accident)
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Morale Hazard
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carelessness or indifference to a loss because of the existence of insurance (leaving car keys in an unlocked car)
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Legal Hazard
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refers to characteristics of the legal system or regulatory environment that increase the frequency of severity of losses (large damage awards in liability lawsuits)
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Pure Risk
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a situation in which there are only the possibilities of loss or no loss, insurance is available for these risks (law of large numbers can be applied more easily)
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Speculative Risk
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a situation in which either profit or loss is possible, not insurable
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Fundamental Risk
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a risk that affects the entire economy or large numbers of persons or groups within the economy (rapid inflation, war, natural disasters)
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Particular Risk
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a risk that affects only individuals and not the entire community (car thefts, bank robberies, fires)
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Personal Risks
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risks that directly affect an individual
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Property Risks
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the risk of having property damaged or lost from numerous causes
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Direct Loss
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a financial loss that results from the physical damage, destruction, or theft of the property
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Indirect or Consequential Loss
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a financial loss that results indirectly from the occurrence of a direct physical damage or theft loss
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Liability Risks
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involve the possibility of being held liable for bodily injury or property damage to someone else
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Loss Prevention
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aims at reducing the probability of loss so that the frequency of losses is reduced
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Loss Reduction
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activities to reduce the severity of losses
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Retention
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in individual or business firm retains all or part of a given risk
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Noinsurance Transfers
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a risk may be transferred to another party through contracts, hedging, or incorporation
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Insurance
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the pooling of fortuitous losses by transfer of such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with risk
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Pooling
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the spreading of losses incurred by the few over the entire group
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Pooling Implies:
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1). the sharing of losses by the entire group 2). prediction of future losses with some accuracy based on the law of large numbers
