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CFP Test Prep > Insurance > Flashcards

Insurance Flashcards

1
Q

Insurable Risk Elements

A

1) There must be sufficiently large numbers of homogeneous exposure units to make losses reasonably predictable

2) The loss produced by the risk bust be definite and measurable

3) Loss must be fortuitous and Measurable

4) Loss must not be catastrophic to insurance company

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2
Q

Self-Insurance Disadvantages

A
  • Catastrophic loss to the company
  • Replace services the insurance company would handle
  • Possibility of high income taxes on self insurance fund
  • Law of large numbers will not operate
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3
Q

Avoidance of Risk

A

Renting instead of buying

Avoid buying a house with a pool

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4
Q

Diversification of Risk

A

Store assets in different locations

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5
Q

Retention of Risk

A

Deductibles on insurance

Coinsurance

Self-Insurance

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6
Q

Reduction of Risk

A

Install Smoke detectors, House alarms

Safety Equipment

create safety programs for business

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7
Q

Transfer of Risk

A

Insurance

Risk Sharing
- Harmless agreements
- Incorporation of business

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8
Q

4 Principles of Indemnity

A

Insurable Interest

Concept of Actual Cash Value

Other Insurance (limit the ability to profit from loss)

Subrogation

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9
Q

Tort

A

a wrongful act other than a breach of contract for which civil action may be brought against the Tortfeasor

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10
Q

Intentional Tort

A

A deliberately performed act such as assault, battery, false arrest

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11
Q

Unintentional Tort

A

Negligence or carelessness

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12
Q

Attractive Nuisance

A

A situation in which high degree of care is imposed on the land occupier for certain conditions on the land

Ex. Pool that isn’t screened

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13
Q

Negligence Per Se

A

a situation where the standards of care is set by a statute

ex. school zones and crosswalks

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14
Q

Strict Liability

A

limited to manufactures and distributors of products found to be defective.

Ex. Romain lettuce with e. coli, Cars with defective parts, Pharmaceuticals that cause illness or death

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15
Q

Absolute Liability

A

Extra hazardous conditions which result in losses to others

Ex. Keeping of wild animals, Workers comp.

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16
Q

Vicarious Liability

A

When one person is held liable for another persons negligence.

Ex. a Manager is responsible for his agents

17
Q

Assumption of Risk

A

If one person recognizes and understands danger in an activity yet voluntarily chooses to encounter it. Another part CAN NOT be held responsible

Ex. Signing a waiver to do dangerous activity

18
Q

Contributory Negligence

A

Driving drunk or j-walking Defeats the claim to the injured

19
Q

Comparative Negligence

A

A Degree of negligence

-Injured was 20% negligent, Driver was 80% Negligent

20
Q

Last Clear Chance

A

Contributory negligence of the injured party will not bar recovery of damages

Not avoiding a risk even with ample amount of time

Ex. Not swerving when a car cuts you off even when you had time to avoid the crash

21
Q

Capital Retention/Preservation

A

Method presumes that only interest is distributed . The original capital is still left at the end of the income period.

5% Rule (or % of assume interest) - inflation

When a problem doesn’t give # of years assume capital Retenion

22
Q

Disability Typical Coverage amount

A

50-60% of earned income

23
Q

Workers Compensation is an Example of?

A

Absolute Liability

24
Q

Medicare Part A

A

Hospital insurance
- Hospitals Stays
- Post Hospital Extended Care
- Post Hospital Home Health Service
- Hospice
- Blood after the first 3 Pints

25
Q

Medicare Part B

A

Medical insurance
- Doctors Services
- Medical Test (Transfusions, X-Rays)
- Free Preventative Care (Cancer screening)
- Therapy

26
Q

Medicare Part D

A

Drug Manufactures must provide a discount

Does not apply to self Administered drugs

27
Q

Medicare Supplemental AKA Medigap Policy

A

Helps to pay deductibles and coinsurance

Only one per retiree

Must be Enrolled on Medicare Part A & B

28
Q

HMO

A

Employer Group Health plan Provides Health Care Services for a fixed Premium (Pre-paid)

Must use doctors provided by Gate Keeper not personal doctor

29
Q

PPO

A

Employer Group Health plan Provides Health Care Services Paid by a *fee-for-service.

Can use personal doctors outside the network

30
Q

COBRA

18 month and 36 month

A

Employers providing group or self-funded health coverage are required to offer terminated employees the right to buy continued health coverage

18M: Voluntary/Involuntary termination

36M:
- Death or divorce with depends
-Loss of dependents status (dependent becomes an adult)

31
Q

Pure Life Annuity

A

Provides periodic payments as long as the annuitant is living

Payments cease upon death

32
Q

Period Certain Annuity

A

Payments guaranteed for a certain time regardless the annuitant is living

CFP Test Prep (5 decks)

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