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Personal Finance > Unit 4 > Flashcards

Unit 4 Flashcards

(104 cards)

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1
Q

Accredited Investor

A

Someone who has earned income that exceeded $200,000 (or $300,000 together with a spouse) in each of the prior two years and reasonably expects the same for the current year; and a net worth more than $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

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2
Q

Activities of Daily Living (ADL)

A

Basic activities such as being able to bathe yourself, fix your own food or eat it by yourself, dress yourself, use the bathroom on your own, or get out of bed without assistance.

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3
Q

Agent

A

The person named in a legal document to act on the behalf of another person.

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4
Q

Agility Skill

A

The ability to adapt in a changing environment to achieve desired results.

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5
Q

Beneficiary

A

The person or entity that receives the policy death benefit when the insured dies.

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6
Q

Benefit Limit

A

The maximum amount a long-term care policy will pay.

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7
Q

Benefit Period

A

The length of time long-term care benefits will be paid. This benefit period could be a few months (very rare) to many years.

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8
Q

Bequest

A

The irrevocable and voluntary transfer of property to another party after death through a will.

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9
Q

COBRA

A

Consolidated Omnibus Budget Reconciliation Act; health insurance that is available to anyone who works for an employer with 20 or more employees.

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10
Q

Cash Value Life Insurance Policy

A

Blends pure term insurance with a savings option.

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11
Q

Coinsurance

A

The sharing of costs between the insured individual and the health insurance company.

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12
Q

Collision Insurance

A

Coverage that pays for the damage to your vehicle caused by contact with another vehicle or object.

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13
Q

Commission

A

Payment based on the sale of a product or service.

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14
Q

Comprehensive Insurance

A

An optional coverage that helps pay for damage to your vehicle caused by a non-accident event.

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15
Q

Confirmatory Bias

A

Ignoring evidence that investment success is based on pure chance, which leads to overconfidence in future decisions.

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16
Q

Conflict of Interest

A

When a financial professional benefits financially to an extent that exceeds the value provided to the­ client; exists any time an advisor makes money based on a recommendation that is not in the best interest of his or her client.

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17
Q

Consumer-Driven Plan

A

A type of coverage designed to reduce yearly premiums by providing an incentive to the insured to pay more upfront medical expenses out of pocket.

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18
Q

Copayment

A

A cost-sharing amount with the insurance company.

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19
Q

Credit Freeze

A

Allows your credit reports to be sealed so that no new accounts can be opened unless you unfreeze the account using a personal identification number (PIN).

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20
Q

Deductible

A

The amount that you must pay on a claim before insurance comes into play.

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21
Q

Defined Contribution Plan

A

A retirement account funded primarily by the employee; defines how much your employer will deposit into your retirement account.

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22
Q

Disability

A

Includes the following three requirements: (1) you cannot do the work you did before an accident or illness, (2) you cannot readjust your skills because of your medical condition, and (3) disability has or is expected to last for at least one year or until death.

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23
Q

Earned Income Tax Credit (EITC)

A

A method of assisting working adults with low incomes through the tax system.

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24
Q

Elimination Period

A

The amount of time between the disability occurring and the insurance company paying the claim.

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25
Estate
Someone’s property, which can include personal, real, and intangible assets; assets less liabilities and other expenses.
26
Estate Taxes
Taxes assessed on the value of a decedent’s estate at death.
27
Face Value
The initial dollar amount of insurance that you select (as the policy owner) to be paid to the beneficiary upon the insured’s (most likely you) death.
28
Executor
The personal representative (e.g., relative or attorney) or institution (e.g., trust company) tasked with the responsibility of carrying out a will’s directions and disposing of the deceased’s property.
29
Fee
The amount typically paid to a financial professional from the client.
30
Fee-for-Service Plan
The most flexible, and costly, type of health insurance coverage available; allows the insured to use the services of different hospitals, clinics, and doctors without prior permission.
31
Fiduciary Standard of Advice
Requires financial professionals to act in the best interest of the ­client at all times and fully disclose any and all conflicts of interest.
32
Financial Advisor
A professional engaged in the business of providing financial and investment advice for a fee.
33
Financial Counselor
Helps people resolve past financial difficulties, as well as helps those with fewer assets and lower incomes establish a plan for the future.
34
Financial Planner
Can act as your “financial quarterback” by providing help and guidance on all aspects of your financial situation. Generally results in a long-term client-planner relationship that usually focuses on helping clients achieve future goals.
35
Fraud
Occurs whenever someone attempts to deceive you with a promise of goods, services, money, or other benefits that really do not exist, were never intended to be provided, or were misrepresented.
36
Gift
The irrevocable and voluntary transfer of property to another living person while alive.
37
Grantor
What you are called when you establish a trust.
38
Healthcare Proxy
A legal document that ensures your wishes are known if you become injured or ill, but are not in a life-ending condition.
39
Hedge Fund
An investment that pools money from wealthy investors and invests in securities or other types of investments with the goal of obtaining positive returns; tends to be less well-­regulated than other managed investment products and services, like mutual funds. Can only solicit investments from accredited investors.
40
Heuristics
A decision-making shortcut for processing a lot of information.
41
Homeowner’s Coverage Policy (HO Policy)
Covers either named perils or all risks.
42
Identity Theft
A crime in which someone wrongfully obtains and uses your personal data, such as your name and Social Security number, in some way that involves fraud or deception for his or her economic gain.
43
Hyperbolic Discounting
The perception that the value of future benefits is lower than that of an alternative available right now.
44
Indemnity
An insurance provision that states that individuals (the policy owners) can only be compensated up to the value of their loss.
45
Individual Retirement Account (IRA)
IRS-approved accounts that allow someone with earned income to earn money for retirement on a tax-deferred basis.
46
Inheritance
Money or assets received, tax-free at the federal level, at the death of another person.
47
Insurable Interest
If the insured individual were to die unexpectedly, the policy owner would suffer a financial loss. Family members, business partners, and employers typically can show an insurable interest.
48
Insurance
The primary way people transfer risk of a loss to another party, like an insurance company.
49
Insured
The person that must die for the policy to pay off (most often, the policy owner is the insured but not always).
50
Liability Coverage
Intended to pay for medical costs, funeral expenses, lost wages, punitive damages, car rentals, repairs, and compensation for pain and suffering for people in the other car involved in an accident.
51
Life Insurance
Provides a tax-free, lump-sum insurance benefit that can be used to pay final expenses, burial costs, debts, and other expenses.
52
Long-Term Care Insurance
A way to transfer the potential financial risk associated with long-term care needs.
52
Long-Term Disability Insurance
Effective after you cannot work for 6 to 12 months. Most policies extend from a few years up until age 65 (at age 65 you can then enroll in Medicare). Higher premiums are associated with increased incomes and duration of coverage.
53
Living Will
A legal document that is used to direct a physician or hospital about the types of medical treatment someone wants or does not want in the case the person becomes incapacitated. Also called an advanced directive.
54
Loss-Averse
A general dislike of losses.
55
Managed Care Plan
System of health care where patients visit doctors, hospitals, and specialists in a specified monitored network.
56
Medicaid
State-administered health insurance designed to provide coverage for individuals and families with low incomes and limited financial assets.
57
Medicare
Available to those who are age 65 or older, those who are younger but have a disability, and those with end-stage renal disease.
58
Near-poor
Individuals living just above the poverty line.
59
Optimism Bias
Believing that one will rarely, if ever, experience painful losses during one’s lifetime.
60
Out-of-Pocket Expense
Deductible, coinsurance, and copayment.
61
Pension Plan
Provides a retiree with a guaranteed payment from his or her employer for the remainder of the retiree’s life. Also known as a defined benefit plan.
62
Peril
Anything that causes you to experience a loss.
63
Personal Automobile Insurance Policy (PAP)
Insurance that helps pay expenses (liabilities) to others in case you cause an accident; some provisions within a PAP can be used to repair your vehicle in case of an accident or other damage.
64
Personal Property Floater
Adds extra insurance coverage for jewelry, art, guns, furs, collectibles, or other high-value property. Sometimes called a rider.
65
Phishing Scheme
An unsolicited e-mail asking you to provide personal information (such as your social security number) or confirm the details of a credit account.
66
Point-of-Service (POS) Plan
A popular hybrid health insurance coverage. Usually has lower out-of-pocket expenses if you use the services of network providers.
67
Policy Owner
The person who makes premium payments. Recall that a premium represents the cost of insurance.
68
Ponzi Scheme
A financial fraud that promises investors and savers a low-risk, high rate of return, interest, or dividends.
69
Poverty Line
The minimum income deemed necessary to meet basic needs in a particular country. In 2022, the U.S. poverty guideline was $30,000 for a family of four.
70
Power of Attorney (POA)
A legal document that allows a named person, often called an agent, to act on your behalf.
71
Probate
The court-supervised process of distributing assets and paying debts after someone’s death.
71
Premium
The cost of the insurance.
72
Problem Solving Skill
The ability to define problems clearly, explore ideas, and create effective, ethical, and evidence-based solutions.
73
Procrastination
Placing more value on the present at the expense of the future.
74
Productivity Skill
The ability to strategize, organize, and plan to best manage your priorities and time.
75
Pyramid Scheme
A scam that is typically based on selling products or recruiting new members into an organization.
76
Renter’s Insurance
Similar to an HO ­policy except that it is designed to provide you with property replacement and liability coverage rather than insurance to replace your ­residence. Sometimes called ­tenant’s insurance.
77
Residual Clause
A will provision that states how all remaining property should be distributed in case there is something left in an estate or property is disclaimed.
78
Retirement Savings Rate
The percentage of your income that you are putting aside for retirement.
79
Safety Net
The group of government programs that provide assistance to people with incomes qualifying as poor or near-poor.
80
Split Limit PAP
Common type of personal automobile liability insurance in which the split limits describe the level of coverage in the policy.
80
Short-Term Disability Insurance
Replaces a portion of your salary for 3, 6, or 12 months. The longer the coverage period and the more income replaced, the higher the premium.
81
Status Quo Bias
A personal preference for keeping things just like they currently are.
82
Suitability Standard of Advice
A requirement that brokers and agents provide advice and recommendations to customers that is suitable to the needs of the customers; this is a lower standard of care compared to the fiduciary standard.
83
Supplemental Nutrition Assistance Program (SNAP)
A federally funded program, started in 1964, in which each month, poor people receive a debit card they can use to buy food.
84
Target Date Mutual Fund
A special type of asset allocation fund managed based on an individual’s expected year of retirement that adjusts the amount held in stocks, bonds, and cash over time.
85
Tax Deduction
A dollar reduction in the amount of taxable income.
86
Tax-Deferred Earnings
Interest, dividends, and other unearned income generated on assets held in tax-deferred accounts; tax-deferred earnings are not currently taxable.
87
Technology Skill
The ability to confidently and efficiently use technologies to complete goals and tasks and maintain a competitive advantage.
88
Telemarketing Fraud
When a product or service is misrepresented in an unsolicited phone call, e-mail, or text message.
89
Temporary Assistance for Needy Families (TANF)
A government assistance program in which the federal government gives money to states to help those in poverty. People receiving assistance must meet certain work requirements and cannot receive benefits for more than 5 years.
90
Term Life Insurance
Provides only a death benefit if the insured individual dies before reaching a predetermined age. Also known as pure term insurance.
91
Testator
A person who makes a will.
92
Title
Proof of property ownership, whether a house or a mutual fund.
93
Trust
A legal entity that holds property and assets for someone or some group.
94
Trustee
The person or organization (such as a bank) that will manage trust assets and authorize distributions from the trust based on the instructions given by the grantor.
95
Umbrella Policy
An insurance policy that provides additional liability coverage beyond what is stated in a homeowner’s, renter’s, or personal automobile policy. Also called excess liability coverage.
96
Underinsured
Drivers on the road who either do not have insurance or carry too little insurance.
97
Unemployment Insurance (UI)
A state-administered program that provides temporary financial assistance to individuals who have lost their job through no fault of their own.
98
Uninsured/Underinsured Motorist Coverage
Additional coverage that pays your medical and property damage expenses above what someone else’s policy pays.
99
Wage Replacement Rate
Percentage, usually between 70% and 80%, which represents a constant standard of living between pre- and post-retirement.
100
Will
A legal document that dictates someone’s desires regarding the distribution of property after death.
101
Workers’ Compensation
Provides benefits when you are injured or become ill as the result of work.

Personal Finance (4 decks)

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