a. reduce costs. The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Principal of subrogation: The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. Survivorship (last-to-die) insurance is used primarily to help pay estate taxes. Installing a sprinkler system in your home to reduce insurance premium costs is an example of risk transfer. the food we eat the air we breathe the water we drink sunlight Subrogation is a part of all indemnity claims. d. change financial risks and reduce losses. Though the annual premium is higher than a comparable policy with a higher deductible, less expensive access to medical care throughout the year may be worth the tradeoff. It pays them money (called a "death benefit") they need to cover funeral expenses, mortgage payments, car payments, and other monthly bills. \hline b. Maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum. Report a concern about FINRA at 888-700-0028, Securities Industry Essentials Exam (SIE), Financial Industry Networking Directory (FIND), National Association of Insurance Commissions (NAIC) Consumer Information, Understanding Structured Notes With Principal Protection, Are You Staying Cyber Safe? \textbf{Long-Term Investing Activities}\\ Five years later, a Bostonian named Ralph Emery wanted to insure his Stanley Steamer against the risk of fire. The insurance policy must be in place. \text { Sales } & 279,000 & 239,000 \\ liability. c. Introversion. \text { May } & 290,000 \\ d. protection and savings. \end{array} b. universal Decreasing term insurance usually has a decreasing face value and a. limited pay What's the difference between term life and whole life? Buying life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. \text{Retained earnings} &32,592& 203,768\\ Transferring risk means asking an insurance company to take over the risk for a small payment (the premium). d. guaranteed purchase If a life insurance policy pays dividends, it is said to be. The first fire insurance company was founded in London the following year. d. risk retention. We're looking for Junior Quality . The insured party must file a claim. What percentage of your income should you spend on life insurance? d. Unbundling That company will pay out the $250,000 to the owner. This method is simpler, easier and less cumbersome. Insurance concepts .pdf - Module 7: INSURANCE CONCEPTS AND LIFE INSURANCE Objectives To learn about the basics of insurance To gain, risk, speculative risk, perils and hazards, If you risk nothing, then you risk everything., One of the basic tenets of financial planning is the accumulation of assets. We also reference original research from other reputable publishers where appropriate. e. 180 days, Marilyn Simms died with a $200,000 life insurance policy. The purpose of life insurance is to help you protect your family when you aren't around. \end{array} The right to maintain ones proportionate ownership in the corporation is the right of _____. e. expense levels. b. mortgage life insurance. e. life income. c. $100,000 to Jack and $50,000 each to Mimi and Ann Graph f(x)f(x)f(x) and locate \mu and the interval 2\mu \pm 2 \sigma2 on the graph. Donna Jamison, a 201120112011 graduate of the University of Florida, with 444 years of banking experience, was recently brought in as assistant to the chairperson of the board of D'Leon Inc, a small food producer that operates in north Florida and whose specialty is high-quality pecan and other nut products sold in the snack foods market. a. Risk transfer 3. Regulation of life insurance varies. financial security for dependents in the event of death. Term is valid for a certain number of years (5,10, 15, 20, etc.) The insurance company changes its policies after property damage occurs. If riskschances of losscan be divided among many members of a group, then they need fall but lightly on any single member of the group. Viewed as a form of mutual aid, risk-sharing can be seen not only as sound business practice, but as enlightened social behavior rooted in accepted principles of ethics. The purchase of insurance is a common form of _____ by the insured. Check all that apply. a. He was required to pay the first $500 of his repair costs, and then the insurance company covered the rest. b. living benefits 5.) d. multiple premium A person's house was seriously damaged during a natural disaster. e. premium reductions. Major downturns in the economy \text{EPS} &(\$ 1.602) & \$ 0.880\\ c. reduce financial risks and share losses. It lowers the payout the company has to make. Insurance Ensures Family and Business Stability Insurance is a safety net for when risks go wrong. Simply put, most permanent life insurance policies have the ability to build cash value over time. \textbf{Customer} & \textbf{Amount}\\ The hospital TPA desk serves as an intermediary between you, the hospital and your insurance company. To select the best policy for you or your family, it is important to pay attention to the three critical components of most insurance policies: deductible, premium, and policy limit. e. biennial, When a primary beneficiary dies before the insured, proceeds are payable to Consider factors such as your risk tolerance, available capital to spend, cost of the policy and the extent to which the people you leave behind when you die rely on you financially. Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal. Life insurance can support the life of a family, should a member be lost. One of the main factors causing the rise in medical costs is the rising average age of the American population. c. quarterly Three components of any type of insurance are crucial: premium, policy limit, and deductible. What Is Auto Insurance?, Battleface. Thus, business enterprises obtain a double benefit from insurancethey are enabled to operate by transferring potentially crippling risk, and they also may obtain capital funds from insurers through the sale of stocks and bonds, for example, in which insurers invest funds. Refer to the case related to Satyam. Provide safety and security:- Insurance provides financial support and reduces uncertainties in business and human life. automobile insurance. Long before it celebrated its three hundredth anniversary in 1988, Lloyds had grown into a major force on the global insurance scene. \textbf{Summary}\\ Insurance is when a third-party promises to idenmify another party for losses they might suffer in the future in exchange for agreed upon payments. A life insurance policy guarantees that the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime. a. a decreasing premium. Workers' compensation is a state program that provides benefits for, Workers suffering injury or illness on the job. Her husband, Jack, was the primary beneficiary and their children, Mimi (age 24) and Ann (age 30), were the contingent beneficiaries. e. variable life. What Determines the Price of an Auto Insurance Policy? He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. c. a combined investment plan and insurance policy. 030\ \text{days} & \$480,000 & \hspace{12pt}1\%\\ a. term b. living benefit Check all that apply. A life insurance policy should contain all the following except Virtually all mortgage companies require borrowers to have insurance coverage for the full or fair value of a property (usually the purchase price) and wont make a loan or finance a residential real estate transaction without proof of it. As a result, Watkins was informed that changes would have to be made-and quickly; otherwise, he would be fired. \text{Total} & \underline{ \underline{ \$25,000}} e. revised as needed. It is probably the single most important part of an academic paper. The basic purpose of insurance is to __________. c. universal The insured (sometimes called the assured) is the one who receives the payment, except in the case of life insurance, where payment goes to the beneficiary named in the life insurance contract. In some instances, life insurance can help replace a portion of the household income your spouse, partner or children will lose if you pass away. What Is Insurance?, Insurance Information Institute. . It increases consumers' insurance premiums. 31 days You surrender your rights over the third party to the insurer. Okay, so now that we've covered those definitionsInsurance 101you're well on your way to becoming an insurance expert. When you buy or lease a car, its important to protect that investment. Most importantly, it would be difficult to obtain credit or financing since few lenders or investors would be willing to risk funds without a guarantee of safety for their investments. 1. The underwriting function is designed to be sure that premiums are based on The insured makes regular payments. d. Coinsurance clause Group life; credit life e. Shifts in the macro-social structure of the population. 3160\ \text{days} & \hspace{4pt}100,000 & \hspace{4pt}3\\ These contracts require policyholders to identify and describe the property that is covered and to specify the causes of loss, called , for which a policyholder will be compensated in the event of loss. The insurance company covered the rest of the cost of the visit.When Maria's mother went to the hospital, her family was responsible for paying the first $1,000 of the bill. OperatingActivitiesNetincome($160,176)Depreciationandamortization116,960Increaseinaccountspayable378,560Increaseinaccruals353,600Increaseinaccountsreceivable(280,960)Increaseininventories(572,160)Netcashprovidedbyoperatingactivities($164,176)Long-TermInvestingActivitiesAdditionstoproperty,plant,andequipment($711,950)Netcashusedininvestingactivities($711,950)FinancingActivitiesIncreaseinnotespayable$436,808Increaseinlong-termdebt400,000Paymentofcashdividends(11,000)Netcashprovidedbyfinancingactivities$825,808SummaryNetdecreaseincash($50,318)Cashatbeginningofyear57,600Cashatendofyear$7,282\small{ c. the insured's estate \text{Net cash provided by operating activities}& (\$ 164,176)\\ a. multiple indemnity clause What must happen in order for an insurance company to make a payout? , eus \text{Notes payable}& 636,808 &200,000\\ Insurance products often are developed to meet specific objectives. Madan Bahsin concludes in her research paper that examined the fraud at Satyam that the scandal brought to light the importance of ethics and its relevance to corporate culture. Explain what you believe Bahsin meant by linking the ethical reasoning methods discussed in the text to corporate governance, using the Satyam fraud to illustrate your points. Its also known as no-fault insurance.. Most people prefer to pay health insurance premiums rather than pay out-of-pocket for medical expenses because. They simply divided their cargoes among several boats. There are many different types of insurance. c. cash value. \text{Addition (subtraction) to retained earnings}& & && (171,176)\\ There would so much uncertainty, so much exposure to sudden, unexpected possibly catastrophic loss, that it would be difficult for anyone to plan with confidence for the future. Group health insurance premiums are usually lower than individual health insurance premiums. b. Again for the sake of convenience, these agreements usually take the form of an insurance policy, with insurance underwriters or an insurance company acting as financial intermediary. e. loan value only. Please and thank you! a. The FDIC, for example, claims in its mission statement to "maintain stability and public confidence in the nation's financial system." It helps to protect the insured person or their family. a. His plan is a ____ life policy. So finding the price that is right for you requires some legwork. The basic purpose of insurance is to _____ Protect yourself from economic losses 2. \text{DPS} & \$ 0.110 & \$ 0.220\\ Negotiating a Settlement With an Insurance Company. Risk is uncertainty regarding economic loss. d. fixed time. Unhappy suppliers were being paid late; and the bank was complaining about the deteriorating situation and threatening to cut off credit. a. avoid risk Multiple people pay into the insurance company pool so that if any client experiences a disaster, there will be money to help cover it. A person was in a car accident and cannot work for several months. As an additional benefit of to society, insurers themselves, the trustees of policyholder and stockholder funds, become major investors and suppliers of capital to the economy. Which is always a cost when buying insurance? \text{Accounts payable} &\$ 524,160 &\$ 145,600\\ All Rights Reserved. \end{array} Is structural damage covered by insurance? However, different insurers may charge different premiums for similar policies. When an insurance company needs to provide a payout, the money is removed from: Maria's family has a health insurance plan. and provides . \text{EBIT}& (\$ 130,948) &\$ 190,428\\ d. high-yield investments. End of preview. In such cases, the third-party's insurance should be compensating for the losses and not the other way around! It does this substituting payment of a small, known feean insurance premiumto a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss. c. limited payment. A hospital administrator decides to review the costs of three departments of the organisation which are summarised in the table. What are the four major types of insurance? Life, health, homeowners, and auto are the most common forms of insurance. Consumer Financial Protection Bureau. Life, health, homeowners, and auto are the most common forms of insurance. Lump sum File a complaint about fraud or unfair practices. \text { August } & 300,000 \textbf{Assets}\\ In the insurance world there are six basic principles that must be met, ie insurable interest, Utmost good faith, proximate cause, indemnity, subrogation and contribution. Kurt purchased a policy with an initial premium of $3,000 and may elect how much he desires to pay in premiums from now on. Put simply, insurance is a contract, represented by a policy, in which a policyholder receives financial protection or reimbursement against losses from an insurance company. After this payment, the insurance company covered the rest of the costs. b. \text{Increase in inventories}& (572,160)\\ Write out the equation for the target volume (in units) profit equation if the income tax rate is t. Which of the following is the best term or phrase for a characteristic pattern of behavior or a disposition to feel and act? e. $150,000 to Jack and $25,000 each to Mimi and Ann, Which of the following policy features allow the insured to increase coverage periodically without showing proof of insurability? 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