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BES Test 4
Study for exam #4
| Question | Answer |
|---|---|
| Insurance | Protection from LOSS + Peace of Mind |
| Premium | cost of risk sharing |
| Risk | chance or uncertainty of loss |
| Peril | of possible loss {fire, windstorm, robbery, disease, or death.} |
| Hazard | a FACTOR that INCREASES likelihood of loss through some peril {driving drunk, smoking in bed, or defective house wiring.} |
| Pure Risk | Personal risks, property risks, and liability risks are types of pure risk |
| Speculative Risk | Chance of loss or gain |
| Liability | legal responsibility for financial cost of another person’s losses and injuries |
| Basic form (HO-1) | home and cartilage |
| Special form (HO-3) | All risk (- flood, war, earthquake, nuclear) |
| Tenant’s form (HO-4) | personally protection at HO-1 and HO-2 levels |
| Modified coverage form (HO-8) | older home, restoration costs high |
| Bodily injury coverage | Accident: YOU’RE FAULT. Medical expense: YOU / PASSENGERS Lost Wages: YOU and PASSENGERS |
| Medical payment coverage | Home insurance that pays the cost of minor accidental injuries on one’s property |
| Uninsured motorist | Accident: OTHERS FAULT-they have no insurance Medical loss and wage loss; NOT cover property loss |
| Underinsured motorist | Pays costs if your car is hit by a person who doesn’t have enough insurance to cover the damage they did to you and your car. |
| Collision Coverage | NO FAULT NEEDED. Repair/replace YOUR CAR. ;If other’s fault, your insurance will collect from others |
| Comprehensive | FAULT not considered; Loss other than collision; Fire, theft, lass breakage, hail, vandalism |
| HIPPA | standards for health insurance portability, nondiscrimination in health insurance, and guaranteed renewability |
| COBRA | integrating the benefits payable under more than one health insurance plan so that the benefits received from all sources are limited to 100 percent of allowable medical expenses |
| exclusion | provision specifies the conditions or circumstances for which the policy does not provide benefits |
| assignment | benefits paid directly to care provider, not you |
| copayment | amount patient pays for each medical services: ranges from 2-50$ |
| HMO | A health maintenance organization (HMO) is a health insurance plan that directly employs or contracts with selected physicians, surgeons, dentists, and optometrists to provide health care services in exchange for a fixed, prepaid monthly premium. |
| PPO | A preferred provider organization (PPO) is a group of doctors and hospitals that agree to provide health care at rates approved by the insurer. |
| Blue Cross | plans provide hospital care benefits on essentially a "service type" basis. Through a separate contract with each member hospital, Blue Cross reimburses the hospital for covered services provided to the insured. |
| Blue Shield | plans provide benefits for surgical and medical services performed by physicians. |
| Medicare | Medicare, established in 1965, is a federal health insurance program for people 65 or older, people of any age with permanent kidney failure, and people with certain disabilities. |
| Medicaid | Title XIX of the Social Security Act provides for a program of medical assistance to certain low-income individuals and families. In 1965 the program, known as Medicaid, became federal law. |
| Medigap | Medicare was never intended to pay all medical costs. To fill the gap between Medicare payments and medical costs not covered by Medicare, many companies sell medigap insurance policies. |
| mortality tables | have been prepared to show the number of deaths among various age groups during any year |
| term insurance | is protection for a specified period of time, usually 1, 5, 10, or 20 years or up to age 70 |
| whole life insurance | policy (also called a straight life policy, a cash-value life policy, or an ordinary life policy), for which you pay a specified premium each year for as long as you live. |
| cash value | is an amount that increases over the years that you receive if you give up the insurance |
| universal life insurance | designed to let you pay premiums at any time in virtually any amount. |
| credit life insurance | used to repay a personal debt should the borrower die before doing so |
| endowment life insurance | the money is paid to the policyholder (the insured) if he or she is alive on the future date (the maturity date) named in the policy. |
| grace period | grace period allows 28 to 31 days to elapse, during which time you may pay the premium without penalty |
| riders | to Life Insurance Policies (1) Waiver of Premium Disability Benefit; (2) Accidental Death Benefit; (3) Guaranteed Insurability Option; (4) Cost of Living Protection ; (5)Accelerated Benefits ; (6) Second-to-Die Option |
| annuity | financial contract written by an insurance company that provides you with a regular income. |
| Inflation risk | increased prices may rise faster than investment income |
| Interest rate risk | increased cost of borrowed may make bonds more valuable and stocks less valuable |
| Business failure risk | business failure and bankruptcy – bad product or poor management |
| Market risk | decrease in value of stocks and bonds in cyclical fashion |
| Global risk | changes in currency affect the return on your investment |
| Liquidity | ranges from near-cash to frozen investment |
| Equity capital | money that a business obtains from its owners |
| Common stock | most basic form of corporate ownership; it can provide a source of income if the company pays dividends |
| Preferred stock | receives cash dividend before common stock holders |
| Dividends | growth potential if the dollar value of the stock increases |
| Bonds | a loan to a corporation, the federal government, or a municipality |
| Maturity dates | most range between 1 and 30 years; the date when the corporation is to repay the borrowed money |
| Mutual Funds | an investment alternative available to individuals who pool their money to by stocks, bonds, and other securities based on the selections of professional managers who work for an investment company. |
| Diversification | process of spreading your assets among several types of investments to lessen risk |
| Balance | the percent of your investments in stocks versus the percentage in bonds |
| Securities | all investments such as stocks, bonds, mutual funds, options traded on securities and over the counter markets |
| proxy | legal form that lists the issues to be decided at a stockholders meeting and request stockholder transfer voting right to other voters |
| preemptive right | right of current stockholder to purchase new stock first before offered to the public in order to maintain percentage in the company |
| public corporation | A public corporation is a corporation whose stock is traded openly in stock markets and may be purchased by an individual. |
| private corporation | A corporation owned by few people and not openly traded in a market |
| dollar appreciation | If the market value of the stock increases, you must decide whether to sell the stock at the higher price or continue to hold it |
| splits | A stock split is a procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares. |
| par value | is an assigned (and often arbitrary) dollar value that is printed on a stock certificate. |
| blue chip stock | very safe investments that generally attract conservative investors. Stocks of this kind are issued by the strongest and most respected companies, such as AT&T, General Electric and Kellogg. |
| Core stock | stocks that pay higher than average dividends. Stocks issued by Bristol-Myers Squibb, Dow Chemical, and Royal Dutch/Shell are often purchased for their higher-than-average dividends. |
| growth stock | stocks issued by corporations that earn profits above the average profits of all the firms in the economy. |
| large cap stock | stocks issued by a large corporation that has a large amount of stock outstanding and a large amount of capitalization. |
| small cap stock | issued by a corporation that has a capitalization of $150 million or less. |
| earnings | current profit; the projected profit of the most recent quarter (3 months period). HIGH=BETTER |
| PE ration | price of share divided by earnings per share over last 12 months. LOW=BETTER |
| Beta | an index that compares the risk associated with a specific stock issue with the risk of the stock market in general |
| diversification | the number of different companies in which one owns stock or bonds |
| balance | the ratio of stocks and bonds in the portfolio |
| Blend | the ratio of income stock (lower risk) and growth stock (higher risk) in portfolio |
| defensive stock | stocks that remain stable during declines in the economy. |
| cyclical stock | stocks that follow the business cycle of advances and declines in the economy |
| penny stock | stocks that typically sell for less than $1 a share |
| bull market | when investors optimistic about economy and stock prices rise |
| bear market | when investors pessimistic about economy and stock prices fall (bear= hibernate) |
| Blend | the ratio of income stock (lower risk) and growth stock (higher risk) in portfolio |
| IPO | Initial Public Offering |
| Broker | account executives licensed to buy and sell. |
| Churning | is excessive buying and selling of securities to generate commissions. Churning is illegal but difficult to prove. |
| DIJA | Dow Jones Industrial Average- the weighted average of 30 blue chip stocks that represent 10-15% of the value on the stock market in New York (the New York Stock Exchange or NYSE). |
| S & P 500 | Standard and Poor’s 500 (Index Funds)- the average of 500 companies listed on the NYSE and in the Chicago Board of Trade that represent about 80% pf the value on the stock market. The base year for these Index funds is 1941 |
| NASDAQ-OTC | National Association of Securities Dealers Automated which is all the over the counter stocks traded, or some 3500 companies. Over-the-Counter |
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SNUStudentJ
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