CSM 204Exam # 4 Study Guide: Chapters 10-12 and 18-19CSM 204 Exam 4 Review SheetDefinitions, types and examples of risk, peril and hazard InsuranceProtection against possible financial lossInsurerThe insurance companyInsuredThe person or thing the insurance is protectingPremiumThe amount of money you pay for insurancePolicyA written contact for insuranceRiskChance or uncertainty of lossTypes of RiskSpeculative riskChance of either loss or gainUninsurablePure RiskChance of only loss if the specified events occurAccidental or unintentionalCan be predictable in naturePerilWhat you are insuring againstThe bad thing that can happenExample – Car InsuranceAccidentsVandalismExample – Home InsuranceFireBurglaryExample – Health InsuranceDiseaseInjuriesExample – Life InsuranceDeathHazardA factor that increases the likelihood of loss through some perilRisk management methodsRisk AvoidanceTotally avoiding doing certain hazardous actionsExample – Avoiding death by plane crashYou decide never to fly in planes; therefore you could never die or sustain injuries by being in a plane that crashedRisk ReductionGetting partially rid of certain hazards by reducing the riskKeeps insurance costs lowerExample – Car InsuranceHaving a navigator in your carWearing a seat beltAbiding by the speed limitExample – Home InsuranceHaving fire extinguishersHaving dead boltsHaving fire alarmsExample – Health InsuranceExercising regularlyGetting regular health check upsNot participating in activities with higher injury ratesRisk AssumptionMaking the conscious decision to assume the riskRisk can be assumed by accident, such as when someone fails to buy insurance by simply forgetting to purchase itSelf-insuranceThe process of establishing a monetary fund to cover the cost of a loss as opposed to purchasing insuranceRisk ShiftingShifting the burden of the consequences associate with perils off of us on onto other people by purchasing insuranceLiability, negligence and vicarious liability LiabilityLegal responsibility for the financial cost of another person’s losses or injuriesVicarious LiabilityA situation in which a person is held legally responsible for the actions of another personExampleParents that are vicariously liable for the actions of their childrenCompanies that are vicariously liable for the actions of its employeesStrict LiabilityA situation in which a person is held responsible for intentional or unintentional actionsNegligenceFailure to take ordinary or reasonable care in a situationPrudent Man RuleWould a prudent (reasonable) person do the same thing?Homeowners Coverages CoversHouse and other structuresAdditional living expensesPays for the cost of living in a temporary location while your home is being repairedPersonal PropertyHousehold belongingsPersonal Property FloaterAdditional property insurance to cover the damage or loss of a specific item of high valueHousehold InventoryA list or other documentation of personal belongingsWith purchase dates and cost informationPersonal Liability CoverageMedical PaymentsIf someone is injured on your propertyPersonal LiabilityIf someone’s stuff gets damaged on your propertyUmbrella Policy/Personal Catastrophe PolicySupplementary personal liability coverageOtherCheck card fraudForgeryCounterfeit moneyCost of removing damaged propertyTemporary repairsFire department chargesEmergency removal of property to protect it from damageNot CoveredFloodNatural rising waterSold by the governmentEarthquakeCost varies by how close you live to places with reoccurring earthquakesWarNot availableNuclear AccidentsNot avaliableSpecialized CoverageHomeowner’s insurance does not usually cover losses from floods and earthquakesEndorsementsAn addition of coverage to a standard insurance policyRenters insurance Covers your belongings inside the building, not the building itselfThings CoveredPersonal property loss of damageAdditional living expensesPersonal liabilityAutomobile insurance coverages Financial Responsibility LawsState legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accidentBodily Injury CoverageBodily Injury LiabilityCoverage for the risk of financial loss due to legal expenses, medical costs, lost wages and other expenses associated with injuries caused by an automobile accident for which the insured was responsibleMeaning primarily to the people in the vehicle whose driver did not cause the accidentProvided by the insurance of the one liable for the accidentMedical Payments CoverageAutomobile insurance that covers medical expenses for people injured in one’s car of as a pedestrianMeaning primarily to the people, including the driver, of the car that caused the wreckProvided by the insurance of the one liable for the accidentUninsured/underinsured Motorist ProtectionAutomobile insurance coverage for the cost of injuries to a person and members of his or her family caused by a driver with inadequate insurance or by a hit-and-run driverMeaning covers you if you are involved in an accident you did not cause if the other person in uninsured of underinsuredProperty Damage CoverageProperty Damage LiabilityAutomobile insurance coverage that protects a person against financial loss when that person damages the property of othersTypes of CoverageCollisionAutomobile insurance that pays for damage to the insured’s car when it is involved in an accidentHitting another vehicleNon-moving itemRolling your carComprehensiveAutomobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collisionRisks CoveredFireTheftGlass BreakageFalling ObjectsVandalismWindHailFloodTornadoLightningEarthquakeAvalancheDamage cause by hitting an animalAmount of Coverage100/300/50$100,000 limit will be paid to one person in an accident in the form of bodily injury liability$300,000 limit will be paid to all persons in an accident in the form of bodily injury liability$50,000 limit will be paid for damage of the property of others in the form of property damage liabilityImportance of health care insurance If something major were to happen to you and you didn’t have health insurance, your finances would become very damaged due to high medical costsWhat you can do to reduce health care costs Review fees and chargesSeek preventive careAsk for generic drugsAs opposed to preferred drugsPractice preventive care and stay wellConsider a high deductibleUse a flexible spending
View Full Document