Perf

• Distinguish between pure risk and speculative risk

  Pure risk involves a situation where the outcome is unknown but the only possibility is a loss. Speculative risk involves both the possibility of loss and gain. 
• Describe the five steps of risk management

  (1) to identify risk exposures, (2) to evaluate the potential losses that might occur, (3) to decide on the best way(s) to handle risk and losses, (4) to administer the risk‑management program, and (5) to periodically evaluate and adjust the program
• Why is the principle of indemnity so important to insurance sellers

  The principle of indemnity protects insurers from paying an insured more than his or her actual financial loss. This keeps individuals from using insurance for making a financial gain.
• four key points to review when reading an insurance policy.

  1) perils covered, (2) property covered, (3) types of losses covered, and (4) people covered.
• Differentiate among independent agents, exclusive agents and direct sellers.

  Independent insurance agents represent several different companies and try to match the needs of their clients with the plans these companies offer. Exclusive agents represent just one company and try to match the needs of their clients with the plans the one company offers. Direct sellers are insurance companies that do not use agents to market their plans. They advertise directly to prospective insureds.
• Give three examples of liability protection under homeowner's insurance policies.

  (1) comprehensive personal liability protection (the standard limit is $300,000), (2) no-fault bodily-injury protection (perhaps up to $1,000), and (3) no-fault property-damage protection (perhaps up to $500).
• All of the HO forms provide coverage for the three liability exposures, loss of use and additional living expenses, and personal property.
• HO-3, a special-form policy, provides all-risk protection for four of the five property losses. Contents and personal property are covered on a named-perils basis for 17 of the 18 major perils. The exception is glass breakage
• HO-4, the renter's contents broad form, protects the contents of a dwelling but not the dwelling itself
• HO‑6, the condominium form, protects owners from losses to contents and personal property as well as losses to the alteration and additions that condominium owners might make to their units.
•  HO‑8, the older‑home form, provides actual cash‑value coverage for older houses.
• Explain the meaning of the numbers 100/200/75.

  The 100 number signifies that the policy will pay no more than $100,000 in bodily-injury liability losses to any one person in an accident. The 200 number signifies that the policy will pay no more than $200,000 in total bodily-injury liability losses in any one accident. The 75 number signifies that the policy will pay no more than $75,000 in property-damage liability losses in an accident.
• Types of automobile insurance coverage

  • Liability insurance
  • Medical payments insurance
  • Uninsured and underinsured motorist insurance
  • Physical damage insurance
• Liability insurance


  Covers the insured when he or she is held responsible for losses suffered by others
• Medical payments insurance

  Covers bodily-injury losses suffered by the driver of the insured vehicle and any passengers, regardless of who is at fault
• Uninsured and underinsured motorist insurance


  Protects the insured and the insured's passengers from bodily-injury losses resulting from an automobile accident caused by an uninsured or underinsured motorist
• Physical damage insurance


  Provides protection from losses due to damage to the insured's car from collision, theft, and other perils
• Silver plans pay 70% of out-of-pocket medical costs.
• A health maintenance organization is an entity that provides a broad range of health care services to members for a set monthly fee on a prepaid basis. 
• Traditional health insurance provides protection against financial losses resulting from illness and injury. Traditional health insurance is often referred to as a fee-for-service plan as it pays for services after they occur rather than on a prepaid basis.
• Identify two benefits of selecting a preferred provider organization (PPO) when seeking health care.

  The insured achieves a benefit by paying a (1) lower deductible and (2) lower coinsurance when he or she uses a preferred provider.
• An HDHP is a type of health insurance policy that typically offers lower premiums but higher deductibles compared to traditional health insurance policies.
• Health savings accounts (HSAs) allow individuals to save money pre-tax to use toward qualified medical expenses.
• Ways to save on taxes when paying for health care or insurance

  • Use a health savings account (HSA)
  • Use a health reimbursement account
  • Use a premium conversion plan
  • Use a flexible spending arrangement
  • Deduct a portion of health care expenses as an itemized deduction
• Health reimbursement account


  Employees can deposit pretax dollars into this account for later use to pay for health care expenses. Employers may also contribute to these accounts.
• Coinsurance is your share of the costs of a health care service. It's usually figured as a percentage of the amount we allow to be charged for services. You start paying coinsurance after you've paid your plan's deductible.
• copay is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have a copay when you get a prescription filled
• Explain COBRA rights and portability rights that apply when you leave a job that as a group health care plan.

  allow you to keep an employer-based group health plan in effect for as long as 18 months for the worker and 36 months for dependents after a worker leaves employment provided that the worker pays the premium. Portability allows you to transfer the group plan to an individual plan after your COBRA rights have expired.
• Premium conversion plans allow an employee to pay his or share of an employer's group plan premiums with pre-tax dollars
• The benefit period is the maximum time period over which long-term care benefits will be paid
• . The waiting period is the time period between the beginning of the need for long-term care and when benefits can be received.
•    Explain how you determine your level of need for disability income insurance.

  the difference between the amount of your current income that you would need to replace after becoming disabled and the benefits you already have through an employer plan and/or Social Security.
• Elimination period (waiting period)


  Time between when the disability occurs and when you first become eligible to receive benefits
• Benefit period


  Length of time you will receive benefits once you become eligible
• Degree of disability


  Conditions under which the disability income will be paid
• Residual clause


  Allows for a reduced level of benefits when you suffer a partial, rather than a total disability
• Social Security rider


  Provides extra protection through increased benefits if you do not qualify for Social Security disability benefits
• Cost-of-living adjustments


  Increase your benefit amount to keep up with inflation
• An any-occupation policy will provide benefits only if you cannot work at all
• . An own-occupation policy will pay benefits if you cannot perform your normal occupation even though you could work at some other occupation.