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HACE 3200 Chapter 9
Moorman Personal Finance UGA
48
Social Studies
Undergraduate 4
04/05/2012

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Term
risk
Definition
an uncertainty with respect to economic loss
possibility of experiencing harm, suffering, danger or loss
Term
settlements
Definition
insurers and government programs negotiate discounts (why hospitals charge higher prices for non-insured)
Term
Basic Health Insurance
Definition
Includes: Hospital, surgical and physicians expense
Term
Hospital insurance
Definition
covers hospitalization expenses (room fees, nursing fees, drug fees)
Term
surgical insurance
Definition
covers only direct cost of surgery
Term
physician expense insurance
Definition
cover office fees, lab fees, X-ray fees
Term
Major Medical Insurance
Definition
cover medical costs beyond the basic plan; usually require co-payments and deductibles
Term
stop-loss provision
Definition
limits the total out of pocket expenses incurred by the insured to a specific dollar amount
Term
lifetime cap
Definition
total amount the insurance company will pay over the life of a policy
Term
Dental and Eye Insurance
Definition
eye exams, glasses, dental work, dentures, etc...expensive unless provided with and employer's plan
Term
Dread Disease and Accident Insurance
Definition
covers only specific illness or accidents; set dollar amount for reimbursement
Term
Private Health Care Plan
Definition
fee-for-service/indemnity plans and managed health care (HMOs and PPOs)
Term
Fee-for-Service (Traditional Indemnity Plans)
Definition
greatest choices; coinsurance; copayments/deductibles; inexpensive BUT require paperwork
Term
Managed Health Care
Definition
2 types: HMOs and PPOs; pays for and provides health care to policy holders; limited choices; monthly premium and copayment
Term
Health Maintenance Organizations (HMOs)
Definition
most popular
system of doctors and hospitals for flat fee
3 types- individual practice, group, and point-of-service
Term
Preferred Provider Organizations (PPOs)
Definition
cross between fee for service and HMO
group of doctors work at reduced cost
additional fees for a nonmember doctor
Term
individual insurance
Definition
expensive tailor-made policy
Term
government sponsored health care plans
Definition
workers comp, Medicare, Medicaid
Term
Workers Compensation
Definition
for workers injured on the job
work-related accidents
coverage determined by STATE
Term
Medicare
Definition
for disabled and over 65
cost covered through social security
divided into A and B
Term
Medicaid
Definition
for lower income, blind, or aged
can be used to offset premiums, etc...incurred with Medicare
Term
Flexible Spending Account
Definition
funded with pre-tax $
pays unreimbursed medical expenses
very flexible--some expenses not eligible for coverage
use it or lose it!
Term
Disability Insurance
Definition
provides income in event of long-term illness or injury
Term
long-term care insurance
Definition
daily dollar benefit for cost of long-term-care
Term
risk aversion theory
Definition
1. rational people try to reduce/avoid risk
2. risk is subjective- individuals define the level
Term
probability
Definition
a person weighing uncertainty
Term
ways to real with risk
Definition
avoidance
reduction
assumption
insurance
Term
risk pooling
Definition
insurance; individuals share their financial risk
Term
premium
Definition
month cost you pay for your insurance policy
Term
face value
Definition
benefit due upon death
Term
insured
Definition
person who's life is covered by insurance
Term
policy owner
Definition
the business that pays for the owns the policy (State Farm)
Term
Beneficiary
Definition
recipient of benefit upon the death of uninsured (usually the family)
Term
earnings multiple approach
Definition
adjust salary down to compensate for the reduction in household expenses
Term
5 to 4
Definition
20%
Term
4 to 3
Definition
22%
Term
3 to 2
Definition
26%
Term
2 to 1
Definition
30%
Term
The Needs Approach
Definition
determine total need
subtract current insurance
determine the amount of additional coverage you need
Term
Term Insurance
Definition
death benefit coverage for a specific term of time (usually annually)
only valid if they die DURING coverage (not permanent)
least expensive
Term
cash-value insurance
Definition
provides death benefit and opp to accumulate savings
permanent- NO time limit
types: whole life, universal life, and variable life
Term
whole life insurance
Definition
permanent protection
fixed premium, death benefit
fixed cash value
LESS death protection for SAME price as term insurance
Term
universal life insurance
Definition
permanent protection
flexible premiums
flexible death benefits
Term
variable life insurance
Definition
permanent protection; returns are earned on a tax-deferred basis
fixed OR flexible premium
Term
lump sum
Definition
one time payout upon death
Term
interest-only settlement
Definition
periodic payments of the interest earned by the principle
Term
installment payment settlement
Definition
periodic payments, normally for a fixed period, of both principal and interest
Term
life annuity settlement
Definition
periodic payments that continue for life of beneficiary
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