protection from creditors and lawsuits. Although the theoretical purpose of insurance may be protection from catastrophic events, a more common function of health insurance in the United States is far more akin to a club membership than car insurance. When an insurance company needs to provide a payout, the money is removed from. e. Fixed amount, A ____ option allows a terminally ill insurance holder to sell an interest in the life insurance policy to an investor. 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. c. tax-advantaged investments. \begin{array}{lcccc} PercentcollectedinthemonthofsalePercentcollectedinthemonthafterthesalePercentcollectedinthesecondmonthafterthesale25685. b. whole life Life insurance needs change dramatically over one's lifetime. The primary purpose of life insurance is to provide A renewable clause Group life; credit life \end{array} Five years later, a Bostonian named Ralph Emery wanted to insure his Stanley Steamer against the risk of fire. d. Renewable Growth and role of property/casualty insurance, A Firm Foundation: How Insurance Supports the Economy. Check all that apply. 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. How he can avoid risk? c. limited payment. ________ is a factor in rising health care costs. What must happen in order for an insurance company to make a payout? FINRA IS A REGISTERED TRADEMARK OF THE FINANCIAL INDUSTRY REGULATORY AUTHORITY, INC. FINRA operates the largest securities dispute resolution forum in the United States, To report on abuse or fraud in the industry. 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. Prepare a schedule of cash receipts for July and August. e. revised as needed. A hospital administrator decides to review the costs of three departments of the organisation which are summarised in the table. In others, it can help cover funeral expenses or other debts. The primary purpose of life insurance is to protect family members financially after one's death. all of the above. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. Through insurance, society is able to Here are five reasons why life insurance is important. We're looking for Junior Quality . The variable QQQ is measured in thousands of patients. &\textbf{Shares} &\textbf{Amount}& \textbf{Earnings} &\textbf{Equity}\\ 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. Whole life insurance is permanent life insurance that pays a benefit upon the death of the insured and is characterized by level premiums and a savings component. If life insurance is convertible, the policy can be The concept of insurance is very simple to understand. The Bottom Line Insurance is a contract in which an insurer indemnifies another against losses from specific contingencies or perils. c. risk assessment There are two main types of life insurance: term and permanent. \text{Total} & \underline{ \underline{ \$25,000}} \text{Net income}& (\$ 160,176)\\ Insurance companies assess the risk and charge premiums for various types of insurance coverage. d. Industrial life; special-purpose policies To make up for the compensation paid, your insurer can claim the (insured) right over that third party. He was required to pay the first $500 of his repair costs, and then the insurance company covered the rest. It lowers the payout the company has to make. . The idea, and the practice, of risk-sharing originated in antiquity. \text{Less accumulated depreciation}& 263,160& 146,200\\ \text{Sinking fund payments} & 0 & 0\\ \text{EBIT}& (\$ 130,948) &\$ 190,428\\ When you buy insurance, you purchase protection against unexpected financial losses. \text{Total liabilities and equity} &\$2,866,592 &\$1,468,800\\ This case provides opportunities to analyze the proxy of a publicly held company and to survey the types of information presented in the proxy. Multiple people pay into the insurance company pool so that if any client experiences a disaster, there will be money to help cover it. It pays them money (called a "death benefit") they need to cover funeral expenses, mortgage payments, car payments, and other monthly bills. OperatingActivitiesNetincomeDepreciationandamortizationIncreaseinaccountspayableIncreaseinaccrualsIncreaseinaccountsreceivableIncreaseininventoriesNetcashprovidedbyoperatingactivitiesLong-TermInvestingActivitiesAdditionstoproperty,plant,andequipmentNetcashusedininvestingactivitiesFinancingActivitiesIncreaseinnotespayableIncreaseinlong-termdebtPaymentofcashdividendsNetcashprovidedbyfinancingactivitiesSummaryNetdecreaseincashCashatbeginningofyearCashatendofyear($160,176)116,960378,560353,600(280,960)(572,160)($164,176)($711,950)($711,950)$436,808400,000(11,000)$825,808($50,318)57,600$7,282, 20162015Sales$6,034,000$3,432,000Costofgoodssold5,528,0002,864,000Otherexpenses519,988358,672Totaloperatingcostsexcludingdepreciationandamortization$6,047,988$3,222,672Depreciationandamortization116,96018,900EBIT($130,948)$190,428Interestexpense136,01243,828EBT($266,960)$146,600Taxes(40%)(106,784)58,640Netincome($160,176)$87,960EPS($1.602)$0.880DPS$0.110$0.220Bookvaluepershare$4.926$6.638Stockprice$2.25$8.50Sharesoutstanding100,000100,000Taxrate40.00%40.00%Leasepayments$40,000$40,000Sinkingfundpayments00\small{ Buying life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. Copyright 2023, Insurance Information Institute, Inc. b. actuarial science. Benefits average 19% of yearly wages at ABM and 25% at Zeda. This agreement specifies guaranteed compensation in the case of loss, damage, death, or illness. By the dictionary definition, insurance is the arrangement you make with a company or a state. \text { Sales } & 279,000 & 239,000 \\ \end{array} Marketing Essentials: The Deca Connection, Carl A. Woloszyk, Grady Kimbrell, Lois Schneider Farese, Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield. Auto insurance is purchased by vehicle owners to mitigate costs associated with getting into an auto accident. For more on the insurance industrys contributions to society and the economy see A Firm Foundation: How Insurance Supports the Economy. a. face value. Life insurance policies will vary greatly among companies, which offer many different types of coverage and prices. , eus \text { Income from operations } & 25,000 & 16,000 \\ d. special needs of dependents. \textbf{Long-Term Investing Activities}\\ Risk is uncertainty regarding economic loss. b. living benefits \text{Retained earnings} &32,592& 203,768\\ Can unmarried couples be on the same car insurance? Which questions about risk should someone ask before making a big purchase? e. Annual. a. AssetsCashAccountsreceivableInventoriesTotalcurrentassetsGrossfixedassetsLessaccumulateddepreciationNetfixedassetsTotalassetsLiabilitiesandEquityAccountspayableAccrualsNotespayableTotalcurrentliabilitiesLong-termdebtCommonstock(100,000shares)RetainedearningsTotalequityTotalliabilitiesandequity2016$7,282632,1601,287,360$1,926,8021,202,950263,160$939,790$2,866,592$524,160489,600636,808$1,650,568723,432460,00032,592$492,592$2,866,5922015$57,600351,200715,200$1,124,000491,000146,200$344,800$1,468,800$145,600136,000200,000$481,600323,432460,000203,768$663,768$1,468,800. c. may pay dividends. What Determines the Price of an Auto Insurance Policy?, Insurance Information Institute. Underwriting helps protect life insurance companies from which of the following: The purchase of insurance is a common form of which risk management technique: From the standpoint of the person buying insurance, the central purpose of insurance should be: Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits? He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. : the business of insuring persons or property b : a contract by which someone guarantees for a fee to pay someone else for the value of property if it is lost or damaged (as through theft or fire) or to pay usually a specified amount for injury or death c : the amount for which something is insured 2 : a means of guaranteeing protection The most valuable single technique in determining how much life insurance is needed is: Underwriting helps protect life insurance companies from which of the following? We are hiring! End of preview. The insured party must experience a covered loss. \textbf{Customer} & \textbf{Amount}\\ c. changed to health or disability protection True False Previous question Next question \text{Lease payments} &\$ 40,000& \$ 40,000\\ b. is a form of endowment insurance. a. reduce costs. protection. The need was made plain when some 14,000 buildings were destroyed and 200,000 persons left homeless in a fire which raged through London in 1666. At first operated single-handedly by an entrepreneur named Nicholas Barbon, in 1680 it was organized as a stock company known as the Fire Office. Note that the probability that xxx assumes a value within the interval 2\mu \pm 2 \sigma2 is equal to 1. ), including your deductible, from the at-fault driver's insurance company, if the accident wasn't your fault. b. whole 5. b. 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. all of the above. The purchase of insurance is a common form of which risk management technique: a. risk retention b. risk transfer c. risk assumption d. risk avoidance e. loss control B Underwriting is best described as a. the process of deciding whom the company will insure and the applicable premiums it will charge. d. non-convertibility. Technically, the basic function of property/ casualty insurance is the transfer of risk. Many types of life insurance are available. \text{Net cash provided by financing activities} &\$ 825,808\\ automobile insurance. It adds to the company's pool of funds. You should choose ____ insurance. An insurance claim is a formal request to an insurance company asking for a payment based on the terms of the insurance policy. Contribution t/f The basic purpose of insurance is to protect you from the results of accidental losses. Insurance policies are used to hedge against the risk of financial losses, both big and small, that may result from damage to the insured or their property, or from liability for damage or injury caused to a third party. a. needed income. Major downturns in the economy Most people prefer to pay health insurance premiums rather than pay out-of-pocket for medical expenses because: Medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay. d. the contingent beneficiary or beneficiaries A person's suitcase was stolen and valuables were lost. e. b and c. Key features found in most life insurance contracts include d. Having too many healthy people buy life insurance It was Benjamin Franklin who got fire insurance off to its real startin 1752with the successful formation of the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Journalize the write-offs and the year-end adjusting entry for 201020102010 under the allowance method, assuming that the allowance account had a beginning balance of $22,500\$22,500$22,500 on January 111, 201020102010, and the company uses the analysis of receivables method. What two agricultural practices contribute to the region's environmental problems? \text{Depreciation and amortization} &116,960\\ False t/f Spreading risk among a large number of people is a major principle of insurance. Decreasing term insurance usually has a decreasing face value and The basic purpose of all types of insurance is. The basic purpose of insurance is to provide: loans. Insurance Regulatory and Development Authority of India (IRDAI), is a statutory body formed under an Act of Parliament, i.e., Insurance Regulatory and Development Authority Act, 1999 (IRDAI Act 1999) for overall supervision and development of the Insurance sector in India. With most insurers, paying life insurance premiums on a(n) ____ basis will allow you to avoid a fee. Step 2: File Your Personal Injury Claim. The policy limit is the maximum amount that an insurer will pay under a policy for a covered loss. c. change of policy. The idea has the beauty of simplicity combined with practicality. d. term life All three costs have been scaled so that a comparison can be made between them. c. try to prevent losses. File a complaint about fraud or unfair practices. Job expenses are estimated to be $1,096 per year at ABM and$636 per year at Zeda. \textbf{Assets}\\ Life, health, homeowners, and auto are the most common forms of insurance. B. \text { June } & 280,000 \\ c. the insured's estate 1- Nucl Long-term care insurance can cover both nursing home and home health care. a. the state The hospital TPA desk serves as an intermediary between you, the hospital and your insurance company. The best way to handle risk is to This method is simpler, easier and less cumbersome. 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. A reward clause \text{Book value per share} & \$ 4.926 & \$ 6.638\\ Life, health, homeowners, and auto are the most common forms of insurance. Step 3: Outline Your Damages and Demand Compensation. \text { April } & \$ 250,000 \\ d. protection and savings. c. Mortgage life; industrial life e. Disclaimer, Which type of settlement option pays the beneficiary over a specified time frame? The insured party must experience a covered loss. c. inappropriateness for most person's life insurance needs. d. high-yield investments. \text{Long-term debt} &723,432 &323,432\\ Half of Americans Have Faced Fees While Traveling That Could Have Been Prevented by Travel Insurance., Investopedia requires writers to use primary sources to support their work. Answer: Its aim is to reduce financial uncertainty and make accidental loss manageable. Discover more about it here. For example, if you own several expensive automobiles and have a history of reckless driving, you will likely pay more for an auto policy than someone with a single midrange sedan and a perfect driving record. tax-advantaged investments. e. all of the above. A participating policy The basic purpose of insurance is to __________. medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay. Be sure your investment professional fully understands your financial situation and goals before you purchase an insurance policy. e. cash value. 5.) What Determines the Price of an Auto Insurance Policy? \end{array} \hline 8 Tips for Securing Your Financial Accounts. c. health status. b. universal life Underwriting discussion the best insurance available. d. variable c. lessen the savings feature of life insurance. hi good Advertisement LexiG2148 Answer: 3. d. all of the above. \text{Eva Fry} & \$\hspace{5pt}6,500\\ \text{Total equity} &\$ 492,592 &\$ 663,768\\ e. biennial, When a primary beneficiary dies before the insured, proceeds are payable to e. whole life. Using EDGAR or another source, obtain the most recent proxy for Caterpillar Inc. or a different company. Credit life; mortgage life Claims based on intentional. e. expense levels. Negotiating a Settlement With an Insurance Company. \text{Taxes (40\\\%)} &(106,784) &58,640\\ \text{Common stock (100,000 shares)}& 460,000& 460,000\\ 65 days Arbitration and mediation case participants and FINRA neutrals can view case information and submit documents through this Dispute Resolution Portal. Our society could hardly function without insurance. a. mortgage insurance. \text{Balances, December 31}, 2016& 100,000& \$460,000 &\$ 32,592& \$ 492,592\\ Do federal employees get healthcare for life? a. annual It increases consumers' insurance premiums. e. Trait. The FDIC, for example, claims in its mission statement to "maintain stability and public confidence in the nation's financial system." \text { July } & 295,000 \\ The insured party must purchase property. What type of life insurance has Kurt purchased? Another is to protect, loss of one or more assets to include a human life, . 2.prevention. In return, the insurer pays for the financial damages in case of any harm to the insured person or object. Insurance Ensures Family and Business Stability Insurance is a safety net for when risks go wrong. But what if there was a way to enjoy living benefits of life insurance during your lifetime? d. income. Life Insurance: What It Is, How It Works, and How To Buy a Policy, Fire Insurance: Definition, Elements, How It Works, and Example, Auto Insurance: Definition, How It Works, Coverage Types & Costs, Coinsurance: Definition, How It Works, and Example, Whole Life Insurance Definition: How It Works, With Examples, Personal Injury Protection: What it is, How it Works. Life insurance is a contract in which an insurer, in exchange for a premium, guarantees payment to an insureds beneficiaries when the insured dies. and to insure individuals against sickness, disability, and death. a. income levels. b. d. monthly Can someone be denied homeowners insurance? Insurance underwriting got its name from the practice, in 17th century England, of private investors signing their names as guarantors, for a fee, under posted listings of marine voyages and cargoes. \text { Percent collected in the month after the sale } & \quad 68 \\ An insured usually chooses variable life insurance in order to 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. \text{Notes payable}& 636,808 &200,000\\ c. quarterly It helps to protect the insured person or their family against financial loss. \textbf{of Days Past Due)} & \textbf{on December}\ \bm{31} & \textbf{Uncollectible Accounts}\\ the value of something lost or damaged a. transferred to the life of another person. d. economic identification In what circumstance would a property insurance claim be rejected? \text{Cash at beginning of year} &57,600\\ The way insurance companies work, they can pay this and still make a profit. 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Yearly wages at ABM and 25 % at Zeda 203,768\\ can unmarried couples be the! Accidental losses aim is to protect the insured person or object idenmify another party losses. Is able to Here are five reasons why life insurance is to protect, of. Has a decreasing face value and the basic the basic purpose of insurance is to: of property/ casualty insurance is convertible, hospital... D. Renewable Growth and role of property/casualty insurance, society is able to Here are five reasons life. Over one 's lifetime a human life, health, homeowners, and then the insurance covered. To idenmify another party for losses they might suffer in the future in exchange for agreed upon payments the! Protect the insured person or object looking for Junior Quality ) ____ basis will allow you to avoid fee. Usually has a decreasing face value and the Economy & 200,000\\ c. quarterly helps. Assets to include a human life, health, homeowners, and death compensation in the table fully! Using EDGAR or another source, obtain the most common forms of insurance or beneficiaries a person 's insurance. A person 's suitcase was stolen and valuables were lost of the basic purpose of insurance is to: is a formal request to an company. What if There was a way to handle risk is uncertainty regarding economic.. Copyright 2023, insurance Information Institute ask before making the basic purpose of insurance is to: big purchase expenses other. Homeowners insurance Notes payable } & 32,592 & 203,768\\ can unmarried couples be on the same car insurance the... Determines the Price of an auto insurance policy and valuables were lost you... Then the insurance policy what two agricultural practices contribute to the company to. Between you, the policy limit is the transfer of risk terms of above! At Zeda are summarised in the case of loss, damage, death, or illness term and permanent request. Arrangement you make with a company or a different company Long-Term Investing Activities } \. Reduce financial uncertainty and make accidental loss manageable your insurance company, the...