Personal Finance Exam 3

Front 1

Amortized

Back 1

Principal is repaid through a series of equal payments.

Front 2

Secured loan

Back 2

A loan that is backed or secured by collateral.

Front 3

Unsecured loan

Back 3

A loan that is not backed by a collateral.

Front 4

A longer maturity does what?

Back 4

Smaller payments, but more interest paid over life of loan.

Front 5

When comparing prospective lenders, you should compare:

Back 5

APR not simple interest!

Front 6

What are some pros to lending a car?

Back 6

Lower down payment, convince of returning car at end of lease period.

Front 7

What are some cons of leasing a car?

Back 7

There is no equity, you are still responsible for maintenance, and additional charges can be imposed for ending lease prematurely or adding too many miles.

Front 8

What is a home equity loan?

Back 8

A loan where the equity in a home serves as collateral for the loan. Can oftentimes be less in interest rate than other loans.

Front 9

You can loan up to how much? And why?

Back 9

80%. There needs to be a 20% cushion for unforeseeable circumstances.

Front 10

What is a VA loan?

Back 10

The VA guarantees lender that they will cover up to 20% of loan. This is for anyone who serves at least 90 days in the military.

Front 11

What is an FSA Insured loan?

Back 11

Where the federal government through the Federal Housing Administration provides insurance for >1% up to 20% of the purchase price. Borrower pays UFMI at closing and MPI monthly.

Front 12

What is an Adjustable-Rate mortgage?

Back 12

Loan in which interest owed changes in response to movements in specific market determined interest rate.

Front 13

Mortgage refinancinf

Back 13

Paying off an existing mortgage with a new mortgage that has a lower interest rate.

Front 14

Market analysis

Back 14

Estimate of the price of a home based on the prices of similar homes in area. This is usually based on price per square foot.

Front 15

How can you handle risk?

Back 15

1) avoid risk

2) reduce/eliminate risk

3) accept risk

4) Insure against risk

Front 16

Captive insurance agent

Back 16

Employee for specific company, can only sell insurance from company.

Front 17

Independent insurance agent

Back 17

Contracted with various companies to sell their products.

Front 18

With all other things equal, higher deductible, ___ premium in all cases.

Back 18

Lower

Front 19

Coverage A

Back 19

Liability: protects you from your own negligence.

Front 20

Coverage B

Back 20

Medical payment coverage: insured against cost of medical care for you and other passengers in your car when you are at fault.

Front 21

Coverage C

Back 21

Uninsured and underinsured motorist coverage: insures for when other person is at fault but they do not have the adequate coverage.

Front 22

Coverage D

Back 22

Collision and compensation coverage: covers damage to your car when it is your fault.

Front 23

Medicaid

Back 23

Health insurance for individuals with low incomes and those in need of public assistance.

M

Front 24

Long-term care insurance

Back 24

Covers expenses associated with long-term health conditions that cause individuals to need help with everyday tasks.

Front 25

Disability income insurance

Back 25

Provides income to policy holders in the event that they become disabled

Front 26

Private health insurance

Back 26

Not government provided; can be issued from private insurance companies to provide coverage for health care expenses

Front 27

Indemnity plan

Back 27

Will reimburse you for part of all expenses. You make claims.

Front 28

HMO

Back 28

Health maintenance covers health care from specific doctors, primary care physician refers you to a specialist.

Front 29

PPO

Back 29

No need for referral, still covers outside of network. Usually has a larger network.

Front 30

COBRA

Back 30

Allows continuation of coverage provided through employers plan for 18 months.

Front 31

HIPPA

Back 31

Prohibits insurance companies from denying health insurance coverage based on applicants health status, medical history, previous claims, or disabilities.

Front 32

Medicare

Back 32

provides insurance to people over 65

Front 33

Term insurance

Back 33

Provided over specified time period and does not build cash value

Front 34

Decreasing-term insurance

Back 34

Benefits reduce over time and premium remains constant

Front 35

Mortgage life insurance

Back 35

Life insurance they pays off a mortgage in the event of the policy holders death

Front 36

While life insurance

Back 36

Forced savings account with life insurance.

Front 37

Limited payment policy

Back 37

A whole life policy that allows you to pay premiums over specified period but remains insured over life.

Front 38

Mortgage life insurance

Back 38

Life insurance they pays off a mortgage in the event of the policy holders death

Front 39

While life insurance

Back 39

Forced savings account with life insurance.

Front 40

Limited payment policy

Back 40

A whole life policy that allows you to pay premiums over specified period but remains insured over life.

Front 41

Universal life insurance

Back 41

Provides insurance over specified term and accumulates savings for holder over time

Front 42

Mortgage life insurance

Back 42

Life insurance they pays off a mortgage in the event of the policy holders death

Front 43

While life insurance

Back 43

Forced savings account with life insurance.

Front 44

Limited payment policy

Back 44

A whole life policy that allows you to pay premiums over specified period but remains insured over life.

Front 45

Universal life insurance

Back 45

Provides insurance over specified term and accumulates savings for holder over time

Front 46

Variable life insurance

Back 46

Provides insurance over specified term and allows holders to invest funds

Front 47

Income method

Back 47

Determines how much life insurance is needed based on th policy holders annual income

Front 48

Budget method

Back 48

How much life insurance is needed based on households future expenses.

Front 49

Simple interest is

Back 49

Interest compounded as a percentage of the existing loan amount (or principal).