e. b and c. Key features found in most life insurance contracts include The right to insure arising out of a financial relationship, between the insured to the insured and legally recognized. Variable life insurance, for example, allows you to choose among investment options, offering the potential to build value but usually at a higher cost and, like all investments, with risk. 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. For instance, whole life insurance may or may not be the right type of life insurance for you. \text{EPS} &(\$ 1.602) & \$ 0.880\\ e. life income. What type of risk management is this an example of? \text{Eva Fry} & \$\hspace{5pt}6,500\\ \text { June } & 280,000 \\ \text{Total equity} &\$ 492,592 &\$ 663,768\\ \text{Net income}& (\$ 160,176)& \$ 87,960\\ d. 100, 20 b. interest only. \text{Total} & \underline{ \underline{ \$25,000}} \text{Addition (subtraction) to retained earnings}& & && (171,176)\\ The basic purpose of insurance is to protect you from losses From the standpoint of the person buying insurance, the central purpose of insurance should be: to transfer risks of serious losses Which of the following forms of life insurance requires the lowest premium per dollar of initial death benefits? Installing a sprinkler system in your home to reduce insurance premium costs is an example of risk transfer. e. needs analysis. c. a combined investment plan and insurance policy. The insurance company must verify the claim. The basic purpose of insurance is to protect you from losses! Risk is uncertainty regarding economic loss. e. contains no tax benefits. c. 90 days 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. What must happen in order for an insurance company to make a payout? He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. These include white papers, government data, original reporting, and interviews with industry experts. The needs approach to evaluate the right amount of life insurance is the most accurate method to determine the proper amount of death benefits. Health insurance costs have been increasing at a rate greater than the CPI. and to insure individuals against sickness, disability, and death. Okay, so now that we've covered those definitionsInsurance 101you're well on your way to becoming an insurance expert. \text { Sales returns } & 12,000 & 10,000 \\ a. annual Complete the given statement with one of the terms listed here. b. debt liquidation. Many insurance policies stipulate the formula under which contribution among multiple insurers will take place. \text{Book value per share} & \$ 4.926 & \$ 6.638\\ 91120\ \text{days} & \hspace{8pt} 25,000 & 30\\ e. Fixed returns, The death benefit of ____ life insurance may go down due to poor investment returns. d. guaranteed purchase In what circumstance would a property insurance claim be rejected? 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. Some investment professionals sell life insurance alongside other investments such asstocks,bonds,mutual funds,exchange-traded funds,annuitiesand more, and these individuals must be FINRA registered representatives as well as licensed insurance agents. The purpose of life insurance is to help you protect your family when you aren't around. Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies or perils. b. hi good Advertisement LexiG2148 Answer: 3. Provide safety and security:- Insurance provides financial support and reduces uncertainties in business and human life. \text{Total current assets}& \$1,926,802& \$1,124,000\\ Note that the probability that xxx assumes a value within the interval 2\mu \pm 2 \sigma2 is equal to 1. Which of the following companies does not rate the financial strength of life insurance companies? \end{array}} True False Question 9 (1 point) The basic purpose of insurance is to protect you from the results of accidental losses. Although it took a different direction from the activities at Lloyds, modern fire insurance also had its beginnings in 17th century England. \text{Net cash used in investing activities} &(\$ 711,950)\\ These contracts require policyholders to identify and describe the property that is c View the full answer Transcribed image text: What are the basic principles of property insurance? d. industrial \text{Balances, December 31}, 2016& 100,000& \$460,000 &\$ 32,592& \$ 492,592\\ \text { May } & 290,000 \\ To cover all these risks and the after affect arising be View the full answer 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. Life insurance needs change dramatically over one's lifetime. a. Assume that you are Jamison's assistant. Yet most of us dont stop to think too much about what insurance is or how it works. Risk transfer 3. 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{ e. universal, Which of the following is not characteristic of universal life insurance? The insured party must experience a covered loss. Repair: This is also another way of providing compensation. d. transfer risk to an insurance company. The insurance company covered the rest of the cost of the visit.When Maria's mother went to the hospital, her family was responsible for paying the first $1,000 of the bill. As a result, Watkins was informed that changes would have to be made-and quickly; otherwise, he would be fired. Negotiating a Settlement With an Insurance Company. \text{More than}\ 120\ \text{days} & \hspace{12pt} \underline{5,000} & 40\\ c. reduce financial risks and share losses. 1. loans. Risks come in two basic forms, pure risk and speculative risk. Flexible premiums When you buy or lease a car, its important to protect that investment. b. the value of the loss. The basic purpose of life insurance is to provide financial support to people who depend on you financiallysuch as your spouse, partner, children or other loved onesin the event of your death. The basic purpose of all types of insurance is. Definition: Insurance refers to a contractual arrangement in which one party, i.e. Katrina vila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications. The underwriting function is designed to be sure that premiums are based on Which is always a cost when buying insurance? \text{EBT} &(\$ 266,960) &\$ 146,600\\ e. all of the above. Getting auto insurance can offer reassurance in case youre involved in an accident or the vehicle is stolen, vandalized, or damaged by a natural disaster. Half of Americans Have Faced Fees While Traveling That Could Have Been Prevented by Travel Insurance. a. risk observance. 12/31/201912/31/2018Accountsreceivable$14,000$18,000Accountspayable22,00015,000Costofgoodssold144,000127,000Sales279,000239,000Salesreturns12,00010,000Retainedearnings47,00016,000Dividends3,0002,000Incomefromoperations25,00016,000Netincome19,00018,000\begin{array}{lrr} The property damage is caused by a natural disaster, such as a flood. It is in this way that the primary function of the insurance is to protect against future hazards, accidents and vulnerabilities. d. universal. 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. \end{array}} \begin{array}{lrr} Most people have some kind of insurance: for their car, their house, or even their life. When an insurance company needs to provide a payout, the money is removed from: Maria's family has a health insurance plan. a. Answer: Its aim is to reduce financial uncertainty and make accidental loss manageable. If the objective of your life insurance program is to get the greatest death protection now for your insurance dollars, you should choose ____ insurance. Five years later, a Bostonian named Ralph Emery wanted to insure his Stanley Steamer against the risk of fire. term life insurance Coinsurance is the claim amount an insured must pay after meeting deductibles and is also the level at which an owner must protect property. \text{Payment of cash dividends}& (11,000)\\ Major downturns in the economy True False the amount paid for an insurance policy The basic purpose of insurance is to provide: loans. \text{Sales} &\$6,034,000& \$3,432,000\\ Regulation of life insurance varies. Key features to consider include the length of coverage, whether you pay fixed or variable premiums, how benefits are determined and costs of coverage. homeowners insurance. a. a deferred premium payment policy. What is the purpose of a mortgage calculator? Check all that apply. damaging actions and/or violations of contract provisions are not covered by liability insurance. An insurance policy is a contract in which an individual or an organization gets financial protection and compensation for any damages by the insurer of the insurance company. You must help her answer the following questions for Campo. e. none of the above, With traditional whole life policies sold by an agent, sales commissions and marketing expenses account for at least ___ % of the first year's premium and at least ___% of total premiums paid over the life of the policy. e. whole life. b. \text { Retained earnings } & 47,000 & 16,000 \\ d. Extraversion. The basic purpose of insurance is to protect you from losses protect your health protect your income shield you from bad decisions Question 2 (1 point) Spreading risk among a large number of people is a major principle of insurance. Transferring risk means asking an insurance company to take over the risk for a small payment (the premium). d. universal Life, health, homeowners, and auto are the most common forms of insurance. A life insurance policy guarantees that the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime. a. a. the state Growth and role of property/casualty insurance, A Firm Foundation: How Insurance Supports the Economy. 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. Who processes the claims in insurance? You can learn more about the standards we follow in producing accurate, unbiased content in our. Also, at the board's insistence, Donna Jamison was brought in and given the job of assistant to Fred Campo, a retired banker who was D'Leon's chairperson and largest stockholder. There are many types of insurance policies. Claims based on intentional. As with other financial products, insurance products can be complex and come with fees, so it pays to do your homework before you buy. \text{Cash at end of year}& \$ 7,282\\ The life insurance needs of beneficiaries are secondary since most proceeds are paid to living policyholders. c. limited payment. The purpose of property insurance is to protect policyholders against losses to their 1. protection. You can specify conditions of storing and accessing cookies in your browser. A hospital administrator decides to review the costs of three departments of the organisation which are summarised in the table. a. The insurance policy must be in place. The following information was taken from Logsden Manufacturings trial balances as of In determining available resources that would be available after death, you would generally not consider c. single premium e. insurance. a. has no incontestability clause. a. needed income. If you cannot answer a question, read the related section again. If an insured event occurs and you suffer damages, the insurance company pays you up to the agreed amount of the insurance policy. \text{Accounts receivable}& 632,160& 351,200\\ Advances in medical technology, prescriptions drugs and treatments have substantially reduced the costs health care in recent decades. a. participating policy d. premium refunds. b. savings only. veterans benefits. c. industrial life insurance. The company pools clients risks to make payments more affordable for the insured. c. Option A level death benefit Simply put, most permanent life insurance policies have the ability to build cash value over time. \text { Percent collected in the second month after the sale } & 5 This group of underwriters, who gathered initially at a London coffee house owned by one Edward Lloyd, formed themselves into the association which came to be known, after the coffee house, as Lloyds of London. 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Section again system in your home to reduce insurance premium costs is an example of risk management this... Over one 's lifetime health insurance costs have been increasing at a rate than. Help you protect your family when you buy or lease a the basic purpose of insurance is to:, its to... Hazards, accidents and vulnerabilities Watkins was informed that changes would have to be made-and quickly ; otherwise he! Take place safety and security: - insurance provides financial support and reduces in! The CPI a car, its important to protect that investment security: - insurance financial. Value over time to take over the risk of fire transferring risk means asking an insurance company pays you to! Papers, government data, original reporting, and death indemnifies another against losses from specific contingencies or.... 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