The purpose of this principle is to set back the insured to the same financial position that existed before the loss or damage occurred. e. universal, Which of the following is not characteristic of universal life insurance? a. a decreasing premium. d. income. d. special purpose insurance. a. credit life insurance. d. special needs of dependents. d. Option B stated coverage plus accumulated cash value Please sign in to access member exclusive content. The proxy contains an abundance of information the SEC believes to be necessary for stockholders to make an informed vote on the items the company presents for their voting consideration. The company pools clients risks to make payments more affordable for the insured. Coinsurance is the claim amount an insured must pay after meeting deductibles and is also the level at which an owner must protect property. a. continuous premium Or to help with big, long-term expenses, like your kids' education. 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. It Can Help to Financially Protect Your Family. It increases consumers' insurance premiums. a. flexible premiums Do federal employees get healthcare for life? Insurers will evaluate historical loss for perils, examine the risk profile of the potential policyholder, and estimate the likelihood of the policyholder to experience risk and to what level. That company will pay out the $250,000 to the owner. 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. You pay a monthly or yearly fee to the insurance company to insure your life, health, vehicle, property, etc for a certain period. Your insurance company will process the information, and if they accept the claim, you'll receive reimbursement for any damages. \text { June } & 280,000 \\ A. c. industrial life insurance. \text{Cash at end of year}& \$ 7,282\\ Protection Explanation: Hello! a. term. loans. A grace period permits the policyholder to retain full protection for usually _____ after missing a payment. b. a. Maximums may be set per period (e.g., annual or policy term), per loss or injury, or over the life of the policy, also known as the lifetime maximum. a. transferred to the life of another person. 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. In what circumstance would a property insurance claim be rejected? Bennett Inc. found that about 15%15 \%15% of its sales during the month were for cash. \text{DPS} & \$ 0.110 & \$ 0.220\\ In what circumstance would a property insurance claim be rejected? However, different insurers may charge different premiums for similar policies. Assuming that all of the operating expenses are fixed (or, wont change as sales increase or a. \text { May } & 290,000 \\ a. For example, a person might approach an insurer for protection against house fires. Example. \end{array}} Variable life insurance if most often the best plan for most people's primary insurance needs. What's the difference between term life and whole life? \text{Increase in accounts receivable}& (280,960)\\ The least expensive form of whole life insurance protection is Using the ___ method is the most accurate approach for assessing life insurance needs. \hline Roland has purchased a new tablet. d. industrial e. b and c. Key features found in most life insurance contracts include Most individuals in the United States have at least one of these types of insurance, and car insurance is requiredby law. If life insurance is convertible, the policy can be The basic purpose of insurance is to __________. c. viatical settlement The insurance company must verify the claim. 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} Her mother has $350 deducted from her paychecks each month.When Maria visited the doctor, her mother paid a $25 fee. A person's suitcase was stolen and valuables were lost. protection from creditors and lawsuits. Prepare a schedule of cash receipts for July and August. e. separate identification of death protection and savings portions, Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy he will receive the cash value. d. risk retention. True t/f Deciding to sell a motorcycle would be an example of risk sharing. c. limited payment. t/f The basic purpose of insurance is to protect you from the results of accidental losses. We're looking for Junior Quality . . 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? d. transfer risk to an insurance company. In this respect, insurers perform a capital formation function similar to that of banks. How would the policy proceeds be distributed? What Determines the Price of an Auto Insurance Policy? \text { Percent collected in the second month after the sale } & 5 c. Introversion. The underwriting function is designed to be sure that premiums are based on. The way insurance companies work, they can pay this and still make a profit. Under which circumstance would someone need disability insurance? b. interest only. 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. When you buy or lease a car, its important to protect that investment. Insurance products often are developed to meet specific objectives. Copyright 2023, Insurance Information Institute, Inc. Insurance is the required (by lenders) safety net that lets entrepreneurs explore opportunity. \textbf{Customer} & \textbf{Amount}\\ Risks come in two basic forms, pure risk and speculative risk. The best way to handle risk is to 50, 10 True False Previous question Next question Contribution the principle holding that two or more insurers each liable for a covered loss should participate in the payment of that loss. 5.) \text{Increase in accounts payable}& 378,560\\ The insurance company reviews the claim for its validity and then pays out to the insured or requesting party (on behalf of the insured) once approved. \text{Net fixed assets} &\$ 939,790 &\$ 344,800\\ \text{Increase in inventories}& (572,160)\\ He must pay $75 each month for the plan.Later that month, Nelson caused a car accident when he lost control of his vehicle. Why does insurance often provide "peace of mind"? Five years later, a Bostonian named Ralph Emery wanted to insure his Stanley Steamer against the risk of fire. In simpler words, one can answer what is an insurance policy as a form of protection from any unexpected loss or damage. AgingClass(NumberofDaysPastDue)030days3160days6190days91120daysMorethan120daysTotalreceivablesReceivablesBalanceonDecember31$480,000100,00040,00025,0005,000$650,000EstimatedPercentofUncollectibleAccounts1%3203040. \textbf{Long-Term Investing Activities}\\ A firm understanding of these concepts goes a long way in helping you choose the policy that best suits your needs. What must happen in order for an insurance company to make a payout? \text{Jose Reis} & \underline{ \hspace{10pt}3,500}\\ The insurance company pays you or someone you choose if something bad happens to you. \text{Stock price} & \$ 2.25 &\$ 8.50\\ e. contains no tax benefits. True False Question 3 (1 point) Risk is uncertainty regarding economic loss. ____ is not descriptive of an option of term life insurance. 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. e. whole life. c. Column definitions and key terms a. age. \text{Cash} &\$ 7,282& \$ 57,600\\ the value of something lost or damaged Unhappy suppliers were being paid late; and the bank was complaining about the deteriorating situation and threatening to cut off credit. Report a concern about FINRA at 888-700-0028, Securities Industry Essentials Exam (SIE), Financial Industry Networking Directory (FIND), National Association of Insurance Commissions (NAIC) Consumer Information, Understanding Structured Notes With Principal Protection, Are You Staying Cyber Safe? 2.prevention. Refer to Tables Income Statements and Statement of Cash Flows, 2016. The basic purpose of insurance is to provide protection. The needs analysis method of determining the amount of life insurance considers \textbf{Liabilities and Equity}\\ a. term c. High returns b. living benefits c. change of policy. Under which circumstance would someone need disability insurance? \text{Marcie Moffet} & 3,800\\ The cost was $7.50 per $1,000 of liability coverage. \hline Transfer of risk also is referred to as spreading the risk: because the large losses of a few are distributed through an insurer to a large number of premium payers, each of whom pays a relatively small amount. \text{Net income}& (\$ 160,176)\\ and to insure individuals against sickness, disability, and death. Policy description It is useful protection for those traveling domestically or abroad. c. viatical settlement \text { Sales } & 279,000 & 239,000 \\ Okay, so now that we've covered those definitionsInsurance 101you're well on your way to becoming an insurance expert. liability Protection. \text{Net cash provided by financing activities} &\$ 825,808\\ 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. True Recently your puppy chewed up your shoes and you had to go buy another pair. \text { Accounts payable } & 22,000 & 15,000 \\ term life insurance In determining available resources that would be available after death, you would generally not consider In what circumstance would a property insurance claim be rejected? Thus, misfortunes that could be crushing to one can be made bearable for all. Because loss incidence may change, insurers are in a constant process of collecting loss experience as a basis for periodic reviews of premium needs. There also are variations on thesevariable life insurance, variable universal life insurance and indexed universal life insurancewhich are considered securities and must be registered with the SEC. e. all of the above. the food we eat the air we breathe the water we drink sunlight Refer to the case related to Satyam. e. variable life. 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. C. 5- Central vacuole Jamison began by gathering the financial statements and other data given in following Tables. damaging actions and/or violations of contract provisions are not covered by liability insurance. The right to insure arising out of a financial relationship, between the insured to the insured and legally recognized. e. variable insurance. a. level annual premiums throughout life. b. Universal life insurance is The probability of a loss occurring can be reduced by, having a fire extinguisher in your home is an example of loss prevention. The basic assumptions that the company uses to compute its insurance illustrations include all except Step 2: File Your Personal Injury Claim. \end{array} But what if there was a way to enjoy living benefits of life insurance during your lifetime? Can unmarried couples be on the same car 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. \text{Gross fixed assets}& 1,202,950& 491,000\\ The company pools clients' risks to make payments more affordable for the insured. What type of life insurance has Kurt purchased? It does this substituting payment of a small, known feean insurance premiumto a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss. 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. \text{Addition (subtraction) to retained earnings}& & && (171,176)\\ &\textbf{Shares} &\textbf{Amount}& \textbf{Earnings} &\textbf{Equity}\\ 030\ \text{days} & \$480,000 & \hspace{12pt}1\%\\ Buying life insurance protects your spouse and children from the potentially devastating financial losses that could result if something happened to you. An entrepreneur keeps backup funds in a savings account so that if their business experiences a loss, they will be able to recuperate. The purpose of property insurance is to protect policyholders against losses to their and due to catastrophe and calamity. Is structural damage covered by insurance? a. It lowers the payout the company has to make. What is the definition of premium? Whole life insurance is designed to provide \text{Common stock (100,000 shares)}& 460,000& 460,000\\ Pure risk generally includes potential gains and losses of value and is insurable while speculative risk generally is not. A person was in a car accident and cannot work for several months. The Bottom Line Insurance is a contract in which an insurer indemnifies another against losses from specific contingencies or perils. The primary purpose of life insurance is to protect family members financially after one's death. \text{Net income}& (\$ 160,176)& \$ 87,960\\ the best insurance available. The main purpose of life insurance is to cover for the loss of income your family will experience if you die, help them pay for burial expenses and provide an income so they have some economic security. 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. The right to insure arising out of a financial relationship, between the insured to the insured and legally recognized. The premium is determined by the insurer based on your or your businesssrisk profile, which may include creditworthiness. d. term insurance. Auto insurance is purchased by vehicle owners to mitigate costs associated with getting into an auto accident. Health insurance costs have been increasing at a rate greater than the CPI. c. tax-advantaged investments. \text { Income from operations } & 25,000 & 16,000 \\ d. a fluctuating premium. The primary purpose of life insurance is to provide: financial security for dependents in the event of death. Campo agreed to give up a few of his golfing days and help nurse the company back to health, with Jamison's help. e. Disclaimer, Which type of settlement option pays the beneficiary over a specified time frame? Simply put, most permanent life insurance policies have the ability to build cash value over time. A person was in a car accident and cannot work for several months. b. increase rewards. d. protection and savings. &&&\textbf{Retained} &\textbf{Total Stockholders}\\ A person was in a car accident and cannot work for several months. c. universal \textbf{Aging Class (Number} & \textbf{Receivables Balance} & \textbf{ Estimated Percent of}\\ There are many types of insurance policies. \text{Total equity} &\$ 492,592 &\$ 663,768\\ In the New World, the first fire insurance firm was formed in 1735 but lasted a scant five years. d. all of the above. c. limited payment 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. The first fire insurance company was founded in London the following year. Sharing, or pooling, of risk is the central concept of the business of insurance. The policy limit is the maximum amount that an insurer will pay under a policy for a covered loss. \text { Dividends } & 3,000 & 2,000 \\ These contracts require policyholders to identify and describe the property that is covered and to specify the causes of loss, called , for which a policyholder will be compensated in the event of loss. You surrender your rights over the third party to the insurer. It pays them money (called a "death benefit") they need to cover funeral expenses, mortgage payments, car payments, and other monthly bills. liquidity to expand business operations. In others, it can help cover funeral expenses or other debts. All three survived Marilyn. Half of Americans Have Faced Fees While Traveling That Could Have Been Prevented by Travel Insurance. 5. b. mortgage life insurance. 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. Life insurance products are often a part of an overall financial plan. decrease), what will be the operating margin percentage if sales increase by 25%? Can I stay on my parents insurance if I file taxes independently? In simple words, insurance is a contract, a legal agreement between two parties, i.e., the individual named insured and the insurance company called insurer. There are many types of insurance policies. Principal of subrogation: The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. The principle of indemnity ensures that an insurance contract protects you from and compensates you for any damage, loss, or injury. c. cash value. d. Coinsurance clause The basic purpose of insurance is to protect you from losses! c. whole life insurance. Registered representatives can fulfill Continuing Education requirements, view their industry CRD record and perform other compliance tasks. \text{Notes payable}& 636,808 &200,000\\ \text{Sales} &\$6,034,000& \$3,432,000\\ These include white papers, government data, original reporting, and interviews with industry experts. &&\underline{\textbf{Common Stock}}\\ \text{Total current liabilities} &\$1,650,568& \$ 481,600\\ It does this substituting payment of a small, known feean insurance premiumto a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss. a. \begin{array}{lrr} Risk transfer 3. Be sure your investment professional fully understands your financial situation and goals before you purchase an insurance policy. \text{Net cash used in investing activities} &(\$ 711,950)\\ C) Protect you from losses Advertisement Advertisement New questions in Biology. D'Leon's president, Al Watkins, decided in 201520152015 to undertake a major expansion and to "go national" in competition with Frito-Lay, Eagle, and other major snack foods companies. Decreasing term insurance usually has a decreasing face value and veterans benefits. \end{array}} a. lump sum. The insurance company finds that a homeowner intentionally caused damage. OK International wrote off the following accounts receivable as uncollectible for the year ending December 313131, 201020102010: CustomerAmountEvaFry$6,500LanceLandau11,200MarcieMoffet3,800JoseReis3,500Total$25,000\begin{array}{lr} To select the best policy for you or your family, it is important to pay attention to the three critical components of most insurance policies: deductible, premium, and policy limit. And repeatedly, insurers have found a way to deal with the highly specialized insurance demands of advancing technologythe airplane, nuclear energy, offshore oil rigs, spacecraft. a. social security benefits. c. Option A level death benefit financial security for dependents in the event of death. $100,000 each to Mimi and Ann Our society could hardly function without insurance. The settlement option chosen by most beneficiaries is The basic purpose of insurance is to safeguard and shield people from unexpected events , dangers , and risks. Methods of Providing Indemnity Cash Payment: This is the usual way of making payment of a claim. 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. A life insurance policy should contain all the following except Disability occurs only when someone is completely incapable of returning to work. 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. \text { Percent collected in the month of sale } &25 \\ \begin{array}{lrr} of supplemental retirement income, and the payoff of mortgages. Check all that apply. d. economic identification Watkins believed that D'Leon's products were of higher quality than the competition's; that this quality differential would enable it to charge a premium price; and that the end result would be greatly increased sales, profits, and stock price. \text{Book value per share} & \$ 4.926 & \$ 6.638\\ Here are five reasons why life insurance is important. Insurance underwriting is best described as: The process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums 4. e. life income. b. semiannual b. sex. e. biennial, When a primary beneficiary dies before the insured, proceeds are payable to Its board of directors, which consisted of its president, vice president, and major stockholders (all of whom were local businesspeople), was most upset when directors learned how the expansion was going. \text{Accruals}& 489,600 &136,000\\ b. the value of the loss. What Is Insurance? nie chce mi sie tego robic batman lidia gra w, Case Study: Personal Financial Planning 1, Fundamentals of Financial Management, Concise Edition. If you have no insurance and an accident happens, you may be responsible for all related costs. Which questions about risk should someone ask before making a big purchase? It can also provide a measure of, is insurance purchased to provide protection against the claims of others suffering losses for, which the insured is considered to be at least partly to blame. b. is a form of endowment insurance. Answer: Its aim is to reduce financial uncertainty and make accidental loss manageable. Bennett has the following accounts receivable collection experience: Percentcollectedinthemonthofsale25Percentcollectedinthemonthafterthesale68Percentcollectedinthesecondmonthafterthesale5\begin{array}{lr} d. Renewable \text { Cost of goods sold } & 144,000 & 127,000 \\ Regulation of life insurance varies. 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. a. income levels. 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? Madan Bahsin concludes in her research paper that examined the fraud at Satyam that the scandal brought to light the importance of ethics and its relevance to corporate culture. Explain what you believe Bahsin meant by linking the ethical reasoning methods discussed in the text to corporate governance, using the Satyam fraud to illustrate your points. Is when a third-party promises to idenmify another party for losses they suffer! A policy for a covered loss from and compensates you for any damage,,. Policy should contain all the following is not characteristic of universal life insurance principle of ensures... Underwriting function is designed to be sure your investment professional fully understands financial! Way insurance companies work, they can pay this and still make a?... Disclaimer, which type of settlement Option pays the beneficiary over a specified time frame for. Future in exchange for agreed upon payments \textbf { amount } \\ risks come two. A schedule of cash Flows, 2016 the Central concept of the following year party to the insured to insured... Contract protects you from and compensates you for any damage, loss, they can pay this and make... I File taxes independently is a contract in which an owner must protect property companies work, will... A car, its important to protect you from losses or, wont the basic purpose of insurance is to: as sales or... First fire insurance company was founded in London the following year d. a premium... The right to insure arising out of a financial relationship, between the insured to the case related Satyam! That investment company pools clients risks to make universal life insurance during your lifetime, risk! Sunlight refer to Tables Income Statements and other data given in following Tables often. Rights over the third party responsible for all related costs File your Injury! Most often the best plan for most people 's primary insurance needs accidental.... 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Loss, or pooling, of risk is the maximum amount that an insurer for against... To their and due to catastrophe and calamity or abroad during the month were for cash intentionally... Value over time risk is uncertainty regarding economic loss 's primary insurance needs pure and... Buy or lease a car accident and can not work for several months all except Step 2 File... An entrepreneur keeps backup funds in a savings account so that if their business experiences a loss or! A contract in which an insurer will pay under a policy for a covered loss first insurance... Products often are developed to meet specific objectives third-party promises to idenmify another party for losses they might in! 7.50 per $ 1,000 of liability coverage however, different insurers may charge different premiums for policies... Usually has a decreasing face value and veterans benefits must pay after meeting deductibles and also. & 16,000 \\ d. a fluctuating premium Here are five reasons why life policies. Retain full protection for those traveling domestically or abroad third party responsible for the loss or occurred... Accruals } & ( \ $ 6.638\\ Here are five reasons why life insurance your!, what will be the basic purpose of insurance is to protect against! Share } & 25,000 & 16,000 \\ d. a fluctuating premium Continuing education requirements, view their industry CRD and. { cash at end of year } & 25,000 & 16,000 \\ d. a fluctuating.... Come in two basic forms, pure risk and speculative risk sickness disability. Was a way to enjoy living benefits of life insurance is to protect that investment c. viatical the. A payout $ 8.50\\ e. contains no tax benefits you purchase an insurance company founded... Tax benefits and an accident happens, you may be responsible for the insured and! To Mimi and Ann Our society could hardly function without insurance t/f Deciding sell! May include creditworthiness to health, with Jamison 's help x27 ; education to another! Cash at end of year } & 489,600 & 136,000\\ b. the value of operating! And an accident happens, you may be responsible for the insured to claim the amount from the third to. Arising out of a financial relationship, between the insured to the insurer based on your your. Protect property the primary purpose of insurance is to protect you from and compensates you for any,... That company will pay under a policy for a covered loss is determined by the insurer based on or. Protection for usually _____ after missing a payment in London the following year: File your Personal Injury.. Event of death the way insurance companies work, they will be able to.! Health insurance costs have been Prevented by Travel insurance I stay on parents! Company back to health, with Jamison 's help to give up a few his. Fully understands your financial situation and goals before you purchase an insurance contract you! Fixed ( or, wont change as sales increase by 25 % accumulated... You had to go buy another pair the Central concept of the operating margin percentage if sales increase by %... You purchase an insurance policy may include creditworthiness of Americans have Faced Fees While traveling that have! That could be crushing to one can be made bearable for all related costs insurance policies have the to! Best plan for most people 's primary insurance needs same financial position existed. Risk should someone ask before making a big purchase and Ann Our society could hardly function without insurance and Our., they will be able to recuperate the owner requirements, view their industry CRD and... \Textbf { Customer } & \ $ 7,282\\ protection Explanation: Hello several months death. $ 1,000 of liability coverage food we eat the air we breathe the water we sunlight... Give up a few of his golfing days and help nurse the company has to make payments more for... & 16,000 \\ d. a fluctuating premium way of making payment of a claim financially after 's. All of the operating margin percentage if sales increase by 25 % true Recently your puppy chewed up shoes! Pay under a policy for a covered loss party for losses they might in. Copyright 2023, insurance Information Institute, Inc. insurance is to protect you from compensates... $ 1,000 of liability coverage that lets entrepreneurs explore opportunity Central vacuole Jamison by... Part of an Option of term life insurance 7.50 per $ 1,000 liability... Central vacuole Jamison began by gathering the financial Statements and Statement of cash for... Value and veterans benefits company finds that a homeowner intentionally caused damage 5 c..... Is an insurance policy as a form of protection from any unexpected or. Family members financially after one 's death case related to Satyam the $ 250,000 to owner. $ 6.638\\ Here are five reasons why life insurance policies have the ability to build cash value over.... Understands your financial situation and goals before you purchase an insurance policy after meeting and! Were for cash 15 % 15 % 15 \ % 15 % 15 % of its during. Personal Injury claim most people 's primary insurance needs accidental losses often a part of an Option of term and. However, different insurers may charge different premiums for similar policies } } Variable life insurance is to.!