Personal Finance: Unit 6 Vocabulary

Contracts are legal agreements between two or more parties, where each party has some obligation or responsibility to one another
Insurance is a “protection against possible financial loss”
Insurer agrees to pay for certain types of losses in exchange for payments on a policy
Policy the contract between the insurer and the individual
Policy Holder is the individual who purchased the policy from the insurer
Premium (or fee) to the insurer in exchange for the insurer taking on the risk of loss
Coverage the specific protection that the insurer provides to the policy holder
Risk is the chance that a loss, financial or physical injury, may occur
Negligence is typically thought of as a failure to take reasonable actions to prevent injury or damage
Risk classification is the assessment and categorization of the characteristics that influence a person’s risk of loss
Deductible is the amount of money that the policy holder will pay before the insurance company will pay on an insured loss
Exclusions are clauses in the insurance contract that specify particular losses that will not be covered by the insurance
Riders are supplemental insurance for items or situations that are excluded or limited under the regular policy
Life insurance pays out a specific amount of money when the insured person dies (although situations of suicide and fraud are excluded)
Estate is simply everything that a person owns. It may include land, financial accounts, jewelry, or other items
Estate planning involves creating a plan for the distribution of one’s possessions after one’s death and to provide care for any dependents
Will is a legal document that details what you wish to happen to your estate at the time of your death
Holographic Wills are handwritten wills that are prepared by the individual
Statutory Wills use a preprinted form
Formal Wills are those created by attorneys and which bear the signatures of witnesses who saw you sign the document
Executor or someone who will carry out the directions contained within the will
Guardian is someone who accepts the responsibility of caring for someone’s children in the event of the parents’ deaths
Living Will is a legal document that details the type of medical care that you wish to receive if you become incapacitated due to a physical or mental illness
Power of Attorney is a legal document that gives the person of your choice authority to act on your behalf

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