FI 301 Study Guide - Final Guide: Fixed-Rate Mortgage, Adjustable-Rate Mortgage, Transaction Account
Document Summary
Insurance- transfer risk to a company that can handle the risk: avoid financial disaster, types: car, health, house, life. Factor affecting premiums - probability of loss, size of loss, competition, expenses and profit margin. Adverse selection those that need insurance are most likely to purchase it. (i. e. smokers, older people) Morale hazard careless or indifference to a loss because of the existence of insurance i. e. speeding up to cross when the light turns orange. Ownership: life insurance- funeral costs, pay off debts (mortgage), protect your family, a stock owned company is owned by its shareholders, a mutual life insurance company is owned by its policy holders. Whole life insurance: protects insured until death, set payment, builds up cash value. Term insurance: betting you are going to die, term, no cash value, less expensive than whole life. Sources of funds: annuity plan- pays you back money monthly over a definite time period. Long term bonds: mortgages, real estate (building)
