Insurance & Risk Management Strategies Flashcards

A client wants to cancel renter's insurance to save money. What key risks should the counselor explain?

Answer: Personal property loss from theft, fire, or water damage plus liability exposure

Renter's insurance covers personal property replacement and personal liability, protecting against potentially devastating losses.

When should a counselor recommend long-term care insurance?

Answer: During the client's 50s to early 60s when premiums are more affordable and health is less likely to disqualify them

The optimal window is mid-50s to early 60s, balancing premium affordability with the risk of developing disqualifying conditions.

What is the difference between 'replacement cost' and 'actual cash value' coverage?

Answer: Replacement cost pays to replace items at current prices; actual cash value deducts depreciation

Replacement cost pays current retail prices for replacement, while actual cash value deducts depreciation for significantly lower payouts.

A self-employed client has no disability insurance. What should the counselor emphasize?

Answer: They have no employer safety net, making individual disability insurance critical

Self-employed individuals lack employer-provided disability benefits, making them entirely responsible for income protection.

What is the primary benefit of a Health Savings Account paired with a high-deductible plan?

Answer: Triple tax advantage: deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses

HSAs offer the only triple tax benefit in the U.S. tax code at contribution, growth, and withdrawal stages.

A client's auto insurance shows 100/300/100 liability coverage. What do these numbers represent?

Answer: $100,000 per person bodily injury, $300,000 per accident bodily injury, $100,000 property damage per accident

The split-limit format represents per-person bodily injury, per-accident bodily injury, and per-accident property damage liability limits.