Finance Final Essay

Submitted By mrod003
Words: 881
Pages: 4

1) The definition of insurance is being protected against any possible financial loss. Insurance is a firm that assumes responsibility for any losses from an insured risk.

2) The definition of property and liability insurance is a legal responsibility from cost of some other person’s losses or injuries.

3) The purpose of life insurance is to protect anyone that may depend on you from any financial losses due to our death. Another purpose may be to pay off home debt or other debts at the time of death, also to leave as part of estate as well as to save money for retirement or income or education for children. One type of life insurance is stock life insurance. Stock life insurance companies are owned by shareholders.. Around 76% are this kind of insurance. They sell non participating policies. The other type of life insurance is mutual life insurance. Mutual life insurance companies are the other 24% of the types of life insurance. They are owned by policy owners. Part of the premium is refunded to policy holders every year which is called policy dividend. There is also term life insurance which is a protection for a specified period of time and if you stop paying the premiums, the coverage stops. There is also whole life insurance where you pay a premium for however long you live. Another type is universal life which gives you more direct control.

4) The purpose of health insurance is to limit the financial burdens that people suffer from illness or any injuries. It is a part of a person’s overall risk management plan to safeguard that person’s family’s economic security.

5) A financial investment is an asset that you can put or invest money into. The purpose of investing is to hope that it grows into more money and thus receiving more than what you initially paid for. Financial investments include savings accounts or CD’s , US savings bonds which are the safest investments because it s a predictable income but does not have a great overall payoff. Higher investments with a higher potential of return include corporate bonds, preferred or common stocks, municipal bonds and real estate rental property. Bonds receive periodic interest rates. Also, bondholders can keep the bond until maturity or sell it to another investor before it matures. The goal of real estate investment is to buy property at a certain price and sell at a higher price.

6) The definition of stocks is one type of security that shows ownership in a corporation or company and claim part of the company’s assets and earnings. The purpose of stocks is to raise money for start up costs and help pay for expansion. A stockholder can sell a share of stock to another investor. Most corporations can distribute about 30-70% of earnings to stockholders which is a good purpose to invest in stock. In return the stockholders have voting rights in the company they invested in.

7) A mutual fund is an investment fund that pools money from many investors to purchase securities. It is managed by a professional fund manager. You can buy shares in a fund. It also provides diversification that can reduce risk. It matches your needs with the funds’ objective.

8) A bond is a loan to a corporation, federal government, or a municipality. The purpose of bonds is to lend the money at an interest rate. Bondholders receive periodic interest payments the