Personal Finance 2

Introduction

In this unit you will learn more about personal financial decision-making. As wage earners and consumers, you will be faced with major personal economic decisions including how to use credit, purchase insurance, plan a career, and protect yourself as a consumer.

Lesson Objectives

In this module, students should be able to:

Evaluate the costs and benefits of using credit.
Analyze how insurance and other risk-management strategies protect against financial loss.
Describe how the earnings of workers are determined in the marketplace.
Explain ways consumers are protected by rules and regulations.
Explain sources of and protection against identity theft.

Key Terms

The following key terms will help you understand the content in this module.

Asset protection – protects assets like your home and car if you need extra insurance coverage to keep from losing them
Bankruptcy – a legal process that relieves debtors of the responsibility of paying their debts or protects them while they try to repay
Collateral – property pledged to a creditor to assure repayment of a loan
Credit – the use of someone else’s money, borrowed now with the agreement to pay it back later
Credit bureau – a business that gathers, stores, and sells credit information to other businesses
Credit history – the complete record of your borrowing and repayment performance
Credit rating – a measure of creditworthiness based on an analysis of your credit and financial history
Credit report – a written statement of a consumer’s credit history, issued by a credit bureau to businesses
Credit score – the total of assigned points used to determine the likelihood that you will repay debt as agreed
Disability insurance – an insurance plan that makes regular payments to replace income lost when illness or injury prevents the insured from working
Insurance – a method for spreading individual risk among a large group of people to make losses more affordable for all
Life insurance – insurance that provides funds to beneficiaries when the insured dies
Premium – the cost (usually monthly) of an insurance policy
Renter’s policy – insurance that protects renters from property and liability risks
Shared liability – when accidents occur where the responsibility must be shared among the parties involved
Term life insurance – the most common form of temporary life insurance – a life insurance policy that remains in effect for a specified period of time
Whole life insurance – a policy for which you pay fixed premiums throughout your life, and the policy pays a stated sum at death to your beneficiary

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