Session:16 Information, Risk, and Insurance
Key Terms
Principles of Microeconomics 3e | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-microeconomics-3e
- adverse selection
- when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system
- asymmetric information
- a situation where the seller or the buyer has more information than the other regarding the quality of the item for sale
- coinsurance
- when an insurance policyholder pays a percentage of a loss, and the insurance company pays the remaining cost
- collateral
- something valuable—often property or equipment—that a lender would have a right to seize and sell if the buyer does not repay the loan
- copayment
- when an insurance policyholder must pay a small amount for each service, before insurance covers the rest
- cosigner
- another person or firm who legally pledges to repay some or all of the money on a loan if the original borrower does not
- deductible
- an amount that the insurance policyholders must pay out of their own pocket before the insurance coverage pays anything
- fee-for-service
- when medical care providers are paid according to the services they provide
- health maintenance organization (HMO)
- an organization that provides health care and is paid a fixed amount per person enrolled in the plan—regardless of how many services are provided
- imperfect information
- a situation where either the buyer or the seller, or both, are uncertain about the qualities of what they are buying and selling
- insurance
- method of protecting a person from financial loss, whereby policy holders make regular payments to an insurance entity; the insurance firm then remunerates a group member who suffers significant financial damage from an event covered by the policy
- money-back guarantee
- a promise that the seller will refund the buyer’s money under certain conditions
- moral hazard
- when people have insurance against a certain event, they are less likely to guard against that event occurring
- occupational license
- licenses issued by government agencies, which indicate that a worker has completed a certain type of education or passed a certain test
- premium
- payment made to an insurance company
- risk group
- a group that shares roughly the same risks of an adverse event occurring
- service contract
- the buyer pays an extra amount and the seller agrees to fix anything specified in the contract that goes wrong for a set time period
- warranty
- a promise to fix or replace the good for a certain period of time