CPCU 553 Flashcards – Module 5

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[h] CPCU 553 – Module 5

[q] Personal Financial Planning

[a] A process in which individuals or families implement a comprehensive plan to achieve their goals and objectives.

[q] Basic financial goals for most individuals

[a] Goals include:

Protecting against loss of income or wealth.

Providing for basic living expenses.

[q] Robo-adviser

[a] A computer program that uses a set of rules to make financial recommendations to an individual.  The recommendations are based on an individual’s age, risk tolerance, and income.

[q] Benefits of a robo-adviser

[a] Benefits include:

Lower fees.

Appeal to younger individuals.


[q] Financial planning life cycle

[a] The process of adjusting an individual’s or family’s financial goals as their circumstances change

[q] Major financial planning focuses of an empty nester

[a] Major focuses include:

Retirement planning.

Long-term care insurance.

Estate planning.

[q] Financial planning techniques included in a comprehensive financial plan

[a] Techniques included:

Risk management planning.

Investment planning.

Tax planning.

Retirement planning.

Estate planning.

[q] Primary method of risk management planning

[a] Insurance

[q] Loss exposures typically not handled through private insurance

[a] Retirement loss exposures.

Unemployment loss exposures.

[q] Dollar cost averaging

[a] A strategy that involves investing the same dollar amount every period, regardless of the movement of the stock market.

[q] Will

[a] A legal document outlining specifics of property distribution upon someone’s death.

[q] Trust

[a] A legal document controlling property.

[q] Special needs trust

[a] A trust that allows an individual to receive benefits from an inheritance without losing government assistance.

[q] Types of social insurance

[a] Types include:

Social Security.

Medicare and Medicaid.

Unemployment insurance.

[q] Annuity

[a] A source of periodic income that the annuitant cannot outlive.

[q] Steps of the financial planning process

[a] Steps (in order):

1) Establishing and prioritizing goals.

2) Gathering information.

3) Analyzing the current situation.

4) Identifying and evaluating alternatives.

5) Developing a plan.

6) Implementing the plan.

7) Monitoring and revising the plan.

[q] Financial statements are created during this step of the financial planning process

[a] Gathering Information (Step 2).