What is the primary purpose of life insurance in financial planning?
Life insurance provides financial protection for dependents in the event of the policyholder's death, helping to cover expenses and preserve wealth.
What does risk management involve in financial planning?
Risk management involves identifying, analyzing, and mitigating potential financial losses using tools like insurance and diversification.
Which type of insurance typically covers liability for accidents in the home?
Homeowners insurance provides coverage for property damage and liability if someone is injured on the insured property.
Which of the following is considered a tax-deferred investment account?
A traditional IRA allows contributions to grow tax-deferred, meaning taxes are paid upon withdrawal during retirement.
What is the purpose of an umbrella liability insurance policy?
An umbrella policy provides additional liability coverage beyond standard insurance limits, offering extra protection for significant claims or lawsuits.
Which of the following is a progressive tax in the U.S.?
The federal income tax system is progressive, meaning the tax rate increases as an individual's taxable income increases.