Personal Risk Management: Life, Health, Auto and Homeowners Insurance

Which type of family is likely to have the least need for a large amount of life insurance?

A single person family

The human life value is defined as the

Present value of the family's share of the deceased breadwinner's future earnings

Which of the following is a cost/expense that an estate clearance fund is designed to pay?

Burial expenses

What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own?

1 to 2 years

Under the needs approach, when is the dependency period of a surviving spouse assumed to end?

When the youngest child reaches age 18

Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a

Sandwiched family

What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the

Opportunity cost of buying life insurance

Which of the following statements about term insurance is true?

Most policies can be renewed for additional periods without evidence of insurability

What is NOT true about ordinary life insurance?

The face amount is paid if the insured lives to age 65

Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balance gradually declines. This type of life insurance is called

Decreasing term insurance

Major defects in the United States healthcare system include

Rising healthcare expenditures AND Considerable waste and inefficiency in the healthcare system

The Affordable Care Act required that most U.S. Citizens and legal residents have qualifying health insurance or pay a financial penalty. This provision is known as the

Individual mandate

Under the Affordable Care Act, it is true that

Health insurers cannot use pre-existing conditions exclusions AND cannot impose annual benefit limits and lifetime benefit limits

One provision of the ACA is designed to benefit young adults up to age 26. This provision allows these young adults to

Remain covered under their parents' health insurance policies

What statement(s) regarding health care expenditures in the US is (are) true?

As a nation, the U.S. spends significantly more on health insurance than most other industrialized nations

The intentional misrepresentation of a material fact is called

Rescission

What statement(s) about eligibility requirements for qualified Health Savings Accounts is (are) true?

Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan

What statement(s) about high-deductible health insurance plans is (are) true?

Coverage under a high deductible plan is necessary to establish an HSA, AND high deductible plans provide a maximum limit on out-of-pocket expenses

The effect of an annual out-of-pocket limit in an individual medical expense is to

Cover 100 percent of eligible medical expenses after the insured has incurred a specified amount of expenses

What is NOT true about long-term care insurance?

Premiums can be reduced by electing shorter elimination periods

What is NOT a covered auto under the liability section of the PAP?

A non-owned van which is driven by the insured on a regular basis

Who is NOT a covered person under the liability section of the PAP?

The former spouse of the named insured, who moved out of the home 2 years ago when the divorce was finalized

Which of the following persons is covered under PAP?

A family member who drives a covered auto AND a family member who occasionally drives a friend's auto

Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state?

Larry's policy automatically provided $50,000 of liability coverage

Who is a covered person under the medical payments coverage of the PAP?

A family member of the named insured, if struck by an auto while crossing the street

Tony has an unendorsed Personal Auto Policy that provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy?

A friend in the car is injured while Tony is driving a covered auto.

In which of the following situations would medical payments be paid under an unendorsed PAP?

Injuries incurred in an auto while it is used in a shared-expense carpool

Which of the following statements about the uninsured motorists coverage of the PAP is true?

The coverage applies only if the uninsured motorist is legally liable

All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP EXCEPT

Theft of a compact disc player which was permanently installed in the auto

Duties of an insured after a collision loss covered under the PAP include

Taking reasonable steps to protect the vehicle from further damage

What does Section I of the homeowners policy provide coverage for?

Loss of use

What is NOT covered under the dwelling coverage (Coverage A)?

The land on which the insured dwelling is located

What statement about the coverage for other structures (Coverage B) under the Homeowners 3 policy is true?

The coverage applies to a detached garage or tool shed on the residence premises

What is NOT subject to special limits of liability under the Homeowners 3 policy?

Furniture destroyed by a fire

What is true about the personal property coverage (Coverage C) of the Homeowners 3 policy?

There are special limits of liability that apply to certain types of personal property

What is a covered property under the personal property coverage (Coverage C)?

A bicycle owned by a foster child living with the named insured

What statement about coverage for loss of use (Coverage D) is true?

If a covered loss makes the home unfit for living, the insurer pays additional living expenses the insured may incur as a result of the loss

What is a covered peril under the personal property coverage (Coverage C)?

Windstorm

What is an exclusion under Section I?

Losses due to the failure of the insured to use all reasonable means to save and preserve property after the time of a loss

Who is NOT an insured person under the homeowners policy?

Nonresident employees of the named insured

Who is eligible for benefits under medical expenses to others (Coverage F)?

A friend who slips and falls on a wet patio, AND a neighborhood child who is severely scratched by a cat in the care of the named insured

What is NOT an insured location for medical payments to others (Coverage F)?

Farmland owned by the insured

Section II DOES NOT have exclusions applying to

Activities of the named insured's minor children

Factors that affect the cost of homeowners insurance include

Construction material AND Deductible amount

What is true about buying homeowners insurance?

Premiums can often be reduced substantially by selecting a higher deductible amount

Tom is planning to build a home. Which of the following statements is true with regard to homeowners insurance and Tom's new home?

Older homes cost more to insure than newer homes

Jane would like to save money on her homeowners' premium. What will NOT reduce her premium?

Adding a personal property replacement endorsement

Tom and Tammy Evans were ready to purchase a home. The home was to serve as collateral for their mortgage loan. Two insurers declined to insure the home, citing "an adverse CLUE report." Why would an insurer reject a homeowners insurance application because of an adverse CLUE report?

Because there had been property insurance claims filed on the home's previous owner

What is true concerning the use of an individual's credit history as an insurance rating factor?

A poor credit history can be improved over time, allowing for the purchase of homeowners insurance at a lower premium