FINAN EXAM #4

CHAPTER 10

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Every liability lawsuit involves an act of negligence.

FALSE

Homeowners insurance covers the cost of living elsewhere while your home is being repaired from a fire.

TRUE

The special form of homeowners insurance includes all risks such as loss or damage from floods or earthquakes.

FALSE

In the event of an accident, bodily injury liability coverage protects both individuals in the driver’s car and people in other cars for medical expenses.

FALSE

A higher deductible will reduce the amount paid for collision and comprehensive physical damage coverage.

TRUE

A situation in which a person is held responsible for the actions of another person is:
A. negligence
B. vicariously liability
C. property damage liability
D. comprehensive coverage

B

Renter’s property insurance would include coverage for
A. personal belongings.
B. structures attached to the main building.
C. damages caused by a flood.
D. business-related property.

A

Coverage that pays for the current replacement cost of a stolen or damaged item is called:
A. replacement value coverage.
B. endorsement coverage.
C. umbrella coverage.
D. actual cash value coverage.

A

Losses caused by damage to your car by another person who is at fault in the accident are covered by
A. collision coverage.
B. comprehensive physical damage.
C. property damage liability.
D. assigned risk coverage.

C

Driver classification includes information on a person’s __________ and is used to set auto insurance rates.
A. type of automobile
B. place of residence
C. driving habits
D. credit rating

C

CHAPTER 11

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Affordable health care has become one of the most important social issues of our time.

TRUE

Hospital expense insurance pays part or all of hospital bills for room, board, and other charges.

TRUE

Dread disease and cancer insurance policies are usually good values for most individuals.

FALSE

Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies.

TRUE

Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy

FALSE

Which type of health insurance pays part or all of the surgeon’s fee for an operation?
A. Hospital expense
B. Surgical expense
C. Physician’s expense
D. Major medical expense

B

What form of insurance is growing faster than any other form of insurance in the country?
A. Long-term care
B. Vision care
C. Dread disease
D. Dental expense

A

Long-term care insurance was virtually unknown 25 years ago, but now it is growing faster than any other form of insurance.

TRUE

Public opinion polls consistently show that Americans are happy with the nation's health care system.

FALSE

Part A of Medicare pays for all covered services for inpatient hospital care after you pay a single annual deductible.

TRUE

Two sources of government health insurance are Medicare and Medicaid.

TRUE

To get Medicare medical insurance (Part B) you must sign up for it and pay a monthly premium.

TRUE

Medicare was never intended to pay all medical costs.

TRUE

Disability income insurance benefits provide regular cash income lost by employees as the result of an accident or illness.

TRUE

Most people are more likely to lose their income due to death than due to disability.

FALSE

Disability benefits begin on the first day you are disabled.

FALSE

Generally, disability income policies with shorter waiting periods have lower premiums.

FALSE

Most health insurance policies in the United States are sold to:
A. victims of communicable diseases.
B. individuals with families.
C. single individuals with no dependents.
D. elderly individuals.
E. employers, who in turn offer the benefits to employees

A

Julie Cumbie is playing softball and gets hurt sliding into second base. She gets an x-ray at her doctor's office to make sure her ankle isn't broken. Which part of her basic insurance coverage should help pay for this x-ray?

A. hospital expense
B. surgical expense
C. physician expense
D. major medical
E. Medicare Part B

C

Jamal Walker developed a serious infection and spent 6 months in his hospital's intensive care unit. What part of his insurance policy would be the most useful for helping to pay for this?

A. hospital expense
B. surgical expense
C. physician expense
D. major medical
E. Medicare Part B

D

Nathanial Drummond has three different insurance policies. He has been injured in an accident and has incurred $30,000 in medical bills. There is a clause in all of his insurance contracts that ensures he receives no more than a total of $30,000 in payments from his insurance companies. What is this clause called?

A. coordination of benefits
B. deductible
C. coinsurance
D. stop-loss provision
E. waiver of premium

A

Each year, Sophie Bennett must pay $500 for doctor's visits before her insurance company will make any payments for doctor's visits. What is this requirement called?

A. coordination of benefits
B. deductible
C. coinsurance
D. stop-loss provision
E. waiver of premium

B

Sophie Bennett is required to pay 20 percent of her medical costs up to a stated dollar limit. What is this requirement called?

A. coordination of benefits
B. deductible
C. coinsurance
D. stop-loss provision
E. waiver of premium

C

Sophie Bennett has personally paid a total of $5,000 in medical costs this year. At this point, there is a clause in her insurance contract that requires her insurance company to pay 100% of her medical costs for the remainder of the year. What clause is this likely to be?

A. coordination of benefits
B. hospital indemnity clause
C. coinsurance
D. stop-loss provision
E. major medical expense provision

D

CHAPTER 12

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Most people buy life insurance to protect someone who depends on them from financial losses caused by their death.

TRUE

Most American families face substantial loss when one spouse dies unexpectedly.

TRUE

Life insurance is one of the most important purchases you may ever make.

TRUE

Single persons living alone have little or no need for life insurance.

TRUE

The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.

TRUE

Universal life, variable life, and adjustable life are types of term life insurance.

TRUE

Two basic types of life insurance are temporary (term) and permanent insurance.

TRUE

Group life and credit life insurance are generally permanent forms of insurance.

FALSE

Term insurance is protection for a specified period of time, usually 1, 5, 10, or 20 years.

TRUE

Term life insurance premiums decrease as you get older.

FALSE

The coverage of term insurance ends at the conclusion of the term, but you can continue it if you have a renewability option.

TRUE

One important feature of a term life policy is its cash value.

FALSE

Cash value policies may make sense for people who intend to keep the policies for only a couple of years.

FALSE

You probably have little or no need for life insurance if you are:
A. a single person living alone or with parents.
B. divorced and have two children.
C. married and your spouse works.
D. gainfully employed.
E. a household with several children.

A

Your annual income is $50,000. What is your life insurance need based on the easy method?

A. $245,000.
B. $300,000.
C. $345,000.
D. $400,000.
E. $450,000.

A ––––––> insurance need = $50,000 x .7 x 7 = $245,000

Which method of determining life insurance requirements is designed specifically for a working couple with no dependents?
A. hard method
B. easy method
C. "nonworking" spouse method
D. thorough method
E. DINK method

E

The total debts of you and your spouse include the following: mortgage, $180,000; auto loan, $10,000; credit card balance, $2,000; and other debts of $6,000. Further, you estimate that your funeral will cost $4,000. Your spouse expects to continue to work after your death. What is your life insurance need using the DINK method?
A. $103,000
B. $106,000
C. $226,000
D. $202,000
E. $99,000

B

PAST EXAM Q's

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Health insurance includes both medical expense insurance and disability income insurance

TRUE

Group health insurance plans comprise about 90% of all health insurance issued by health and life insurance companies

TRUE

You can only buy group health insurance if you have a family. Individuals can't purchase health insurance

FALSE

Individual health insurance covers either one person or a family

TRUE

Very few group health policy contracts have a coordination of benefits provision

FALSE

A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin

TRUE

A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount

TRUE

A stop-loss provision requires the policyholder to pay up to a certain amount, after which the company pays 100% of all remaining covered expenses

TRUE

Disability income insurance benefits provide regular cash income lost by employees as the result of an accident or illness

TRUE

Health Insurance includes:
A. life insurance.
B. disability insurance.
C. personal liability insurance.
D. an annuity.
E. an endowment.

B

Which type of health insurance pays part or all of an insured's hospital bills for room, board, and other charges?
A. surgical expense
B. hospital expense
C. physician's expense
D. Medicare Part B
E. major medical

B

Joe Johnson needs surgery for appendicitis. Which part of his basic insurance coverage should help pay for this surgery?
A. hospital expense
B. surgical expense
C. physician expense
D. major medical
E. Medicare Part B

B

Joan Wilder receives a phone call from a salesperson who tries to sell her an insurance policy by scaring her about her high risk of death from this disease. She knows that this type of insurance policy has a notoriously poor value so she politely declines. What type of insurance policy did this salesperson likely try to sell her?
A. comprehensive major medical
B. hospital indemnity
C. long-term care
D. cancer
E. disability income

D

Marcia Fuller has an insurance policy that lists that she and her three daughters, ages 6, 10, and 12, are covered under this policy. Which provision in her insurance policy is defined
by this list?
A. eligibility
B. assigned benefits
C. benefit limits
D. guaranteed renewable
E. exclusions and limitations

A

Dean Thomas has an insurance policy that cannot be cancelled unless he fails to pay his premium. What provision in his insurance policy would specify this?
A. eligibility
B. assigned benefits
C. benefit limits
D. guaranteed renewable
E. exclusions and limitations

D

Benjamin Northcutt has an insurance policy that does not cover cosmetic surgery like the nose job he would like to have. What provision in his insurance policy would specify this?
A. eligibility
B. assigned benefits
C. benefit limits
D. guaranteed renewable
E. exclusions and limitations

E

Which one of the following provisions requires that the policyholder pay a basic amount before the policy benefits begin?
A. coinsurance
B. stop loss
C. deductible
D. self insurance
E. incontestable

C

The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risk

TRUE

The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization

TRUE

Increased liability insurance is available with an umbrella policy

TRUE

A home of wood is more expensive to insure than a comparable brick structure

TRUE

The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage

FALSE

The uncertainties of direct and indirect losses to personal or real property due to fire, wind, accident, theft, etc., are called ____________ risks.
A. personal
B. business
C. property
D. liability
E. speculative

C

Starting a small business that may or may not succeed is an example of ___________ risk.
A. speculative
B. pure
C. commercial
D. personal
E. liability

A

Using a home security system is an example of ____________ risk.
A. shifting
B. accepting
C. reducing
D. sharing
E. transferring

C

If a homeowner leaves toys on stairs that results in injury to a delivery person, this may be ruled as:
A. vicarious liability.
B. negligence.
C. assigned risk.
D. umbrella coverage.
E. coinsurance.

B

Negligence refers to:
A. failure to take ordinary and reasonable care.
B. cancellation of insurance.
C. property damage.
D. high risk insurance coverage.
E. common hazards in our society.

A

While cleaning your home, a worker damages some furniture. You take action against the worker's employer to cover the cost of the damage. This is an example of a(n) ____________
liability.
A. umbrella
B. assigned
C. common situation
D. peril
E. vicarious

E

The additional living expenses component of a home insurance policy is designed to:
A. pay for temporary housing while your home is repaired.
B. cover damage to property while away from home.
C. reimburse a homeowner for damage done by a visitor.
D. pay for medical expenses of people injured on your property.
E. pay for repairs caused by fire or other hazards.

A

Renter's insurance would include coverage for:
A. flood damage.
B. personal property.
C. building and other structures.
D. umbrella liability.
E. earthquake damage.

B

Which one of the following is not covered by renter's insurance?
A. medical expenses for injuries to visitors
B. fire damage to the building's roof
C. additional living expenses
D. accidental damage to the property of others
E. cost of legal action due to personal liability

B

Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?
A. $100
B. $150
C. $200
D. $350
E. $400

E

The ____________ method to settle claims is based on the current replacement cost of a
damaged or lost item less depreciation.
A. replacement value
B. actual cash value
C. umbrella
D. endorsement
E. personal property floater

B

Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to
your home, what amount of the claim would the insurance company pay?
A. $250
B. $350
C. $450
D. $600
E. not able to determine from this information

B –––> Payment = $600 - 250 = $350

The 100 in 100/300/50 refers to:
A. property damage liability coverage.
B. the amount of the deductible.
C. collision coverage.
D. the total coverage for an accident
E. the limit for bodily injury claims that can be paid to one person.

E

Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by:
A. medical payments.
B. collision.
C. bodily injury liability.
D. uninsured motorists protection.
E. no-fault coverage.

D

Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?
A. assigned risk pool
B. financial responsibility coverage
C. comprehensive system
D. no-fault insurance
E. uninsured motorists protection

D

The 25 in 50/100/25 refers to ____________ coverage.
A. collision
B. bodily injury liability
C. comprehensive physical damage
D. medical payments
E. property damage liability

E

Which one of the following types of coverage would pay for damage to your automobile in an accident for which you were at fault?
A. property damage liability
B. collision
C. comprehensive physical damage
D. no-fault insurance
E. assigned risk pool coverage

B

Comprehensive coverage would cover financial losses due to:
A. injuries caused by a driver without insurance.
B. damage to your car in an accident for which you were at fault.
C. damage to your car caused by wind or hail.
D. legal action against you for an accident.
E. damage to a neighbor's tree caused by your car.

C

Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?
A. $150,000
B. $100,000
C. $50,000
D. $25,000
E. None. The total amount would be covered by insurance.

C –––> Excess individual claim = $150,000 - 100,000 = $50,000. The other claims are less than $100,000 each and the total claim is less than $300,000.

Your geographic location is a major factor in determining the ____________ used to calculate your automobile insurance premiums.
A. driver classification
B. assigned risk pool
C. coverage level
D. legal responsibilities
E. rating territory

E

Wind damage occurs to your car costing $800 to repair. If you have a $100 deductible for collision and full coverage with no deductible for comprehensive, what portion of the claim
will the insurance company pay?
A. $100
B. $200
C. $500
D. $700
E. $800

E

Nick Rod owns a home in Edmond, Oklahoma and pays $665 per year in insurance on the home. The $665 is an example of a:
A. peril.
B. hazard.
C. risk.
D. premium.
E. liability.

D

Kevin Brown rides his bicycle to work so that he doesn't have to worry about getting in a car accident. How is Kevin managing his risk?
A. avoidance
B. reduction
C. assumption
D. shifting
E. creation

A