Home and Automobile Insurance
True / False Questions
23. A job tends to have less of a long-term commitment to a field than a career. TRUE
24. Education, training, and the demands for a person's skills are major influences on
salary. TRUE
25. A tax-exempt employee benefit is usually more advantageous than a tax-deferred
benefit.
TRUE
Multiple Choice Questions
26. A commitment to a profession that requires continued training and offers a clear path
for occupational growth is a(n):
A. apprenticeship.
B. job.
C. internship.
D. career.
E. cooperative employment experience.
27. To assess the current value of a lump-sum retirement benefit that will be received in
10 years, use the ____________ calculation.
A. present value of annuity
B. present value of a single amount
C. future value of an annuity
D. future value of a single amount
28. Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with
a value of $500 would have a tax-equivalent value of:
A. $694.
B. $528.
C. $500.
D. $360.
E. $140.
29. Tax-deferred employee benefits are
A. not subject to federal income tax.
B. not subject to state income tax.
C. taxed at some future time.
D. are taxed at a special rate.
. ____________________ is a benefit on which you pay no taxes.
A. Networking
B. Vesting
C. A tax deferred benefit
D. A tax exempt benefit
E. An opportunity cost
The answers for the next four chapters are at the end of this document.
Chapter 10 Home and Automobile Insurance
True/False Questions
T
F
1. The purpose of insurance is to help protect you and your family against
financial hardship due to hazard, accident, death, and similar risks.
T
F
2. Personal risks, property risks, and liability risks are types of speculative
risks.
T
F
3. The most common method of dealing with risk is to shift, or transfer it to
an insurance company or some other organization.
T
F
4. Vicarious liability refers to the failure to take ordinary or reasonable care
in a situation.
T
F
5. Personal belongings that have a high value require coverage with a
personal property floater.
T
F
6. The purpose of a household inventory is to provide evidence of items
covered by home insurance.
T
F
7. Increased liability insurance is available with an umbrella policy.
T
F
8. Medical payments coverage in a home insurance policy is designed to pay
for legal action taken against a homeowner who may be legally
responsible for injury or property damage of others.
T
F
9. The Comprehensive Form of homeowner's insurance includes coverage
for damage due to floods.
T
F 10. Replacement cost for settling property insurance claims is less costly than
the actual cash value method.
T
F 11. A home made of wood is more expensive to insure than a comparable
brick structure.
T
F 12. The 100/300 amounts for bodily injury liability insurance refer to the costs
of insurance coverage.
T
F 13. Medical payments automobile insurance coverage pays for the costs of
injuries to persons in the driver's vehicle.
T
F 14. Property damage liability coverage would pay for damage to another
vehicle for which you were at fault.
T
F 15. The driver classification category is based on automobile style, model, and
value of the vehicle.
Multiple Choice Questions
16. Peril is defined as:
A) the refusal by an insurance company to pay for the covered loss.
B) the cause of risk.
C) the cause of a possible loss.
D) an uncertainty as to loss.
17. Defective house wiring is an example of a:
A) hazard.
B) peril.
C) risk.
D) speculation.
18. 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
19. Using a home security system is an example of ____________ risk.
A) shifting
B) accepting
C) reducing
D) sharing
E) transferring
20. Wearing a seat belt in an automobile to protect yourself against injury is an
example of ____________ risk.
A) reducing
B) assuming
C) pooling
D) shifting
E) avoiding
21. High winds cause damage to trees, shrubs, and other plants. This insurance claim
would be covered under the ____________ component of homeowner's
insurance.
A) additional living expenses
B) personal property
C) building and other structures
D) personal liability
E) property damage
22. 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.
23. Renter's insurance would include coverage for:
A) flood damage.
B) personal property.
C) building and other structures.
D) umbrella liability.
E) earthquake damage.
24. Which of the following are covered by renter's insurance?
A) medical expenses for injuries to visitors
B) fire damage of 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
25. 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
26. Which of the following insurance policy provisions requires that the insured must
pay for part of the loss of a claim if the property is not insured for the specified
percentage of replacement value?
A) personal property floater
B) an endorsement
C) coinsurance clause
D) umbrella coverage
E) assigned risk clause
27.
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
28. 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
29. 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.
30. 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
31. Which of the following coverages 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
32. 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) None. The total amount would be covered by insurance
33. Which of the following refers to a category based on age, sex, marital status, and
driving habits that is used to set automobile insurance premiums?
A) rating territory
B) assigned risk pool
C) no-fault system
D) driver classification
34. Susan Bize owns a home in Edmond, Oklahoma. She has a coffee maker in the
home that has been recalled because it is likely to start fires. The coffee maker is
an example of:
A) A peril
B) A hazard
C) A risk
D) A premium
E) None of the above
Chapter 11 Health and Disability Insurance
True/False Questions
35. T
36. T
37. T
38. T
39. T
40. T
41. T
42. T
43. T
44. T
45. T
46. T
47. T
F The United States has the lowest per capita medical expenditures of any
industrialized country in the world.
F The number of Americans without basic health insurance has been decreasing
since the 1980s.
F Most people are more likely to lose their income due to death than due to
disability.
F The fact is that for all age groups disability is more likely than death.
F Group health insurance plans comprise more than 85 percent of all health
insurance issued by health and life insurance companies.
F Group health insurance will cover you but not your immediate family.
F Very few group health policy contracts have a coordination of benefits
provision.
F Disability income insurance benefits provide regular cash income lost by
employees as the result of an accident, illness, or pregnancy.
F Just about every worker is covered by disability income insurance.
F Disability benefits begin on the first day you are disabled.
F A deductible provision requires the policyholder to pay a basic amount before
the policy benefits begin.
F A coinsurance provision requires the policyholder to share the expenses
beyond the deductible amount.
F Long-term care insurance was virtually unknown 25 years ago, but now it is
growing faster than any other form of insurance.
Multiple Choice Questions
48.
49.
50.
51.
52.
53.
54.
Which country has the highest per capita medical expenditures of any industrialized
country in the world?
A) Australia
B) Britain
C) Canada
D) Denmark
E) U.S.A.
What can you do to reduce your health care costs?
A) Stay well.
B) Gain a little extra weight.
C) Smoke and drink.
D) Live dangerously.
E) Don't seek medical care.
Which type of health insurance policy may cover all of your health insurance needs
or may deny benefits if you lose your job?
A) group health
B) individual health
C) Basic health
D) Comprehensive medical
E) Disability income
Which type of insurance provides for the partial replacement of income lost by
employees as a result of an accident, illness, etc.?
A) Comprehensive major medical
B) major medical expense
C) physician's expense
D) Disability income
E) surgical expense
With disability income insurance, benefits usually begin:
A) on the first day of disability.
B) Between 30 and 90 days after the disability occurs.
C) on the 10th day of disability.
D) one year after the start of the disability.
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 Insurance
B) Surgical Expense Insurance
C) Physician Expense Insurance
D) Major Medical Expense Insurance
E) None of the above
Sophie Bennett must pay $500 in doctors visits before her insurance company
will make any payments for doctors visits. This is called:
A) Coordination of benefits
B) Deductible
C) Coinsurance
D) Stop-Loss provision
E) Major medical expense insurance
55.
Sophie Bennett has met the deductible for her doctor’s visits. However, her
insurance company requires her to pay 20% of all expenses above this deductible
amount. This clause is called:
A) Coordination of benefits
B) Add on expenses
C) Coinsurance
D) Stop-Loss provision
E) Major medical expense insurance
F)
Chapter 12 Life Insurance
True/False Questions
56.
T F Life insurance proceeds may be used to provide an education or income
for children.
57.
T F Single persons living alone have little or no need for life insurance.
58.
T F Households with small children most often have the greatest need for life
insurance
59.
T F The first step in buying insurance is to determine whether you really need
life insurance.
60.
T F The easy method of determining life insurance is based on the rule of
thumb that a "typical family" will need about 70 percent of wage-earner's salary
for seven years.
61.
T F 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.
62.
T F The " family need" method of determining life insurance need provides a
thorough estimation of life insurance needs.
63.
T F A term insurance policy pays a benefit only if you die during the period
that the policy covers.
64.
T F The premium for the whole life policy increases with your age.
65.
T F Universal life, variable life, and adjustable life are types of term life
insurance.
66.
T F
Term insurance is protection for a specified period of time, usually 1, 5,
10, or 20 years.
67.
T F
Term life insurance premiums decrease as you get older.
Multiple Choice Questions
68. Life insurance premiums are determined basically by the:
A) forces of supply.
B) forces of demand.
C) forces of competition.
D) use of mortality tables.
E) guesswork of insurance executives.
69. 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.
The easy method of determining your life insurance requirements is:
A) overly simplistic.
B) simple, but remarkably useful.
C) simple, but useless.
D) for a "typical" family.
E) valid if there are only one or two children in the family.
71. Suppose that yours is a typical family. Your annual income is $50,000. Use the easy
method to determine your need for life insurance. Your insurance should be in the
amount of:
A) $245,000.
B) $300,000.
C) $345,000.
D) $400,000.
E) $450,000.
72. Which method of determining life insurance requirements is suited for a working
couple with no dependents?
A) hard method
B) easy method
C) "nonworking" spouse method
D) thorough method
E) DINK method
73. You are a dual income, no kids family. You and your spouse have the following
debts (total): 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. Using the
DINK method, what should be your need for life insurance?
A) $103,000
B) $206,000
C) $226,000
D) $233,000
E) over $233,000
70.
ANSWERS
1. True
2. False
3. True
4. False
5. True
6. True
7. True
8. False
9. False
10. False
11. True
12. False
13. True
14. True
15. False
16. C
17. A
18. A
19. C
20. C
21. A
22. B
23. B
24. E
25. C
26. B
27. B
28. E
29. E
30. C
31. D
32. B
33. False
34. False
35. False
36. True
37. True
38. False
39. False
40. True
41. False
42. False
43. True
44. True
45. True
46. E
47. A
48. A
49. D
50. B
51. C
52. B
53. C
54. True
55. True
56. True
57. True
58. True
59. True
60. True
61. True
62. False
63. False
64. True
65. False
66. D
67. A
68. B
69. A
70. E
71. A