Chapter 8 Personal Finance
???The main goal when setting insurance goals is to
(Minimize or max) Maximize personal property and liability risks.
98. Last month, some of your friends were injured in an accident. Their total injuries were as follows: -Brenda - $75,000 • Raquel - $150,000 • Louis - $25,000 Coverage was 100/300/50. What was the total medical coverage in this accident? D. $200,000 Since coverage is capped at $100,000 per person and $300,000 for the accident, Brenda and Louis are fully covered. Raquel's coverage would be limited to $100,000. Total coverage = $75,000 + $100,000 + $25,000 = $200,000.
200,000
-Last month, some of your friends were injured in an accident. Their total injuries were as follows: -Brenda - $85,000 • Raquel - $125,000 • Louis - $40,000 Coverage was 100/300/50. What was the total medical coverage in this accident? Since coverage is capped at $100,000 per person and $300,000 for the accident, Brenda and Louis are fully covered. Raquel's coverage would be limited to $100,000. Total coverage = $75,000 + $100,000 + $25,000 = $200,000.
225,000 or 250,000
b
38. An individual who purchases insurance is A. The insurance company. B. A policyholder. C. An insurer. D. A victim. E. An employer.
Premium
39. What is the fee that a policyholder pays when an insurance company agrees to take on the risk? A. Coverage B. Insured C. Premium D. Peril E. Risk
c
40. Insurance allows someone to A. Reduce risk. B. Assume risk. C. Shift risk. D. Avoid risk. E. Eliminate risk.
Hazard
41. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.
Negligence
42. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The fact that Barbara didn't put away the skateboard is called A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.
Peril
43. Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through her window. The windstorm was a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.
d
44. The most common risks are A. Personal risks. B. Property risks. C. Liability risks. D. All of these are common risks. E. None of these are common risks.
Peril
45. Anything that may possibly cause a loss is called a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Speculation.
Negligence
46. The failure to take ordinary or reasonable care to prevent accidents from happening is called A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.
b
47. An insurance company will A. Insure speculative and pure risks. B. Insure pure risk, but not speculative risk. C. Insure neither pure risk nor speculative risk. D. Insure speculative risk, but not pure risk. E. Insure all types of risks.
e
48. Which of the following is NOT one of the commonly used general risk management techniques? A. Reduce risk B. Assume risk C. Shift risk D. Avoid risk E. Increase risk
Risk Avoidance
49. If you choose to avoid the risk of a traffic accident by not driving to work, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.
Risk Reduction
50. If you choose to wear your seatbelt, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.
Risk Assumption
51. If you choose to take responsibility for negative results of a risk, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.
risk shifting
52. If you choose to insure your home or your vehicle, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.
e
53. An insurance program A. Should be constant through one's life. B. Should change along with needs and goals. C. Should minimize personal property and liability risks. D. Should be constant through one's life, and should minimize personal property and liability risks. E. Should minimize personal property and liability risks, and change along with one's needs and goals.
e
54. Which of the following questions should one ask when developing a risk management plan? A. What do I need to insure? B. How much should I insure something for? C. What kind of insurance should I buy? D. Whom should I buy insurance from? E. All of these questions should be asked when developing a risk management plan.
d
55. Which of the following is correct? A. The best risk management plan is constant through one's life. B. Once a plan is set up, it should be reviewed every 10 years. C. A solid risk management plan works well without insurance as a component. D. One question that should be asked when developing a risk management plan is "What do I need to insure?" E. The main goal of insurance should be to maximize personal, property, and liability risks.
d
56. The two basic types of risk that people face regarding their personal property are A. Basic and criminal. B. Physical damage and destruction. C. Destruction and basic. D. Physical damage and damage caused by criminal behavior. E. Negligence and criminal behavior.
The legal responsibility for the financial cost of another person's losses or injuries.
57. Liability is defined as A. An insurance program for individuals and households. B. The legal responsibility for the financial cost of another person's losses or injuries. C. Negligence. D. A loss due to physical damage. E. Risk assumption.
Automobiles
58. Homeowner's insurance covers all of the following except A. Personal property. B. Personal liability. C. Additional living expenses. D. Automobiles. E. Building and other structures on the property.
e
59. Homeowner's insurance covers all of the following except A. A detached garage. B. Trees and shrubs. C. A tool shed. D. Personal property. E. All of these are covered.
Theft of a diamond necklace valued at $25,000
60. Homeowner's insurance covers all of the following except A. Three months in a hotel after a house fire. B. Theft of a diamond necklace valued at $25,000 C. A three-year-old television. D. A fire that damages your neighbor's roof that was caused by a spark from your grill. E. Medical costs for a visitor who slipped on your steps and broke his ankle.
d
61. The best place to keep a household inventory is A. On a bookshelf in the family room. B. In the freezer. C. In the attic. D. In a safe deposit box. E. In the garage.
A listing of items and their details in your memory.
62. All of the following are acceptable types of documentation for a household inventory except A. Photographs with dates purchased and values of objects listed on the backs. B. Video recordings of assets. C. Written listings of items, purchase prices, and assets. D. Computerized spreadsheets with details about the items and their ages and costs. E. A listing of items and their details in your memory.
Personal property floater.
63. Insurance that covers valuable items, such as an expensive harp, is called A. Buildings and other structures coverage. B. Homeowner's insurance. C. Personal property floater. D. Household inventory insurance. E. Personal property insurance.
Personal property items up to 55-75% of the insured value of the home.
64. Personal property insurance covers A. All personal property. B. Furniture and appliances, but not clothing or some electronics. C. Clothing and some electronics, but not furniture and appliances. D. All items up to 200% of the insured value of the home. E. Personal property items up to 55-75% of the insured value of the home.
e
65. Personal liability coverage does NOT protect A. An occasional babysitter. B. The homeowner. C. A visitor. D. Members of the homeowner's family. E. A housekeeper.
Umbrella policy.
66. A policy that supplements your basic personal liability coverage is called a(n) A. Endorsement. B. Homeowner's insurance. C. Medical payments coverage. D. Supplementary policy. E. Umbrella policy.
a
67. When Stanley was visiting Elaine, he tripped on her front porch step and sprained his ankle. His injuries were covered by A. Elaine's medical payments coverage. B. Stanley homeowner's policy. C. Elaine's health insurance coverage. D. Elaine's life insurance policy. E. The insurance policy of the mason who installed the front porch step 15 years ago.
b
68. If you have a loss due to a flood, A. Your homeowner's insurance should normally cover the loss. B. You need to have purchased special coverage if you live in an area that has frequent floods in order to be covered. C. FEMA (Federal Emergency Management Agency) will automatically provide coverage if this is your second flood loss. D. You need an umbrella policy for coverage. E. Your additional living expenses coverage will apply if you move to an area that has not flooded in one year.
Renter's insurance covers the building and other structures on the site.
69. Which of the following is NOT correct about renter's insurance? A. The broad form covers personal property against perils specified in the policy. B. Renter's insurance covers the building and other structures on the site. C. The comprehensive form protects personal property against perils not specifically excluded in the policy. D. Typical coverage pays only the actual cash value of one's losses. E. Renter's insurance includes personal property protection, additional living expenses, and personal liability.
e
70. Homeowner's insurance includes all of the forms listed here except A. HO-1. B. HO-2. C. HO-5. D. HO-6. E. HO-8.
Business Property
71. Home insurance policies include coverage for all of the following except A. Credit card fraud. B. The cost of removing damaged property. C. Temporary repairs after a loss to prevent further damage. D. Business property. E. Emergency removal of property to protect it from damage.
d
72. Vincent is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for 75% of its replacement cost. C . He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 55-75% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.
a
73. Yogi is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price to rebuild or repair it. B. He should insure the building for 75% of its replacement cost. C . He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.
b
74. Zach is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for its replacement value to receive the full cost of repairing or replacing it. C. He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.
c
75. Andrew is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for 75% of its replacement cost. C. He should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.
e
76. Barnaby is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for 75% of its replacement cost. C. He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His policy should automatically increase coverage as construction costs rise.
The Location of her employer!!! Extra info: Proximity to schools can increase home values, while increased distance from schools often lowers home values.
77. Sandra is contacting several insurance companies to compare coverage for her home. Which of the following should NOT affect her premium? A. Alarm system B. Amount of coverage C. Type of structure D. Deductible E. Proximity to a school
b
78. Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium? A. Installing an alarm system. B. Increasing the amount of coverage. C. Installing smoke detectors or a fire extinguisher. D. Increasing her deductible. E. All of these should reduce her premium.
e
79. Tom wanted to receive as many discounts on his home insurance as possible. Which of the following would NOT provide a discount? A. Smoke detector. B. Fire extinguisher. C. Deadbolt locks. D. Alarm systems. E. All of these should provide a discount for Tom.
d
80. Motor vehicle crashes cost more than ______ in lost wages and medical bills every year. A. $10,000 B. $750,000 C. $12 million D. $150 billion E. $2 trillion
Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.
81. Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amber was driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Based on her experience, which of the following would be true? A. Amber's insurance company should refuse coverage of her medical payments because she was not driving in her own vehicle. B. The insurance company of the owner of the sideswiped car should pay for all damages since the car was illegally parked. C. Amber's insurance should not cover any damage since she carried liability, collision, and comprehensive coverage. D. The bicyclist should cover his own medical expenses because he was at fault for riding on the road. E. Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.
d
82. Motor vehicle coverage typically includes all of the following except A. Most legal expenses. B. Bodily injury liability up to a specific level for all injured in an accident. C. Medical payments up to a policy limit. D. Bodily injury liability of all expenses, no matter the cost, for the most injured. E. Uninsured motorist's protection.
Anyone in your vehicle, including you.
83. Medical payments coverage applies to medical expenses of A. Anyone in your vehicle, including you. B. Anyone in your vehicle who is injured, except the driver. C. The driver, but no passengers who are injured. D. The owner of the vehicle, but not other passengers. E. The uninsured motorist who causes an accident.
Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids.
84. Paul was driving his kids to a piano lesson in a 2005 minivan. While driving, he was hit by an uninsured motorist. Although Paul and his kids had only minor injuries, their vehicle was totaled. Based on this information, which of the following is correct? A. The uninsured motorist needs to purchase insurance after the fact. B. Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids. C. The uninsured motorist will be required to purchase a new minivan for Paul's family. D. It is likely that the uninsured motorist will not receive any citations or fines because she did not have insurance. E. In all states, Paul's uninsured motorist's coverage must cover damage to all vehicles involved in the accident.
e
85. Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct? A. Timothy's injuries would be covered to $100 and property damage would be limited to $300. B. Nick's injuries would be covered to $50,000. C. Individually, Timothy and Nick's injuries would be covered to $300,000 each. D. The total coverage for Timothy and Nick would be $100,000, and the driver who caused the accident would be covered to $50,000. E . The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for total injuries sustained in the accident.
c
86. Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.
Property damage liability policy.
87. Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. The damage to the telephone pole would be covered under Madeline's A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.
Collision policy.
88. Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.
Property damage liability
89. Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause, he should, at a minimum, carry which type of insurance? A. Property damage liability. B. Collision. C. Comprehensive physical damage. D. All of these are required for all vehicles. E. No coverage is required for any driver in the United States.
d
90. Al left his vehicle parked on the street in the front of his house when he went on vacation. While he was gone, his street flooded and his car was severely damaged. This damage would be covered under his A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.
Comprehensive physical damage policy.
91. Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. The vehicle would not be covered because he was not in it when the damage occurred.
Using the no-fault system.
92. Various states are trying to reduce the time and cost of settling vehicle injury cases. One alternative is A. Omitting uninsured motorist's protection. B. Requiring the driver to pay all medical expenses. C. Using the no-fault system. D. Requiring emergency road service coverage. E. Having the state pay for driver's insurance.
d
93. Which of the following is NOT a type of motor vehicle insurance available to drivers? A. Wage loss insurance B. Emergency road service coverage C. Rental reimbursement coverage D. All of these may be available to drivers E. Nonel of these is optional.
The cost and number of claims you have should not affect your premium. The number of small claims you have should not affect your premium.
94. Which of the following is NOT correct? A. If you live in a rural area, your auto insurance premium will likely be lower than if you live in a city. B. In general, young drivers (under 25) and elderly drivers (over 70) have more frequent and more serious accidents. C. Multiple accidents or traffic violations can increase insurance rates. D. The number of small claims you have should not affect your premium. E. Your credit score can cause your premium to change.
c
95. Which of the following should reduce your auto insurance premium? A. Celebrate your 70th birthday B. Get a speeding ticket C. Get good grades in college D. Move from a farm to a city E. Start smoking
$210,000
96. Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70% of value, how much of her belongings would be covered? A. $120,000 B. $210,000 C. $224,000 D. $300,000 E. $320,000
c
97. Sally was driving her own car and collided with a pickup truck. Sally sustained $125,000 in injuries, and her passenger sustained $10,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident? A. $1,000 B. $100,000 C. $110,000 D. $125,000 E. $135,000
Samantha was driving on the highway during a storm and hail dented her car. This damage would be covered under her
comprehensive physical damage coverage
