ECON111 Review for Test 2 (6-10)

The average used car costs about _______ less than the average new car.

$10,000

Motor vehicle bodily injury coverage typically includes all of the following except

Bodily injury liability of all expenses, no matter the cost, for the most injured.

A vehicle lease has several costs. Which of the following is the price of the vehicle?

Capitalized cost.

The price of a leased vehicle is known as the

Capitalized cost.

Which of the following are associated with a vehicle lease?

Capitalized cost. Money factor. Payment schedule. Residual value.

This term life insurance policy will guarantee that you will pay the same premium for the duration of your policy.

Multiyear level term

Private mortgage insurance

Must be terminated automatically when the homeowner's equity reaches 22% of the property value at the time the mortgage was executed.

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

Negligence.

The failure to take ordinary or reasonable care to prevent accidents from happening is called

Negligence.

Which of the following is correct?

One question that should be asked when developing a risk management plan is "What do I need to insure?"

Yvette has a flexible-rate mortgage that limits the amount to which her monthly payments can rise. This feature is called a(n)

Payment cap.

Personal property insurance covers

Personal property items up to 55-75% of the insured value of the home.

The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is

Physician expense.

Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called

Points.

This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired.

Warranty

Which of the following is NOT correct?

When showing the home, Caryn's suggestion to open drapes but keep lights turned off to conserve energy will give her property a positive image.

If you have a loss due to a flood,

You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered.

Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer.

contingency clause

Negotiation activities are part of the ____ phase of the research-based buying process.

evaluating alternatives postpurchase activities preshopping activities selection and purchase

Coordination of benefits (COB) provision applies to

Combining the benefits of two insurance policies issued for a married couple.

A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider?

Cost-of-living protection

Which of the following is NOT a type of permanent life insurance?

Decreasing term

Jenny wants health insurance that sets the amount that she must pay toward medical expenses before the insurance starts paying benefits. She is concerned about a

Deductible.

In which circumstances may the right to elect continued coverage under COBRA exist for a covered spouse or dependent?

Divorce. Legal separation. Loss of dependent child status. The covered employee's death. All of these.

Homeowner's insurance includes all of the forms listed here except

HO-8.

Zach is applying for insurance for his new home. Which of the following is correct?

He should insure the building under the replacement value method to receive the full cost of repairing or replacing it.

Which of the following is correct?

Health insurance plans may reimburse an individual for hospital stays, doctors' visits, and medications.

Steve's employer offers a health plan that stresses preventive services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer?

Health maintenance organization (HMO)

What is the most important part of an insurance agent's job?

Help you select the proper kind of protection within your financial boundaries.

When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services included all of the following except

Home appraisal.

Which of the following annuities is purchased with a lump-sum payment and allows an individual to receive income payments beginning now?

Immediate annuity

While Paul was shopping for a new chainsaw, he found a great deal on a new drill and bought it. This is an example of

Impulse shopping

A primary reason for buying an annuities is for

Individual retirement accounts (IRAs).

A provision in a health insurance policy that sets specific levels of repayment for certain services is called

Internal limit.

The dealer's cost is also known as the

Invoice price.

While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except

Is it possible to delay the purchase or to do without the item? Should I pay for the item with cash or buy it on credit? Which brands should I consider? How do the price, quality, and service compare at different stores?

Medicaid covers

Lab services; Skilled nursing and home health services; Prescription drugs; Eyeglasses.

The owner/landlord is known as the

Lessor.

The settlement option that pays the life insurance proceeds in equal periodic installments for a specified number of years after your death is called

Limited installment payment.

Most customer complaints result from the all of the following except

Long product lives.

A variable operating cost for a vehicle is

Maintenance and repairs.

Individuals over the age of 65 who are eligible for medicare may also be interested in purchasing more coverage called

Medigap.

Brett bought a house five years ago for $150,000. At that time he borrowed $140,000 from his bank. The house is now worth $162,000. The current value of his mortgage must be no higher than --- for him to request termination of his PMI policy.

$126,360: Once his equity has increased to 22% of the current market value, he can request that PMI be cancelled. He may request termination of PMI when his mortgage balance reaches $126,360 {$162,000 × (1 - .22)}.

If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal?

$180.50: Interest = Principal × interest rate × Time = $150,000 × 5% × 1 month/12 months = $625.00. Total payment - Interest = Principal = $805.50 - $625.00 = $180.50.

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?

$225,000

Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the easy method?

$343,000

Larry has a health insurance policy that includes a deductible of $1,000 and a coinsurance of 20%. If his total bill is $7,000, how much will his insurance pay?

$4,800

Which of the following is not a legal option for high-income consumers?

A legal aid society

An individual who purchases an insurance policy is called

A policyholder.

Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n)

ARM.

Donald wanted to buy a house in the country, so he sought advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he had some information incorrect. Which of the following is incorrect?

An advantage is that the down payment required is less than the security deposit for a rental.

Who is most likely to use a home health care agency?

An elderly neighbor.

This health insurance provision lets your insurer make direct payments to your doctor or hospital.

Assigned benefits

Which of the following is INCORRECT about dread disease policies?

Each policy covers a wide range of conditions.

Mike bought a new car. His new car warranty probably included all of the following except

Extended coverage for air conditioning.

Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. They will consider factors such as Social Security and liquid assets. Which method are they using to determine their life insurance needs?

Family need method

The duration of benefits for a disability income insurance plan can be

For only a few years. Until age 65. For life. All of these are possibilities.

Which of the following provisions requires the policyholder to again qualify as an acceptable risk and pay overdue premiums with interest in order to put a lapsed policy back in force?

Policy reinstatement

Patrick has an old car and wants to keep his insurance costs down, but he wants coverage in case he damages the property of others, including street signs and telephone poles. In order to minimize the financial impact of an accident he may cause, he should, at a minimum, carry which type of insurance?

Property damage liability coverage.

Which of the following expenses is NOT usually incurred by a tenant?

Property taxes.

Most people buy life insurance to

Protect the people who depend on the insured from financial losses caused by his or her death.

A reverse mortgage

Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the homeowner dies.

If you choose to wear your seatbelt, you are using

Risk reduction.

If you have a problem whose remedy will be between $1,500 and $3,000, the appropriate tool to use would be (a)

Small claims court.

Mark was severely injured while on vacation and expects to be unable to work for at least 12 months. Because of his injury, he should expect to be eligible for disability income from

Social Security.

Another name for temporary life insurance is

Term life insurance.

Which of the following is NOT correct?

The cost and number of claims you have should not affect your premium.

Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium (without penalty)?

The grace period

Liability is defined as

The legal responsibility for the financial cost of another person's losses or injuries.

Homeowner's insurance covers all of the following except

Theft of jewelry valued at $25,000.

Elaine purchased her living unit in a building with five other separate units. She purchased a

Townhouse.

Which of the following is NOT correct?

Traditional financial guidelines suggest that your home should cost about five times your annual income.

A standard measurement used to compare the prices of packages of different sizes is

Unit pricing.

Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life?

Variable annuity

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Variable life