Money and Credit Exam 3 (chp 8-10)
The Medicare co-insurance payment is typically:
20%
Which of the following is a basic, seldom-used homeowner's policy with very narrow coverage?
HO-1
Which of the following homeowners' policies provides coverage for damage caused by electrical current?
HO-2
Which of the following homeowners' policies is best suited to a renter of an apartment?
HO-4
Which of the following statements is true of the health reimbursement account (HRA)?
The amount of unused money in the health reimbursement account can be rolled over annually.
Which of the following is true of the multiple-of-earnings method?
The multiple-of-earnings method determines the amount of life insurance coverage needed by multiplying the gross annual earnings of the insured by some selected number.
Which of the following is true of insurance underwriting?
Underwriters design rate classification schedules so that people pay premiums that reflect their chance of loss.
Universal life insurance is:
a combined investment plan and insurance policy.
Group life insurance is most likely to be for
a term
The best way to buy automobile insurance is through
an insurance agent
A life insurance agent who takes her profession seriously is likely to have earned a professional certification like the
chartered life underwriter
An increase in the amount of the deductible will
decrease the amount of insurance premiums
Homeowner's co-insurance requires the insured to carry insurance protection equal to the market value of the house.
false
Only one agent should be consulted for discussing personal financial needs and insurance requirements while buying life insurance.
false
Premiums for workers' compensation insurance are paid by the employees.
false
A life insurance policy with a small face amount where the premium may be collected weekly by agents is termed _____.
industrial life insurance
Even though homeowners are eligible for reimbursement on a full replacement-cost basis if they keep their homes insured for at least 80 percent of the amount that it would cost to build them today, ___ can cause the actual amount of coverage to fall below 80 percent.
inflation
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A provides
inpatient hospital services
The first step in buying property and liability insurance is to develop a(n) ___.
inventory of exposures to loss
The average age of the American population
is increasing
The average age of the American population ___.
is increasing
It pays to comparison shop for insurance policies because of the
large variations in premiums and services
Medicare and Medicaid cover
less than half of the total cost of long-term care
The probability of a loss occurring can be reduced by_____.
loss prevention
Group health insurance premiums are _____.
lower than an employer's health insurance plan premiums
The _____ method is the most accurate method of determining the amount of life insurance coverage needed for an individual.
needs analysis
Which of the following is a characteristic of a universal life insurance policy?
no choice in how the accumulation account is invested
The personal property floater:
provides either blanket or scheduled coverage of items that are not covered adequately in a standard homeowner's policy.
To purchase a personal liability umbrella policy, the insured party must already have
relatively high liability limits on their homeowner's and auto coverage
Section II of a homeowner's insurance contract covers:
the cost of defending the insured
Underwriting refers to _____:
the determination of which exposures to insure.
When insuring property, people need to consider not only replacing and restoring the actual property in the event of a loss, but also
the liability arising from the insured's responsibility for the property loss
Insurance underwriting is best described as:
the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums.
Disability income insurance will provide income to a disabled or ill person
with a waiting period before income is received
A captive agent is:
an insurance agent who represents only one insurance company
The principle of indemnity will prevent:
an insured from collecting more than what he or she has lost.
A supplementary medical insurance (SMI) provides health care protection beyond the basic hospital coverage for:
anyone age 65 or over who pays premium on a voluntary basis
Auto insurance is needed primarily:
as protection against potential liability claims.
The most preferred technique for determining how much life insurance coverage is needed for an individual is:
assessing the family's total economic needs and subtracting the financial resources available to meet those needs.
Nonforfeiture rights guarantee that a policy owner will not lose his or her policy's _____.
cash value
A life insurance agent who takes her profession seriously is likely to have earned a professional certification like the:
chartered life underwriter
An insurance company assigns more complex loss cases to a
claims adjuster
A personal liability umbrella policy typically includes:
coverage for auto-related liability losses in excess of the limits purchased in the automobile insurance.
Comprehensive automobile coverage refers to:
coverage for damage to an insured automobile from perils (with a few exceptions) other than collision.
An increase in the amount of the deductible will ___.
decrease the amount of insurance premiums
While using the needs analysis approach, we _____.
deduct an individual's available resources from his or her family's total economic needs to calculate how much life insurance he or she requires
Insurance is a tool that can reduce one's _____ risk.
economic
Employers set up a salary reduction agreement with the employees if:
employees need additional insurance benefits.
Negligence occurs when someone:
fails to act in a reasonable manner.
Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.
false
All group insurance plans extend health insurance benefits to retirees.
false
Disability insurance is available only when someone is completely incapable of returning to work during his or her lifetime.
false
Earthquakes are covered under most homeowner's insurance policies.
false
Generally, the primary purpose of life insurance is to provide a tax-advantaged investment plan.
false
If an insured has a high-risk hobby, then he or she should expect to pay less for life insurance.
false
Insurance agents always disclose their commissions in an insurance policy.
false
Long-term-care insurance provides protection against the cost of extended hospital stays.
false
Medicare and Medicaid are administered by hospitals and physicians.
false
Risk avoidance involves asking an insurance company to take over the risk for a small payment (the premium).
false
T/F generally there are only 3 ways one can deal with risk: 1. avoid 2. eliminate/reduce 3.insure against
false
Under the adjusted (modified) community rating approach to health insurance premium pricing, all policyholders in an area pay the same premium without regard to their personal health, age, gender, or other factors.
false
Underwriters can predict whether or not you will suffer a loss this year.
false
A personal property floater and a personal liability umbrella policy offer similar coverage.
fasle
The primary purpose of life insurance is to provide:
financial security for dependents in the event of death
_____ can be both an advantage and a disadvantage of universal life insurance.
flexible premiums
Standard homeowner's policies will not include coverage for damage done by ___.
flood
Employers often provide _____ life insurance as a fringe benefit for their employees.
group
Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?
guaranteed purchase option
During the past few decades, the percentage of our income spent on health care:
has increased due to an aging U.S. population.
One drawback of long-term-care insurance is its:
high annual premiums.
Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B covers
imaging, laboratory tests, and prosthetic devices
The primary purpose of a life insurance plan is to help:
in the protection of the dependents of the insured from financial loss in the event of his or her untimely death.
A(n) ___ agent represents multiple insurance companies.
independent
An individual receiving health care:
is allowed to receive multiple payments from more than one insurance company for this care.
You want to pay premiums for 20 years and have your insurance premium obligations finished at that time. However, you feel you will need life insurance for the rest of your life. You should choose a _____ insurance.
limited payment whole life
The settlement option chosen by most policyholders is:
lump sum
Which of the following is true of long-term care insurance?
many policies offer inflation protection riders for an additional premium.
A good health insurance plan embodies more than financing medical expenses, lost income, replacement services; it incorporates
means of risk reduction such as risk avoidance
Which of the following is a public assistance program that provides health insurance benefits only to those who are unable to pay for health care?
medicaid
It is not possible to avoid
most risks in your life
If you are laid off, your group health insurance
must be continued if you pay the premiums
Which of the following leads to the payment of a higher insurance premium by the potential insured?
obesity of the potential insured
Workers' compensation insurance will make compensation payments to an injured worker _____.
only if he has been hurt on the job
A factor that is likely to have the greatest effect on the cost of automobile insurance is the
owners driving record
Insurance companies make profit by:
paying out less than the sum of the premiums and the earnings on them.
The insured of a life policy dies. The primary and contingent beneficiaries have died previously. The insurance company does what with the death benefits?
pays the benefits to the insured's estate
A ___ is a hybrid form of health maintenance organization (HMO) that allows members to go outside of the HMO network for care.
point-of-service POS plan
Term life insurance is characterized by _____.
premium amounts related to the age of the insureds
Disability income policies usually have a(n) _____, which is a time delay from the date of the issuance of the policy until benefit privileges are activated.
probationary period
A coordination of benefits provision in a health care policy ___ by collecting benefits in multiple payments for health care.
prohibits collecting more than 100% of covered charges
The community rating approach to health insurance premium pricing _____.
prohibits insurance companies from varying rates based on health status or claims history
The basic purpose of insurance is to _____.
protect yourself from economic losses
Donna, who is single and 30 years old, received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
raising her deductible from $250 to $1,000
A ___ covers the cost of visits to a doctor's office or for a doctor's hospital visits, including consultation with a specialist.
regular medical expense insurance
An insured individual's right to continue a health insurance policy if he or she chooses is known as:
renewability.
A(n) _____ is a common provision in many term policies.
renewable clause
Sally was at fault in a 2 car collision where the other car was a ferrari. There was no injuries. The other driver is irate at what looks like a total loss. Sally tries to calm him down by stating that she is insured up to $500,000. What has Sally done most wrong?
revealing her policy limits
___ is the choice to accept and bear the risk of loss.
risk assumption
The premiums on a whole life policy are used for life insurance and:
savings
A(n) _____ policy is a type of term insurance.
straight term
Where your insurance company pays you for a loss caused by another, it has the right to seek reimbursement from the negligent party. that is, it has a right of:
subrogation
A personal liability umbrella policy is designed to ___.
supplement
The insurance portion of a universal life policy is most analogous to:
term insurance
Which of the following types of insurance policies provides temporary coverage for a set period?
term life insurance policy
The purchasing power of income from a long-term disability policy is protected by _____.
the Cost-of-living adjustment (COLA) provision
The Affordable Care Act (ACA) requires insurance companies to adhere to:
the adjusted community rating approach for individuals and small businesses.
A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary, which means that _____.
the cash benefits from your life insurance policy cannot be claimed by creditors
Replacement-cost coverage is the reimbursement of:
the cost of repairing or replacing damaged structures without deducting physical depreciation.
___ represents the initial amount that's not covered by the policy and thus must be paid by the insured.
the deductible
Long-term care is a term used to describe _____.
the delivery of medical care to persons with chronic medical conditions in a nursing home
When purchasing a long-term-care policy, ___
the guaranteed renewability provision is recommended
In a traditional indemnity (fee-for-service) plan,:
the health care provider and the insurer are separate.
An insured does not get the right to arbitration when:
the insurance company denies responsibility for the loss
_____ determines the amount of life insurance coverage required for an individual by considering his or her financial obligations and available financial resources in addition to life insurance.
the needs analysis method
The liability coverage under a personal automobile policy is provided to:
the non-family member involved in the accident
A homeowner's policy does not provide protection for:
the personal property of tenants.
At the scene of an accident, the police are only responsible for assessing
the probability of law violation
In the pure community rating approach to health insurance premium pricing, all policyholders in an area pay:
the same premium without regard to their personal health, age, or gender.
People under the age of 65 years are covered by Medicare health insurance plan if:
they receive monthly Social Security disability benefits
Employees should consider risk assumption for certain health risks because:
they would rather pay small amounts from savings than higher premiums to cover them.
One of the key goals of the Affordable Health Care Act of 2010 is:
to reduce the number of uninsured citizens in the country.
From the standpoint of a person buying insurance, the central purpose of insurance should be:
to transfer the risk of serious losses.
A house with a replacement value of $110,000 is currently insured for $90,000. The house is damaged in a windstorm, causing a loss of $15,000. The insurance company will pay an amount equal to $15,000 less the deductible.
true
An elimination period is the number of days that must pass before disability policies pay the benefits.
true
Generally, group insurance plans are more reasonably priced than individual policies.
true
Health Maintenance Organizations (HMOs) provide health care to participants without requiring them to file insurance claims.
true
Insurance policies provide the opportunity for claims arbitration to settle any disputed liability claims.
true
Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes.
true
Living a healthy lifestyle is an example of loss prevention and control.
true
Millions of Americans are not covered by health insurance.
true
Never discuss liability at the scene of an accident, or with anyone other than the police and the insurance company.
true
Risk avoidance is attractive when the cost of avoidance is less than the cost of handling it some other way.
true
Social Security survivor's benefits are intended to provide basic, minimum support to families faced with the loss of the principal wage earner.
true
Suppose you carelessly, but unintentionally, knocked someone down a flight of stairs in your home. You would be covered by your homeowner's insurance.
true
T/F. All other things being equal, the higher the deductible, the lower the premium-in all cases.
true
The availability of group coverage through employee benefit programs should be considered when developing a life insurance program.
true
The federal government has introduced a subsidized flood insurance program for homeowners and tenants living in designated communities.
true
The need for life insurance increases with children.
true
The premiums for homeowners' insurance policies are based on the size of the deductible, any policy limits, and the standard coverage.
true
Underwriters use life expectancy figures to look at overall longevity for various age groups and also consider specific factors related to an applicant's health, habits, and experiences.
true
You would have a better chance of choosing your own doctor with a preferred provider organizations (PPO) plan than with a health maintenance organizations (HMO) plan.
true
In order to qualify for disability insurance under Social Security, a person must be:
unable to carry out duties of any job
By ___, insurance companies decide who will be insured by them.
underwriting
Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.
underwriting
Dependent children _________will usually be covered by your health insurance policy.
up to a stated maximum age
A _____ is standard in disability income policies.
waiver of premium
A liability suit could result against you if:
your dog bites your neighbor.
The maximum coverage under most dental policies is often in the range of _____ per patient.
$1000 to $2500
Patrick's monthly take-home pay is $5,000. His net worth is $125,000. He estimated that he would receive Social Security benefits worth $1,000 and company disability benefits $2,000 if he becomes disabled. The additional disability benefits that he needs to arrange for equals _____.
$2,000
Marilyn Simms died with a $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy proceeds be distributed?
$200,000 to Jack
Patrick's monthly take-home pay is $5,000. His net worth is $125,000. He estimated that he would receive Social Security benefits worth $1,000 and company disability benefits $2,000 if he becomes disabled. The additional disability benefits that he needs to arrange for equals _____.
$2000
Bob's policy starts Jan 1st. Annual deductible is $500. Insurance pays 80% after deductible is met.. On Jan 2nd, he falls and breaks his arm. Total medical costs are $1500. what does Bob have to pay out-of-pocket?
$700
Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death. What is the amount of insurance, as per the needs analysis method, that Jonathan should purchase if he has current financial resources worth $1,000,000?
1,000,000
It is advisable to purchase life insurance from an insurance company that has been in business for at least _____ years.
25
A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:
31 days
Homeowners are eligible for reimbursement on a full replacement-cost basis only if they keep their homes insured for at least ___ of the amount that it would cost to build them today.
80%
Which of the following statements is true of medical insurance costs in the U.S.?
A poor demand-and-supply distribution of health care facilities and services has increased the health care costs.
Which of the following changes would tend to increase the premium on a disability policy?
A shorter elimination period
Which of the following represents a disadvantage of a whole life insurance policy?
A whole life insurance policy often provides lower yields than other investment vehicles.
_____ and _____ are both relatively expensive types of decreasing term life insurance.
Credit life; mortgage life
Which of the following homeowners' policies provides coverage for the damage caused by the accidental discharge of water or steam?
HO-2
The ___ is a good homeowner's policy for a condominium owner.
HO-6
Which of the following is true of the health care industry?
In a traditional indemnity plan, the premium cost is low if it is a high-deductible plan.
is an effective way to handle small exposures to loss when insurance is too expensive.
Risk assumption
When trying to determine your disability income needs, you should consider your available disability benefits from employers, income needs, and:
Social Security benefits
Which of the following statements is true of the Affordable Health Care Act (ACA)?
The ACA eliminates lifetime limits on total health care insurance payments by insurers.
Which of the following is true of a good insurance agent?
The agent is recommended by professionals like bankers and attorneys.