Personal Finance - Insurance Post Test
Your renter's insurance policy costs $20/month and has a $1,000 deductible. A thief breaks into your apartment and steals your $800 TV set. How much would your insurance company pay?
$0
Frank has an auto policy with a coverage limit of $30,000 and a deductible of $1,000. He gets into an accident and the damages to his car total $6,200. How much will Frank need to pay out-of-pocket?
$1,000
Your health insurance plan has a $20 copay for certain covered prescription medications. You arrive at the pharmacist and pick up your prescription (which is covered under your plan) which has a list price of $75. How much would you pay the pharmacy?
$20
You cause an accident in which someone is injured. The case goes to trial and there is a verdict to compensate the injured person with $58,000. You have a $50,000 coverage limit per person for Bodily Injury. How much will you have to pay out-of-pocket?
$8,000
Your parents tell you that on your 22nd birthday, they would like for you to get your own health insurance. You are very healthy, are not taking any prescription medicines, and generally only see your doctor for your annual physical. What type of health insurance is likely to be best for you?
A high deductible plan with a low monthly premium
Bruce has just graduated from college and decides that instead of paying for insurance, he'll work on building up his emergency fund. This way, if something goes wrong, he can just pay for it using cash from his emergency fund. Why is this a bad idea?
An accident or illness can strike at any time and be quite expensive, so it's possible he'd need a big sum of money well before his emergency fund was large enough
Which of the following statements is TRUE about auto insurance premiums?
Auto insurance premiums can vary from company to company, therefore, it is important to comparison shop for the best price and coverage
Since doctors only accept specific health insurance plans, what should you do prior to selecting your own health insurance plan?
Check the list of doctors "in the network"
Which term refers to an arrangement where you are responsible for paying a percentage of covered medical expenses after your deductible is met?
Co-insurance
Insurance companies make money by...
Collecting more in premiums than they need to pay out each year
While parked on the street overnight, the driver's side mirror of Sam's car is knocked off by a passing car. The driver flees the scene because they don't have insurance, so Sam never finds out who hit his car. Which type of auto insurance coverage will help cover the cost to get the mirror replaced?
Collision
While parked on the street overnight, the passenger window in Sam's car was smashed by someone trying to break in. Which type of auto insurance coverage will help cover the cost to get the window replaced?
Comprehensive
Why would someone choose to get long term disability insurance even if they already have health insurance?
Health insurance only covers medical bills, while long term disability will help compensate for lost work with 40-60% of their income.
What type of auto insurance are you required to carry in almost every state (49 out of 50)?
Insurance if you cause injury to another person
Which of the following insurance coverage options would be the lowest priority for a typical single person 1-2 years out of college?
Life Insurance
Which person will probably have the LEAST expensive health insurance payments?
Patty, age 26, who works as an administrative assistant at a marketing firm
Which of the following is the best alternative plan to purchasing cell phone insurance?
Put aside money that is equal to the monthly premium in a savings account, in case of phone repairs or replacement.
How do insurance companies decide how much to charge an individual for their monthly premiums?
The company assesses the individual's risk factors and assigns higher premiums to higher risk individuals
Social Security generally provides insurance for which of the following groups of people?
The elderly or disabled
You have the option to enroll in your company's employer-sponsored health insurance. Which of the following statements will be TRUE if you choose to enroll?
You can make your monthly payments pre-tax, lowering the overall amount of money you are taxed each year
Lucille just graduated college and is on a very tight budget, so she chooses a health insurance plan with a low monthly premium and a high deductible. She figures that if she gets seriously ill or injured, she'll just change the plan before she heads to the doctor or hospital. Why won't her plan work?
You cannot change your plan instantly at any time, and she cannot predict when an emergency will strike
When setting your premium, your car insurance company may consider each of the following EXCEPT...
Your height
What is an insurance premium?
Your monthly payment to your insurer, regardless of whether you use any services
Which of these is NOT considered an "out-of-pocket" expense?
Your monthly premium
Insurance companies operate by charging individuals different prices for coverage depending on their risk levels. Then, they collect everyone's monthly premiums together and use the money to make payments when people file a claim (for example, someone is in an auto accident or needs to see a doctor). This concept is known as
risk pooling
