Personal Finance Test 3
If your home is insured for $100,000, and your homeowner's policy covers up to 75% for household belongings, how much coverage do you have for household belongings?
$75,000
The financial impact of death includes:
-loss of services -loss of income -final expenses
The goals of insurance include:
-minimizing liability risks -minimizing personal risks -minimizing property risks
Which of the following are typical of the limits of coverage for personal belongings in a homeowner's insurance policy?
70% of the home coverage 75% of the home coverage 55% of the home coverage
Which of the following risks are covered by homeowner's insurance?
Coverage for your place of residence Coverage for the financial risks associated with injuries to others Coverage for the financial risks of damage to personal property
People's risk management needs typically remain unchanged throughout their lives.
False
True or false: The main types of risks related to a home and an automobile are property damage and loss of income due to premature death.
False
True or false: Your homeowner's insurance covers damage to your home, other structures on your property, and your automobile.
False
The financial impact of disability includes which of the following?
Increased expenses Loss of income Loss of services
_____ is the legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible.
Liability
The financial impact of illness includes:
Loss of income, catastrophic hospital expenses
_____ damage to a property is caused by events such as fire, wind, water, and smoke.
Physical
The connection between managing risks and maximizing your success can be best described by which of the following statements?
Reducing risks and, therefore, financial loss improves your chances for economic, social, physical, and emotional well-being.
_____ is the chance of loss or injury.
Risk
Which of the following strategies help reduce the financial impact of death?
Social Security survivor benefits life insurance estate planning
_____ risk, such as the risk of starting a business or gambling with your money, carries a chance of either loss or gain.
Speculative
Health insurance is one way people protect themselves against economic losses due to illness, accident, or disability.
True
Physical damage to a property is caused by hazards such as fire, wind, water, and smoke.
True
True or false: A basic risk management plan sets goals to reduce the potential loss of income due to premature death, illness, accident, or unemployment.
True
True or false: A household inventory is a list or other documentation of personal belongings with purchase dates and cost information.
True
True or false: Automobile insurance covers property and personal damage caused by the policyholder's car.
True
True or false: Home owner's insurance covers damages to your home due to many perils, such as fire and windstorm, and it also covers personal injuries received by persons on your property.
True
True or false: Lending institutions require home mortgage borrowers to have home insurance.
True
True or false: Life insurance replaces income lost when the policyholder dies.
True
True or false: Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.
True
True or false: The best risk management plans are flexible enough to handle life's changing situations.
True
True or false: The coverage of Comprehensive Form HO-5 allows for the replacement costs for the contents of your home.
True
True or false: When we make a decision to assume risk, we are essentially self-insuring.
True
Which of the following are examples of the risk reduction technique of risk management?
Wearing seat belts Quitting smoking
Which of the following are covered by renter's insurance?
additional living expenses personal liability personal property
Deciding not to buy collision insurance on your car is risk
assumption
Deciding not to buy collision insurance on your car is risk _____.
assumption
Self-insurance is a risk strategy that requires the establishment of a monetary fund to cover the cost of a loss.
assumption
Choosing never to sky-dive is an example of risk _____.
avoidance
Which of the following are general risk management techniques?
avoidance assumption reduction
The four risk management methods (in the same order as presented in the text) include risk _____, risk _____, risk _____, and risk _____.
avoidance reduction assumption shifting
Group health insurance provided by employers is often part of an employee's ______.
benefit package
The coverage of Comprehensive Form HO-5 allows for the replacement costs for the contents of your home and guaranteed replacement cost coverage on _____.
buildings
In order to contain health care costs, physicians are encouraging consumers to pay with _____ for routine medical care and lab services.
cash
Administrative costs in the United States are much higher than those in other nations due to activities such as:
checking eligibility. filing reimbursement claims. paying health insurance premiums. enrolling beneficiaries in a health plan.
Which of these strategies help reduce the financial impact of a disability?
collecting Social Security disability income drawing upon savings and investments during your disability collecting disability income from a disability insurance policy
Which of the following best defines homeowner's insurance?
coverage for your residence and its financial risks
A basic risk management plan sets goals to reduce additional _____ due to the injury, illness, or death of a family member.
expenses
Home insurance covers the policyholder's place of residence and its associated ______, such as damage to personal property and injuries to others.
financial risks
A personal property _____ for a homeowner's insurance policy requires a detailed description of the items covered and a periodic household _____ to verify the current value.
floater, appraisal
Most homeowner's policies cover many perils, but not:
flood
Which of the following are possible limits to the coverage for additional living expenses in a homeowner's insurance policy?
full cost of temporary living expenses up to a year 10% to 20% of the home's coverage
Employers typically provide health insurance called _____ health insurance.
group
Defective house wiring is an example of a(n) _____ that increases the chances of fire.
hazard
By exercising, not smoking, getting rest, and driving carefully, individuals can greatly reduce their ______.
health care costs
Understanding and managing risks can ______.
help you to provide better protection for you and your family
Health insurance is one way people protect themselves against economic losses due to ______.
illness disability accident
Life insurance replaces _____ that would be lost if the policyholder died.
income
Personal risks are uncertainties surrounding loss of _____ or life due to premature death, illness, disability, old age, or unemployment.
income
According to the text, the financial impact of retirement includes decreased:
income and unplanned living expenses.
For a couple, the financial impact of death includes loss of one _____, loss of services, and final burial _____.
income, expenses
The added use of technology, use of prescription drugs, life expectancy of the elderly, and accidents and crimes all lead to _____ health care costs.
increased
Most homeowner's insurance policies have a built-in _____ clause that increases coverage as property values increase.
inflation
Examples of the risk reduction technique of risk management include ______.
installing smoke alarms wearing seat belts in a car
The protection against possible loss that gives you peace of mind is called ______.
insurance
A household _____ is a list or other documentation of personal belongings, with purchase dates and cost information.
inventory
The best plans are flexible enough to handle changing _____ situations.
life
Additional living expense coverage pays for the cost of ______.
living in a temporary location while your home is being repaired
Hazards increase the likelihood of a(n) _____ through a peril.
loss
Liability is the legal responsibility for the financial cost of another person's financial _____ or injuries.
losses
A basic risk _____ plan sets goals to reduce potential loss of real or personal property due to fire, theft, or other hazards.
management
Losses from floods and earthquakes are usually ______ by homeowner's insurance.
not covered
Losses from floods and earthquakes are usually ______ by homeowner's insurance. Multiple choice question.
not covered
Personal risks are uncertainties surrounding loss of income or life due to ______.
old age disability unemployment illness
Which of the following are covered by a homeowner's policy?
other structures house personal property
A deductible is a set amount that the policyholder must pay ______ on an insurance policy.
per loss
An umbrella policy supplements your basic _____ liability coverage and provides protection for injury claims, such as libel, slander, defamation of character, and invasion of property.
personal
Which of the following financial losses can you insure against?
personal and property damage when driving loss of home or belongings catastrophic illness
You inherited a $25,000 ring from your grandmother. You should cover it with a(n) ______.
personal property floater
Shifting of risk is done through the purchase of an insurance _____ from an insurance company.
policy
Shifting of risk is done through the purchase of an insurance from an insurance company.
policy
Automobile insurance covers _____ and personal damage (bodily injury) caused by the policyholder's car.
property
The goals of insurance include minimizing personal, _____, and liability risks.
property
The strategies for reducing the financial impact of illness include:
purchase health insurance. use Medicare practice health-enhancing behaviors.
Personal risk, property risk, and liability risk are called _____ risk since there would be a chance of loss only if the specified events occurred.
pure
When there is only a chance for loss if a specified event occurs, a risk is called ______.
pure risk
Wearing your seatbelt or installing smoke alarms would belong to the risk _____ technique of risk management.
reduction
Personal property that is excluded from homeowner's insurance includes ______.
rental property aircraft business property
Insurance similar to homeowner's that is available for tenants is ______.
renter's insurance
An insurance company shares the _____ and assumes financial responsibility for losses from an insured risk. This is found in the discussion of what is insurance toward the beginning of the chapter.
risk
Shifting _____ of is done through the purchase of an insurance policy.
risk
Shifting of _____ is done through the purchase of an insurance policy.
risk
Uncertainty or lack of predictability is called ______.
risk
A deductible is a combination of which of the following two risk management methods?
risk shifting risk assumption
Which of the following strategies can reduce the financial impact of retirement?
savings and investments part-time work pension and retirement accounts
Which of the following are risk assumption actions?
self-insuring deciding not to purchase collision insurance
An insurance company is a risk- _____ business that agrees to pay for losses that may happen to someone it insures. This is found in the discussion of what is insurance at the beginning of the chapter.
sharing
When a risk includes a chance of either loss or gain, it is called:
speculative risk.
Losses from floods are not covered under homeowner's insurance, but by:
the National Flood Insurance Program.
The coverage of HO-3 policies includes which of the following perils?
theft freezing smoke fire and lightning
What type of policy supplements your basic personal liability coverage and provides protection for injury claims?
umbrella policy
The coverage of tenants form HO-4 covers damages to personal property from all of the following perils except:
war.
Tenants Form HO-4 covers personal belongings from the perils of which of the following?
windstorm fire smoke
The main types of risks related to a home and an automobile are ______.
your responsibility for damage to the property of others damage or loss to your property your responsibility for injuries to others
