Your Money and Credit FINAL

Replacement-cost coverage is the reimbursement of:

the cost of repairing or replacing damaged structures without deducting depreciation.

Living a healthy lifestyle is an example of loss prevention and control.

true

Jonathan estimates that financial resources worth $2,000,000 will be necessary to protect his family after his death. What amount of insurance, as per the needs analysis method, should Jonathan purchase if he has current financial resources worth $1,000,000?

$1,000,000

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

It is advisable to purchase life insurance from an insurance company that has been in business for at least _____ years.

25

Which of the following changes would tend to increase the premium on a disability policy?

A shorter elimination period

Which of the following is a characteristic of a universal life insurance policy?

Cash value lower than the death benefit

A personal property floater and a personal liability umbrella policy offer similar coverage.

False

Homeowner's co-insurance requires the insured to carry insurance protection equal to the market value of the house.

False

Increasing the amount of the deductible is the only way to bring down the cost of homeowner's insurance.

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

The primary purpose of life insurance is to provide a tax-advantaged investment plan.

False

Underwriters can predict whether or not you will suffer a loss this year.

False

Uninsured motorists protection usually provides protection to the insured's car if a hit-and-run incident occurs.

False

Ben (age 40) pays a low ($15) co-payment each time he visits a doctor or hospital. Other than the low per-service deductible, there is very little cost sharing. However, Ben has a relatively low deductible, has no exclusions, and does not have to file insurance claims. Which of the following most likely provides Ben's health coverage?

HMO

Which of the following homeowner's policies is best suited to a renter of an apartment?

HO-4

The _____ is a good homeowner's policy for a condominium owner.

HO-6

Which of the following statements regarding private health insurance plans is true?

In a traditional indemnity plan, the premium cost is low if it is a high-deductible plan.

Which of the following statements regarding insurance underwriting is true?

Insurance underwriters design rate classification schedules so that people pay premiums that reflect their chance of loss.

Which of the following statements regarding long-term-care insurance is true?

Many policies offer inflation protection riders for an additional premium.

Which of the following statements regarding risk avoidance is true?

Risk avoidance is any activity that helps evade an act that creates a risk.

Which of the following types of insurance policies provides temporary coverage for a set period?

Term life insurance policy

Which of the following statements regarding the Affordable Health Care Act (ACA) is true?

The ACA eliminates lifetime limits on total health care insurance payments by insurers.

Which of the following statements regarding a good insurance agent is true?

The agent is recommended by professionals like bankers and attorneys.

Which of the following statements regarding the multiple-of-earnings method is true?

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 statements regarding companies that sell insurance directly to consumers is true?

Their premiums are generally lower than for companies that sell insurance through agents.

Social Security survivor's benefits are intended to provide basic, minimum support to families faced with the loss of a principal wage earner.

True

The federal government has introduced a subsidized flood insurance program for homeowners and tenants living in designated communities.

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

Universal life insurance is:

a combined savings/investment plan and insurance policy.

_____ is a health care plan in which subscribers/users contract with the provider organization, which uses a designated group of providers meeting specific selection standards to furnish health care services for a monthly fee.

a managed care plan

A personal liability umbrella policy typically includes:

added liability coverage for homeowner's and automobile insurance.

Medicare's supplementary medical insurance (SMI) provides health care protection beyond the basic hospital coverage for:

anyone age 65 or over who pays premiums on a voluntary basis.

The 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.

If a term life insurance is convertible, the policy can be:

changed to a comparable whole life policy.

An insurance company assigns more complex loss cases to a:

claims adjustor.

Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.

continuous whole life

An increase in the amount of the deductible will:

decrease the amount of insurance premiums.

While using the needs analysis approach to determine how much life insurance to purchase, you should:

deduct available resources from your family's total economic needs.

Social Security disability income benefits are available only when someone is permanently unable to do any job.

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

The primary purpose of life insurance is to provide:

financial security for your dependents after your death.

A(n) _____ agent represents multiple insurance companies.

independent

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% of the amount that it would cost to build them today, _____ can cause the actual amount of coverage to fall below 80%.

inflation

Medicare Part A provides:

inpatient hospital services.

A(n) _____ policy is a contract between an individual and a company under which the company agrees to reimburse the individual for losses suffered by him or her according to specified terms.

insurance

A captive agent is a(n):

insurance agent who represents only one insurance company.

Group life insurance is a(n):

insurance that provides a master policy for a group.

It pays to comparison shop for insurance policies because of the:

large variations in premiums and services.

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 insurance designed to help with nursing home, assisted living community, or in-home care due to chronic illness is called:

long term care

The settlement option chosen by most policyholders is:

lump sum

When offering a flexible-benefit plan, most employers will set up a salary reduction agreement with an employee if the employee:

needs additional insurance benefits.

The _____ method is the most detailed method of determining the amount of life insurance coverage needed for an individual.

needs analysis

A good health insurance plan embodies more than financing medical expenses, lost income, and replacement services; it incorporates:

other means of risk reduction such as risk avoidance.

Insurance companies make profit by:

paying out less than the sum of the premiums and the earnings on them.

Section II of a homeowner's insurance contract covers:

paying successfully pursued liability claims against an insured.

The community rating approach to health insurance premium pricing:

prohibits insurance companies from varying rates based on health status or claims history.

A(n) _____ provision enables you to purchase the policy again at its expiration.

renewable

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.

The purchasing power of income from a long-term disability policy is protected by:

the cost-of-living adjustment (COLA) provision.

Underwriting refers to:

the determination of which exposures to insure.

A homeowner's policy does not provide protection for:

the personal property of tenants.

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.

Part A liability coverage under a personal automobile policy may be viewed as "following":

the vehicle.

From the standpoint of a person buying insurance, the central purpose of insurance should be:

to transfer the risk of serious losses.

Avoiding alcoholic beverages while driving is an example of loss prevention.

true

Guaranteed renewable term insurance allows you to renew a policy for another term without qualifying medically.

true

If you have a high-risk hobby, then you could be required to pay more for life insurance than others pay.

true

In order to qualify for disability insurance under Social Security, a person must be:

unable to carry out the duties of any job.

Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.

underwriting

It can be difficult to evaluate the true cost of a _____ policy at the time of purchase.

universal life insurance

Dependent children _____ will usually be covered by their parents' health insurance policy.

up to a stated maximum age

A $300,000/$500,000 bodily injury liability automobile policy could pay _____ to all injured victims in one accident.

up to a total of $500,000

The policy owner assumes the investment risk with a _____ insurance policy.

variable life