Exam 3 PMM
Sarah purchased a Personal Auto Policy with liability limits of 25/50/25. Sarah ran a stop sign and hit a van. The van sustained $15,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $15,000; Passenger #2, $60,000; and Passenger #3, $10,000. How much will Sarah's insurer pay under Part A: Liability Coverage?
$65,000
Disability Insurance
A form of health insurance that provides periodic payments to replace income when the insured is unable to work as a result of illness, injury, or disease-not as a result of a work-related accident or condition
HMO (Health Maintenance Organization)
A managed care organization that provides comprehensive medical services for a predetermined annual fee per enrollee.
Personal Umbrella Policy
A policy covering (BI &PD) and Personal Injury Liability in excess of the insured's underlying policy limits. This provides excess coverage over the limits of an underlying policy
According to the Keown book, why don't renters typically have renter's insurance?
All of the above. They have never heard of such insurance, they didn't know they needed coverage, and they felt insurance was too expensive.
Which of the following could increase the cost of your auto insurance?
All of the above. Driving a sportier car, decreasing the amount of your deductible, driving more miles per year.
Amy Lambert's home is insured for $85,000 and her detached garage is destroyed by a windstorm. She hopes to collect $11,850 under her homeowner's policy. What will happen?
Amy will receive $8,500 under coverage B: other structures.
Group practice plan
An insurance plan in which doctors are generally employed directly by an HMO, and members of the HMO must receive their medical treatment from these doctors at a central facility.
Individual Insurance Policy
An insurance policy that is tailor-made for you, reflecting your age, health (as determined by an examination), and chosen deductible size
Split-Limit Coverage
Auto insurance liability coverage that allows for separate coverage limits for bodily injury and property damage, split-coverage limits per person, or both.
comprehensive physical damage
Automobile insurance that covers financial loss from damage to a vehicle caused by a risk other than a collision, such as fire, theft, glass breakage, hail, or vandalism.
Medicaid
Federal program that provides medical benefits for low-income persons.
Medigap
a private insurance policy that pays the difference between the medical charge and the amount that Medicare pays
who should consider disability insurance
anyone who relies on income to live, even though its expensive
Statisticians who specialize in estimating the probability of death based on personal characteristics are called
actuaries
Replacement Cost Coverage
additional homeowner's coverage that provides for the actual replacement cost of a stolen or destroyed item as opposed to the actual cash value
Combined Single-Limit Coverage
auto insurance liability coverage that combines both bodily injury and property damage liability
Felix's $2,000 TV was stolen. He has no record of his purchase, however, he knows his insurance company will reimburse him the full value of the TV.
false
Term life insurance has a life insurance component and a savings plan
false
the first homeowner's policy in the U.S. was written to cover?
fire
A ________ is a savings plan offered by some employers that allows each employee to have pretax earnings deposited into a specially designated account for paying qualified medical and dependent care bills.
flexible spending account
Cleanup Funds
funds needed to cover immediate expenses at the time of your death
Credit or Mortgage Group Life Insurance
group life insurance provided by a lender for its debtors
sally health has the option of obtaining life insurance through her place of employment. She will not need to take a physical exam. this type of policy would be a/an _______ policy
group life term
Preferred Provider Organization (PPO)
group of healthcare providers that provide services to a specific group, often at a reduced rate
premium
an amount to be paid for an insurance policy.
Coinsurance or Percentage Participation
an insurance provision that defines the percentage of each claim that the insurance company will pay
Direct Writer
an insurer in which the salesperson is an employee of the insurer, not an independent contractor
Patient Protection and Affordable Care Act
health care reform law passed in 2010 that includes incentives and penalties for employers providing health insurance as a benefit
individual practice association, group practice, and point of service plans are the three basic types of
health maintenance organizations
Long-Term Disability (LTD)
insurance plan that typically starts after a specified period of time (6 to 12 weeks, for example) from the time of a disability and pays a portion of the employee's salary until retirement age
surgical insurance
insurance that covers all or part of the surgeon's fees for an operation
uninsured motorist's protection
insurance that covers you and your family members if you are involved in an accident with an uninsured or hit-and-run driver
Hospital Insurance
insurance that usually pays most or all hospital charges if an illness or injury requires the insured to be hospitalized
Basic Health Insurance
insurance which includes hospital expense coverage, surgical expense coverage and physician expense coverage
Term Insurance
life insurance protection for a specified period of time; sometimes called temporary life insurance.
whole life insurance
life insurance that pays a benefit on the death of the insured and also accumulates a cash value.
Major Medical Expense Insurance
pays most of the costs exceeding those covered by the hospital, surgical, and physician expense policies
Fire, theft, and windstorm damage are examples of
perils
Universal Life Insurance
permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates. (if your income changes a lot)
Reggie was hosting a BBQ when the deck fell off his house. Several of his friends were hurt in the accident. Luckily for Reggie he has ________ coverage on his home owner's insurance.
personal liability
Rider
special provision that may be added to your policy, often at an additional cost, to provide extra benefits for features to a policy in order to meet your specific needs.
Coinsurance Provision
states a percentage of the bill in excess of the deductible, which the insured must pay out-of-pocket up to some maximum annual dollar limit
actuaries
statisticians who specialize in estimating the probability of death based on personal characteristics
umbrella liability insurance
supplements your basic auto and property liability coverage by expanding limits and including additional risks
Decreasing Term Insurance
term insurance in which the annual premium remains constant but the face amount of the policy declines each year
Settlement or Payout Options
the alternative ways that a beneficiary can choose to receive the policy benefits upon the death of the insured
co-payment/deductible
the amount of expenses that the insured must pay before the insurance company will pay any insurance benefits
Face Amount or Face of Policy
the amount of insurance provided by the policy at death
Which of the following is not a determinant of the cost of your automobile insurance rates?
the number of children you have
Waiting or Elimination Period
the period, after an insured meets the policy's eligibility requirements, during which he or she must pay expenses out-of-pocket; when the waiting period expires, the insured begins to receive benefits
Collision Loss
the portion of auto insurance coverage that provides benefits to cover damages resulting from an accident with another vehicle or object
Francis was just learning to drive. She forgot to put the car into park and it rolled down the driveway and into the neighbor's automobile. What part of her automobile insurance policy will cover the damage to her neighbor's automobile?
Part A: liability coverage
Deon tried to merge onto the Atlantic Expressway and caused a three-car accident. He has automobile insurance with limits of 50/100/25. What is the maximum amount that his insurance company will pay for the bodily injury liability claims?
$100,000
Your home and property have a market value of $200,000. Since you want to make sure that you meet the coinsurance provisions, you should have at least ________ of insurance.
$160,000
Sarah purchased a Personal Auto Policy with liability limits of 50/100/25. Sarah ran a stop sign and hit a van. The van sustained $12,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $12,000; Passenger #2, $63,000; and Passenger #3, $15,000. Sarah sustained $10,000 in medical expenses, and Sarah's car sustained $13,000 in damages. How much will Sarah's insurer pay under Part A: Liability Coverage?
$89,000
Traditional Indemnity Plan (fee for service plan)
- physicians are paid for each covered service - insureds have freedom in selecting their own physician - plans pay indemnity benefits for covered services up to certain limits - common types include basic medical expense insurance & major medical
Personal Automobile Policy (PAP)
-pap part A: liability coverage. -pap part B: medical expense coverage. -pap part C: uninsured motorist's protection coverage. -pap part D: coverage for damage to your car. -standard exclusions. -no-fault insurance.
Loan Clause
A clause that provides the right to borrow against the cash value of the policy at a guaranteed interest rate.
Policy Reinstatement Clause
A clause that provides the right to restore a policy that has lapsed after the grace period has expired. Generally, reinstatement is provided for within a specified period (usually 3 to 5 years after the policy has expired).
Insurance Credit Score
A credit score, based on the same information as your traditional credit score, that is used in determining what your home and auto insurance rates will be.
rehabilitation coverage
A disability insurance provision that provides payments for vocational rehabilitation, allowing the policyholder to be retrained for employment
Medicare
A program added to the Social Security system in 1965 that provides hospitalization insurance for the elderly and permits older Americans to purchase inexpensive coverage for doctor fees and other health expenses.
Renewable Term Insurance
A type of term insurance that can be renewed for an agreed-on period or up to a specified age (usually 65 or 70), regardless of the insured's health
The needs approach to determining life insurance amounts considers which of the following?
All of the above -- Debt elimination funds, immediate financial needs, and dependency expenses.
Interest-Adjusted Net Cost Method
Considers the time value of money by applying an interest adjustment to yearly premiums and dividends.
Waiver of Premium
Continuation of life insurance coverage if the insured becomes totally disabled and is unable to pay the premiums.
John Meadow rents an apartment and wants tenant's insurance or an ________ policy.
HO-4
What does HMOs stand for
Health maintenance organizations
80 percent rule
Insurance company rule that you must buy homeowner's coverage for at least 80 percent of your home's actual replacement value at the time of your loss in order to receive full reimbursement for any loss
long-term care insurance
Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance either at home or in a residential facility
personal liability
Liability assumed by borrowers that allows lenders to sue them personally for fulfillment of the contract.
Which of the following are not discounts for PAP coverage?
Low miles per gallon discount
Personal Articles Floater (PAF)
Personal Inland Marine insurance that provides All-Risk coverage on nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.
Property Insurance
Provides payment to the insured person if his or her property is damaged or destroyed by an accident covered by the insurance policy.
Workers' Compensation Laws
State statutes that establish an administrative process for compensating workers for injuries that arise in the course of their employment, regardless of fault.
Group Term Insurance
Term insurance provided, usually without a medical exam, to a specific group of individuals, such as company employees, who are associated for some purpose other than to buy insurance.
Open Peril
Term used in property insurance to describe the breadth of coverage provided under an insurance policy form that insures against "any risk of loss" that is not specifically excluded.
Named Peril
The cause of loss specifically covered by the insurance policy. No coverage is provided for unlisted perils.
Coverage Grace Period
The late-payment period for premiums during which time the policy stays in effect and no interest is charged. If payments still aren't made, the policy can be cancelled after the grace period.
Actual Cash Value (ACV)
The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation.
Convertible Term Life Insurance
This optional form of term life insurance lets the policyowner convert the policy to a whole life policy without having to prove insurability. The new policy's face amount cannot exceed the term policy's face amount at the time of conversion. Typically, the option to convert must be exercised no later than a certain date, such as two or three years before the policy expires.
An HO-3 policy is a special form of homeowner's insurance policy that offers open perils protection except those perils specifically excluded.
True
It is possible to have a different deductible for collision loss than you have for comprehensive physical damages
True
Flexible Spending Account (FSA)
Type of Section 125 plan that allows employees to use pretax dollars to pay for out-of-pocket health and dependent-care expenses.
Change of Policy Clause
a clause that gives the policyholder the right to change the form of the policy -- for example, from a continuous-premium whole life policy to a limited-premium whole life policy
Inflation Gaurd
a coverage extension that automatically increases amounts of insurance on buildings by an agreed upon percentage annually
Short-Term Disability (STD)
a disability policy that provides benefits over a given period, generally from 6 months to 2 years
Individual Practice Association (IPA)
a form of HMO in which subscribers receive services from physicians practicing from their own offices and from community hospitals affiliated with the IPA
Nonforfeiture Right
a life insurance feature giving the whole life policyholder, upon policy cancellation, the portion of those assets that were set aside to provide payment for the future death claim
Traditional Net Cost (TNC) Method
a method of comparing insurance costs that sums the premiums over a stated period (usually 10 or 20 years) and subtracts from this the sum of all dividends over that same period
Needs Approach
a method of determining how much life insurance you need based on funds your family would require to maintain their lifestyle after your death. - the amount of money to pay off debts, funeral, shcool, etc
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred: —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses?
bodily injury liability
peril
cause of loss
Variable Life Insurance
contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance. policy holder has risk, not insurance company
no-fault insurance
coverage requiring that parties to an automobile accident be indemnified by their own insurance company regardless of who is at fault
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred: —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover KENS medical expenses?
medical payments coverage
A method of determining how much life insurance you require based on funds your family would require to maintain its lifestyle after your death is called the
needs approach
beneficiary
one who benefits from something; a person who is left money or other property in a will or the like
Risk pooling
organizing people into a group to collectively absorb the risk faced by each individual
cash value life insurance
part insurance and part investment, in which you can borrow money against the total amount of premiums paid
managed health care plan- prepaid care plan
policy under which individuals receive services from specific doctors or hospitals that are part of the plan
physician expense insurance
provides benefits for doctors' fees for nonsurgical care, x-rays, and lab tests
Sharing financial consequences associated with risk in the insurance industry is sometimes called
risk pooling
endorsement
the signature of the payee, the party to whom the check has been written
Earnings Multiple Approach
to replace the annual salary stream of a bread winner for X years, normally 5-15 times gross salary is recommended
Angela's home suffered a small fire. She had to stay in an apartment temporarily while her home was being fixed. The provision on her home owners policy that covers her expenses while she is not able to live in her home is known as: Coverage D: Loss of Use
true
long-term care insurance provides money to help pay for nursing home and home health care expenses
true
