FIN210 Personal Finance SmartBook Chapter 10

Which of the following accurately describes the split limits of 100/300 with bodily injury liability for automobile insurance?

$100,000 limit claim per person and $300,000 limit for each accident

Suppose Kenny is involved in an accident that was not his fault and the other driver has 50/100/25 coverage limits. Kenny's injuries amount to $20,000. How much will the other driver's policy cover for Kenny's claim?

$20,000

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

Select all that apply Which of the following are covered by renter's insurance? - personal liability - other structures - personal property - additional living expenses - flood damage

- personal liability - personal property - additional living expenses

A basic risk management plan sets [_____] to reduce the potential [_____] of income due to premature death, illness, accident, or unemployment.

Blank 1: goals or objectives Blank 2: loss or risk

Liability is the legal responsibility for the financial cost of another person's financial [_____] or injuries.

Blank 1: losses, costs, loss, or cost

The personal belongings of students in college housing are usually covered by the home insurance policies of their [_____].

Blank 1: parents or guardians

The amount you can collect with collision insurance is limited to the actual [_____] value of the automobile at the time of the accident.

Blank 1: retail, cash, market, selling, sale, monetary, or resale

Medical payments coverage covers the costs of health care for people who were injured in the other automobile involved in an accident with your car.

False

True or False: The main bodily injury coverages are bodily injury liability, mortgage payments coverage, and uninsured motorist protection.

False

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

What kind of insurance pays for damage to an automobile in case of an accident regardless of fault?

collision

One question you should ask before filing an auto insurance claim is "How much is your Blank______?"

deductible

Collision insurance pays for the damage to an automobile as a result of an accident regardless of _____.

fault

A ______ is state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident.

financial responsibility law

Home insurance covers the policyholder's place of residence and its associated ______, such as damage to personal property and injuries to others.

financial risks

The protection against possible loss that gives you peace of mind is called _____.

insurance

Your personal insurance plans should change with your ______.

needs and goals

In a ______ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

no-fault

Losses from floods and earthquakes are usually ______ by homeowner's insurance.

not covered

You inherited a $25,000 ring from your grandmother. You should cover it with a(n) ______.

personal property floater

Select all that apply The financial impact of disability includes which of the following? - Increased expenses - Final expenses - Loss of services - Loss of income

- Increased expenses - Loss of services - Loss of income

Select all that apply Which of these strategies help reduce the financial impact of a disability? - collecting Social Security disability income - practicing health-enhancing behaviors - using Medicare and Medicaid - drawing upon savings and investments during your disability - collecting disability income from a disability insurance policy

- collecting Social Security disability income - drawing upon savings and investments during your disability - collecting disability income from a disability insurance policy

The four risk management methods (presented in the text) include risk [_____] , risk [_____] , risk [_____] and risk [_____] .

Blank 1: avoidance Blank 2: reduction Blank 3: assumption Blank 4: shifting

The best plans are flexible enough to handle changing [_____] situations.

Blank 1: life or lifestyle

True or false: Life insurance replaces income lost when the policyholder dies.

True

Which of the following best defines homeowner's insurance? - coverage for loss of income from disability and premature death that occurs at home - coverage for all risks that you take as long as you own a home - coverage of all risks related to your residence and apartments that you rent - coverage for your residence and its financial risks

coverage for your residence and its financial risks

Jim was involved in an accident that was caused by the other driver and was reimbursed for his medical expenses by his own insurance company. Jim likely lives in a state with a(n) ______ system.

no-fault

A principle in which thousands of policyholders pay a small sum of money into a central pool, which is then large enough to meet the expenses of the small number of people who suffer a loss is called ______.

pooling risks

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

Losses from floods are not covered under homeowner's insurance, but by:

the National Flood Insurance Program.

Insurance plans should be evaluated every ______.

2-3 years

The risk of physical damage to your car such as fire, theft, falling objects, and hitting an animal are covered by [_____] physical damage.

comprehensive

An example of an endorsement on a homeowner's policy is ______ coverage.

earthquake

In general, ______ and those over ______ pay higher premiums.

young drivers; 70

In general, young drivers (under [_____] ) and those over [_____] have more frequent and severe accidents.

25; 70

People's risk management needs typically remain unchanged throughout their lives.

False

True or False: Medical payments coverage covers the costs of health care for people who were injured in the other automobile involved in an accident with your car.

False

True or False: People's risk management needs typically remain unchanged throughout their lives.

False

True or false: Comprehensive physical damage insurance for your car covers damage to your vehicle if you are at fault in an accident.

False

True or false: The amount you can recover with collision insurance is limited to the wholesale value of your vehicle.

False

True or false: Your homeowner's insurance covers damage to your home, other structures on your property, and your automobile.

False

Sally is living in a dorm and her computer is stolen. The loss is probably covered by:

her parent's homeowner's policy.

Life insurance replaces [_____] that would be lost if the policyholder died.

income

Additional living expense coverage pays for the cost of ______.

living in a temporary location while your home is being repaired

Property damage liability protects you against financial loss when you damage:

the property of others.

What type of policy supplements your basic personal liability coverage and provides protection for injury claims?

umbrella policy

Kenny is involved in an accident that was not his fault. His property damage amounted to $20,000, but the other driver's insurance only covered $15,000. Kenny's policy pays the rest because he has:

underinsured motorist coverage.

The main factors that influence premiums for automobile insurance are:

vehicle type, rating territory, and driver classification.

Select all that apply Which of the following are possible limits to the coverage for additional living expenses in a homeowner's insurance policy? - 10% to 20% of the home's coverage - full cost of temporary living expenses up to five years - 50% of your annual salary for up to nine months - full cost of temporary living expenses up to a year

- 10% to 20% of the home's coverage - full cost of temporary living expenses up to a year

Select all that apply 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 - 55% of the home coverage - 10% of the value of the belonging - 100% of the value of the belonging - 75% of the home coverage

- 70% of the home coverage - 55% of the home coverage - 75% of the home coverage

Select all that apply Which of the following risks are covered by homeowner's insurance? - Coverage for your place of residence - Coverage for the financial risks of damage to personal property - Coverage for the financial risks associated with injuries to others - Coverage of financial risks associated with the operation of your automobile

- Coverage for your place of residence - Coverage for the financial risks of damage to personal property - Coverage for the financial risks associated with injuries to others

Select all that apply What questions should you ask when deciding to file an auto insurance claim? - Am I at fault for the accident? - How much is my deductible? - Was someone else involved? - What recent claims have I had?

- How much is my deductible? - Was someone else involved? - What recent claims have I had?

Select all that apply Which of the following strategies help reduce the financial impact of death? - Medicare and Medicaid - Social Security survivor benefits - life insurance - estate planning - health-enhancing behaviors

- Social Security survivor benefits - life insurance - estate planning

Select all that apply Which of the following are general risk management techniques? - speculation - avoidance - reduction - investing - assumption

- avoidance - reduction - assumption

Select all that apply The two main categories of automobile coverage are: - bodily injury. - disability. - property damage. - life insurance.

- bodily injury. - property damage.

Select all that apply The financial impact of illness includes: - catastrophic hospital expenses. - loss of income. - lawsuits and legal expenses. - final expenses.

- catastrophic hospital expenses. - loss of income.

Select all that apply Which of the following are covered by a homeowner's policy? - automobile - boat - house - personal property - other structures

- house - personal property - other structures

Select all that apply Property covered under property damage liability insurance includes: - lamp posts. - furniture. - street signs. - office equipment. - buildings. - vehicles.

- lamp posts. - street signs. - buildings. - vehicles.

Select all that apply Most of the money automobile insurance companies pay in claims goes for ______. - medical expenses - legal expenses - other costs that arise when someone is injured - damage to the car

- medical expenses - legal expenses - other costs that arise when someone is injured

Select all that apply The goals of insurance include: - minimizing liability risks. - minimizing personal risks. - maximizing investment return. - minimizing the likelihood of perils. - minimizing property risks.

- minimizing liability risks. - minimizing personal risks. - minimizing property risks.

Select all that apply Which of the following financial losses can you insure against? - personal and property damage when driving - losses when gambling at a casino - loss of home or belongings - catastrophic illness

- personal and property damage when driving - loss of home or belongings - catastrophic illness

Select all that apply The strategies for reducing the financial impact of illness include: - purchase health insurance. - practice health-enhancing behaviors. - use Medicare - practice estate planning. - purchase life insurance.

- purchase health insurance. - practice health-enhancing behaviors. - use Medicare

Select all that apply Beyond the standard bodily injury and property damage coverage, other possible automobile coverage includes ______. - living expenses - meals - towing service - car rental - wage loss - towing service -car rental - wage loss

- towing service - car rental - wage loss

Select all that apply The main bodily injury coverages are: - uninsured motorist's protection. - collision coverage. - bodily injury liability. - medical payments coverage.

- uninsured motorist's protection. - bodily injury liability. - medical payments coverage.

Strategies designed to reduce the financial impact of death include [_____] planning, [_____] insurance, and Social Security survivor benefits.

Blank 1: estate Blank 2: life

A personal property [_____] for a homeowner's insurance policy requires a detailed description of the items covered and periodic [_____] to verify the current value.

Blank 1: floater Blank 2: appraisal, evaluation, inventory, or appraisals

A household [_____] is a list or other documentation of personal belongings, with purchase dates and cost information.

Blank 1: inventory or ledger

Underinsured motorist coverage provides financial protection when another driver has insurance, but the coverage is [_____] than the amount needed to cover the damages.

Blank 1: less, insufficient, inadequate, below, lesser, or lower

[_____]is the legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible.

Liability

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: Your driver classification is one of the main factors that affects the premium for your vehicle insurance.

True

A(n) [_____] is an addition to coverage for a homeowner's policy, such as earthquake insurance.

endorsement

Medical payments coverage covers [_____] in your car including friends, carpool members, and others who ride in your vehicle who may be injured in an accident.

passengers, people, persons, everyone, injuries, occupants, anyone, or others

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

Shifting of risk is done through the purchase of an insurance [_____] from an insurance company.

policy, coverage, or plan

An insurance policy contract requires that the policyholder pay an annual amount, usually called a(n) [_____] , to cover the risk. This is the cost of the policy.

premium

An insurance policy contract requires that the policyholder pay an annual amount, usually called a(n) [_____], to cover the risk. This is the cost of the policy.

premium

The principle of pooling risks is based on a large number of people paying relatively small sums of money called [_____] to meet the expenses of a small number of people who suffer losses.

premium

An insurance policy requires the payment of an annual [_____] as part of a contract to cover the risk. This is found in the discussion of what is insurance.

premium or fee

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

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

The purpose of a financial responsibility law is to force drivers to ______.

show their ability to cover the costs of damage or injury from automobile accidents