FINN 1003 Exam 3

Which homeowners' policy provides coverage for damage caused by electrical current?

HO-2

Which of the following homeowners' policies provides coverage for the damage caused by the accidental discharge of water or steam?

HO-2

Which homeowners' policy is best suited to a renter of an apartment?

HO-4

What is true of medical insurance costs in the U.S.?

a poor demand-and-supply distribution of health care facilities and services has increased the health care costs.

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

false

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

false

Uninsured motorists protection usually provides protection to the insured's car if a hit-and-run incident occurs. T/F

false

the primary purpose of life insurance is to provide:

financial security for dependents in the event of death

To purchase a personal liability umbrella policy, the insured party must already have ____

relatively high liability limits on their homeowner's and auto coverage

When insuring property, people need to consider not only replacing and restoring the actual property in the event of a loss, but also _______

the liability arising from the insured's responsibility for property loss

You would have a better chance of choosing your own doctor with a preferred provider organizations (PPO) plan than with a health maintenance organizations (HMO) plan. T/F

true

By _______ insurance companies decide who will be insured by them.

underwriting

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 _________ at the time of purchase.

universal life insurance

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

$1,000,000

Patrick's monthly take-home pay is $5,000. His net worth is $125,000. He estimated that he would receive Social Security benefits worth $1,000 and company disability benefits $2,000 if he becomes disabled. The additional disability benefits that he needs to arrange for equals _____.

$2,000

A grace period permits a policyholder to retain full death protection even though the premium has not been paid for

31 days

Homeowners are eligible for reimbursement on a full replacement-cost basis only if they keep their homes insured for at least

80 percent

What is a good homeowner's policy for a condominium owner?

HO-6

Universal life insurance is

a combined investment plan and insurance policy

insurance policy

a contract between the insured and the insurer under which the insurer agrees to reimburse the insured for losses suffered according to specified terms

needs analysis method

a method of determining the amount of life insurance coverage needed by considering a person's financial obligations and available financial resources in addition to life insurance

multiple-of-earnings method

a method of determining the amount of life insurance coverage needed by multiplying gross annual earnings by some selected number

decreasing term policy

a term insurance policy that maintains a level premium throughout all periods of coverage while the amount of protection decreases

convertibility

a term life policy provision allowing the insured to convert the policy to a comparable whole life policy

renewability

a term life policy provision allowing the insured to renew the policy at the end of its term without having to show evidence of insurability

A captive agent is

an insurance agent who represents only one insurance company.

.Group life insurance is

an insurance that provides a master policy for a group

loss control

any activity that lessens the severity of loss once it occurs

loss prevention

any activity that reduces the probability that a loss will occur

A 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

Auto insurance is needed primarily _____

as protection against potential liability claims.

risk avoidance

avoiding an act that would create a risk

Social Security survivor's benefits

benefits under Social Security intended to provide basic, minimum support to families faced with the loss of a principal wage earner

cash value

cash value the accumulated refundable value of an insurance policy; results from the investment earnings on paid-in insurance premiums

An insurance company assigns more complex loss cases to a ______

claims adjustor

Comprehensive automobile coverage refers to

coverage for damage to an insured automobile from perils (with a few exceptions) other than collision.

The _____ represents the initial amount that's not covered by the policy and thus must be paid by the insured.

deductible

Employers set up a salary reduction agreement with the employees if

employees need additional insurance benefits

Negligence occurs when someone

fails to act in a reasonable manner

Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades. T/F

false

All group insurance plans extend health insurance benefits to retirees. T/F

false

Disability insurance is available only when someone is completely incapable of returning to work during his or her lifetime. T/F

false

Earthquakes are covered under most homeowner's insurance policies. T/F

false

Only one agent should be consulted for discussing personal financial needs and insurance requirements while buying life insurance. T/F

false

Risk avoidance involves asking an insurance company to take over the risk for a small payment (the premium). T/F

false

The life insurance needs of beneficiaries are secondary since most proceeds are paid to policyholders. T/F

false

During the past few decades, the percentage of our income spent on health care:

has increased due to an aging U.S. population.

An agent that represents multiple insurance companies.

independent agent

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

inflation

term life insurance

insurance that provides only death benefits, for a specified period, and does not provide for the accumulation of cash value

The first step in buying property and liability insurance is to develop a(n) _______

inventory of exposures to loss

whole life insurance

life insurance designed to offer ongoing insurance coverage over the course of an insured's entire life

The insurance designed to help with nursing home or in-home care due to chronic illness is called

long-term care

_______ is any activity that lessens the severity of loss once it occurs.

loss control

Group health insurance premiums are _____.

lower than an employer's health insurance plan premiums

A life insurance policy can be structured so that death benefits are paid directly to a(n) ______ which means that creditors cannot claim the cash benefits from the life insurance policy.

named beneficiary

Which of the following leads to the payment of a higher insurance premium by the potential insured?

obesity of the potential insured

Disability income policies usually have a(n) _____, which is a time delay from the date of the issuance of the policy until benefit privileges are activated.

probationary period

is not insured. Donna, who is single and 30 years old, received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?

raising her deductible from $250 to $1,000

__________ covers the cost of visits to a doctor's office or for a doctor's hospital visits, including consultation with a specialist.

regular medical expense insurance

straight term policy

straight term policy a term insurance policy written for a given number of years, with coverage remaining unchanged throughout the effective period

A personal liability umbrella policy is designed to

supplement homeowner's insurance coverage

What is true of the Affordable Health Care Act (ACA)?

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

The Affordable Care Act (ACA) requires insurance companies to adhere to

the adjusted community rating approach for individuals and small businesses

risk assumption

the choice to accept and bear the risk of loss

Section II of a homeowner's insurance contract covers

the cost of defending the insured

Replacement-cost coverage is the reimbursement of

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

Section I of a homeowner's insurance policy covers:

the dwelling, accompanying structure, and personal property of the insured.

When purchasing a long-term-care policy, _______

the guaranteed renewability provision is recommended

The liability coverage under a personal automobile policy is provided to:

the non-family members involved in the accident.

A homeowner's policy does not provide protection for

the personal property of tenants

underwriting

the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums

What is true of companies that sell insurance directly to consumers?

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

People under the age of 65 years are covered by Medicare health insurance plan if

they receive monthly social security disability benefits

.Never discuss liability at the scene of an accident, or with anyone other than the police and the insurance company. T/F

true

A house with a replacement value of $110,000 is currently insured for $90,000. The house is damaged in a windstorm, causing a loss of $15,000. The insurance company will pay an amount equal to $15,000 less the deductible. T/F

true

An individual's need for additional life insurance can be determined by looking at the difference between his or her family's available financial resources after his or her death and his or her family's total economic needs. T/F

true

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

true

Insurance policies provide the opportunity for claims arbitration to settle any disputed liability claims. T/F

true

Life insurance proceeds paid to your heirs are not usually subject to state or federal income taxes. T/F

true

Suppose you carelessly, but unintentionally, knocked someone down a flight of stairs in your home. You would be covered by your homeowner's insurance. T/F

true

The premiums for homeowners' insurance policies are based on the size of the deductible, any policy limits, and the standard coverage. T/F

true

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

variable life

A _____ is standard in disability income policies.

waiver of premium

Disability income insurance will provide income to a disabled or ill person ______

with a waiting period before income is received

A liability suit could result against you if

your dog bites your neighbor.