Money and Credit Exam 3

Group insurance plans are legally required to extend health insurance benefits to retirees. T/F

False

Long-term-care insurance provides protection against the cost of extended hospital stays. T/F

False

Medicare and Medicaid are administered by hospitals and physicians. 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 in exchange for a small payment. T/F

False

The cost of workers' compensation insurance is usually paid by the employees. T/F

False

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

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. T/F

False

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

False

_____ is the choice to accept and bear the risk of loss.

Risk Assumption

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.

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. T/F

True

You would have a better chance of insurance coverage for medical services not provided by the network with a preferred provider organization (PPO) plan than with a health maintenance organization (HMO) plan. T/F

True

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

True

Term life insurance is characterized by:

lower initial premiums than other types of insurance.

Which of the following is a public assistance program that provides health insurance benefits only to those who are unable to pay for health care?

medicaid

A coordination of benefits provision in a health care policy _____ by collecting benefits in multiple payments for health care.

prohibits collecting more than 100% of covered charges

The basic purpose of insurance is to:

protect you and your family from economic losses.

The personal property floater:

provides either blanket or scheduled coverage of items that are not covered adequately in a standard homeowner's policy.

A(n) _____ 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

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

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

A policy provision ensuring continued insurance coverage for the insured's lifetime as long as the premiums continue to be paid is known as:

renewability

A nonforfeiture option guarantees that a policyholder will not lose the policy's:

cash value

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

A higher home insurance cost may result from:

a low credit score of the insured.

Insurance is a tool that can reduce your _____ risk.

economic

Standard homeowner's policies will not include coverage for damage done by:

flood

Families faced with the loss of a principal wage earner receive Social Security benefits:

from the government that are intended to provide basic, minimum support.

Employers often provide _____ life insurance as a fringe benefit for their full-time employees.

group

One drawback of long-term-care insurance is its:

high annual premiums.

Medicare Part B covers:

imaging, laboratory tests, and prosthetic devices.

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 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

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 premiums for homeowner's insurance policies are affected by the type of structure and its location. T/F

True

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

it determines the amount of life insurance coverage needed by multiplying the gross annual earnings of the insured by some selected number.

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

large variations in premiums and services.

At the scene of an accident, the police are only responsible for assessing the:

probability of a law violation.

A captive agent typically represents two to ten different insurance companies. T/F

False

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

False

The maximum coverage under most dental policies is often in the range of _____ per patient.

$1,000 to $2,500

Michael's estimated current monthly take-home pay is $4,500. His total existing monthly benefit is $2,950. Michael's estimated monthly disability benefit is:

$1,550

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 benefit that he needs to arrange for is:

$2,000

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

You can learn about the financial strength of an insurance company by checking _____ rating system.

Standard & Poors

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 statements regarding medical insurance costs in the United States is true?

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

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

A shorter elimination period

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

True

Social Security survivor's benefits are intended to provide basic, minimum support to families faced with the loss of a principal wage earner. T/F

True

_____ can be both an advantage and a disadvantage of universal life insurance.

Flexible premiums

Which of the following is a basic, seldom-used homeowner's policy with very narrow coverage?

HO-1

Which of the following homeowner's policies provides coverage for damage caused by electrical current?

HO-2

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

HO-4

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

True

More than 15% of the working-age population are not covered by health insurance. T/F

True

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

True

Which of the following statements regarding workers' compensation insurance is true?

Workers' compensation insurance compensates workers who are injured on the job or become ill through work-related causes.

The principle of indemnity will prevent:

an insured from collecting more than what he or she has lost.

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

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.

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

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

inventory of exposures to loss.

A(n) _____ agent represents multiple insurance companies.

independent

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

The best way to buy automobile insurance is through a(n):

insurance agent

A captive agent is a(n):

insurance agent who represents only one insurance company.

An insured does not get the right to arbitration when the:

insurance company denies responsibility for the loss.

Group life insurance is a(n):

insurance that provides a master policy for a group.

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

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.

Section II of a homeowner's insurance contract covers:

paying successfully pursued liability claims against an insured.

A(n) _____ policy is a type of term insurance.

straight term

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 underwriting function of insurance companies is designed to ensure that premiums are based on:

the chance of losses

While performing needs analysis, when determining the available resources to offset the economic needs, you would generally ignore:

the children's educational qualifications.

Replacement-cost coverage is the reimbursement of:

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

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

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

Long-term care is a term used to describe:

the delivery of medical and personal care to persons with chronic medical conditions who are not in a hospital.

Underwriting refers to:

the determination of which exposures to insure.

Section I of a homeowner's insurance policy covers:

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

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

universal life insurance

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.

In the pure community rating approach to health insurance premium pricing, all policyholders in an area pay:

the same premium without regard to their personal health, age, or gender.

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

to transfer the risk of a serious loss

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

unable to carry out the duties of any job.

A personal liability umbrella policy is more likely to be opted for by people:

with a moderate to high level of income and net worth.

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

with a waiting period before income is received.