Personal Finance Chapter 8
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
Brad had tools stolen from his home. He paid $2,000 for the tools, they are now worth $150, and the replacement cost of the is $2,500. Assuming Brad has replacement cost insurance, how much will his insurance company pay?
$2,500
According to the text, the amount of property damage liability coverage that is suggested is
$50,000 to $100,000 often suggested
Brad has tools stolen from his house. He paid $2,000 for the tools years ago; they were worth $150 at the time of the theft and the replacement cost for the tools is $2,500. Assuming no deductibles and an actual cash value policy, Brad should receive how much from his insurance company?
$650
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 a year
Which of the following are typical of the limits of coverage for personal belongings in a home owner's insurance policy?
-55% of the home coverage -70% of the home coverage -75% of the home coverage
The main bodily injury coverages are:
-bodily injury liability -uninsured motorist's protection -medical payments coverage
Which of these strategies help reduce the financial impact of a disability?
-buying disability insurance policy -observing safety precautions -savings and making investments
Beyond the standard bodily injury and property damage coverage, other possible automobile coverage includes:
-car rental -wage loss -towing services
The financial impact of illness includes
-catastrophic hospital expenses -loss of income
The financial impact of property loss includes:
-cost to repair -the replacement cost of theft -storm damage to property
Which of the following risks are covered by home owner's insurance?
-coverage for the financial risks associated with your place of residence -coverage for the value of additional living expenses -coverage for the financial risks of damage to personal property
The tenants form HO-4 covers personal belongings of renters from the perils of which of the following?
-fire -lightning -smoke -windstorm
Insurance provides protection against many types of risks including all of the ones listed EXCEPT
-gambling -insuring values of stocks and bonds
Insurance companies required that in order to have the personal property floater the insured must
-have detailed description of the item insured -have the item appraised and evaluated by an expert
Which of the following are covered by a home owner's policy?
-house -personal property -other structures
Which of the following are negligent actions?
-improperly supervising children in a swimming pool -falling to remove large items from a stairway
The financial impact of disability includes which of the following?
-increased expenses -loss of services -loss of one income
Examples of risk reduction actions include
-installing smoke alarms -wearing a seat belts in a car
Several incentives exist to reduce premium costs on home owner's policies including:
-installing smoke detectors and fire extinguishers -added dead bolts to your door -installing security alarm systems
Which of the following are risk reduction actions?
-locking up your valuables -quitting smoking -wearing seat belts
The financial impact of death includes
-loss of services -loss of income -final expenses
What are some ways of reducing premiums on automobile insurance?
-maintaining a safe driving record -comparison shopping for automobile insurance -complete driver training -installing security devices
Strategies to reduce the financial impact of personal liability include
-maintaining property -observing safety -having home owner's insurance
The goals of insurance include
-minimizing liability risks -minimizing personal risks -minimizing property risks
Most of the money automobile insurance companies pay in claims goes for
-other costs that arise when someone is injured -medical expenses -legal expenses
A deductible is a set amount that a policyholder must pay
-per loss on an insurance policy -for assuming risk -for risk shifting
Which of the following are covered by renter's insurance?
-personal liability -personal property -additional living expenses
Which types of risks would be classified as pure risks?
-personal risks -property risks -liability risks
The main influences on the premium paid for home and property insurance include
-policy type -location of home -type of structure
The strategies for reducing the financial impact of illness include:
-practice health-enhancing behaviors -purchase health insurance
Which of the following are general risk management techniques?
-risk assumption -risk reduction -risk avoidance
Which of the following strategies can reduce the financial impact of retirement?
-savings and investments -Social Security -pension and retirement accounts
Which of the following strategies reduce the financial impact of property loss?
-security systems -home owner's insurance -automobile insurance -flood insurance
Which of the following are risk assumption actions?
-self-insuring -deciding not to purchase collision insurance
The coverage of HO-3 policies includes which of the following perils?
-smoke -windstorms -theft -fire and lightning
Property covered under property damage liability insurance includes
-street signs -telephone poles -buildings -vehicles
An umbrella policy will cover the insured for
-supplementing the coverage of personal liability -all kinds of personal injury claims -damaging the reputation of another
Homeowner's coverage includes:
-trees -garage -plants -toolshed
The main types of risks related to a home and an automobile are:
-your responsibility for injuries to others -damage or loss to your property -your responsibility for damage to the property of others
Rank in order the steps for creating a personal insurance program
1. Set insurance goals 2. Develop a plan to reach your goals 3. Put your plan in to action 4. Check your results
Some policies may limit the additional living expense coverage to
10 to 20 percent of the home's coverage amount
In general, young drivers (under _________) and those over __________, have more frequent and severe accidents
25, 70
By contacting several insurance agents to compare premiums, you can save as much as or more than ________ on insurance costs
30%
In the past, most home owner's policies contained a provision requiring that the building be insured for at least ______ of the replacement value
80%
Insurance companies or insurers are in the business of diluting risks for the insured
False
Purchasing insurance is the only way to manage risk
False
The main bodily injury coverages are bodily injury liability, mortgage payments coverage, and uninsured motorist's protection
False
Which of the following statements is not true?
Insurance companies cannot use credit scores in determining premiums
Life insurance is a financial strategy to deal with the financial impact resulting from the loss of one income on the death of spouse
True
Personal belongings of students in college housing are usually covered (up to a certain limits) on the home insurance policies of their parents
True
Physical damage to a property is caused by perils such as fire, wind, water, and smoke
True
Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events
True
The best risk management plans are flexible enough to handle life's changing situations
True
The coverage of Comprehensive Form HO-5 allows for the replacement costs for the contents of your home
True
You can be held legally responsible for another person's injury or damage even if it was not your fault
True
Your driver classification is one of the main factors that affects the premium for your vehicle insurance
True
Identify the policy that supplements your basic personal liability coverage and provides protection for all kinds of personal injury claims?
Umbrella policy
The price paid for insuring your home and your car should be thought of as
an investment for protecting your resources
All of the following are covered by homeowner's insurance except:
animals
Wage loss insurance will reimburse you for
any salary or income lost due to injury in an automobile accident
All of the people who cannot get vehicle insurance are put in a category by the state which is known as
assigned risk pool
Homeowner's insurance policies provide coverage for the ________ in which you live and any other structures on the property
building
The type of structure and the type of _______ materials used influence the cost insurance coverage
building
The amount you can collect with collision insurance is limited to the actual _________ value of the automobile at the time of the accident
cash
Expensive replacement parts and _______ repairs due to body style contribute to higher automobile premium rates
complicated
Which of the following best defines home owner's insurance?
coverage for your residence and the associated financial risks
According to the text, the financial impact of retirement includes
decreased income and unplanned living expenses
One of the strategies available for reducing the financial impact of retirement is to
develop hobbies and skills that can pay off during retirement
A(n) _________ is an addition to coverage for a home owner's policy, such as earthquake insurance
endorsement
Insurance is a protection against possible ________ loss, and provides protection against many ___________
financial, risks
Most home owner's policies cover many perils, but not:
flood
Additional living expenses in case of fire or other event damages are
for you to stay in a motel or a rented apartment while your home is being fixed
A ________ is anything that increases the likelihood of loss through some peril
hazard
A home located in an area where there is a history of high claims will have __________ premiums
high
Personal risks involve loss of _________ or _________ due to various reasons
income, life
As construction costs rise, you should _______ the amount of insurance coverage
increase
Medical payments coverage is insurance that applies to the medical expenses of anyone who is __________ in your vehicle including you
injured
A household ___________ is a list or other documentation of personal belongings, with purchase dates and cost information
inventory
The cost of mobile home insurance is most heavily affected by ________ and by the method used to attach the housing unit to the ________
location, ground
Risk management is a _________ management process
long term
Your personal insurance plans should change with your
needs and goals
All of the following can be classified as criminal behavior, which can cause property losses, except
negligence
Liability risks involve losses due to
negligence
Not clearing ice from the front steps of your house is an example of ________ which is failure to take ordinary or reasonable care
negligence
In a ________ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies
no-fault
People buy insurance policies against a wide range of
perils
Choose the correct statement which applies to limits of coverage for personal property
personal property coverage typically limits the payouts for theft
Comprehensive insurance for your car covers ________ damage to your car from such risks as fire, theft, falling objects, and hitting an animal
physical
Shifting of risk is done through the purchase of an insurance ________ from an insurance company
policy
The contract that is purchased by the insured person when joining a risk-sharing group is known as
policy
An insurance policy requires the payment of a annual _________ as part of a contract to cover the risk
premium
The main influence on the _________ paid for home and property insurance include location, type of structure, and policy type
premium
Automobile insurance covers ________ damage and personal damage (bodily injury) caused by the policyholder's car
property
Your insurance protection for your home should be based on the amount needed to ___________ or repair your house and not the amount you originally __________ for the home
rebuild, paid
One of the key goals when planning insurance is to
reduce possible loss of income
Shifting of _________ is done through the purchase of an insurance policy
risk
Not eating a high fat diet and exercising lowers the chances of illnesses. This is an example of
risk reduction
Fewer accidents and less vandalism occur in ___________ areas than in urban cities
rural
Setting aside a special fund to make sure that you would cover yourself in the event of a loss is
self-insurance
Towing and emergency road service coverage pays for the cost of getting your vehicle to a
service station, but not for the cost of repairs
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
When a risk includes a chance of either loss or gain, it is called
speculative risk
The higher the deductible:
the more risk the insured is assuming
Property damage liability protects you against financial loss when you damage
the property of others
When insurance companies take on the risk of loss or injury, it refers to the fact that no one can predict
trouble
The coverage that provides an insured the financial protection when another driver has insurance but not enough to pay for the injuries he or she has caused is known as ________ motorist protection
under insured
Most homeowners policy will cover personal computer data
up to a certain limit
The main factors that influence premiums for automobile insurance are:
vehicle type, rating territory, and driver classification
Your household inventory can include
video recording or photos
The coverage of tenants form HO-4 covers damages to personal property from all of the following perils except:
war
The liability insurance of regular employees who come to the house such as a gardener, cook, or housekeeper may be covered by
workman's compensation
All of the losses would be covered by homeowner's insurance except
you accidentally injure yourself with a sharp blade at home
