Personal Finance - Chapter 8 Practice Exam

Sally was driving her own car and collided with a pickup truck. Sally sustained $133,000 in injuries, and her passenger sustained $18,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident? (Textbook: 8.4)

$118,000

If you choose to take responsibility for the negative results of a risk, you are using:

Risk assumption

An individual who purchases an insurance policy is called:

A policyholder

Homeowner's insurance typically covers all of the following except: 1. A detached garage. 2. Trees and shrubs. 3. A toolshed. 4. Personal property. 5. All of these are covered.

All of these are covered.

Homeowner's insurance typically covers all of the following except: 1. Personal property. 2. Personal liability and related coverage. 3. Additional living expenses. 4. Automobiles. 5. The building in which you live and any other structures on the property.

Automobiles.

Albert left his vehicle parked on the street in the front of his house when he went on vacation. While he was gone, his street flooded and his car was severely damaged. This damage would be covered under his:

Comprehensive physical damage coverage.

Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his:

Comprehensive physical damage coverage.

Andrew is applying for insurance for his new home. Which of the following is correct? - He should base the amount of insurance on the price he paid for it. - He should insure the building for 75 percent of its replacement cost. - He should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings. - His personal belongings should be covered with his home at 125 percent of his home's insured amount. - His insured amount should remain the same as long as he lives in his house.

He should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings.

The failure to take ordinary or reasonable care to prevent accidents from happening is called:

Negligence.

Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and the skateboard crashed through her window. The windstorm was a:

Peril

Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. The damage to the telephone pole would be covered under Madeline's:

Property damage liability coverage.

If you choose to avoid the risk of a traffic accident by not driving to work, you are using:

Risk avoidance

Which of the following is NOT correct? - If you live in a rural area, your auto insurance premium will likely be lower than if you live in a large city. - In general, young drivers (under 25) and elderly drivers (over 70) have more frequent and more serious accidents. - Multiple accidents or tickets will increase insurance rates. - The cost and number of claims you have should not affect your premium. - Your credit score can cause your premium to change.

The cost and number of claims you have should not affect your premium.

Sandra is contacting several insurance companies to compare coverage for her home. Which of the following should NOT affect her premium? (Textbook: 8.3) - The existence of an alarm system in her home - The amount of coverage - The type of structure - The deductible amount - The location of her employer

The location of her employer

A policy that supplements your basic personal liability coverage is called a(n): 1. Endorsement. 2. Homeowner's insurance. 3. Medical payments coverage. 4. Supplementary policy. 5. Umbrella policy.

Umbrella policy

If you have a loss due to a flood: - Your homeowner's insurance should normally cover the loss. - You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered. - FEMA (Federal Emergency Management Agency) will automatically provide coverage if this is your second flood loss. - You need an umbrella policy for coverage. - Your additional living expenses coverage will apply if you move to an area that has not flooded in one year.

You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered.

An insurance company is a _________ business that agrees to pay for losses that may happen to someone it insures.

risk-sharing