Chapter 6- Business
Marco Martinez has homeowners insurance that pays 80 percent of the actual cash value of items. Components of his LCD TV purchased two years ago for $600 melted from the heat of the fire. The TV was declared a total loss. After depreciation, the TV had an actual cash value of $350. How much will Marco's insurance company pay for the TV?
280
A(n)__________________is an amount you must pay toward your medical expenses before your insurance begins to pay.
deductible
_____________________provides income to replace a portion of normal earnings when the insured is unable to work due to a nonwork-related injury or illness.
disability insurance
Which type of health plan requires patients to choose caregivers from an approved list of independent health care providers?
preferred provider organization (PPO) plan
____________________is the process of identifying your risks and deciding how serious they are.
risk assessment
Self-insuring is an example of which risk strategy?
risk assumption
A person suing you and possibly winning a large judgment against you is an example of
risk of financial resources
Buying insurance is an example of which risk strategy?
risk transfer
One method of assuming risk is to __________________, which involves setting aside money to be used in the event of injury or loss of assets.
self-insure
If a visiting guest is injured inside a tenant's apartment, who is responsible for the injuries?
the tenant
Insurance providers are not allowed to charge higher or lower auto insurance premiums based on the driver's age.
False
Medicaid is a government-sponsored health insurance program for senior citizens.
False
Melinda Smith has homeowner's insurance that pays 80 percent of the replacement cost of items. Components of her personal computer purchased three years ago for $2,000 melted from the heat of a fire. The computer was declared a total loss. A comparable computer sells for $1,800 today. How much will Melinda's insurance company pay for the computer?
1,440
If your health insurance has a $10,000 stop-loss provision, what percentage of medical expenses will it pay once you have incurred $10,000 in deductibles and copays in a year?
100 percent
Provide five reasons why people buy life insurance.
Five reasons why people buy life insurance include, to provide cash to pay for a funeral, to pay off debt (like a mortgage), to pay for education, to accumulate savings, and to provide inheritance and estate taxes.
Aside from changing your driving habits, discuss four strategies for reducing the cost of your automobile insurance.
Four strategies for reducing the cost of your automobile insurance include comparing insurance costs, asking for higher deductibles, maintain a good credit record, and buy a safe car.
Identify four steps that a person might take to minimize health care costs.
One step to minimize health care costs is to use generic drugs. Another way to minimize health care costs is to make sure medicines and treatments are covered by insurance before filling prescriptions. Also, you can choose a high-deductible plan. Lastly, you can take care of yourself by eating well, exercising, not smoking, and relaxing.
Explain how unmanaged care plans differ from managed care plans. Identify two common types of managed care plans.
The biggest difference between unmanaged care plans and managed care plans is that participants in a managed care plan must select doctors, hospitals, and other providers who belong to the network. The two most common types of managed care plans health maintenance organizations and preferred provider organization.
A universal life insurance policy allows the policyholder to change the death benefit and premiums to fit changing needs throughout the insured's life.
True
A(n) ____________________________plan allows patients to choose doctors and other providers for medical services without using an approved list.
fee-for-service
Which of the following would not be covered by a regular homeowner's insurance policy?
flood damage
Which type of health plan emphasizes preventive care?
health maintenance organization (HMO) plan
The type of health care coverage that would pay for extended hospital stays is
major medical
______________________is government-sponsored health insurance for people age 65 or older that is run by the Social Security Administration.
medicare
________________________pays for medical, hospital, and funeral costs of the insured, the insured's family, and other passengers in the insured's car in the event of an accident.
personal injury protection (PPI)
A(n)_______________________is the price you pay for insurance coverage.
premium
_________________________coverage provides protection against damages caused by a motorist who is at fault but does not have sufficient insurance or means to pay for the full extent of your damages.
uninsured/underinsured
An umbrella policy is so named because it provides liability coverage above that of your homeowners and car insurance.
True
Which type of insurance coverage protects against damage to your own vehicle when you are at fault in hitting another car?
collision coverage
You are unable to work due to an injury. Your short-term disability insurance coverage provides 65 percent of your regular pay. If your regular annual salary is $40,000 per year, how much is your insurance providing you per month (round to the nearest dollar)?
2,167
Lu Cho has health insurance that pays 90 percent of covered charges after a $1,000 deductible. There is a stop-loss provision of $10,000. So far this year, Lu has paid $7,900 in deductibles and copayments. Lu received a new statement for $4,000 in medical charges. How much will Lu have to pay?
210
Sean Adams has health insurance that pays 80 percent of covered charges after a $100 deductible. He received a statement for $700 in covered charges. How much will Sean have to pay?
220
List and differentiate the five main types of coverage provided by a full-coverage automobile insurance policy.
Liability, Collision, Comprehensive, Personal injury protection (PIP), and Uninsured/underinsured motorist. Liability coverage protects the insured against loss as a result of injury to another person or damage to that person's property. Collision coverage protects against damage to your own vehicle if you hit another car or lose control and roll over. Protection against damages to your car from causes other than collision or rolling over is provided by comprehensive coverage. Personal injury protection (PIP) pays for medical, hospital, and funeral costs of the insured and passengers in the insured's car in the event of an accident, regardless of who is at fault.Uninsured/underinsured motorist coverage provides protection against damages caused by a motorist who is at fault and does not have insurance to pay for your damages.
How can you be prepared in case you need to file an insurance claim for the loss of property due to theft or fire?
One way to be prepared in case you need to file an insurance claim for the loss of property due to theft or fire is to take inventory of everything in your home so if you lose any items, you know what needs to be replaced.
What is the purpose of "no-fault" insurance?
The purpose of "no-fault" insurance is so that drivers receive reimbursement for their damages from their own insurer, regardless of who is at fault. This also helps avoid the years of legal battling required to settle a case and determine fault.
Every state has an assigned risk pool that allows drivers with poor driving records to obtain basic liability coverage.
True
Group life insurance makes it possible for individuals who would not qualify for an individual policy to have life insurance.
True
Long-term care insurance will cover the expenses involved in extended care for a young person suffering from a debilitating injury.
True
Renters insurance protects your personal belongings when they are in your car.
True
The Affordable Care Act requires all U.S. citizens to have health insurance or pay a penalty for failing to do so.
True
Uninsured/underinsured motorist insurance would cover pedestrians who are injured by an uninsured motorist.
True
What is the main difference between whole life insurance and limited-pay life insurance?
With whole life insurance, the insured pays fixed premiums as long as the policy is in effect. However, with limited-pay insurance, the insured pays premiums for a specific number of years or until age 65.
The likelihood of a risk actually resulting in a loss is called________________
probability
A stop-loss provision in your health insurance policy limits the amount your insurance company will have to pay out in a given year.
False
All but two states have financial responsibility laws that require drivers to be prepared to pay for damages caused to others.
False
Term life insurance provides a death benefit and builds a cash value.
False
The beneficiary is the person covered by a life insurance policy.
False
With a health savings account (HSA), the balance not used by the end of the year is forfeited.
False
What happens if a loan taken out against the cash value of a life insurance policy is not repaid before the insured's death?
If a loan is taken out against the cash value of a life insurance policy is not repaid before the insured's death, the loan amount plus any interest owed is subtracted from the amount the beneficiaries are set to receive from the death benefit.
List and define the four strategies for managing risk and provide an example of each.
The first strategy for managing risk is risk assessment. For example, you should begin by asking yourself what risks you take on a regular basis, such as the risks that you take by driving a car. The second strategy is risk strategy. Risk strategy includes reducing risk, avoiding risk, transferring risk, and assuming risk. The third strategy is risk assumption. One method of assuming risk is to self-insure, which involves setting aside money to be used in the event of injury or loss of assets. Lastly, the fourth strategy risk transfer. An example is when you buy insurance to cover financial losses from damaging events, such as auto accidents, fire, theft, and injury.