EXAM #3 ALL

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31. About ___ of the U.S. life insurance companies are stock companies. A. 5% B. 25% C. 50% D. 75% E. 95%

24. An advantage of a buy-down is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

TRUE

24. The actual cash value method of settling claims is based upon the replacement cost of an item less depreciation.

TRUE

25. A brick home should cost less to insure than a similar structure made of wood.

TRUE

27. If you need information to compare Acme Home Insurance and Zebra Home Insurance, you should contact the state insurance commissioner or a consumer organization that deals with insurance.

TRUE

29. Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage.

TRUE

3. An example of a peril is a robbery.

TRUE

30. A real estate agent can provide service to save you time and effort with selling your home.

TRUE

33. If you drive a model of vehicle that is frequently stolen, you should expect to pay a higher premium for your auto insurance.

TRUE

34. If you live in a city, you should expect to pay a higher premium for your auto insurance than someone who lives in a rural area.

TRUE

4. An example of a hazard is defective house wiring.

TRUE

4. Angela wanted to rent an apartment, so her landlord required her to sign a lease. The lease is a legal document that defines the conditions of her rental agreement.

TRUE

6. Lenny the landlord has the right to take legal action against Tina the tenant if she does not pay her rent on a timely basis

TRUE

7. Risk management is an organized plan for protecting yourself, your family, and your property.

TRUE

8. The first step to setting up an insurance program is to set insurance goals.

TRUE

1. Insurance is protection against possible financial loss.

TRUE Insurance is protection against possible financial loss.

22. Mortgage lenders require that homeowners purchase home insurance.

TRUE Lenders require home insurance.

46. The type of health insurance coverage that may specify the maximum payment amount for an operation is A. Dental expense. B. Surgical expense. C. Hospital expense. D. Physician expense. E. Major medical expense.

72. (p. 232) Yvette has a flexible-rate mortgage that has a maximum monthly increase. This feature is called a(n) A. ARM. B. FHA loan. C. Negative amortization. D. Payment cap. E. VA loan.

81. Which of the following is a charge you will pay when you purchase a variable annuity? A. Surrender charge. B. Mortality and expense risk charge. C. Administrative fee. D. Fund expense. E. All of these.

(p. 222) The opportunity to have another person take over rent payments and live in the rental unit is called (a) A. Lease. B. Lessee. C. Lessor. D. Rental agreement. E. Subletting.

46. (p. 225) Which of the following is a form of housing in which the units are owned by a nonprofit organization? A. Condominium B. Cooperative housing C. Manufactured home D. Single-family dwelling E. Townhouse

100.Georgia has a health insurance policy that includes a deductible of $500 and a coinsurance of 20%. If her total bill is $3,000, how much will her insurance pay? A. $250 B. $480 C. $500 D. $1,000 E. $2,000

101.Larry has a health insurance policy that includes a deductible of $1,000 and a coinsurance of 20%. If his total bill is $7,000, how much will his insurance pay? A. $800 B. $1,000 C. $2,200 D. $4,800 E. $6,000

102.Peter has a health insurance policy that includes a deductible of $1,000, a coinsurance of 20%, and a stoploss of $4,000. If his total bill is $20,000, how much will he pay? A. $1,000 B. $3,800 C. $4,000 D. $4,800 E. $19,000

103.Sandy went to the doctor three times, and each appointment cost $200. Her copayment was $25 per visit. How much was Sandy required to pay in total for her three visits? A. $25 B. $75 C. $175 D. $200 E. $525

2. (p. 226) Georgina and Henry are looking at houses. Which of the following is correct? A. A "handyman's special" will be set at a higher price than one that is in "move-in condition." B. They should assess the school system in the area they want to live. C. The amount they can afford for housing will be primarily determined by the down payment. D. Their first house should be their "dream house" and contain all the features desired. E. All of these are correct.

24. A person who is named to receive the benefits from an insurance policy is a(n) A. Contract. B. Beneficiary. C. Policyholder. D. Insurer. E. Child.

25. Most people buy life insurance to A. Pay off a mortgage. B. Protect the people who depend on the insured from financial losses caused by his or her death. C. Pay for a vacation. D. Spend money. E. Pay taxes.

26. Which of the following households most likely has the greatest need for life insurance? A. Single adult living alone. B. Adult child living with parents. C. Retired couple with a pension. D. Household with children. E. Independently wealthy adult.

27. Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs? A. Easy method B. Dual income, no kids method C. Formal calculation method D. Nonworking spouse method E. Family needs method

28. Jeff and Erica have two children. They plan to purchase life insurance using this formula: (18 - Youngest child's age) × $10,000. Which method are they using to determine their life insurance needs? A. Easy method B. Dual income, no kids method C. Formal calculation method D. Nonworking spouse method E. Family needs method

29. Donald and Charlene are married and do not have any children. Each plans to continue to work after the other one dies. Which method are they using to determine their life insurance needs? A. Easy method B. Dual income, no kids method C. Formal calculation method D. Nonworking spouse method E. Family needs method

30. Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. Which method are they using to determine their life insurance needs? A. Easy method B. Dual income, no kids method C. Formal calculation method D. Nonworking spouse method E. Family need method

32. (p. 218) Which of the following is NOT correct? A. Renting is usually less expensive in the short run. B. Home ownership usually has long-term financial advantages. C. Lifestyle and financial factors should be analyzed to determine if you should rent or buy. D. Traditional financial guidelines suggest that your home should cost about five times your annual income. E. Renting offers mobility.

32. You want to purchase a life insurance policy that pays a dividend. What kind of policy would you want to purchase? A. Dividend policy B. Nonparticipating policy C. Mutual policy D. Participating policy E. Stock policy

33. (p. 222) Which of the following is a disadvantage of renting? A. Renters have fewer responsibilities than home owners. B. Tenants cannot take tax deductions for mortgage interest and property taxes. C. Renters usually do not have to be concerned with maintenance and repairs. D. Taking possession of a rental unit is less expensive than buying a home. E. Renting can be more convenient for those who move frequently.

33. Todd plans to purchase a life insurance policy from a stock life insurance company. What kind of policy is he planning to purchase? A. Dividend policy B. Nonparticipating policy C. Mutual policy D. Participating policy E. Stock policy

34. (p. 222) Which of the following is an advantage of renting? A. Noise from parties may be monitored closely. B. Renters have fewer responsibilities than home owners. C. Tenants cannot take tax deductions for mortgage interest and property taxes. D. Tenants may be subject to restrictions regarding decorating. E. All of these are advantages of renting.

34. Jeanne wants to purchase a life insurance policy with guaranteed premiums. What kind of policy would she want to purchase? A. Dividend policy B. Nonparticipating policy C. Mutual policy D. Participating policy E. Stock policy

35. (p. 222) Most tenants sign a lease. Which of the following is part of a lease agreement? A. The amount of the down payment. B. The conditions under which the landlord may enter the apartment. C. The interest rate for a lease loan. D. The name and address of the buyer. E. The sale date.

35. Another name for temporary life insurance is A. Whole life. B. Straight life. C. Ordinary life. D. Term. E. Cash value life.

36. What is the primary purpose of medical expense insurance? A. Protect against death expenses. B. Provide payments to make up for some income of a person who cannot work as a result of injury or illness. C. Pay actual medical costs for illness or injury. D. Pay a salary if an employee is disabled. E. Repay loans if an employee cannot work because of illness or injury.

36. Which of the following is NOT a type of permanent insurance? A. Whole life B. Straight life C. Ordinary life D. Term life E. Cash value life

37. (p. 222) A legal document that includes information about the due date of monthly rent is called a A. Lease. B. Lessee. C. Lessor. D. Rental statement. E. Sublease.

37. Another name for permanent life insurance is A. Whole life. B. Renewable term. C. Convertible term. D. Decreasing term. E. Credit life.

37. Which of the following is correct? A. A premium reimburses you for hospital stays, doctors' visits, and medications. B. A premium is the amount your employer will pay for your health insurance coverage. C. Disability income insurance pays actual medical costs. D. Medical expense insurance provides payments to make up for income of a person who cannot work as a result of injury or illness. E. Medical expense plans may reimburse an individual for hospital stays, doctors' visits, and medications.

38. (p. 222) The owner/landlord is known as the A. Lease. B. Lessee. C. Lessor. D. Renter. E. Sublease.

38. An individual who purchases insurance is A. The insurance company. B. A policyholder. C. An insurer. D. A victim. E. An employer.

38. Most people receive health insurance from A. Individual plans. B. Their bank or lending institution. C. A plan offered by their employer. D. COBRA. E. None of these—most do not have health insurance coverage.

38. Which of the following is NOT temporary insurance? A. Whole life B. Renewable term C. Convertible term D. Decreasing term E. Multiyear level

39. (p. 222) The tenant is the A. Lease. B. Lessee. C. Lessor. D. Owner. E. Sublease.

39. If you want to purchase term insurance, you will receive all of the following except A. Protection against loss of life for a specified term. B. Cash value. C. Temporary insurance. D. A benefit during the period it covers, such as 1, 5, 10, or 20 years. E. A policy whose coverage stops after a period of time.

39. The Health Insurance Portability and Accountability Act of 1996 A. Sets federal standards to ensure that workers do not lose their health insurance if they change jobs. B. Sets state standards to ensure that workers do not lose their health insurance if they change jobs. C. Applies to individual health insurance policies. D. Prevents employees from moving from one group health plan to another without a lapse in coverage. E. Is an update of the Consolidated Omnibus Budget Reconciliation Act of 1986.

39. What is the fee that a policyholder pays when an insurance company agrees to take on the risk? A. Coverage B. Insured C. Premium D. Peril E. Risk

40. (p. 222) This provides the tenant protection from rent increases. A. Lease B. Lessee C. Lessor D. Rental statement E. Sublease

46. The failure to take ordinary or reasonable care to prevent accidents from happening is called A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.

40. Coordination of benefits (COB) applies to A. Combining health insurance and disability insurance coverage. B. Combining all group and individual insurance coverages. C. Combining the Health Insurance Portability and Accountability Act of 1996 and COBRA. D. Combining three or more disability policies issued for an individual. E. Combining the benefits of two insurance policies issued for a married couple.

40. Insurance allows someone to A. Reduce risk. B. Assume risk. C. Shift risk. D. Avoid risk. E. Eliminate risk.

40. Which of the following is NOT a type of permanent life insurance? A. Whole life B. Variable life C. Universal life D. Adjustable life E. Decreasing term life

41. (p. 222) This gives the landlord the right to take legal action against a tenant for nonpayment of rent or destruction of property. A. Lease B. Lessee C. Lessor D. Rental statement E. Sublease

41. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.

41. If you have a renewable term policy, A. You may not purchase insurance once your term ends. B. Your premium may increase if you continue it for another term because you will be older. C. Your premium will not increase because your policy is renewable. D. You can convert your policy to a permanent type at the end of the term. E. None of these is correct.

41. Which of the following about individual health insurance policies is correct? A. They are used by employees of large organizations. B. All insurance companies that offer this type of policy are required to charge the same rates. C. They are primarily for employees of small companies. D. They are permitted for individuals only, not for families. E. They are available for the self-employed or others who are dissatisfied with the coverage that their group plan provides.

42. (p. 222) Which of the following expenses is NOT usually recommended or necessary for a tenant? A. Security deposit. B. Utilities. C. Renter's insurance. D. All of these are recommended or necessary. E. None of these is correct.

42. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The fact that Barbara didn't put away the skateboard is called A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.

42. If you have a multiyear level term policy, A. You can convert your policy to a permanent type at the end of the term. B. You policy will continue for one year. C. Your premium will be the same for the duration of your policy. D. Your premium will not increase when you renew it. E. None of these is correct.

42. Which of the following about individual health insurance policies is NOT correct? A. They can cover individuals. B. They are used by the self-employed. C. They can provide family coverage. D. All insurance companies that offer this type of policy are required to charge the same rates. E. They can be purchased directly from the company of your choice.

43. (p. 225) Which of the following is NOT a benefit of home ownership? A. Stability of residence B. Personalized living location C. Deductibility of mortgage interest D. Deductibility of real estate taxes E. Maintenance and costs of repairs and home improvements

43. Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through her window. The windstorm was a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Risk.

43. COBRA stands for A. Coverage of Benefits Reduction Act. B. Continuation of Benefits for Retirees Act. C. Consolidated Omnibus Budget Reconciliation Act. D. Coverage of Benefits for the Retired Act. E. Consolidation of Benefit Reapplication Act.

43. If you have a conversion term policy, A. Your premium will not increase when you renew it. B. You can convert your policy from permanent to term at any time. C. You can convert your term policy to a permanent policy. D. Your policy will have the same premium as other term policies. E. Your premium will be higher than a whole life policy premium.

44. (p. 225) Donald wanted to buy a house in the country, so he sought advice from his cousin Evan. Evan explained the advantages and disadvantages of home ownership; however, he had some information incorrect. Which of the following is incorrect? A. An advantage is that Donald can deduct mortgage interest and real estate taxes. B. A disadvantage is that Donald is responsible for maintenance and costs of repairs and home improvements. C. An advantage is that the down payment required is less than the security deposit for a rental. D. A disadvantage is that real estate taxes are a major expense for home owners. E. An advantage is that Donald can paint his house bright purple with green trim to match his college's colors.

44. The most common risks are A. Personal risks. B. Property risks. C. Liability risks. D. All of these are common risks. E. None of these are common risks.

44. The type of health insurance coverage that pays for some or all of the daily costs of room and board during a hospital stay is A. Dental expense. B. Surgical expense. C. Hospital expense. D. Physician expense. E. Major medical expense.

44. This term life policy will guarantee that you will pay the same premium for the duration of your policy. A. Renewable term B. Multiyear level term C. Decreasing term D. Limited payment E. Single year term

45. (p. 225) Which of the following is a legal form of ownership in which the owners pay a monthly fee for maintenance of the common areas? A. Condominium B. Cooperative housing C. Manufactured home D. Single-family dwelling E. Apartment Blooms

45. Another name for a straight term policy is A. Renewable term. B. Multiyear level term. C. Decreasing term. D. Limited payment. E. Single year term.

45. Anything that may possibly cause a loss is called a A. Hazard. B. Negligence. C. Peril. D. Premium. E. Speculation.

45. The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is A. Dental expense. B. Surgical expense. C. Hospital expense. D. Physician expense. E. Major medical expense.

46. Which of the following is NOT a feature of whole life insurance? A. It accumulates cash value. B. It provides both a death benefit and a savings component. C. The policy will return all premiums if you survive to the end of the policy. D. You must pay interest on any outstanding policy loans. E. The policy requires that you pay a specified premium each year for the rest of your life.

47. (p. 225) Which of the following is a form of housing in which shareholders purchase stock to obtain the right to live in a unit of the building? A. Condominium B. Cooperative housing C. Manufactured home D. Single-family dwelling E. Townhouse

47. An insurance company will A. Insure speculative and pure risks. B. Insure pure risk, but not speculative risk. C. Insure neither pure risk nor speculative risk. D. Insure speculative risk, but not pure risk. E. Insure all types of risks.

47. Of the following, which one is the most positive feature of whole life insurance? A. You must pay interest on any loans. B. You pay premiums each year for the rest of your life. C. It is more expensive than term insurance. D. It builds cash value. E. It is permanent life insurance.

47. The type of health insurance coverage that takes up where basic health insurance coverage leaves off is A. Dental expense. B. Surgical expense. C. Hospital expense. D. Physician expense. E. Major medical expense.

48. (p. 225) Diane purchased her house and had it assembled before it was moved to her lot. She purchased a A. Condominium. B. Cooperative housing. C. Manufactured home. D. Single-family dwelling. E. Townhouse.

48. Fran is interested in purchasing health insurance that limits the total out-of-pocket amount that she will have to pay. She should consider a A. Deductible. B. Coinsurance. C. Stop-loss provision. D. Hospital indemnity policy. E. Dread disease policy.

48. Megan wants to purchase a life insurance policy that will allow her to invest in stock. Which of the following policies should she buy? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

48. Which of the following is NOT one of the commonly used general risk management techniques? A. Reduce risk B. Assume risk C. Shift risk D. Avoid risk E. Increase risk

49. (p. 225) Elaine purchased her living unit in a building with five other separate units. She purchased a A. Condominium. B. Duplex. C. Manufactured home. D. Single-family dwelling. E. Townhouse.

49. If you choose to avoid the risk of a traffic accident by not driving to work, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.

49. Jenny wants health insurance that limits the amount that she must pay before the insurance starts paying benefits. She is concerned about a A. Deductible. B. Coinsurance. C. Vision care policy. D. Hospital indemnity policy. E. Dread disease policy.

49. Molly is thinking about buying a life insurance policy, but she is not sure about how much she will need in the next few years. She may need to change her coverage as her needs change. Which of the following policies would meet her needs? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

50. (p. 225) Paul and Lora built their home. When they researched contractors, they paid attention to all of the following except A. Contractor's reputation and experience. B. Contractor's relationship with suppliers and subcontractors. C. Payment arrangements during construction. D. Time and payment schedules. E. Contractor's property tax payments during construction.

50. If you choose to wear your seatbelt, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.

50. Miguel is concerned that the health insurance option he is considering plays upon unrealistic fears. He is most concerned about a A. Deductible. B. Coinsurance. C. Stop-loss provision. D. Hospital indemnity policy. E. Dread disease policy.

50. Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following policies would meet her needs? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

51. (p. 225) Frank and Diane want to buy a house. Which of the following do they need before they purchase a house? A. Down payment. B. Home owner's insurance. C. Mortgage interest. D. Mortgage principal. E. Real estate taxes.

51. If you choose to take responsibility for negative results of a risk, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.

51. Nancy is studying the health insurance plan options offered by her employer. She wants a policy that will have the insurance pay a percentage of her medical expenses after she meets her deductible. She should review the A. Deductible. B. Coinsurance. C. Stop-loss provision. D. Hospital indemnity policy. E. Dread disease policy.

51. Pam just started working at XYZ Widget Company and finally wants to get insurance coverage. She does not want to take a medical exam to get coverage because she has some underlying health conditions and is concerned that she might not qualify for a policy. Which of the following life insurance policies should she apply for? A. Adjustable life B. Group life C. Limited life D. Universal life E. Variable life

52. If you choose to insure your home or your vehicle, you are using A. Risk avoidance. B. Risk reduction. C. Risk assumption. D. Risk shifting. E. Risk increasing.

52. The insurance that helps pay hospital, surgical, medical, and other bills with a low deductible is known as a(n) A. Basic health insurance policy. B. Individual policy. C. Comprehensive major medical policy. D. Hospital indemnity policy. E. Dread disease policy.

52. Which of the following is a poor choice for the amount of protection offered for an individual? A. Group life B. Term C. Credit life D. Endowment life E. Adjustable life

53. (p. 226) What should a home buyer consider when evaluating a house? A. Zoning laws. B. Location of businesses and future construction projects. C. School system. D. Property values of the community. E. All of these should be evaluated.

53. An insurance program A. Should be constant through one's life. B. Should change along with needs and goals. C. Should minimize personal property and liability risks. D. Should be constant through one's life, and should minimize personal property and liability risks. E. Should minimize personal property and liability risks, and change along with one's needs and goals.

53. Wendy has had a life insurance policy for five years. She was recently divorced. Which of the following provisions should she take action on? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

53. Which of the following is NOT a type of health insurance available to individuals or employees? A. Dental expense insurance B. Hospital indemnity policy C. Dread disease policy D. Minor medical indemnity insurance E. Vision care insurance

54. (p. 226) When Ingrid was selling her house, she contacted Gabe, her real estate agent, to help her with the sale. Gabe's services included all of the following except A. Negotiating a settlement price. B. Receiving an offer from a buyer. C. Representing Ingrid at the closing. D. Showing Ingrid's home to potential buyers. E. Home appraisal.

54. This health insurance provision lets your insurer make direct payments to your doctor or hospital. A. Assigned benefits B. Benefit limits C. Exclusions and limitations D. Internal limits E. Service benefits

54. Which of the following questions should one ask when developing a risk management plan? A. What do I need to insure? B. How much should I insure something for? C. What kind of insurance should I buy? D. Whom should I buy insurance from? E. All of these questions should be asked when developing a risk management plan.

55. (p. 226) Jim wants to make an offer to buy an older house. At this point, he should A. Move into the house. B. Set up a home inspection. C. Contact the seller to purchase his lawn tools. D. Close the purchase transaction. E. Sign his mortgage papers.

55. Fred bought life insurance when he was 47, although he told the insurance company that he was 42. He has since died. Which of the following provisions will affect the amount of money his beneficiaries will receive? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

55. Which of the following is TRUE about long-term care insurance? A. It covers help at home but not in a nursing home. B. It covers a stay in a nursing home but not help at home. C. The older you are when you enroll, the higher the annual premium. D. Insurance plans are sold primarily to individuals in the 20-40 age group. E. These plans typically pay for all costs.

55. Which of the following is correct? A. The best risk management plan is constant through one's life. B. Once a plan is set up, it should be reviewed every 10 years. C. A solid risk management plan works well without insurance as a component. D. One question that should be asked when developing a risk management plan is "What do I need to insure?" E. The main goal of insurance should be to maximize personal, property, and liability risks.

56. (p. 227) Kelly selected a home and submitted an offer to the seller. A. The seller must accept her offer. B. Her offer must have been for the asking price. C. The seller's price is affected by Kelly's need to buy. D. The seller may choose to provide a counteroffer. E. Kelly will receive earnest money when she presents the offer.

56. Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

56. The two basic types of risk that people face regarding their personal property are A. Basic and criminal. B. Physical damage and destruction. C. Destruction and basic. D. Physical damage and damage caused by criminal behavior. E. Negligence and criminal behavior.

56. This health insurance provision sets limits on the amount of repayment for certain services. A. Assigned benefits B. Copayment C. Exclusions and limitations D. Internal limits E. Service benefits

57. (p. 228) Madeline wants to purchase a larger house. However, she has not yet sold her current home. She may want to include a(n) ________ in her offer. A. appraisal B. contingency clause C. dual agent D. earnest money E. purchase agreement

57. A health insurance policy with this provision lists coverage in terms of services, not dollar amounts. A. Assigned benefits B. Benefit limits C. Exclusions and limitations D. Internal limits E. Service benefits

57. Fred bought life insurance five years ago. He forgot to tell them that he had a heart condition, and, as a result of that condition, he recently died. Which of the following provisions prevents the life insurance company from refusing to pay his beneficiaries because of his original misrepresentation? A. Incontestability clause B. Misstatement of age provision C. Naming a beneficiary D. Policy reinstatement E. The grace period

57. Liability is defined as A. An insurance program for individuals and households. B. The legal responsibility for the financial cost of another person's losses or injuries. C. Negligence. D. A loss due to physical damage. E. Risk assumption.

58. (p. 238) When Nancy buys her house, the mortgage company will probably conduct a(n) A. Appraisal. B. Contingency clause. C. Dual agent. D. Earnest money. E. Purchase agreement.

58. Homeowner's insurance covers all of the following except A. Personal property. B. Personal liability. C. Additional living expenses. D. Automobiles. E. Building and other structures on the property.

58. The policy loan provision means that A. An individual can take out a loan on his or her term policy. B. The death benefit will be increased by the amount of an outstanding policy loan. C. The policy owner can borrow any amount up to the cash value of the policy. D. The beneficiary can borrow any amount up to the total benefit. E. No interest will accumulate for any loans related to life insurance.

58. Which of the following is INCORRECT about dread disease policies? A. They are illegal in many states. B. Each policy covers a wide range of conditions. C. They play upon unrealistic fears. D. These policies are usually sold through the mail, in newspapers, and magazines, or by door-to-door salespeople. E. They cover diseases that are already covered if you are insured under a major medical plan.

59. (p. 226) Opal is a real estate agent who represents the buyer as well as the seller. In some states, the buyers are required to sign a disclosure acknowledging that they are aware that Opal is working as a(n) A. Appraisal. B. Contingency clause. C. Dual agent. D. Earnest money. E. Purchase agreement.

59. Amy bought a life insurance policy and named Ben as her beneficiary. She has since died. Who will receive the benefits from her policy? A. Ben. B. Ben's beneficiaries. C. Her contingent beneficiaries. D. Her parents. E. None of these.

59. Homeowner's insurance covers all of the following except A. A detached garage. B. Trees and shrubs. C. A tool shed. D. Personal property. E. All of these are covered.

59. What is a typical copayment amount for individuals? A. $0-5 B. $20-30 C. $35-50 D. $75-100 E. $100-200

60. (p. 228) Pauline just submitted an offer on her dream home. To show that she is serious, she also included a(n) A. Appraisal. B. Contingency clause. C. Dual agent. D. Earnest money. E. Purchase agreement.

60. A policy that pays you back for actual expenses is called A. A coinsurance plan. B. A reimbursement plan. C. A deductible plan. D. An indemnity plan. E. A reasonable and customary plan.

60. Bonnie is most concerned about being able to buy additional insurance without undergoing medical exams. Which of the following riders should she consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

60. Homeowner's insurance covers all of the following except A. Three months in a hotel after a house fire. B. Theft of a diamond necklace valued at $25,000. C. A three-year-old television. D. A fire that damages your neighbor's roof that was caused by a spark from your grill. E. Medical costs for a visitor who slipped on your steps and broke his ankle.

61. (p. 229) Private mortgage insurance A. Cannot be avoided. B. Is part of all mortgages. C. Is usually required if the down payment is less than 25%. D. Must be terminated automatically when the home owner's equity reaches 22% of the property value at the time the loan was initiated. E. Protects the buyer from financial loss if the value of the home increases.

61. After you have reached a certain limit that you must pay for the deductible and coinsurance, the insurance company covers 100% of any additional cost. This is called A. Reimbursement. B. Out-of-pocket limit. C. Deductible. D. Internal limit. E. Indemnity.

61. Bill is worried about being able to pay his premium if he is totally and permanently disabled before age 60. Which of the following riders should he consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

61. The best place to keep a household inventory is A. On a bookshelf in the family room. B. In the freezer. C. In the attic. D. In a safe deposit box. E. In the garage.

62. (p. 229) Major factors that affect the affordability of your mortgage include all of the following except A. The amount available for a down payment. B. Current mortgage rates. C. Income. D. Length of the loan. E. Size of the home.

62. All of the following are acceptable types of documentation for a household inventory except A. Photographs with dates purchased and values of objects listed on the backs. B. Video recordings of assets. C. Written listings of items, purchase prices, and assets. D. Computerized spreadsheets with details about the items and their ages and costs. E. A listing of items and their details in your memory.

62. Frank, age 38, was hit by a car and died. Which of the following riders provided an additional benefit for his heirs? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

62. The set amount that you must pay toward medical expenses before the insurance company pays benefits is called A. Reimbursement. B. Out-of-pocket limit. C. Deductible. D. Internal limit. E. Indemnity

63. (p. 230) Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the mortgage calculation included all of the following except A. Expected maintenance costs. B. The home purchase price he can afford. C. The monthly mortgage payment he can afford. D. The mortgage amount he can afford. E. All of these are correct.

63. A provision in a health insurance policy that will cover only a fixed amount for an expense is called A. Reimbursement. B. Out-of-pocket limit. C. Deductible. D. Internal limit. E. Indemnity.

63. A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

63. Insurance that covers valuable items, such as an expensive harp, is called A. Buildings and other structures coverage. B. Homeowner's insurance. C. Personal property floater. D. Household inventory insurance. E. Personal property insurance.

64. (p. 230) Rebecca paid extra money to reduce her mortgage interest rate. That extra money is called A. Amortization. B. Escrow. C. Lock. D. PMI. E. Points.

64. Brittany and Brandon are both charged $250 for an office visit to the same specialist. Brittany's reimbursement policy has a deductible of $300. Once she has met the deductible, the policy will cover the full cost of her visits. Brandon's indemnity policy will pay him $150, the maximum amount his plan provides for a visit to any specialist. Which of the following is correct? A. Brittany will pay less because the policy will cover up to $300 for her visit. B. Brittany will pay more because she must pay the entire bill since she has not met her deductible while Brandon will have part of his bill paid by his policy. C. Brandon will pay $150 and his insurance company will pay $100. D. Brandon will pay more because Brittany will have the first $300 paid by her policy. E. None of these is correct.

64. Mildred was diagnosed with terminal cancer and knows that she doesn't have long to live. Which of the following riders would allow her to receive cash now? A. Waiver of premium disability benefit B. Accidental death benefit C. Guaranteed insurability option D. Cost-of-living protection E. Accelerated benefits

64. Personal property insurance covers A. All personal property. B. Furniture and appliances, but not clothing or some electronics. C. Clothing and some electronics, but not furniture and appliances. D. All items up to 200% of the insured value of the home. E. Personal property items up to 55-75% of the insured value of the home.

65. (p. 231) Ricky has a conventional mortgage. He can monitor his interest and principal payments using _____ information. A. amortization B. escrow C. lock D. PMI E. points

65. A quality health insurance plan should do all of the following except A. Offer basic coverage for hospital and doctor bills. B. Impose no unreasonable exclusions. C. Limit out-of-pocket expenses to no more than $3,000 to $5,000 per year. D. Provide at least 120 days' hospital room and board in full. E. Provide a lifetime maximum level of coverage of up to $50,000.

65. Personal liability coverage does NOT protect A. An occasional babysitter. B. The homeowner. C. A visitor. D. Members of the homeowner's family. E. A housekeeper.

65. What is the most important part of an insurance agent's job? A. Sell you the highest level of coverage available. B. Collect premiums for the insurance contract. C. Tell you why her product is better than the competitor's. D. Help you select the proper kind of protection within your financial boundaries. E. Convince you to buy the policy that will pay her the highest commission.

66. (p. 230) When Smee applied for a loan, he was assured that his rate would not change if he closed within a specific time period. Smee had a(n) ______ on the interest rate. A. amortization B. escrow C. lock D. PMI E. points

66. A policy that supplements your basic personal liability coverage is called a(n) A. Endorsement. B. Homeowner's insurance. C. Medical payments coverage. D. Supplementary policy. E. Umbrella policy.

66. Which of the following is NOT a private health care plan? A. Health maintenance organization (HMO) B. Home health care agency C. Hospital and medical service plan D. Medicare E. Preferred provider organization (PPO)

66. Which of the following is NOT important when buying life insurance? A. Buying from a financially strong company B. Buying from professionally qualified representatives C. Ignoring the reputations of local agencies D. Working with a representative who will help you select the proper kind of protection within your financial boundaries E. Asking family or friends for recommendations to choose an insurance company

67. (p. 229) Trenton wants to buy a house but can provide only a 10% down payment. He probably will be required to have A. Amortization. B. Escrow. C. Lock. D. PMI. E. Points.

67. Blue Cross and Blue Shield are A. Health maintenance organizations (HMO). B. Private insurance companies. C. Hospital and medical service plans. D. Types of Medicare. E. Preferred provider organizations (PPO).

67. When Stanley was visiting Elaine, he tripped on her front porch step and sprained his ankle. His injuries were covered by A. Elaine's medical payments coverage. B. Stanley homeowner's policy. C. Elaine's health insurance coverage. D. Elaine's life insurance policy. E. The insurance policy of the mason who installed the front porch step 15 years ago.

67. Which of the following is NOT a factor that affects the price a company charges for a life insurance policy? A. The company's cost of doing business. B. The return on its investments. C. The mortality rate it expects among its policy holders. D. The policy features. E. All of these affect the price.

68. (p. 232) Because Dan served in the army, he should be eligible for a(n) A. ARM. B. FHA loan. C. Negative amortization. D. Payment cap. E. VA loan.

68. All of the following are major rating agencies for insurance except A. A.M. Best. B. Dun & Bradstreet. C. Moody's. D. Standard & Poor's. E. Weiss Research.

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

68. Xavier's employer offers a health plan that stresses preventive services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer? A. Health maintenance organization (HMO) B. Private insurance company C. Hospital and medical service plan D. Medicare E. Preferred provider organization (PPO)

69. (p. 232) Ursula wants to have an interest rate that can increase or decrease during the life of her loan. She should look for a(n) A. ARM. B. FHA loan. C. Negative amortization. D. Payment cap. E. VA loan.

69. After you purchase a life insurance contract, you have a "free look" period that lasts A. 3 days. B. 5 days. C. 10 days. D. 30 days. E. 60 days.

69. Which of the following is NOT correct about renter's insurance? A. The broad form covers personal property against perils specified in the policy. B. Renter's insurance covers the building and other structures on the site. C. The comprehensive form protects personal property against perils not specifically excluded in the policy. D. Typical coverage pays only the actual cash value of one's losses. E. Renter's insurance includes personal property protection, additional living expenses, and personal liability.

69. Yvonne's employer offers a health plan that has a group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees. This health plan offers some flexibility since members can either visit a physician from a list or go to their own doctors. What kind of plan does her employer offer? A. Health maintenance organization (HMO) B. Private insurance company C. Hospital and medical service plan D. Medicare E. Preferred provider organization (PPO)

70. (p. 232) Paul is 23 years old and has a small amount to use as a down payment for his first house. He might be eligible for a(n) A. ARM. B. FHA loan. C. Negative amortization. D. Payment cap. E. VA loan.

70. Homeowner's insurance includes all of the forms listed here except A. HO-1. B. HO-2. C. HO-5. D. HO-6. E. HO-8.

70. The settlement option that pays the life insurance proceeds in equal periodic payments for a specified number of years after your death is called A. Lump-sum payment. B. Limited installment payment. C. Final life payment. D. Life income option. E. Proceeds left with the company.

70. This type of plan combines features of HMOs and PPOs. It uses a network of participating physicians and medical professionals who have contracted to provide services for certain fees. A. Home health care agency B. Hospital and medical service plan C. Medicare D. Point-of-service plan E. Private insurance company

71. (p. 232) Veronica has had a variable-rate mortgage for several years. Unfortunately, the monthly payments have not covered her interest owed. As a result, her home equity is decreasing because of A. ARM. B. FHA loan. C. Negative amortization. D. Payment cap. E. VA loan.

71. Home insurance policies include coverage for all of the following except A. Credit card fraud. B. The cost of removing damaged property. C. Temporary repairs after a loss to prevent further damage. D. Business property. E. Emergency removal of property to protect it from damage.

71. The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called A. Lump-sum payment. B. Limited installment payment. C. Final life payment. D. Life income option. E. Proceeds left with the company.

71. Which of the following is most likely to use a health maintenance organization? A. A healthy young adult who travels around the world for his job. B. A family with teenagers who need annual checkups for sports at school. C. A neighbor who has seen the same specialists for the last 15 years. D. A low-income elderly relative. E. All of these would be likely to use a health maintenance organization.

72. The settlement option in which the company acts as trustee and pays interest to the beneficiary is called A. Lump-sum payment. B. Limited installment payment. C. Final life payment. D. Life income option. E. Proceeds left with the company.

72. Vincent is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for 75% of its replacement cost. C . He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 55-75% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.

72. Who is most likely to use a home health care agency? A. A mother who is looking for a plan to cover immunizations for her children. B. A healthy young adult. C. A family with teenagers who need annual check-ups for sports at school. D. An elderly neighbor. E. All of these would be likely to use a home health care agency.

73. (p. 233) If you have a mortgage that has fixed monthly payments and a very large final payment, you have a(n) A. Balloon mortgage. B. Buy-down. C. Convertible ARM. D. Growing-equity mortgage. E. Interest-only mortgage.

73. Anna contributes pretax dollars to an account managed by her employer for her health care expenses. If she does not spend all of her money by the end of the year, she may forfeit it. What kind of plan does she have? A. FSA B. HRA C. HSA D. Medicare E. Self-funded health plan

73. Which of the following products allows an individual to receive payments beginning now? A. Term insurance B. Deferred annuity C. Whole life insurance D. Immediate annuity E. Universal life insurance

73. Yogi is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price to rebuild or repair it. B. He should insure the building for 75% of its replacement cost. C . He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.

74. (p. 233) If you have an interest rate subsidy from a home builder or real estate developer, you have a A. Balloon mortgage. B. Buy-down. C. Convertible ARM. D. Growing-equity mortgage. E. Interest-only mortgage.

74. Monica's employer offers a health insurance plan with a very high deductible. In addition, her employer provides a fund for her to spend specifically on health care. What kind of plan does she have? A. FSA B. HRA C. HSA D. Medicare E. Self-funded health plan

74. Which of the following statements is correct? A. A deferred annuity allows an individual to receive payments from an annuity immediately. B. A deferred annuity allows an individual to receive payments from a life insurance policy immediately. C. A life insurance policy allows an individual to receive payments from an annuity at once. D. A deferred annuity allows an individual to receive payments from a life insurance policy at some future date. E. An immediate annuity allows an individual to receive payments from an annuity beginning at once.

74. Zach is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for its replacement value to receive the full cost of repairing or replacing it. C. He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His insured amount should remain the same as long as he lives in his house.

75. (p. 233) If you do not pay back any of the loan amount for a portion of the loan period, you have a(n) A. Balloon mortgage. B. Buy-down. C. Convertible ARM. D. Growing-equity mortgage. E. Interest-only mortgage.

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

75. Jacob is concerned that his out-of-pocket health care expenses will be quite high, so he is considering adding contributions to a tax-free account that he can use with his high-deductible policy to cover catastrophic expenses. What kind of plan does he have? A. FSA B. HRA C. HSA D. Medicare E. Self-funded health plan

75. Which of the following statements is incorrect? A. A deferred annuity allows an individual to receive payments from an annuity at some future date. B. An immediate annuity allows an individual to receive payments from an annuity beginning at once. C. A life insurance policy allows the beneficiary to receive proceeds at some future date. D. An annuity is more advisable for people in poor health than for those who are likely to live longer than average. E. An insurance company will calculate the annual amounts to pay each person for an annuity.

76. (p. 233) The primary benefit of a home equity loan is A. Its limited availability. B. The deductibility of the loan interest on federal taxes. C. The required monthly payments. D. The use of the home as collateral for the loan. E. None of these is a primary benefit.

76. Barnaby is applying for insurance for his new home. Which of the following is correct? A. He should base the amount of insurance on the price he paid for it. B. He should insure the building for 75% of its replacement cost. C. He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D. His personal belongings should automatically be covered with his home at 125% of his home's insured amount. E. His policy should automatically increase coverage as construction costs rise.

76. Individuals over the age of 65 who are eligible for federal government health plan coverage may also be interested in purchasing more coverage called A. Medicare Part A. B. Medicare Part B. C. Medicaid. D. Medigap. E. Statewide health coverage.

76. Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life? A. Fixed annuity B. Term insurance C. Whole insurance D. Variable annuity E. 401(k)

77. (p. 233) A reverse mortgage A. Is the same thing as a second mortgage. B. Offers a home buyer a home loan with a 30-year payment period. C. Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies. D. Two of these are correct. E. All of these are correct.

77. Jack needs comprehensive medical coverage; however, his income is quite low. What plan should he investigate? A. Medicare Part A B. Medicare Part B C. Medicaid D. Medigap E. Medicare Part C

77. Sandra is contacting several insurance companies to compare coverage for her home. Which of the following should NOT affect her premium? A. Alarm system B. Amount of coverage C. Type of structure D. Deductible E. Proximity to a school

77. Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life? A. Fixed annuity B. Term insurance C. Whole life insurance D. Variable annuity E. 401(k)

78. (p. 234) During a home purchase closing, you should A. Order an appraisal. B. Pay all closing costs, settle last-minute items, and sign documents. C. Schedule an inspection of the condition of the home. D. Sign documents and pay half of the settlement costs. E. Review zoning laws for the municipality where the home is located.

78. Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium? A. Installing an alarm system. B. Increasing the amount of coverage. C. Installing smoke detectors or a fire extinguisher. D. Increasing her deductible. E. All of these should reduce her premium.

78. Medicare (Part A) covers A. Dental care. B. Routine checkups. C. Most immunizations. D. Inpatient hospital care. E. All of these are covered.

78. Which of the following statements is correct? A. It is better to fund a fixed annuity before fully funding your IRA, Keogh, or 401(k). B. The timing for payments of a variable annuity are variable. C. It is better to fund a variable annuity before fully funding your IRA, Keogh, or 401(k). D. A fixed annuity is one where the investments made into the annuity are variable. E. It is better to fund an IRA, Keogh, or 401(k) before buying an annuity.

79. (p. 236) Which of the following is the document that transfers ownership of property from one party to another? A. Deed B. Escrow C. Mortgage D. PMI E. Points

79. A Medigap policy fills the gap between medical costs and medical payments from A. Home health care agencies. B. Hospital and medical service plans. C. Medicare. D. Medicaid. E. Private insurance companies.

79. Annuities are often purchased for A. 401(k) plans. B. Certificates of deposit. C. Individual retirement accounts (IRAs). D. Term life insurance plans. E. Whole life insurance plans.

79. Tom wanted to receive as many discounts on his home insurance as possible. Which of the following would NOT provide a discount? A. Smoke detector. B. Fire extinguisher. C. Deadbolt locks. D. Alarm systems. E. All of these should provide a discount for Tom.

80. (p. 237) Which of the following is an account used to pay property taxes and home insurance? A. Deed B. Escrow C. Mortgage D. PMI E. Points

80. Medicaid covers A. Lab services. B. Skilled nursing and home health services. C. Prescription drugs. D. Eyeglasses. E. All of these.

80. Motor vehicle crashes cost more than ______ in lost wages and medical bills every year. A. $10,000 B. $750,000 C. $12 million D. $150 billion E. $2 trillion

80. The Tax Reform Act of 1986 A. Preserved the tax advantage of annuities but curtailed deductions for IRAs. B. Allowed whole life insurance policies to be sold. C. Identified annuities to be the same as certificates of deposit. D. Allowed annuities to be purchased for individual retirement accounts. E. Made all annuities tax free.

81. (p. 238) Walt has decided to sell the home he has lived in for 50 years. The house has two bedrooms on the first floor, a finished basement, and a finished attic with a low ceiling. To prepare his home for sale, he should A. Exaggerate the size of his yard. B. Keep everything "as is." C. List his house as a three-bedroom. D. Take steps to make the house appear bright and large. E. Underestimate the cost of utilities.

81. Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amber was driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Based on her experience, which of the following would be true? A. Amber's insurance company should refuse coverage of her medical payments because she was not driving in her own vehicle. B. The insurance company of the owner of the sideswiped car should pay for all damages since the car was illegally parked. C. Amber's insurance should not cover any damage since she carried liability, collision, and comprehensive coverage. D. The bicyclist should cover his own medical expenses because he was at fault for riding on the road. E. Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.

81. Which of the following is incorrect? A. Disability income insurance provides regular cash income when you're unable to work because of a disability. B. Disabilities can include pregnancy, a non-work-related accident, or an illness. C. The exact definition of disability varies from insurer to insurer. D. A bad disability policy pays you if you cannot work at your regular job. E. Disability can cause even greater financial problems than death.

82. (p. 238) Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except A. Current mortgage rates. B. Demand in the housing market. C. His original cost. D. Recent selling prices of comparable homes in the area. E. The appraised value of his home.

82. All of the following are sources of disability income except A. Worker's compensation. B. Employer plans. C. Social Security. D. Private income insurance programs. E. All of these are sources of disability income.

82. Motor vehicle coverage typically includes all of the following except A. Most legal expenses. B. Bodily injury liability up to a specific level for all injured in an accident. C. Medical payments up to a policy limit. D. Bodily injury liability of all expenses, no matter the cost, for the most injured. E. Uninsured motorist's protection.

82. Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry. A. $40,000 B. $196,000 C. $280,000 D. $400,000 E. $430,000

83. (p. 238) Which of the following is NOT correct? A. Alex's daily maintenance and timely repairs around his home should increase his sale price. B. Brenda's new hot tub will probably not increase the selling price more than her recently added storage space. C. Caryn's suggestion to open drapes but keep lights turned off to conserve energy will give her property a positive image. D. Darryl's decision to sell his house "by owner" could save him several thousands of dollars. E. Eric's listing with a real estate agent will provide him with services such as advice on features of his home to highlight.

83. Holly and Matt want to use the "nonworking" spouse method to determine the amount of life insurance coverage they need. If their youngest child is 5 years old, how much do they need? A. $13,000 B. $18,000 C. $50,000 D. $130,000 E. $180,000

83. How much income is usually replaced with a private income insurance program for a disability? A. 0% B. 10-30% C. 40-60%, with some plans paying up to 75% D. 50-70%, with some plans paying up to 100% E. 100%

83. Medical payments coverage applies to medical expenses of A. Anyone in your vehicle, including you. B. Anyone in your vehicle who is injured, except the driver. C. The driver, but no passengers who are injured. D. The owner of the vehicle, but not other passengers. E. The uninsured motorist who causes an accident.

84. (p. 238) Franklin wants to sell his house himself. Which of the following is NOT correct about his sale? A. He should create a detailed information sheet and distribute it in stores and other public areas. B. He should plan to spend time and effort in the sales process. C. He should require potential buyers to provide names, addresses, telephone numbers, and background information. D. He should show the house only when he is home alone. E. He should provide information about the availability of financing and financing requirements.

84. Katrina was injured in an accident at work. The benefits she will receive to cover part of her income will come from A. A private income insurance program. B. Her employer plan. C. Medicare. D. Social Security. E. Worker's compensation.

84. Paul was driving his kids to a piano lesson in a 2005 minivan. While driving, he was hit by an uninsured motorist. Although Paul and his kids had only minor injuries, their vehicle was totaled. Based on this information, which of the following is correct? A. The uninsured motorist needs to purchase insurance after the fact. B. Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids. C. The uninsured motorist will be required to purchase a new minivan for Paul's family. D. It is likely that the uninsured motorist will not receive any citations or fines because she did not have insurance. E. In all states, Paul's uninsured motorist's coverage must cover damage to all vehicles involved in the accident.

84. Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the easy method? A. $140,000 B. $343,000 C. $490,000 D. $700,000 E. $750,000

85. (p. 228) If you are selling your house by owner, you should still enlist the assistance of A. A real estate agent to help with the closing. B. A lawyer or title company to assist with the contract, closing, and other legal matters. C. Your brother-in-law to aid with legal issues of the sale. D. Two of these are correct. E. All of these are correct.

85. Mark was severely injured while on vacation and expects to be unable to work for at least 12 months. Because of his injury, he should expect to be eligible for disability income from A. A private income insurance program. B. Medicaid. C. Medicare. D. Social Security. E. Worker's compensation.

85. Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the "nonworking" spouse method? A. $140,000 B. $343,000 C. $490,000 D. $700,000 E. $750,000

91. Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. The vehicle would not be covered because he was not in it when the damage occurred.

85. Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct? A. Timothy's injuries would be covered to $100 and property damage would be limited to $300. B. Nick's injuries would be covered to $50,000. C. Individually, Timothy and Nick's injuries would be covered to $300,000 each. D. The total coverage for Timothy and Nick would be $100,000, and the driver who caused the accident would be covered to $50,000. E . The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for total injuries sustained in the accident.

86. (p. 240) Which of the following is NOT correct regarding real estate agents? A. They can provide advice on features of your home to highlight. B. They handle financial aspects of the sale. C. They may include a presentation of your home on various websites. D. They may screen potential buyers to determine if they will qualify for a mortgage for your home. E. They require that you conduct your own showings.

86. Cameron, age 25, sustained a debilitating hand injury and was unable to perform his job as a viola player in the local orchestra for 45 days. His employer has a disability income insurance policy that pays 70% of take-home pay with an elimination period of 60 days and coverage to age 65. Given this information, which of the following is true for Cameron? A. He will receive disability income for 15 days. B. His employer will pay 70% of his current income for 40 years. C. He will not be eligible for any disability income because his disability ended before the elimination period ended. D. He will receive disability income for 45 days. E. His employer will estimate his average salary through age 65 to determine his disability income.

86. Marianne and Roger are in good health and have reasonably secure careers. Each earns $45,000 annually. They own a home with a $125,000 mortgage; they owe $25,000 for their car loans and have $22,000 in student loans. If one should die, they think that funeral expenses would be $12,000. What is their total insurance need using the DINK method? A. $12,000 B. $86,000 C. $98,000 D. $172,000 E. $217,000

86. Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.

87. 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 A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.

87. Which of the following is true about an elimination period? A. Premiums for a plan with an elimination period of 30 days will be less than premiums for a plan with an elimination period of 45 days. B. Premiums for a plan with an elimination period of 50 days will be the same as premiums for a plan with an elimination period of 75 days. C . Premiums for a plan with an elimination period of 40 days will be less than premiums for a plan with an elimination period of 75 days. D. Premiums for a plan with an elimination period of 90 days will be the same as premiums for a plan with an elimination period of 60 days. E. Premiums for a plan with an elimination period of 90 days will be less than premiums for a plan with an elimination period of 60 days.

88. Disability income insurance plans can offer benefits A. For only a few years. B. Until age 65. C. For life. D. All of these are possibilities. E. None of these is correct.

88. Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.

89. If you are concerned that your disability insurer may try to cancel your coverage if your health becomes poor, you should look for a plan that offers A. Duration of benefits to age 65. B. A plan that provides 70-80% of your take-home pay. C. Accident and sickness coverage. D. Guaranteed renewability. E. A short elimination period.

89. Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause, he should, at a minimum, carry which type of insurance? A. Property damage liability. B. Collision. C. Comprehensive physical damage. D. All of these are required for all vehicles. E. No coverage is required for any driver in the United States.

90. (p. 228) Brett bought a house five years ago for $150,000. At that time he borrowed $140,000 from his bank. The house is now worth $162,000. If he wants to stop paying his private mortgage insurance, he can request termination of PMI. The current value of his mortgage must be no higher than A. $122,000. B. $126,360. C. $140,000. D. $150,000. E. $162,000.

90. Al 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 A. Uninsured motorist's protection. B. Property damage liability policy. C. Collision policy. D. Comprehensive physical damage policy. E. Bodily injury liability policy.

90. Rising health costs are due to all of the following except A. Costs of prescription drugs. B. The growing number of uninsured. C. Advancements in medical technology. D. Baby boomers using fewer health care services. E. The overweight population.

91. (p. 228) Carrie bought a house five years ago for $150,000. At that time she borrowed $140,000 from her bank. The house is now worth $162,000. Her PMI will automatically be dropped when her mortgage balance drops to A. $117,000. B. $122,000. C. $140,000. D. $150,000. E. $162,000.

91. The average per employee cost for health care in 2012 was more than A. $1,500. B. $4,000. C. $8,900. D. $19,800. E. $20,000.

92. (p. 228) Jordan earns an annual salary of $45,000. If a lender uses 33% of monthly gross income as a guideline for the maximum PITI (principal, interest, taxes, and insurance), what is the maximum mortgage that Jordan can apply for? A. $1,237.50 B. $1,485.00 C. $2,475.00 D. $3,750.00 E. $7,500.00

92. How many people in the United States do not have health insurance? A. 500,000 B. 2 million C. 8 million D. 27 million E. Over 50 million

92. Various states are trying to reduce the time and cost of settling vehicle injury cases. One alternative is A. Omitting uninsured motorist's protection. B. Requiring the driver to pay all medical expenses. C. Using the no-fault system. D. Requiring emergency road service coverage. E. Having the state pay for driver's insurance.

93. Which of the following is NOT a type of motor vehicle insurance available to drivers? A. Wage loss insurance B. Emergency road service coverage C. Rental reimbursement coverage D. All of these may be available to drivers E. Nonel of these is optional.

93. Which of the following is NOT correct? A. Health costs have increased because of the use of sophisticated technologies. B. Victims of accidents and crimes require fewer emergency medical services than in the past. C. Regulations shift costs instead of reducing cost. D. Some tests are duplicated for patients, leading to higher health costs. E. Restrictive work rules in the health care

94. Which of the following activities is NOT a step being taken to reduce health care costs? A. Community health education programs motivate people to take better care of themselves. B. Physicians encourage patients to pay cash for routine medical care and lab tests. C. Programs to carefully review health care fees are available. D. Involvement in community health planning can help achieve a better balance between health needs and health care resources. E. All of these activities can reduce health care costs.

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

95. Under the 2010 health care reform law, which of the following is NOT correct? A. Adult children can remain on their parents' insurance policy until age 26. B. Most insurers must provide preventive care screenings without charging deductibles or co-pays. C. Employers must offer continuing coverage through COBRA for up to 24 months after you leave your job. D. Two of these are not correct. E. None of these are correct.

95. Which of the following should reduce your auto insurance premium? A. Celebrate your 70th birthday B. Get a speeding ticket C. Get good grades in college D. Move from a farm to a city E. Start smoking

96. Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70% of value, how much of her belongings would be covered? A. $120,000 B. $210,000 C. $224,000 D. $300,000 E. $320,000

96. The Health Insurance and the Patient Protection And Affordable Care Act of 2010 A. Prohibits denying coverage to children with preexisting medical conditions. B. Bans insurance companies from dropping people from coverage when they get sick. C. Eliminates co-pays for preventive services. D. Ensures access to an effective appeals process by the health insurance plan. E. All of these are true.

97. In which circumstances may the right to elect continued coverage under COBRA exist for a covered spouse or dependent? A. Divorce. B. Legal separation. C. Loss of dependent child status. D. The covered employee's death. E. All of these.

97. Sally was driving her own car and collided with a pickup truck. Sally sustained $125,000 in injuries, and her passenger sustained $10,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident? A. $1,000 B. $100,000 C. $110,000 D. $125,000 E. $135,000

98. Which of the following is correct about your health plan's summary plan description? A. It contains information about the coverage of dependents. B. It contains information about what services will require a co-pay. C. It contains information about circumstances when your employer can terminate your health plan benefits. D. All of these are correct. E. None of these is correc

99. Georgia has a health insurance policy that includes a deductible of $600 and a coinsurance of 20%. If her total bill is $4,000, how much will she be required to pay? A. $400 B. $600 C. $1,200 D. $1,280 E. $3,400

21. Most low and middle income people will NOT qualify for a VA-guaranteed loan.

TRUE VA loans assist eligible armed services veterans with home purchases. FHA loans are available for many low and middle income people.

107. What is the purpose of a personal property floater?

A floater is additional property insurance that covers the damage or loss of a specific item of high value. These floaters can be used for items such as musical instruments, jewelry, computers, or other electronic equipment.

106. Daniel's house was severely damaged in a fire and he needed to file a claim for his losses. What would facilitate the processing of his insurance claim? Explain your answer.

A household inventory would provide documentation of his personal belongings. He can use photographs of his home and contents (with the date and value of objects listed on the back), a video recording, or a listing. The inventory should be kept in a secure location, such as a safe deposit box.

99. What is the difference between a pure risk and a speculative risk?

A pure risk is accidental and unintentional. Although no one can predict whether a pure risk will occur, it is possible to predict the costs that will accrue if one does. This type of risk is insurable. A speculative risk is not insurable. It carries a chance of either loss or gain. Winning the lottery and starting a small business are two examples.

59. Homeowner's insurance covers all except

A. A detached garage B. Trees and shrubs C. A tool shed D. Personal property E. All of these are covered

83. Medical payments coverage applies to medical expenses of

A. Anyone in your vehicle, including you

67. When Stanley was visiting Elaine, he tripped on her front porch step and sprained his ankle. His injuries were covered by

A. Elaine's medical payments coverage.

41. Barbara left a skateboard on her front steps. Her neighbor then tripped on the skateboard and was injured. The skateboard is a

A. Hazard

73. Yogi is applying for insurance for his new home. Which of the following is correct?

A. He should base the amount of insurance on the price to rebuild or repair it.

44. The most common risks are

A. Personal risks B. Property risks C. Liability risks D. All of these are common risks

89. Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause he should, at a minimum, carry which type of insurance?

A. Property damage liability

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

A. Risk avoidance

79. Tom wanted to receive as many discounts from his home insurance as possible. Which of the following would NOT provide a discount?

A. Smoke detector. B. Fire extinguisher. C. Dead-bolt locks. D. Alarm systems. E. All of these should provide a discount for Tom.

93. Which of the following is NOT a type of motor vehicle insurance available to drivers?

A. Wage loss insurance B. Emergency road service coverage C. Rental reimbursement coverage D. All of the above may be available to drivers

54. Which of the following questions should one ask when developing a risk management plan?

A. What do I need to insure? B. How much should I insure something for? C. What kind of insurance should I buy? D. Who should I buy insurance from? E. All of the questions should be asked when developing a risk management plan.

57. Liability is defined as:

B. The legal responsibility for the financial cost of another person's losses or injuries

108. What is the purpose of an umbrella policy?

An umbrella policy, also called a personal catastrophe policy, supplements basic personal liability coverage. This covers the policyholder for personal injury claims, lawsuits, and other liability claims that exceed the homeowner's policy coverage levels.

68. If you have a loss due to a flood

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

96. Cheyenne has a home insured for $400,000. It would cost $420,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70 percent of value, how much of her belongings would be covered?

B. $280,000 The coverage is $400,000 * 70% = $280,000.

60. Homeowner's insurance covers all except

B. A diamond necklace valued at $25,000

38. An individual who purchases insurance is

B. A policyholder

74. Zach is applying for insurance for his new home. Which of the following is most correct?

B. He should insure the building for full replacement coverage.

78. Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium?

B. Increasing the amount of coverage

47. An insurance company will

B. Insure pure risk, but not speculative risk

42. Barbara left a skateboard on her front steps. Her neighbor then tripped on the skateboard and was injured. The fact that she didn't put away the skateboard is called

B. Negligence

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

B. Negligence

B. Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids

87. 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

B. Property damage liability

69. Which of the following is NOT correct about renter's insurance?

B. Renter's insurance covers the building and other structures on the site.

50. If you choose to wear your seatbelt, you are using

B. Risk reduction

53. An insurance program

B. Should change along with needs and goals C. Should minimize personal property and liability risks

75. Andrew is applying for insurance for his new home. Which of the following is correct?

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

39. What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

C. Premium

97. Sally was driving her own car and collided with a pick-up truck. Sally sustained $150,000 in injuries and her passenger sustained $1,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident?

C. $101,000 Sally's injuries would be covered to $100,000. Her passenger would be covered in full at $1,000. Total coverage = $100,000 + $1,000 = $101,000

86. Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her

C. Collision

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

C. Collision

95. Which of the following should reduce your auto insurance premium?

C. Get good grades in college

43. Barbara left a skateboard on her front steps. A windstorm then swept the skateboard up and through her window. The windstorm is a

C. Peril

45. Anything that pay possibly cause a loss is called a

C. Peril

63. Insurance that covers valuable items, such as an expensive harp, is called

C. Personal property floater

51. If you choose to take responsibility for negative results of a risk, you are using

C. Risk assumption

40. Insurance allows someone to

C. Shift risk

92. Various states are trying to reduce the time and cost of settling vehicle injury cases. One of those alternatives is

C. Using the no-fault system

98. Last month, some of your friends were injured in an accident. Their total injuries were as follows: -Brenda - $75,000 • Raquel - $150,000 • Louis - $25,000 Coverage was 100/300/50. What was the total medical coverage in this accident?

D. $200,000 Since coverage is capped at $100,000 per person and $300,000 for the accident, Brenda and Louis are fully covered. Raquel's coverage would be limited to $100,000. Total coverage = $75,000 + $100,000 + $25,000 = $200,000.

80. Motor vehicle crashes cost more than ______ in lost wages and medical bills every year.

D. $240 billion

58. Homeowner's insurance covers all except

D. Automobiles

82. Motor vehicle coverage typically includes all except

D. Bodily injury liability of all expenses, no matter the cost, for the most injured

71. Home insurance policies include coverage for all except

D. Business property

D. Comprehensive physical damage

91. Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his

D. Comprehensive physical damage.

61. The best place to keep a household inventory is

D. In a safe deposit box

56. The two basic types of risk that people face regarding their personal property are

D. Physical damage and damage caused by criminal behavior

52. If you choose to insure your home or your vehicle, you are using

D. Risk shifting

94. Which of the following is NOT correct?

D. The number of small claims you have should not affect your premium

72. Vincent is applying for insurance for his new home. Which of the following is correct?

D.His personal belongings should automatically be covered with his home at 55 percent to 75 percent of his home's insured amount.

55. Which of the following is correct?

D.One question that should be asked when developing a risk management plan is: What do I need to insure?

65. Personal liability coverage does NOT protect

E. A housekeeper

62. All of the following are acceptable types of documentation for a household inventory except

E. A listing of items and their details in your memory.

70. Homeowner's insurance includes all of the forms listed except

E. HO-8

76. Barnaby is applying for insurance for his new home. Which of the following is correct?

E. His policy should automatically increase coverage as construction costs rise.

48. Which of the following is NOT one of the commonly used general risk management techniques?

E. Increase risk

77. Sandra is contacting several insurance companies to compare coverage for her home. Which of the following should NOT affect her premium?

E. Location to a school

64. Personal property insurance covers

E. Personal property items up to 55 - 75 percent of the insured value of the home

66. A policy that provides supplemental your basic personal liability coverage is called a(n)

E. Umbrella policy

E.Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.

85. Timothy was driving his friend Nick to football practice. While driving, he was hit by driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?

E.The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for injuries sustained in the accident.

104. What is an example of a property loss?

Examples include physical damage caused by perils such as fire, wind, water, and smoke (e.g., a windstorm causing a large tree branch to smash the car windshield) and loss or damage caused by criminal behavior such as robbery, burglary, vandalism, and arson.

10. A duplex is a house with two or more separate dwellings.

FALSE A duplex is a building with two separate homes.

26. At the closing of a home purchase, the buyer conducts a walk-through of the property.

FALSE A walk-through should be completed prior to closing. At closing, documents are signed, last-minute details are settled, and appropriate amounts are paid.

29. About 50 percent of home sales are By Owner.

FALSE About 10 percent are by owner.

31. If your home is assessed for $200,000, the market value of the home should be less than $200,000.

FALSE According to the Personal Finance in Practice, the assessed value is normally lower than the market value.

35. An assigned risk pool is a method of calculating the insurance premiums for various groups of drivers.

FALSE An assigned risk pool includes people who cannot get motor vehicle insurance due to a poor driving record.

18. Another name for a homeowner's insurance policy is an umbrella policy.

FALSE An umbrella policy is used in addition to a homeowner's policy.

31. Collision insurance covers your vehicle against risks such as falling objects and hail.

FALSE Comprehensive physical damage coverage protects against these risks.

5. An example of a peril is defective wiring.

FALSE Defective wiring is a hazard.

2. Your decision to rent or to buy your residence should be based solely on lifestyle factors.

FALSE Financial factors should also be considered.

20. Merrill bought a house and applied for a loan through the VA (Veterans Administration). The VA will provide the down payment when he closes on the house.

FALSE Government agencies, such as the VA, do not provide the down payment. Instead, they help home buyers obtain low-interest, low-down-payment loans.

28. Home improvements will definitely increase the selling price.

FALSE Home improvements may or may not increase the selling price.

15. Homeowner's insurance excludes detached structures.

FALSE Homeowner's insurance includes detached structures such as a garage or toolshed.

30. Uninsured motorist's protection automatically covers you and your family members as well as damage to the vehicle itself.

FALSE In most states, it does NOT cover damage to the vehicle itself.

26. Angela should decrease her deductible from $1000 to $250 in order to reduce her home insurance premium

FALSE Increasing the deductible should decrease the premium.

36. It is illegal to use a credit score to determine the premium to charge an individual.

FALSE Insurance companies may consider the credit score when deciding whether to sell, renew, or cancel a policy and what premium to charge. However, an insurer cannot refuse to issue you a home or auto insurance policy solely based on your credit report.

2. Samuel should buy insurance in order to eliminate his risk.

FALSE Insurance is a risk-sharing business; one cannot eliminate risk with insurance.

23. Sam's house should be insured for the amount he originally paid for it.

FALSE It should be insured for the cost to rebuild or repair the home, not the original cost.

16. A household inventory should be stored in a home office.

FALSE It should be stored in a secure location, such as a safe deposit box.

15. An approved mortgage application usually locks in an interest rate for 60 - 120 days.

FALSE Lock in periods usually range from 30 to 90 days.

32. Emergency road service coverage includes coverage for a tow to a service station as well as repairs to make the vehicle drivable.

FALSE Once the vehicle arrives at the repair shop, insurance does not cover repair costs.

9. Jim and Sandy are setting up their insurance program. One of their goals should be to reduce the possible loss of income due to fire or theft.

FALSE One goal should be to reduce the loss of income caused by premature death, illness, accident, or unemployment. Another goal should be to reduce the loss of property caused by perils, such as fire or theft, or hazards.

14. Private mortgage insurance is usually required if the down payment for a home is less than 30 percent.

FALSE PMI applies if the down payment is less than 20 percent.

28. Every state in the United States has a law requiring people to carry motor vehicle insurance.

FALSE Recently, more than 45 states had laws; however, every state has a financial responsibility law that requires drivers to prove that they can pay for damage or injury caused by an automobile accident.

21. Insurance coverage for a rental is more expensive than insurance coverage for a mobile home.

FALSE Renter's insurance is relatively inexpensive. Mobile home insurance is quite expensive.

7. When Brett's apartment lease ends, he should receive his entire security deposit back even though the carpet has been damaged while he was living there.

FALSE Since a security deposit is held to cover the cost of damages, Brett may receive only a part of it back.

23. An advantage of a second mortgage is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

FALSE The definition is for a buy-down.

11. A condominium is a form of housing in which the units in a building are owned by a nonprofit organization

FALSE The definition is for cooperative housing.

6. Risk avoidance is an organized plan for protecting yourself, your family, and your property.

FALSE The definition is for risk management.

11. Once a risk management plan is in place, the insurance programs that were set up should remain the same even as one's family needs change.

FALSE The insurance programs should grow or shrink as the protection needs change.

8. Rental insurance isn't very important since the landlord's insurance on the building includes coverage on all tenants' belongings.

FALSE The landlord's insurance is not expected to include the personal belongings of the tenants. It is important to obtain adequate renter's insurance in case of damage.

13. When interest rates are high and the demand for homes is low, prices of homes will likely be at a premium

FALSE The prices will probably be low.

20. A landlord is responsible for paying renter's insurance.

FALSE The renter is responsible.

5. A landlord has the right to sublet an apartment.

FALSE The renter may have this right.

25. If you pay an extra $100 per month on your mortgage, your total loan principal will decrease and your total interest will remain the same.

FALSE The total principal will not change; however, the reduction in interest will reduce the loan period by several years. (The text offers an example of paying an extra $25 per month on a $75,000, 20-year 10 percent mortgage. The impact of the extra payments decreases the loan period by more than 5 years.)

16. As interest rates increase, more people have the ability to afford an average-priced home.

FALSE These are inversely related.

9. A disadvantage of home ownership is the deductibility of mortgage interest and real estate tax payments.

FALSE This is a financial benefit.

3. An advantage of renting is pride of ownership.

FALSE This is an advantage of buying.

19. The National Flood Insurance Program makes flood and earthquake insurance available for all homeowners.

FALSE This program is available in some places.

13. Caroline was found liable in an accident. This was probably not due to negligence on her part.

FALSE Usually, liability is because of negligence.

37. One way to keep auto insurance rates down is to insure each vehicle you own with a different insurer.

FALSE You may receive a multi-vehicle discount if you insure two or more vehicles with the same company.

18. The most common conventional mortgage is the 20 year ARM.

FALSE A conventional mortgage has a fixed rate and fixed payment. An adjustable loan does not fit into this category.

27. The purpose of an escrow account is to pay the points at closing.

FALSE An escrow is money from your monthly payments used for the payment of property taxes and home insurance.

19. Most new mortgages are assumable.

FALSE Due to volatile interest rates, assumable mortgages are seldom offered.

17. Mortgage points are paid at the end of the mortgage.

FALSE Points are prepaid interest and are paid when you buy the house and take out the mortgage.

111. List five factors that can affect the cost of home insurance.

Factors include: • Location of home - close to a water supply or fire hydrant • Location of home -high crime areas will have higher rates • Location of home - severe weather such as tornadoes and hurricanes can increase costs • Type of structure - brick homes usually cost less to insure than wood • Amount of coverage for your home • Deductible - a higher deductible should reduce the premium • Discounts - smoke detector, fire extinguisher, dead-bolt locks, alarm systems

105. List three types of coverage in a homeowner's insurance policy.

Homeowner's insurance coverage includes • Building and other structures • Additional living expenses • Personal property - up to a limit • Personal liability and related coverage • Specialized coverage (flood or earthquake)

If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward interest? A. $180.50 B. $625.00 C. $665.28 D. $805.50 E. $7,500.00

If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal? A. $180.50 B. $625.00 C. $665.28 D. $805.50 E. $7,500.00

115. What are three ways that you can maintain or reduce your auto insurance rates?

Many answers are appropriate: • Improve your credit score • Don't file small claims • Increase your deductible • Keep a clean driving record • Compare coverage at other companies • Take a driver training program • Maintain good grades • Install security devices • Be a nonsmoker • Insure two or more vehicles with the same company • Cover only liability for an old car

102. What are some questions that someone should ask himself when developing a risk management plan?

Questions include: • What do I need to insure? • How much should I insure it for? • What kind of insurance should I buy? • Who should I buy insurance from?

112. Why is it important to compare home insurance companies?

Rates can vary among insurance companies. In addition, service and coverage can vary. Not all companies settle claims in the same way.

22. A balloon mortgage has fixed monthly payments for a period of time. At the end of that time, the entire principal balance must be paid in full.

TRUE

1. Your lifestyle affects your housing buying decisions.

TRUE

10. An important question that should be asked when setting up an insurance program is: "What do I need to insure?"

TRUE

12. A handyman's special is a home that needs work and is priced lower than homes in better condition.

TRUE

12. An insurance claim is a request for payment to cover financial losses.

TRUE

14. A homeowner policy provides coverage for additional living expenses after a fire.

TRUE

17. Robby fell on a piece of ice on Peter's front steps and broke his arm. This is an example of a liability.

TRUE

110. Discuss the amount of home insurance you should have.

The amount of home insurance should be based on: • The costs to rebuild or repair your house. • The automatic increase in coverage as construction costs rise. • Full coverage replacement value. • Coverage for personal belongings. • Claim settlement method - replacement cost will be more expensive than actual cash value.

100. Explain two ways that someone may choose to manage risk. Include an example of each method.

The following are acceptable answers: Risk avoidance - not taking an action that could be risky. Example: not driving a car to avoid a traffic accident. Risk reduction - take action to decrease the likelihood that risks will cause you harm. Examples: wear a seatbelt and install fire extinguishers. Risk assumption - take responsibility for the negative results of a risk. Example: self-insurance to cover a loss. Deciding to NOT purchase collision insurance for an old car. Risk shifting - insurance. Example: Purchasing insurance for an auto or a home.

109. Identify at least 3 forms of home insurance.

The forms are listed below: • HO-1 - Basic form. Protects against perils such as fire, lightening, windstorms, hail, volcanic eruptions, explosions, smoke, theft, vandalism, glass breakage, and riots. • HO-2 - Broad form. Includes HO-1 plus falling objects and damage from ice, snow, or sleet. • HO-3 - Special form. Includes the above plus other risks except those specifically excluded from the policy. • HO-4 - Tenant's form. Protects the personal property of renters against the risks listed in the policy. It does not include coverage on the building or other structures. • HO-5 - Comprehensive form. This expands the coverage of HO-3 by including endorsements for items such as replacement cost coverage on contents and guaranteed replacement cost coverage on buildings. • HO-6 - Condominium owner's insurance. Protects property and any additions or improvements made to the living unit.

101. What should an insurance program's main goal be?

The main goal should be to minimize personal, property, and liability risks.

103. Two main types of risk are related to your home and your vehicle. What are these main risks?

The main risks are risk of damage or loss of your property and your responsibility for injuries to other people or damage to their property (liability).

113. Discuss what 100/300/50 means with relation to liability coverage for automobile insurance.

The numbers 100/300/50 stand for maximum bodily injury coverage per person in an accident/limit to all persons in an accident/maximum payment for damage of property of others.

114. Provide an example of coverage under:

a. Property damage liability b. Collision c. Comprehensive physical damage Rates can vary among insurance companies. In addition, service and coverage can vary. Not all companies settle claims in the same way. Blooms: Comprehension Difficulty: Easy Kapoor - Chapter 08 #112 Learning Objective: 3 Topic: Cost factors The numbers 100/300/50 stand for maximum bodily injury coverage per person in an accident/limit to all persons in an accident/maximum payment for damage of property of others. Examples include: a. Property damage liability - damage to another car, buildings, equipment such as street signs and telephone poles b. Collision - damage to your vehicle when it is involved in an accident c. Comprehensive physical damage - fire, theft, falling objects, vandalism, hail, floods, tornadoes, earthquakes, and avalanches

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