FIN322 Exam 2
92. Which of the following statements is true of the Affordable Health Care Act (ACA)?
*a. The ACA eliminates lifetime limits on total health care insurance payments by insurers. b. The ACA limits the total number of surgeries for the insurers. c. The ACA requires employers to reimburse the cost of hospital stay of the insured. d. The ACA decides the insurance payments for dependents. e. The ACA provides major medical insurance with low deductibles to protect against catastrophic illnesses.
71. ___________ represents the initial amount that's not covered by the policy and thus must be paid by the insured.
*a. The deductible b. The co-insurance c. The copayment d. The premium
133. The best way to buy automobile insurance is through __________.
*a. an insurance agent b. a state insurance commission c. an auto dealer d. a finance company
151. A captive agent is:
*a. an insurance agent who represents only one insurance company. b. a federal insurance agent who can sell low-cost flood insurance coverage. c. an independent agent who can insure homeowners and tenants together for flood insurance. d. an automobile insurance agent who insures only other insurance agents. e. a claims adjustor who assesses the probability of law violations during an investigation.
34. The primary purpose of life insurance is to provide:
*a. financial security for dependents in the event of death. b. protection from creditors and lawsuits. c. tax-advantaged investments. d. high-yield investments. e. liquidity to expand business operations.
7. Employers often provide _____ life insurance as a fringe benefit for their employees.
*a. group b. credit c. mortgage d. standard e. home service
115. During the past few decades the percentage of our income spent on health care:
*a. has increased due to an aging U.S. population. b. has decreased due to costly advances in medical technology. c. has increased due to advanced demand-and-supply distribution of health care facilities. d. has decreased due to increased regulation and decreased administrative costs. e. has decreased due to the reduction in the health care costs.
88. One drawback of long-term-care insurance is its:
*a. high annual premiums. b. overlap with Medicare. c. inability to cover custodial care. d. short duration.. e. non-renewability clause..
79. Group health insurance premiums are _____.
*a. lower than an employer's health insurance plan premiums b. paid by the insurer to the insured c. designed to cover only comprehensive medical expenses d. equal to the reimbursements of medical expenses on claims for medical treatment e. only meant to offer coverage for prescription drug, dental, and vision care services
58. The settlement option chosen by most policyholders is:
*a. lump sum. b. interest only. c. fixed amount. d. fixed time. e. life income.
141. The personal property floater:
*a. provides either blanket or scheduled coverage of items that are not covered adequately in a standard homeowner's policy. b. is available to meet the needs of "innocent" victims of accidents who are negligently injured by uninsured, underinsured, or hit-and-run motorists. c. is a specialized inland marine policy covering boats and trailers used with boats. d. covers against liability caused by the ownership or use of items of personal property. e. is an additional amount of insurance equal to a specified percentage of the replacement value of the property.
65. A(n) _____ policy is a type of term insurance.
*a. straight term b. whole life c. increasing term d. variable term e. risk assumption
140. A personal liability umbrella policy is designed to __________.
*a. supplement homeowner's insurance coverage b. establish a subsidized flood insurance program c. replace homeowner's insurance coverage d. subsidize the health insurance coverage
137. Replacement-cost coverage is the reimbursement of:
*a. the cost of repairing or replacing damaged structures without deducting physical depreciation. b. reasonable living expenses while the insured's house is being repaired. c. the cost of damages caused by perils other than those mentioned in the policy. d. the cost of defending the insured. e. the increase in the deductible to reduce the amount of the insurance premium.
150. An insured does not get the right to arbitration when:
*a. the insurance company denies responsibility for the loss. b. the loss is of a relatively small value. c. the claim is assigned to a claims adjustor. d. the insured leaves the scene of the accident. e. the insured has made several claims from the insurance company.
146. When insuring property people need to consider not only replacing and restoring the actual property in the event of a loss, but also __________.
*a. the liability arising from the insured's responsibility for property loss b. the construction cost of the property c. the home equity in the property d. the excess compensation claim for loss to the property
41. Insurance underwriting is best described as:
*a. the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums. b. a set of activities used to identify the risk and rewards of investing an insured's funds on marketable securities. c. production-related activities performed primarily by agents on the field. d. a process of developing taxing structures for insurance policies. e. a function most often performed by an actuary.
35. From the standpoint of a person buying insurance the central purpose of insurance should be:
*a. to transfer the risk of serious losses. b. to collect for all accidental losses. c. to profit from uncertain future events. d. to contribute to charitable purposes. e. to reduce payouts for the small risks taken.
148. A $100,000/$300,000 bodily injury liability automobile policy could pay up to a total of __________ to all injured victims in one accident.
,a. $100,000 b. $400,000 *c. $300,000 d. $200,000
86. Patrick's monthly take-home pay is $5000. His net worth is $125,000. He estimated that he would receive Social Security benefits worth $1,000 and company disability benefits $2,000 if he becomes disabled. The additional disability benefits that he needs to arrange for equals _____.
,a. $3,000 *b. $2,000 c. $5,000 d. $6,000 e. $7,000
61. A life insurance agent who takes her profession seriously is likely to have earned a professional certification like the ___________.
,a. Chartered Financial Analyst *b. Chartered Life Underwriter c. Chartered Financial Advisor d. Certified Insurance Agent
143. Donna who is single and 30 years old, received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Donna drives a 2002 Pontiac Firebird. She is currently not covered by health insurance, has an emergency fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the price of her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
,a. Maintaining her liability limits at current levels b. Raising her medical payments coverage *c. Raising her deductible from $250 to $1,000 d. Maintaining her collision coverage at current levels e. Raising her collision coverage by $10,000
81. In the pure community rating approach to health insurance premium pricing all policyholders in an area pay:
,a. a premium equal to the premium payable to the federal or state insurance exchange for a similar insurance policy. b. premiums based on their family size, where they live, whether they use tobacco, and their age. c. the same premium without regard to their personal health, age, or gender. *d. the premium as a contribution to a community pool of funds and utilize it on a need basis. e. premiums at varied rates based on their health status or claims history.
66. While using the needs analysis approach we _____.
,a. add an individual's available resources to his or her family's total economic needs to calculate how much life insurance he or she requires b. multiply an individual's gross annual earnings by some selected number to arrive at an estimate of adequate life insurance coverage c. get only a loose approximation of life insurance needs of an individual d. divide an individual's gross annual earnings by some selected number to arrive at an estimate of adequate life insurance coverage *e. deduct an individual's available resources from his or her family's total economic needs to calculate how much life insurance he or she requires
102. If you are laid off your group health insurance ___________.
,a. can be continued if the employer chooses to *b. must be continued if you pay the premiums c. must be continued and your ex-employer pays the premiums d. is continued and is paid by Social Security
154. To purchase a personal liability umbrella policy the insured party must already have __________.
,a. federally subsidized flood insurance coverage *b. relatively high liability limits on their homeowner's and auto coverage c. high levels of personal debt d. made several claims with the insurance company
2. It is not possible to avoid ___________.
,a. loss control *b. most risks in your life c. accumulating savings d. making investments
13. In order to predict the number of losses that will occur in a given time accurately insurance companies must study a ___________ numbers of cases.
,a. medium b. small *c. large d. negligible
139. At the scene of an accident the police are only responsible for assessing __________.
,a. the amount of loss b. the amount of claim c. the liability of the insurance company *d. the probability of a law violation
128. Even though homeowners are eligible for reimbursement on a full replacement-cost basis if they keep their homes insured for at least 80 percent of the amount that it would cost to build them today __________ can cause the actual amount of coverage to fall below 80 percent.
,a. the replacement cost *b. inflation c. the insurance premium d. deductibles
14. If a term life insurance is convertible the policy can be:
,a. transferred to the life of another person. b. exchanged for cash. c. changed to health or disability protection. *d. changed to a comparable whole life policy. e. revised as needed by the insurer.
68. Disability income policies usually have a(n) _____ which is a time delay from the date of the issuance of the policy until benefit privileges are activated.
,a. waiting period *b. probationary period c. elimination period d. internal limit period e. outer limit period
101. In a traditional indemnity (fee-for-service) plan
: ,*a. the health care provider and the insurer are separate. b. the insurer always pays directly to the health care provider. c. the lower the deductible, the lower the premium. d. the insured receives comprehensive health care services from a designated group of doctors. e. the health care provider contracts with the insured's employee union to provide health insurance benefits.
109. When purchasing a long-term-care policy
___________. ,a. the optional renewability provision is recommended *b. the guaranteed renewability provision is recommended c. the non-renewability provision is recommended d. the automatic renewability at reduced premium is recommended
80. The maximum coverage under most dental policies is often in the range of _____ per patient.
a. $1,500 to $2,500 b. $2,000 to $2,500 *c. $1,000 to $2,500 d. $1,500 to $2,000 e. $3,000 to $5,000
76. The Medicare co-insurance payment is typically:
a. 0 percent. b. 50 percent. *c. 10 percent. d. 20 percent. e. 75 percent.
21. A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:
a. 12 months. b. 6 months. c. 3 months. d. 50 days. *e. 31 days.
8. It is advisable to purchase life insurance from an insurance company that has been in business for at least _____ years.
a. 5 b. 10 c. 19 d. 15 *e. 25
83. Which of the following statements is true of medical insurance costs in the U.S.?
a. Advances in medical technology have decreased the medical insurance costs. b. The average annual premium for the aging U.S. population has increased by about 20% from 1999 to 2015. *c. A poor demand-and-supply distribution of health care facilities and services has increased the health care costs. d. Increased regulation and decreased administrative costs have reduced the medical insurance costs in the U.S. e. Due to the financial importance of health insurance, nearly 50 percent of the U.S. population has health insurance.
93. ___________ is a health care plan that emphasizes cost control and preventive treatment.
a. An indemnity plan b. A fee-for-service plan *c. A managed care plan d. A supplementary medical insurance
25. ___________ insurance is a type of insurance that is issued in policies with small face amounts often $1,000 or less.
a. Credit life *b. Industrial life c. Mortgage life d. Variable life
62. _____ and _____ are both relatively expensive types of decreasing term life insurance.
a. Group life; credit life *b. Credit life; mortgage life c. Mortgage life; industrial life d. Industrial life; special-purpose policies e. Special-purpose policies; group life
125. Which of the following homeowners' policies is best suited to a renter of an apartment?
a. HO-1 b. HO-2 c. HO-3 *d. HO-4 e. HO-8
121. The __________ is a good homeowner's policy for a condominium owner.
a. HO-2 b. HO-3 c. HO-4 *d. HO-6
127. Which of the following homeowners' policies provides coverage for the damage caused by the accidental discharge of water or steam?
a. HO-7 *b. HO-2 c. HO-8 d. HO-9 e. HO-1
147. Which of the following homeowners' policies provides coverage for damage caused by electrical current?
a. HO-7 *b. HO-2 c. HO-8 d. HO-9 e. HO-1
82. Which of the following is true of the health care industry?
a. In the fee-for-service plans, the health care provider is the same as the insurer. *b. In a traditional indemnity plan, the premium cost is low if it is a high-deductible plan. c. In managed care plans, employers contract with the health care service provider. d. In traditional indemnity plans, the government waives the doctor's fees or the hospital charges. e. A group health insurance is a contract between pharmaceutical companies and the health care provider.
18. Which of the following is true of insurance underwriting?
a. Insurance underwriting is any activity that reduces the chance that a loss will occur. b. Insurance underwriting is a process used to avoid an act that would create a risk. c. Insurance underwriting is a process that helps insurers determine the insurance needs of the potential insured. d. Insurance underwriting is any activity that lessens the severity of loss once it occurs. *e. Underwriters design rate classification schedules so that people pay premiums that reflect their chance of loss.
11. Which of the following represents a disadvantage of a whole life insurance policy?
a. It is difficult to evaluate the true cost of a whole life insurance policy at the time of purchase. b. A whole life insurance policy provides only temporary coverage for a set period. c. A whole life insurance policy may require a policyholder to pay higher premiums when the policy is renewed. *d. A whole life insurance policy often provides lower yields than other investment vehicles. e. A whole life insurance policy does not provide any tax advantages on accumulated earnings.
20. Which of the following leads to the payment of a higher insurance premium by the potential insured?
a. Job promotion of the potential insured b. High-paying career of the potential insured *c. Obesity of the potential insured d. Childbirth in the family of the potential insured e. Wedding of the potential insured
104. Which of the following is true of long-term care insurance?
a. Long-term-care policies do not reimburse the insured for the cost of services incurred on a day-to-day basis. b. The maximum duration of benefits is only one year. c. There is no waiting period to receive the benefits. d. Most long-term-care insurance policies are non-renewable in nature. *e. Many policies offer inflation protection riders for an additional premium.
16. ___________ is the choice to accept and bear the risk of loss.
a. Loss assumption *b. Risk assumption c. Risk avoidance d. Loss avoidance
19. ___________ is an effective way to handle small exposures to loss when insurance is too expensive.
a. Loss assumption *b. Risk assumption c. Risk prevention d. Loss control
90. Which of the following is a public assistance program that provides health insurance benefits only to those who are unable to pay for health care?
a. Medicare *b. Medicaid c. Blue Cross/Blue Shield d. Point-of-service (POS) plan e. Workers' compensation
99. The insurance designed to help with nursing home or in-home care due to chronic illness is called:
a. Medicare. b. major medical plan. c. comprehensive major medical plan. d. nursing home care. *e. long-term care.
4. Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?
a. Multiple indemnity clause *b. Guaranteed purchase option c. Disability clause d. Paid-up insurance option e. Extended-term option
46. Which of the following is a characteristic of a universal life insurance policy?
a. No flexible premiums *b. No choice in how the accumulation account is invested c. Absence of a savings feature d. Fixed premiums and protection levels e. Lighter fees than other insurance policies
107. Which of the following is true of the workers' compensation insurance?
a. Self-employed people pay lower premium to their employees for workers' compensation insurance as compared to corporate employees. b. Workers' compensation insurance includes only rehabilitation expenses. c. Employers are required to bear half of the entire cost of workers' compensation insurance. *d. Workers' compensation insurance compensates workers who are injured on the job or become ill through work-related causes. e. Compensation received from the insurance coverage is based on historical usage; employees who file the least claims pay the lowest premiums on the insurance coverage.
26. While performing needs analysis when determining the available resources to offset the economic needs, you would generally ignore:
a. Social Security benefits. *b. the educational qualification of the children. c. the earning potential of the surviving spouse. d. savings corpus. e. the employer-provided group life insurance.
27. Insurance companies use _____ to determine whom they will insure and what they will charge for the coverage.
a. Social Security survivor's benefits b. the needs analysis method *c. underwriting d. risk assumption e. loss control
49. Which of the following is true of a good insurance agent?
a. The agent is aggressive while pursuing business from the potential insured. *b. The agent is recommended by professionals like bankers and attorneys. c. The agent charges high commissions for providing insurance coverage. d. The agent replies with fancy buzzwords and generic answers to questions. e. The agent is the first one to solicit the potential insured's patronage.
75. Which of the following statements is true of the health reimbursement account (HRA)?
a. The entire health care cost of employees is reimbursed and deposited in a health reimbursement account by the employer. b. The premium amount for the insurance policy of dependents is reimbursed and deposited in a health reimbursement account by employer. *c. The amount of unused money in the health reimbursement account can be rolled over annually. d. The employer's contribution to the health reimbursement account is taxable. e. The health reimbursement account balance is replenished by the insurance company when the account balance is used up.
30. _____ determines the amount of life insurance coverage required for an individual by considering his or her financial obligations and available financial resources in addition to life insurance.
a. The savings analysis method *b. The needs analysis method c. The earnings analysis method d. The liabilities analysis method e. The borrowings analysis method
67. Which of the following is true of companies that sell insurance directly to consumers? NO CLUE
a. Their insurance agents review the loss claims and file a lawsuit against the negligent party. b. They hire only Certified Insurance Counselors as their captive agents. c. Their premiums are lower than for companies that sell insurance through agents. d. They reimburse a higher amount of insurance claims than the companies that sell insurance through agents. e. Their deductibles are lower than the companies that sell insurance through agents.
32. Which of the following types of insurance policies provides temporary coverage for a set period?
a. Universal life insurance policy b. Whole life insurance policy c. Variable life insurance policy *d. Term life insurance policy e. Extended life insurance policy
38. Universal life insurance is:
a. a deferred premium payment policy. b. primarily sold to college students. *c. a combined investment plan and insurance policy. d. a provision for a secondary beneficiary. e. less expensive than other policy types.
77. An exclusive provider organization (EPO) is _____.
a. a hybrid form of health maintenance organization (HMO) that reimburses members a specified percentage of the cost *b. a managed care plan that reimburses members only when affiliated providers are used c. a managed care plan in which subscribers receive services from physicians practicing from their own offices d. a hybrid form of health maintenance organization (HMO) that allows members to go outside the HMO network for care e. a prepaid hospital and medical expense plan that allows members to use nonaffiliated providers
131. A higher home insurance cost may result from:
a. a low crime rate in the area of the insured's residence. *b. a low credit score of the insured. c. fewer insurance claims from the area of the insured's residence. d. the lack of a swimming pool at the insured's residence. e. fewer captive insurance agents hired by the insurance company.
63. Group life insurance is:
a. a term policy designed to pay off the mortgage balance in the event of the borrower's death. b. an insurance that is sold in conjunction with the sale of a group of assets. c. an insurance in which benefits are a function of the returns being generated on the investments selected by the policyholder. *d. an insurance that provides a master policy for a group. e. an insurance that issues many master policies for an insured.
114. The community rating approach to health insurance premium pricing _____.
a. advocates offering Social Security Medicare program to all individuals irrespective of their age b. favors the government's contribution to the health savings account (HSA) *c. prohibits insurance companies from varying rates based on health status or claims history d. considers only medical insurance coverage from a private insurance company e. offers consumer directed health plans that go one step beyond a flexible-benefit plan
96. A supplementary medical insurance (SMI) provides health care protection beyond the basic hospital coverage for:
a. all Medicare recipients. b. all social security recipients. c. all workers' compensation insurance recipients. d. Medicaid recipients who pay for SMI on a voluntary basis. *e. anyone age 65 or over who pays premiums on a voluntary basis.
152. A(n) __________ agent represents multiple insurance companies.
a. captive b. business c. casualty *d. independent
124. An insurance company assigns more complex loss cases to a __________.
a. captive insurance agent *b. claims adjustor c. Chartered Property and Casualty Underwriter d. Certified Insurance Counselor
17. Insurance companies make profit by:
a. charging consultation fees to the insured. b. avoiding the risk of loss of the insured. c. charging underwriting fees from insurance agents. *d. paying out less than the sum of the premiums and the earnings on them. e. giving less than the amount mentioned in the policy to the insured
130. Comprehensive automobile coverage refers to:
a. complete coverage including liability, medical payments, and damage to the automobile. * b. coverage for damage to an insured automobile from perils (with a few exceptions) other than collision. c. coverage that adds items of personal property, such as CB radios and telephones, that are ordinarily excluded. d. coverage for bodily injuries suffered in an automobile accident. e. coverage for damage due to a multi-car collision.
24. The most preferred technique for determining how much life insurance coverage is needed for an individual is:
a. computing the Human Life Value. b. using the probability of death each year, prevailing interest rates, and assumed inflation rates to find the discounted present value of a future income stream. *c. assessing the family's total economic needs and subtracting the financial resources available to meet those needs. d. estimating the sum of money which, when paid in installments, will produce the same income as the person would have earned after deducting assumed amounts for taxes and personal maintenance expenses. e. using the multiple-of-earnings method adjusted for occupation.
1. You want to pay premiums for 20 years and have your insurance premium obligations finished at that time. However you feel you will need life insurance for the rest of your life. You should choose a _____ insurance.
a. continuous premium whole life *b. limited payment whole life c. single premium whole life d. renewable premium whole life e. convertible whole life
33. A life insurance policy with a small face amount where the premium may be collected weekly by agents is termed _____.
a. credit life insurance b. mortgage life insurance *c. industrial life insurance d. special purpose insurance e. group life insurance
117. A _____ is standard in disability income policies.
a. deflation protection b. noncancelable agreement c. long-term-care insurance *d. waiver of premium e. home insurance coverage
105. Employers set up a salary reduction agreement with the employees if:
a. employees pay hospitalization charges for the pre-existing conditions. b. employees pay health care costs due to lapse of insurance coverage. *c. employees need additional insurance benefits. d. employees do not look for ways to avoid exposure to health care loss before it occurs. e. employees are injured on the job or become ill through work-related causes.
12. Nonforfeiture rights guarantee that a policy owner will not lose his or her policy's _____.
a. face value b. death benefits for survivors *c. cash value d. premium refunds e. premium reductions
138. Standard homeowner's policies will not include coverage for damage done by __________.
a. fire *b. Flood c. Lightning d. wind
119. The average age of the American population ___________.
a. has been constant over the last three decades *b. is increasing c. is projected to be constant for the next three decades d. is decreasing
129. Section II of a homeowner's insurance contract covers:
a. hospitalization costs for the insured. b. contractual wrongdoing. c. the house and its contents. *d. the cost of defending the insured. e. the dwelling, accompanying structure, and personal property of the insured.
47. The _____ method is the most accurate method of determining the amount of life insurance coverage needed for an individual.
a. human life value b. multiple earnings c. risk assessment d. economic identification *e. needs analysis
37. The underwriting function of insurance companies is designed to ensure that premiums are based on_____.
a. income levels b. the value of losses c. the value of gains *d. the chance of losses e. expense levels
153. An increase in the amount of the deductible will __________.
a. increase the insurance coverage b. decrease the replacement cost of the insured property *c. decrease the amount of insurance premiums d. increase the personal property floater coverage for the insured property
28. A life insurance policy can be structured so that death benefits are paid directly to a(n) ___________ which means that creditors cannot claim the cash benefits from the life insurance policy.
a. insurance agent *b. named beneficiary c. underwriter d. insurance broker
100. An individual receiving health care:
a. is allowed to receive a one-time payment only from his/her insurance company for this care. b. is allowed to receive multiple payments from only two insurance companies for this care. *c. is allowed to receive multiple payments from more than one insurance company for this care. d. is allowed to receive either compensation from the employer or a one-time payment from only one insurance company for this care. e. is allowed to receive payments from his/her her employer only twice in hislifetime.
123. Negligence occurs when someone:
a. is not insured. b. fails to act as an insured. *c. fails to act in a reasonable manner. d. admits an error. e. is more than 18 years of age.
54. Term life insurance is characterized by _____.
a. level annual premiums throughout one's life *b. premium amounts related to the age of the insureds c. its inappropriateness for most people's life insurance needs d. non-convertibility e. cash value accumulation
132. A liability suit could result against you if:
a. lightning strikes your home. b. your son falls down the stairs of your home. c. your automobile is stolen. *d. your dog bites your neighbor. e. smoke from the fireplace fills your house.
44. The death benefit of a(n) _____ life insurance policy may go down because of poor investment returns.
a. limited payment b. whole *c. variable d. group e. industrial
142. The first step in buying property and liability insurance is to develop a(n) __________.
a. list of insurance agents offering insurance *b. inventory of exposures to loss c. statement of premiums of five different insurance companies d. list of floater policies
5. ___________ is an activity that reduces the chance that a loss will occur.
a. loss control b. risk transfer *c. loss prevention d. risk avoidance
9. The purchase of insurance is a common form of _____ by the insured.
a. loss prevention *b. risk transfer c. risk assumption d. risk avoidance e. loss control
48. Insurance is a tool that can reduce one's _____ risk.
a. mental *b. economic c. accident d. exposure
69. Funds for Medicare benefits come from:
a. monthly payments by users directly to the health care service organization. b. the co-payment for health care services by the insured. c. the premiums paid by the employers for the employees. *d. Social Security taxes paid by covered workers and their employers. e. the health care service organization.
106. Medicare and Medicaid cover ___________.
a. more than half of the total cost of long-term care b. all the costs related to long-term care *c. less than half of the total cost of long-term care d. the balance between the actual medical cost and the coverage amount
51. The insurance portion of a universal life policy is most analogous to:
a. mortgage insurance. b. group insurance. c. whole life insurance. *d. term insurance. e. variable insurance.
3. The most accurate way to determine how much life insurance you need is to use the ___________ method.
a. multiple-of-earnings *b. needs analysis c. disposable income d. DuPont analysis
111. Workers' compensation insurance will make compensation payments to an injured worker _____.
a. only if he has been hurt on the job *b. only if he cannot prove negligence on the part of his employer c. only if the worker has a take-home salary of $5,000 or more d. only if his or her spouse is unemployed e. only if the worker has a minimum of four dependents
144. A personal liability umbrella policy is more likely to be opted for by __________.
a. people who cannot afford a basic health policy b. people who cannot afford a basic homeowner's and automobile insurance *c. people with high incomes and high net worth d. people with low incomes and low net worth
74. A ___________ is a hybrid form of health maintenance organization (HMO) that allows members to go outside of the HMO network for care. NO IDEA
a. point-of-service (POS) plan b. Blue Cross Blue Shield plan c. fee-for-service plan d. traditional indemnity plan
103. An insured individual's right to continue a health insurance policy if he or she chooses is known as:
a. policy exclusion. b. co-insurance. *c. renewability d. benefits duration
91. Medicare is a government-sponsored health care plan composed of Part A and Part B. Part B covers ___________.
a. post-hospital medical services b. therapy, rehabilitation, and home health care c. inpatient hospital services *d. imaging, laboratory tests, and prosthetic devices
89. Medicare is a government-sponsored health care plan composed of Part A and Part B. Part A provides ___________.
a. prescription drug coverage b. services of physicians and surgeons *c. inpatient hospital services d. home health services
52. The basic purpose of insurance is to _____.
a. protect your health *b. protect yourself from economic losses c. supplement your income d. shield you from bad decisions e. protect yourself from non-financial losses
43. The primary purpose of a life insurance plan is to help:
a. provide tax benefit to the beneficiaries of the policy in the event of the insured's untimely death. *b. in the protection of the dependents of the insured from financial loss in the event of his or her untimely death. c. in the loss prevention of the insured in the event of his or her untimely death. d. in controlling the loss of the insured in the event of his or her untimely death. e. in the risk avoidance of the insured in the event of his or her untimely death.
118. Dependent children ___________ will usually be covered by your health insurance policy.
a. regardless of age *b. up to a stated maximum age c. up to two in number d. regardless of their employment
10. A(n) _____ is a common provision in many term policies.
a. reward clause *b. renewable clause c. loss prevention clause d. limited risk clause e. arbitration clause
22. The probability of a loss occurring can be reduced by_____.
a. risk observance *b. loss prevention c. risk assumption d. loss retention e. insurance
40. Underwriting refers to _____:
a. selling insurance at a premium less than that of the competitors. b. the payment of a claim. c. a method for developing policy wording. *d. the determination of which exposures to insure. e. restoring the claimant to the financial condition prior to loss
126. A personal liability umbrella policy typically includes:
a. subsidies for flood insurance established in cooperation with a private insurance agent. *b. coverage for auto-related liability losses in excess of the limits purchased in the automobile insurance. c. coverage for only other types of vehicles such as mobile homes. d. the basic health and homeowner's protection needed by most families. e. the provision for assessment of liability by the police at the scene of the accident.
155. It pays to comparison shop for insurance policies because of the __________.
a. subsidized deductible options b. different educational qualifications of the captive agents *c. large variations in premiums and services d. different legal liabilities of insurance agents
42. Henry must make set premium payments on his insurance policy until he dies and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.
a. term life *b. continuous whole life c. limited payment whole life d. viatical life e. group life insurance
31. Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.
a. term life insurance *b. whole life insurance c. universal life insurance d. variable life insurance e. mortgage life insurance
59. It can be difficult to evaluate the true cost of a _____ at the time of purchase.
a. term life insurance b. whole life insurance *c. universal life insurance d. variable life insurance e. mortgage life insurance
39. Families faced with the loss of a principal wage earner receive Social Security benefits _____.
a. that are deducted from the insurance proceeds, for the purpose of tax calculation b. after paying additional taxes on the benefit amount *c. from the government that are intended to provide basic, minimum support d. that amount to 5 to 10 times the current income of the principal wage earner e. after the repayment of all the financial obligations of the principal wage earner
97. The purchasing power of income from a long-term disability policy is protected by _____.
a. the Affordable Health Care Act (ACA) *b. the Cost-of-living adjustment (COLA) provision c. Medicare benefits d. Social Security income e. the Health reimbursement account (HRA)
156. The principle of indemnity will prevent:
a. the act of one person from being imputed to another. *b. an insured from collecting more than what he or she has lost. c. a negligent third party from being held liable for damages if the injured party is insured. d. a significant amount of loss control activity. e. an insurer from ever waiving its right to subrogation Exam #2 Potential Discussion Questions
149. Section I of a homeowner's insurance policy covers:
a. the cost of defending the insured. b. the reasonable expenses incurred by an insured in helping the insurance company's defense. c. hospitalization costs provided to the insured. *d. the dwelling, accompanying structure, and personal property of the insured. e. the liability for negligence of the insured.
6. Insurance companies use actuarial data to measure:
a. the creditworthiness of a given population. *b. the risk of loss for a given population. c. the wealth of a given population. d. the gross productivity of a given population. e. the consumer price index of a given population.
113. Some employers providing health insurance as an employee benefit offer only one plan and pay __
a. the entire health care cost for employees b. the entire health care cost for dependents of employees c. the entire health care premium only for dependents of employees *d. either all or part of the health care insurance premiums e. the entire cost of the additional insurance benefit desired by employees
116. Long-term care is a term used to describe _____.
a. the inflation protection riders in the insurance policy *b. the delivery of medical care to persons with chronic medical conditions in a nursing home c. the coverage for a serious illness or accident that prevents an insured person from working for an extended period d. an extended period of hospital stay due to a serious illness or accident e. compensation provided to the workers who are injured on the job or become ill through work-related causes.
56. You can learn about the financial strength of an insurance company by checking ___________ rating system.
a. the insurance agent's b. the U.S. Securities and Exchange Commission's *c. Standard & Poor's d. the Federal Bureau of Investigation's
135. The liability coverage under a personal automobile policy is provided to:
a. the insured for damage. b. the family members of the insured. c. the holder of an auto loan. d. the lawyer needed to defend criminal charges. *e. the non-family members involved in the accident.
36. A life insurance policy can be structured so that the death benefits are paid directly to a named beneficiary which means that _____.
a. the life insurance proceeds are paid directly to named beneficiaries after payment of state or federal income taxes *b. the cash benefits from your life insurance policy cannot be claimed by creditors c. the life insurance proceeds are invested as premiums for the life insurance of the beneficiary d. the cash benefits are remitted to the beneficiary after the beneficiary pays estate taxes e. the life insurance company makes additional payments to the family of the insured so that they continue to live comfortably
145. A homeowner's policy does not provide protection for:
a. the personal property of family members at home. b. the personal property of family members who are in college. c. a business unit's property valued below $2,500 while it is on the insured premises. *d. the personal property of tenants. e. the personal property of family members who are traveling.
110. The Affordable Care Act (ACA) requires insurance companies to adhere to: NO IDEA
a. the pure community rating approach for individuals and small businesses. b. the adjusted community rating approach for individuals and small businesses. c. the modified community rating approach for SEC registered corporations. d. the unadjusted community rating approach for SEC registered corporations. e. the cost-of-living adjustment (COLA) for individuals and small businesses.
87. Employees should consider risk assumption for certain health risks because:
a. these are covered by Social Security. b. they are required to pay health care costs when their insurance coverage lapses. *c. they would rather pay small amounts from savings than higher premiums to cover them. d. they need not look for ways to avoid exposure to risks before they occur. e. they will eliminate some or all of the factors from their lifestyle and reduce their chances of becoming ill.
70. People under the age of 65 years are covered by Medicare health insurance plan if:
a. they agree to pay a negotiated fee for medical services. b. they have been denied health insurance because of a pre-existing condition. c. they volunteer to pay premiums. d. they are injured on the job or become ill through work-related causes. *e. they receive monthly Social Security disability benefits.
134. Auto insurance is needed primarily:
a. to finance automobile maintenance. *b. as protection against potential liability claims. c. as a part of the homeowner's insurance requirements. d. to counter the effects of increasing fuel prices. e. to satisfy federal requirements for a lawful citizenship.
78. One of the key goals of the Affordable Health Care Act of 2010 is:
a. to increase the amount of Social Security taxes. * b. to reduce the number of uninsured citizens in the country. c. to provide health care coverage to the employers employing less than 50 full-time employees. d. to underwrite the employee health care coverage on behalf of employers. e. to tax workers for job-related illness or injury.
95. In order to qualify for disability insurance under Social Security a person must be:
a. unable to carry out the duties of the current job. *b. unable to carry out the duties of any job. c. ill for at least two years. d. willing to undergo rehabilitation. e. unable to pay health insurance premium for more than 6 months.
64. A(n) _____ policy is a contract between an individual and a company under which the company agrees to reimburse the individual for losses suffered by him or her according to specified terms.
a. underwriting b. risk *c. insurance d. debt e. reimbursement
57. Group life insurance is most likely to be for ___________.
a. variable life b. special purpose c. whole life *d. a term
45. The policy owner assumes the investment risk with a ___________ insurance policy.
a. whole life b. term life *c. variable life d. viatical life
98. Disability income insurance will provide income to a disabled or ill person ___________.
a. without a waiting period b. with unlimited funds for years *c. with a waiting period before income is received d. with payments made to the recipient up to age 70
72. A ___________ covers the cost of visits to a doctor's office or for a doctor's hospital visits
including consultation with a specialist. ,a. surgical expense insurance b. hospitalization insurance policy c. elective surgery insurance *d. regular medical expense insurance
55. By ___________
insurance companies decide who will be insured by them. ,a. loss prevention b. risk assumption *c. underwriting d. needs analysis
84. A good health insurance plan embodies more than financing medical expenses
lost income, replacement services; it incorporates ___________. ,a. Social Security benefits b. flexibility in insurance premium payment on the lapse of the insurance policy c. lifetime limited dollar insurance coverage on pre-existing conditions *d. means of risk reduction such as risk avoidance
108. The ACA's provisions relating to long-term care include the Community Living Assistance Services and Support Program (CLASS) NO IDEA
which will be administered by ___________. ,a. the U.S. Department of Health and Human Services b. private insurance providers c. the Social Security administration d. the government
120. A coordination of benefits provision in a health care policy ___________ by collecting benefits in multiple payments for health care.
'a. prohibits collecting more than 100 percent of covered charges b. allows the collection of only 75 percent of covered charges c. prohibits collecting more than 80 percent of covered charges d. allows the collection of only 50 percent of covered charges
23. Jonathan estimates that financial resources worth $2000,000 will be necessary to protect his family after his death. What is the amount of insurance, as per the needs analysis method, that Jonathan should purchase if he has current financial resources worth $1,000,000?
*a. $1,000,000 b. $2,000,000 c. $2,500,000 d. $1,500,000 e. $500,000
94. Michael's estimated current monthly take-home pay is $4500. His total existing monthly benefits is $2,950. Michael's estimated monthly disability benefits is _____.
*a. $1,550 b. $550 c. $2,950 d. $7,450 e. $4,500
29. Marilyn Simms died with a $200 000 life insurance policy. Her husband, Jack, is the primary beneficiary, and their children, Mimi (age 24) and Ann (age 30), are the contingent beneficiaries. All three survive Marilyn. How will the policy proceeds be distributed?
*a. $200,000 to Jack b. $100,000 each to Mimi and Ann c. $100,000 to Jack and $50,000 each to Mimi and Ann d. $66,666 each to Jack, Mimi, and Ann e. $150,000 to Jack and $25,000 each to Mimi and Ann
136. Homeowners are eligible for reimbursement on a full replacement-cost basis only if they keep their homes insured for at least __________ of the amount that it would cost to build them today.
*a. 80 percent b. 20 percent c. 100 percent d. 50 percent
112. Which of the following changes would tend to increase the premium on a disability policy?
*a. A shorter elimination period b. Use of "any occupation" definition of disability instead of "own occupation to which one is reasonably suited" c. Decreasing the benefit level to 50% from 66% of prior earnings d. Decreasing the payment period until age 65 to a maximum of 2 years e. Mandatory disability insurance in which the employer pays the entire premium
50. _____ can be both an advantage and a disadvantage of universal life insurance.
*a. Flexible premiums b. Tax features c. High returns d. Unbundling premiums e. Underwriting
85. Ben's (aged 40) health coverage charges a low ($15) deductible each time he visits a doctor or hospital. Other than the low per-service deductible there is very little cost sharing. However, Ben has the advantages lack of deductibles, few or no exclusions, and not having to file insurance claims. Which of the following most likely provides Ben's health coverage?
*a. HMO b. Blue Cross Blue Shield association c. Commercial insurer (major medical) d. Medicare e. Fee-for-service indemnity plan
122. Which of the following is a basic seldom-used homeowner's policy with very narrow coverage?
*a. HO-1 b. HO-2 c. HO-3 d. HO-4 e. HO-6
53. ___________ is any activity that lessens the severity of loss once it occurs.
*a. Loss control b. Loss prevention c. Risk control d. Risk avoidance
15. _____ involves abstaining from any activity that will affect an individual financially.
*a. Risk avoidance b. Loss prevention c. Loss control d. Risk assumption e. Premium collection
60. Which of the following is true of risk avoidance?
*a. Risk avoidance is any activity that helps evade an act that creates a risk. b. Risk avoidance is any activity that increases the chance that a loss will occur. c. Risk avoidance is any activity that lessens the severity of loss once it occurs. d. Risk avoidance is an act that reduces the probability that a loss will occur. e. Risk avoidance is an effective way to handle small exposures to loss when insurance is too expensive.
73. When trying to determine your disability income needs you should consider your available disability benefits from employers, income needs, and:
*a. Social Security benefits. b. wage policy. c. non-monetary incentives. d. flexible benefits. e. income tax bracket.
