principals of insurance test 4
To calculate a human life value, it is necessary to deduct certain costs from a person's average annual earnings. These costs include A) funeral costs. B) income taxes. C) investment income. D) pension benefits after retirement
B) income taxes.
Which statement is true concerning the economic problem of premature death in the United States? The economic impact of premature death of the breadwinner varies for different types of families. Increased life expectancy has increased the economic problem of premature death over time. A) I only B) II only C) both I and II D
1 only
What is the length of the readjustment period which is considered when the needs approach is used to determine the amount of life insurance to own? A) 3 to 6 months B) 1 to 2 years C) until the youngest child reaches age 18 D) until the surviving spouse reaches age 65
1 to 2 years
Which of the following $100,000 whole life insurance policies, issued by the same company to a man age 32, would require the highest first-year premium? A) continuous premium (ordinary) life B) whole life paid-up at 65 C) 10-payment whole life D) 20-payment whole life
10-payment whole life
Which of the following statements about premature death is (are) true? 1. From an economic standpoint, premature means death before a specified age, such as 65. 2. The economic problem of problem of premature death in the U.S. has declined substantially over time. A) I only B) II only C) both I and II D) neither I nor II
2 only
Which of the following statements about second-to-die life insurance is (are) true? 1. The insurance is a form of endowment coverage. 2. The premium is lower than the combined cost of purchasing a life insurance policy on each insured. A) I only B) II only C) both I and II D) neither I nor II
2 only
Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true? It provides bodily injury liability coverage for any vehicle rented by the insured. It can be added to PAP to insurance motorcycles and motor scooters. A) I only B) II only C) both I and II D) neither I nor II
2 only
Which of the following statements is (are) true regarding the results of the 2014 study by the Life Insurance Market Research Association (LIMRA) on the adequacy of life insurance owned by households in the United States? 1. The average household is adequately insured against the risk of premature death. 2. The average household is significantly underinsured against the risk of premature death. A) I only B) II only C) both I and II D) neither I nor II
2 only
Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision coverage. Which of the following losses would be covered under his policy? A) Rob wrecked his car while using it as a taxi cab. B) Thieves took Rob's radar detector from his car. C) A flash flood washed Rob's car off the road and damaged it. D) The new tires Rob had on the car were defective and wore out after 2 months.
A flash flood washed Rob's car off the road and damaged it.
All of the following statements about the conversion of a term policy are true EXCEPT A) Under an attained age conversion, the premium is based on the insured's attained age at the time of conversion. B) Under an original age conversion, the policyowner must pay a financial adjustment in addition to the premium for the new policy. C) Most insurers require original age conversion to take place within a specified period (5 years, for example) of the issue of the term policy. D) Evidence of insurability is required before a conversion is permitted.
Evidence of insurability is required before a conversion is permitted.
One provision of the Affordable Care Act provides creates in each state a transparent and competitive insurance marketplace where individuals and small firms can purchase affordable and qualified health coverage. This marketplace is called a A) Medicaid plan. B) Medicare plan. C) Health Maintenance Organization (HMO). D) Health Insurance Marketplace.
Health Insurance Marketplace.
Tony has an unendorsed Personal Auto Policy which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy? A friend in the car is injured while Tony is driving a covered auto. A passenger on a motorcycle driven by Tony is injured when Tony hit another vehicle. A) I only B) II only C) both I and II D) neither I nor II
I only
Which of the following statements about endowment insurance policies is (are) true? The face amount is paid if the insured dies during the policy period or at the end of the policy period if the insured is still alive. The use of endowment insurance has increased in recent years because of its favorable tax treatment. A) I only B) II only C) both I and II D) neither I nor II
I only
Which of the following statements about life insurance cash values is (are) true? Cash values are a result of the level premium method of purchasing life insurance. The cash value of a policy must always exceed the policy's legal reserve. A) I only B) II only C) both I and II D) neither I nor II
I only
Which of the following statements about universal life insurance is (are) true? 1. The current interest rate credited to the cash value at the time the policy is issued remains fixed for the life of the policy. 2. A monthly deduction is made from the policy's cash value for the cost of insurance protection. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements about variable universal life insurance is (are) true? I Variable universal life insurance has fixed premium payments. Variable universal life insurance allows the policyowner to decide where the premiums are invested. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements concerning the collision damage waiver when renting an auto is true? It relieves the renter from legal liability to third parties arising out of operation of the rented car. It relieves the renter from legal liability for the vehicle if it is damaged or stolen. A) I only B) II only C) both I and II D) neither I nor II
II only
John has an auto which is covered for collision losses subject to a $250 deductible. Kate's auto also has collision coverage but her deductible is $500. Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kate's car because his car is in the shop for repairs? A) John's policy will pay $1,500, and Kate's policy will pay nothing. B) John's policy will pay $1,750, and Kate's policy will pay nothing. C) Kate's policy will pay $1,750, and John's policy will pay nothing. D) Kate's policy will pay $1,500, and John's policy will pay $250.
Kate's policy will pay $1,500, and John's policy will pay $250.
Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state? A) Larry's policy was suspended while he was in the neighboring state. B) Larry had only $25,000 of liability coverage. C) Larry's policy automatically provided $50,000 of liability coverage. D) Larry's policy automatically provided $100,000 of liability coverage.
Larry's policy automatically provided $50,000 of liability coverage.
Which of the following statements about term insurance is true? A) The coverage is appropriate if the goal is permanent lifetime protection. B) Most policies can be renewed for additional periods without evidence of insurability. C) Premiums increase at a constant rate each time the policy is renewed. D) Most policies have a cash value that is refunded when coverage ceases.
Most policies can be renewed for additional periods without evidence of insurability.
All of the following statements about Part D (coverage for damage to your auto) of the PAP are true EXCEPT A) Coverage may be purchased with or without collision insurance. B) Losses are paid regardless of fault. C) Coverage applies to a nonowned auto occasionally driven by an insured. D) No coverage is provided for newly-acquired vehicles.
No coverage is provided for newly-acquired vehicles.
Which of the following statements about health savings accounts (HSAs) is true? A) There are no limits to annual contributions that an individual may make to his or her HSA. B) Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made. C) The health insurance plan covering the HSA account beneficiary is not permitted to use a deductible. D) HSAs offer no tax benefits for the individual who establishes the account.
Once an individual has reached age 65 or is covered by Medicare, no additional contributions to the HSA may be made.
All of the following statements describe the flexibility available to the owner of a universal life insurance policy EXCEPT A) Policy loans are permitted on an interest-free basis. B) The frequency of premium payments can be varied. C) The death benefit can be increased with evidence of insurability. D) Premium payments can be any amount provided there is sufficient cash value to keep the policy in force.
Policy loans are permitted on an interest-free basis.
The appraisal provision in the Personal Auto Policy is used to determine the A) value of a loss payable under property damage liability. B) amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree. C) amount of auto insurance that should be purchased for an older/antique car. D) value of the loss payable under the medical payments coverage
amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree.
All of the following are typical characteristics of individual medical expense coverage EXCEPT A) annual benefit limits. B) essential health benefits. C) deductibles. D) coinsurance.
annual benefit limits.
Dennis was involved in an accident. He believes the damage to his auto is $7,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss? A) other insurance provision B) agreed amount endorsement C) coinsurance provision D) appraisal provision
appraisal provision
If the value of a vehicle is increased after repairs, such as repainting an entire auto when only one fender or door is damaged, the insurer will not pay for the increase in value. Another name for the increase in value is A) diminution. B) betterment. C) appraisal. D) subrogation.
betterment
Bill is attempting to determine how much life insurance to purchase. He has two dependent children and his wife does not work outside of the home. An advisor suggested that Bill should consider Social Security benefits when doing his life insurance planning. One concern in this regard is the period after Social Security benefits to a widow terminate until they resume again. This period is called the A) blackout period. B) dependency period. C) emergency period. D) readjustment period.
blackout period.
The period during which a surviving spouse is ineligible for Social Security benefits is referred to as the A) emergency period. B) readjustment period. C) dependency period. D) blackout period.
blackout period.
Which of the following statements concerning individual medical expense insurance is (are) correct? Once the deductible is satisfied, no additional deductible is payable during the calendar year. Family deductibles are substantially higher than individual deductibles. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Which of the following statements is (are) true concerning benefit payments under long-term care insurance? Expense-incurred policies pay for actual charges up to a specified daily limit. Per diem policies pay a specified daily benefit regardless of the charges incurred. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Which of the following is a cost/expense that an estate clearance fund is designed to pay? A) burial expenses B) retiring the mortgage C) education costs D) income for the widow(er) during the readjustment period
burial expenses
The human life value is defined as the A) present value of a deceased breadwinner's future gross income. B) future value of a deceased breadwinner's past earnings. C) present value of the family's share of a deceased breadwinner's future earnings. D) future value of the family's share of a deceased breadwinner's future earnings.
C) present value of the family's share of a deceased breadwinner's future earnings.
A car damaged in an auto accident may have reduced market or resale value after it is repaired. Some insureds have sought to recover this reduction in market or resale value. This loss in value is called A) gap coverage. B) betterment. C) diminution. D) subrogation.
diminution.
When using the needs approach, several "special needs" should be considered. One special need is money to cover unexpected events, such as major car repairs, dental bills, or home repairs. Money set aside for this purpose is called a(n) A) estate clearance fund. B) emergency fund. C) readjustment period fund. D) mortgage redemption fund.
emergency fund.
The Affordable Care Act requires all new medical expense plans to provide a comprehensive set of coverages and services. This comprehensive set of coverages and services that must be provided are called A) essential health benefits. B) dread disease benefits. C) long-term care benefits. D) respite care benefits.
essential health benefits.
A common use of second-to-die life insurance is A) insuring children. B) insuring "double income with kids" families. C) estate planning. D) insuring key employees of a business.
estate planning.
A legal reserve in life insurance is a result of A) premium taxes payable by life insurance companies being postponed during the early policy years. B) dividends being paid to policyholders. C) inadequate premiums in the early policy years being subsidized by investment earnings. D) excess premiums in the early policy years being invested at compound interest.
excess premiums in the early policy years being invested at compound interest.
The net amount at risk for an ordinary life insurance policy is the difference between the A) present value of future benefits and the present value of future premiums. B) face amount of the policy and the total premiums that have been paid. C) face amount of the policy and the legal reserve. D) annual premium and the annual policyholder dividend.
face amount of the policy and the legal reserve.
The 2005 PAP states that the insurer has no duty to provide coverage if the insured fails to comply with certain listed duties. In practice, however, the insurer is only relieved of its duty to provide coverage if A) the insured was unaware of the listed duties. B) failure to comply with the duties is prejudicial to the insurer. C) the claim involves bodily injuries of more than $50,000. D) the claim occurred in another state.
failure to comply with the duties is prejudicial to the insurer.
Ellen purchased a health insurance policy. Under the provisions of the Affordable Care Act, which of the following renewal provisions must the insurer use in the policy? A) cancellable B) guaranteed issue C) renewable at the insurer's option D) conditionally renewable
guaranteed issue
Because of the Affordable Care Act, all new medical expense plans that offer individual and group coverage must accept all individuals and employers in the state who apply for coverage. These insurers are required to continue to renew the coverage at the option of the individual or plan sponsor. Thus, under the Affordable Care Act, the renewal provision is A) conditionally renewable. B) guaranteed issue. C) nonrenewable. D) renewable at the insurer's option.
guaranteed issue.
Kevin has an individual disability income policy that his insurer agrees to keep in force until age 60. However, the company has the right to increase the premium each year for the underwriting class in which Kevin has been placed. Which renewal provision is found in Kevin's policy? A) noncancellable B) guaranteed renewable C) conditionally renewable D) nonrenewable.
guaranteed renewable
In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does the PAP provide coverage? A) in Mexico B) in Canada C) in both Mexico and Canada D) anywhere in the world
in Canada
Greta purchased a long-term care policy. Under a typical policy, Greta's eligibility for benefits may be triggered by A) how long premiums have been paid. B) inability to perform activities of daily living. C) continuous hospitalization for at least 60 days. D) eligibility for Medicare benefits.
inability to perform activities of daily living.
The Affordable Care Act has provisions that improve the quality of health care and lower costs. All of the following are examples of these provisions EXCEPT A) reducing paperwork and administrative expenses. B) increasing the number of medical specialists and reducing the number of primary care physicians. C) compensating physicians based on value rather than on the volume of services. D) cracking down on healthcare fraud.
increasing the number of medical specialists and reducing the number of primary care physicians.
Gwen purchased an interesting life insurance policy. A minimum interest rate is guaranteed on the cash value, but additional interest may be credited based on the investment performance of a group of common stocks. There is also a cap on the additional interest credited to the policy. Based on this information, what type of life insurance did Gwen purchase? A) variable life insurance B) indexed universal life insurance C) current assumption whole life insurance D) variable universal life insurance
indexed universal life insurance
The Affordable Care Act requires that most U.S. citizens and legal residents have qualifying health insurance or pay a financial penalty. This provision of the Affordable Care Act is known as the A) Health Insurance Marketplace option. B) public option. C) individual mandate. D) premium subsidy option.
individual mandate.
In which of the following situations would medical payments be paid under an unendorsed PAP? A) injuries incurred while riding a motorcycle B) injuries incurred while an auto is being used without the presumption that permission would have been granted to use the auto C) injuries incurred in an auto while it is used in a share-the-expense car pool D) injuries incurred during the course of employment if workers compensation benefits are available
injuries incurred in an auto while it is used in a share-the-expense car pool
The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to A) add coverage for newly-acquired autos. B) provide coverage for when the insured is using someone else's auto with the permission of the owner. C) insure motorcycles, mopeds, motor scooters, and similar vehicles. D) provide coverage for when the insured is using someone else's auto without the permission of the owner
insure motorcycles, mopeds, motor scooters, and similar vehicles.
Under the Affordable Care Act, if a health insurer does not meet the minimum loss ratio requirement, the insurer must A) pay a fine to the federal government. B) issue rebates to the people the insurer covered. C) not sell any health insurance for a period of one year. D) reduce the premium on the policies it sells the following year.
issue rebates to the people the insurer covered.
Barb was injured in an auto accident. She was totally disabled and collected disability income benefits for 8 months. She would like to return to work on a part-time basis to see if her recovery is complete. During this period, her insurer will pay reduced disability income benefits. This type of disability is called A) recurrent disability. B) presumptive disability. C) permanent disability. D) partial disability.
partial disability.
The inability of the insured to perform some but not all of the important duties of his or her occupation is called A) residual disability. B) total disability. C) recurrent disability. D) partial disability.
partial disability.
The purpose of gap insurance is to A) pay the difference between the bodily injury liability limit purchased and the actual amount of bodily injury liability if it exceeds the limit. B) pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan. C) pay the difference between the medical payments coverage limit and the actual medical expenses of injured family members or passengers in the insured auto. D) pay the difference between the uninsured motorists coverage limit and the actual amount of the medical expenses incurred by the insured.
pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan.
Beth's disability income insurance policy provides benefits for accidental death, dismemberment, and loss of sight. The maximum amount payable under this benefit is known as the A) face value. B) cash value. C) principal sum. D) monthly benefit.
principal sum.
One long-term care insurance benefit trigger considers whether the insured needs supervision to protect against threats to health or safety due to memory loss or disorientation. This benefit trigger is referred to as a(n) A) activities of daily living trigger. B) medical necessity trigger. C) needs test trigger. D) severe cognitive impairment trigger.
severe cognitive impairment trigger.
All the following are common exclusions in a medical expense insurance policy EXCEPT A) dental care. B) surgeons' fees. C) long-term care. D) routine eye care.
surgeons' fees.
The Affordable Care Act includes a provision designed to help small employers make health insurance coverage available to their employees. This provision allows small employers to reduce their federal income tax by a percentage of the employer's contribution to health insurance for employees. This subsidy, in the form of reduction of income taxes, is called a A) marginal tax rate. B) tax credit. C) tax bracket. D) tax deduction.
tax credit.
Gary purchased a Personal Auto Policy (PAP) that included collision coverage. Gary lost control of his vehicle on an icy road. He slid across the center line into oncoming traffic. Another vehicle hit his car, causing severe damage to it. Ignoring any deductible, what is the insurer's liability for damage to Gary's car? A) the greater of the actual cash value or the amount necessary to repair or replace the vehicle B) the replacement cost of the vehicle C) the lesser of the actual cash value or the amount necessary to repair or replace the vehicle D) the original purchase price of the vehicle
the lesser of the actual cash value or the amount necessary to repair or replace the vehicle
Which of the following pieces of information is needed to calculate a person's human life value? A) the marital status of the person. B) the person's estimated annual Social Security benefits after retirement. C) the person's cost of self-maintenance. D) current outstanding debts, including mortgage debt.
the person's cost of self-maintenance.
A vehicle is considered a constructive total loss when A) it cannot be repaired. B) the repair cost exceeds the actual cash value. C) it can be repaired, but the insured prefers a cash settlement. D) it can be repaired, but the insurer prefers a cash settlement.
the repair cost exceeds the actual cash value.
All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP EXCEPT A) vandals damaged a portable cell phone kept in the car. B) theft of a compact disc player which was permanently installed in the auto. C) damage caused to a car's engine because the named insured never changed the oil. D) destruction of a radar detector which overheated and caught on fire.
theft of a compact disc player which was permanently installed in the auto.
Carl would like to purchase life insurance. He would also like to invest in a mutual fund. An agent told Carl about a form of life insurance in which Carl could select where the saving component is invested. This form of life insurance has fixed premiums and the cash value is not guaranteed. This type of life insurance is called A) universal life insurance. B) whole life insurance. C) variable life insurance. D) current assumption whole life.
variable life insurance.
Under the needs approach, when is the dependency period of a surviving spouse assumed to end? A) 1 or 2 years after the breadwinner's death B) when the youngest child reaches age 18 C) when the surviving spouse reaches age 65 D) when the surviving spouse dies
when the youngest child reaches age 18
Kristen has an individual medical expense policy with a $1,000 calendar-year deductible, a $5,000 annual out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the year. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay? A) $4,400 B) $4,800 C) $5,000 D) $5,100
$4,800
Which of the following statements regarding health care expenditures in the United States is (are) true? As a nation, the U.S. spends significantly more per-person on health care than most other industrialized nations. Health care expenditures in the U.S. are high because everyone is covered by a health insurance plan. A) I only B) II only C) both I and II D) neither I nor II
1 only
Dirk required surgery for a kidney impairment. His total bill for medical services was $50,000. Dirk has a medical expense policy with a $1,000 calendar-year deductible and a $5,000 annual out-of-pocket limit. His coinsurance percentage is 20 percent. The out-of-pocket limit applies to coinsurance only. Assuming this surgery and hospitalization were the first medical care that Dirk received during the year and that all of the hospital services were eligible for coverage under the policy, how much of the $50,000 bill will the insurer pay? A) $39,000 B) $39,200 C) $40,000 D) $44,000
$44,000
Sarah purchased a Personal Auto Policy with liability limits of 50/100/25. Sarah ran a stop sign and hit a van. The van sustained $15,000 in damages. The following bodily injuries were suffered by passengers in the van: Passenger #1, $15,000; Passenger #2, $60,000; and Passenger #3, $10,000. Sarah sustained $5,000 in medical expenses, and Sarah's car sustained $10,000 in damages. How much will Sarah's insurer pay under Part A: Liability Coverage? A) $90,000 B) $100,000 C) $115,000 D) $125,000
$90,000
Duties of an insured after a collision loss covered under the PAP include which of the following? Take reasonable steps to protect the vehicle from further damage. Admit fault if the insured believes he or she caused the collision. A) I only B) II only C) both I and II D) neither I nor II
1 only
Which of the following statements about the needs approach for estimating the amount of life insurance to purchase is (are) true? 1. It involves an analysis of various family needs which must be met if a family breadwinner dies. 2. Its use is appropriate only if a person currently has no life insurance protection. A) I only B) II only C) both I and II D) neither I nor II
1 only
Which of the following statements about the payment of defense costs by the PAP is (are) true? They are paid in addition to the policy limits. They are payable even after the limit of liability is exhausted. A) I only B) II only C) both I and II D) neither I nor II
1 only
All of the following statements about optional disability income benefits are true EXCEPT A) Under a cost-of-living rider, benefits are periodically adjusted for inflation. B) A Social Security rider pays additional benefits if the insured is turned down for Social Security disability benefits. C) Adding a return of premium rider results in a lower initial premium. D) Under an option to purchase additional insurance, the insured has the right to buy additional insurance at specified times without evidence of insurability.
Adding a return of premium rider results in a lower initial premium
Which of the following statements about indexed universal life insurance is true? A) It is another name for variable life insurance. B) Although a minimum interest rate is guaranteed, the rate credited can be higher if a specified stock index performs well. C) The cash value is usually credited with 100 percent of the return on the equity index, including dividends paid on the stocks in the index. D) The formula used to determine the additional interest credited to the policy places no limit on the additional interest that can be credited.
Although a minimum interest rate is guaranteed, the rate credited can be higher if a specified stock index performs well.
Sarah is using the needs approach to determine how much life insurance to buy. Her cash needs are $30,000; her income needs are $140,000; and special needs are $100,000. Sarah has the following assets: $20,000 in bank accounts, $30,000 in retirement plans, and $40,000 in investment accounts. Sarah owns no individual life insurance. She is covered by a $50,000 group life insurance policy through her employer. Based on this information, how much additional life insurance should Sarah purchase? A) $80,000 B) $130,000 C) $150,000 D) $160,000
B) $130,000
Julian, age 45, would like to determine how much life insurance to purchase using the human life value approach. He assumes his average annual earnings over the next 20 years will be $40,000. Of this amount, $20,000 is available annually for the support of his family. Julian will generate this income for 20 more years and he believes that 5 percent is the appropriate interest (discount) rate. The present value of one dollar payable for 20 years at a discount rate of 5 percent is $12.46. What is Julian's human life value? A) $184,600 B) $249,200 C) $360,800 D) $400,000
B) $249,200
Prior to passage of the Affordable Care Act, insurance policies typically contained a provision excluding coverage for impairments that were present or were treated during a specified period prior to the effective date of the policy. This provision is a(n) A) time limit on certain defenses. B) preexisting-conditions clause. C) benefit period provision. D) incontestable clause.
B) preexisting-conditions clause.
Angie was injured when her car was struck by a driver who ran a red light. The other driver carried the minimum liability coverage necessary to be considered financially responsible. Angie's injuries were $15,000 above the minimum bodily injury limit. There is a coverage that can be added to the PAP that applies when a negligent driver carries the minimum liability insurance required by the state, but is less than the insured's actual damages for bodily injury. This coverage is called A) medical payments coverage. B) underinsured motorists coverage. C) bodily injury liability coverage. D) uninsured motorists coverage.
B) underinsured motorists coverage.
Which of the following statements about the medical payments coverage of the PAP is true? A) The amount of the benefit typically is $100,000. B) Covered expenses must be incurred within 30 days of the accident. C) Covered expenses include the cost of funeral services. D) The benefit limit applies on a per-accident basis rather than on a per-person basis.
Covered expenses include the cost of funeral services.
Which statement concerning towing and labor coverage under the PAP is (are) true? There's no coverage for towing if the auto breaks down—towing is only covered if the auto needs to be towed after a collision has occurred. Towing and labor coverage pays for repairs at a service station or garage. A) I only B) II only C) both I and II D) neither I nor II
D) neither I nor II
Jenny purchased a Personal Auto Policy (PAP) that included property damage liability, collision coverage, medical payments coverage, and other-than-collision coverage. Jenny had too much alcohol to drink at a graduation party. While driving home from the party, Jenny ran off the road and hit a tree. Police responded to the accident, and Jenny was arrested for driving under the influence of alcohol. Which of the following statements is true regarding the damage to Jenny's car? A) Damage to the car is covered under Jenny's property damage liability coverage. B) Damage to the car is covered under Jenny's collision coverage. C) Damage to the car is covered under Jenny's other-than-collision loss coverage. D) There is no coverage as Jenny was intoxicated at the time of the accident.
Damage to the car is covered under Jenny's collision coverage
Dan picked up his friend Rodney to drive to their softball game. Both Dan and Rodney have a Personal Auto Policy (PAP) with $5,000 of medical payments coverage. Dan hit a parked car, and Rodney was injured, incurring $9,000 of medical expenses. How will this claim be settled under the other insurance provision of the PAP? A) Both insurers will pay $4,500. B) Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000. C) Dan's insurer will pay $4,000 and Rodney's insurer will pay $5,000. D) Dan's insurer will pay $3,000, Rodney's insurer will pay $3,000, and Rodney must pay $3,000 out of his own pocket.
Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000.
All of the following statements about the tax treatment of Health Savings Accounts (HSAs) are true EXCEPT A) Contributions to a qualified HSA are tax deductible. B) Distributions from a qualified HSA used to fund medical expenses are taxable income. C) Investment income in a qualified HSA accumulates income tax free. D) Distributions from a qualified HSA prior to age 65 for nonmedical purposes are subject to a 10 percent penalty tax.
Distributions from a qualified HSA used to fund medical expenses are taxable income.
All of the following are defects which limit the usefulness of the human life value approach in determining the correct amount of life insurance to purchase EXCEPT A) The effects of inflation are ignored. B) Other sources of income for survivors are ignored. C) Earnings are assumed to remain constant. D) Earnings during the individual's productive lifetime are ignored.
Earnings during the individual's productive lifetime are ignored.
The purchase of term insurance is justified by which of the following circumstances? 1. The insured wants to save money through the policy for a specific need. 2. The insured has a temporary need for life insurance protection. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following persons is (are) insured under the uninsured motorists coverage of the PAP? 1. A pedestrian struck by a covered auto if he or she has no insurance to pay medical expenses 2. The spouse of a named insured who is killed by an uninsured motorist A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following situations would be covered under the liability section of the PAP? 1. A mechanic is sued by a pedestrian who is injured when the mechanic has an accident while road testing the insured's auto. 2. The daughter of the named insured is sued after she has an accident when a new friend she just met at a campus hangout lets her drive his car. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements about a variable universal life insurance policy is (are) true? There is a minimum guaranteed interest rate for the cash value. The policyowner has a variety of investment options for the savings component of the policy. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements about disability and disability income insurance is (are) true? Most disability income policies replace 100 percent of gross earnings. The probability of being disabled before age 65 is much higher than commonly believed. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements about eligibility requirements for qualified Health Savings Accounts (HSAs) is (are) true? Only individuals who are eligible for Medicare benefits can establish a qualified HSA. Applicants must be covered by a high deductible health plan and not be covered by any other comprehensive health plan to establish a qualified HSA. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements about long-term care insurance is (are) true? Long-term care insurance is inexpensive, especially if purchased at older ages. Purchasers have a choice of daily benefits and benefit periods. A) I only B) II only C) both I and II D) neither I nor II
II only
Which of the following statements is true regarding disability income insurance? A) The purchase of disability income insurance is not necessary if you are covered under workers compensation. B) Increasing the elimination period reduces the premium for disability income insurance. C) Disability income insurance usually replaces 100 percent of lost income. D) A uniform definition of disability appears in all disability income policies.
Increasing the elimination period reduces the premium for disability income insurance.
All of the following statements about employer-provided group life insurance are true EXCEPT A) Individual evidence of insurability, through a medical exam, is usually required. B) Group life insurance is a common employee benefit. C) A single contact between the employer and the insurer is issued. D) Employees are given certificates of insurance as evidence of the coverage.
Individual evidence of insurability, through a medical exam, is usually required.
All of the following statements about universal life insurance are true EXCEPT A) Interest is credited to the policy's cash value each month. B) Any withdrawal of a policy's cash value reduces the amount of the death benefit. C) Interest credited to a policy's cash value is taxable for the policyowner in the year credited. D) The policyowner can add to a policy's cash value at any time subject to policy guidelines.
Interest credited to a policy's cash value is taxable for the policyowner in the year credited.
All of the following statements about current assumption whole life insurance are true EXCEPT A) It is a form of participating whole life insurance that pays annual dividends. B) An accumulation account is credited with an interest rate based on present market conditions and company experience. C) Under the low-premium version, the premium is subject to change after an initial guaranteed period. D) Under the high-premium version, the premium may be discontinued after a period of time.
It is a form of participating whole life insurance that pays annual dividends.
Which of the following statements about re-entry term insurance is true? A) It permits the coverage to be renewed an unlimited number of times as long as insurability is demonstrated. B) It permits a refund of premiums paid if the term insurance is renewed a specified number of times. C) It permits a lower renewal premium if the insured demonstrates insurability. D) It permits a lapsed whole life policy to be reinstated as term insurance.
It permits a lower renewal premium if the insured demonstrates insurability.
Which of the following statements about limited-payment life insurance is true? A) It is a form of term insurance. B) It matures at the end of the premium-payment period. C) The premium decreases each year during the premium-payment period. D) Its use may be appropriate if a person wants paid-up life insurance during retirement.
Its use may be appropriate if a person wants paid-up life insurance during retirement.
Which of the following statements about individual disability income policies is true? A) Benefits are typically paid only for disabilities resulting from sickness. B) Benefits paid for partial disabilities are usually greater than benefits paid by the same policy for total disabilities. C) Most policies pay a benefit equal to 100 percent of the disabled person's lost income. D) Many policies provide or make available a residual disability benefit for persons who are able to work but at a reduced income.
Many policies provide or make available a residual disability benefit for persons who are able to work but at a reduced income.
The Affordable Care Act has a provision that expands a public assistance program designed to make health coverage available to low-income individuals by increasing the maximum amount of income that can be earned and still qualify for benefits. As a result, millions of individuals are eligible for coverage under this program. This public assistance program is called A) Medicare. B) Health Maintenance Organization. C) Health Insurance Marketplace Exchange. D) Medicaid.
Medicaid.
All of the following statements about individual disability income policies are true EXCEPT A) Premiums are often waived while a person is disabled but must be resumed if the insured recovers. B) At the time of purchase, the insured can choose the length of the benefit period from among several available options. C) In order to encourage rehabilitation, benefits may be continued during periods of vocational training. D) Most disability income insurance policies contain an elimination period of 10 or fewer days.
Most disability income insurance policies contain an elimination period of 10 or fewer days.
Which of the following statements about the liability limits of the PAP is (are) true? The policy can be written with split limits of liability. Prejudgment interest is considered part of the damage award and is subject to the policy limit of liability. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Some managed care plans use physicians, hospitals, and health care organizations that agree to make medical services available to insureds at discounted fees. Insureds are not required to use these entities, but if they do, health care costs are less than if these entities are not used. Such health care entities are called A) Preferred Provider Organizations (PPOs). B) Health Maintenance Organizations (HMOs). C) Blue Cross/Blue Shield Plans. D) Health savings accounts (HSAs).
Preferred Provider Organizations (PPOs).
Which of the following statements about home service life insurance, which evolved over time from a type of life insurance called industrial life insurance, is true? A) Most policies have a face value exceeding $100,000. B) Premiums are usually not collected at the insured's home and are remitted directly to the agent or the insurer. C) Industrial life insurance is group term insurance coverage marketed to employees at the work site. D) This popular product accounts for over 40 percent of the life insurance sold today.
Premiums are usually not collected at the insured's home and are remitted directly to the agent or the insurer.
All of the following statements about long-term care insurance are true EXCEPT A) Premiums can be reduced by electing shorter elimination periods. B) A common benefits trigger is the inability to perform a certain number of activities of daily living. C) Protection against inflation is usually made available as an optional benefit. D) Policies currently sold are guaranteed renewable.
Premiums can be reduced by electing shorter elimination periods.
John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of 100/300/50. John also has a PAP, and his liability limits 250/500/50. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy? A) Sophie's policy will pay $150,000, John's policy will pay $150,000. B) Sophie's policy will pay $50,000, John's policy will pay $250,000. C) Sophie's policy will pay $100,000, John's policy will pay $200,000. D) John's policy will pay the entire amount.
Sophie's policy will pay $100,000, John's policy will pay $200,000.
Which of the following statements regarding convertible term insurance is true? A) Evidence of insurability must be provided to convert the policy. B) More term policies are converted using the original-age method than using the attained-age method. C) The converted coverage has a lower face amount than the term coverage. D) The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.
The annual premium for the cash value coverage is lower if an original-age conversion is used than if an attained-age conversion is used.
Which of the following statements about the uninsured motorists coverage of the PAP is true? A) The coverage usually applies only to property damage. B) The coverage applies only if the uninsured motorist is legally liable. C) Unless higher amounts are purchased, the maximum benefit is normally limited to $1,000. D) A covered person's only recourse is to sue the insurer if there is a disagreement over the amount of damages.
The coverage applies only if the uninsured motorist is legally liable.
Which of the following statements is true regarding return of premium term insurance? A) The insurance is free because premiums are refunded at the end of the coverage period. B) Life insurers charge less for this coverage than for regular term insurance that does not include a refund provision. C) The return of premium is only offered on one-year term insurance policies. D) The coverage is expensive and is not free when time value of money is considered.
The coverage is expensive and is not free when time value of money is considered.
Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP? A) The covered auto was damaged when the car hit a deer. B) The covered auto is vandalized by a thief after it is stolen. C) The covered auto is damaged when it slid off an icy road and hit a fence. D) The covered auto is damaged by a fire after the engine overheated.
The covered auto is damaged when it slid off an icy road and hit a fence.
Which of the following statements about a decreasing term insurance policy is true? A) The face amount of the policy decreases during the policy period, and the premium increases. B) The face amount of the policy decreases during the policy period, but the premium remains level. C) The premium decreases during the policy period, but the face amount remains constant. D) Both the premium and the face amount of the policy decrease gradually over the policy period
The face amount of the policy decreases during the policy period, but the premium remains level.
All of the following statements about ordinary life insurance are true EXCEPT A) Premiums are level throughout the policy period. B) The face amount of the policy is paid if the insured lives to age 65. C) There is a build-up of cash value that can be borrowed by the policyholder. D) It offers the policyholder the flexibility to meet a wide variety of financial objectives.
The face amount of the policy is paid if the insured lives to age 65.
Joyce was injured by an uninsured drunk driver while she was riding in a friend's car. Joyce and her friend each have a PAP with an uninsured motorists limit of $50,000. How much will be paid by each policy if it is determined that Joyce has $70,000 of bodily injuries? A) Each policy will pay $35,000. B) Joyce's policy will pay $50,000, and the friend's policy will pay nothing. C) Joyce's policy will pay $50,000, and the friend's policy will pay $20,000. D) The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.
The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.
Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable? A) The insured injures a pedestrian while operating a friend's new motorcycle. B) The insured backs into and damages the garage door of his rented house. C) The insured intentionally runs into another motorist's car after the driver cut in front of him. D) The insured damages a parked car while driving a dump truck for his employer.
The insured backs into and damages the garage door of his rented house.
Which of the following statements is true about uninsured motorists coverage under the Personal Auto Policy? A) The benefits are paid without regard to fault. B) The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver. C) Uninsured motorists benefits are limited to the medical expenses of the insured. D) Subrogation is never used when uninsured motorists benefits are paid.
The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver.
All of the following statements about the termination provisions of the PAP are true EXCEPT A) The insured can cancel the policy for any reason. B) The insurer can cancel a newly-written policy if it has been in force for fewer than 60 days. C) The insurer can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations. D) The insurer can refuse to renew the policy at its annual anniversary date as long as proper notice is given prior to the end of the policy period.
The insurer can cancel the policy after it has been in force for 60 days only if the insured has three or more traffic violations.
Which of the following statements about savings bank life insurance is true? A) The maximum amount that a depositor can purchase is $50,000. B) The maximum amount of insurance that a depositor can purchase is limited to the amount of money on deposit in his or her savings account with the savings bank. C) The objective of savings bank life insurance is to provide protection to the bank in case a borrower dies before a loan is repaid. D) The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses.
The objective of savings bank life insurance is to provide low-cost insurance to consumers by holding down expenses.
Which of the following statements about variable life insurance is true? A) Premium payments are flexible. B) The death benefit cannot be higher or lower than a guaranteed, specified, value. C) The policyowner has the option of investing the cash value in several investment accounts. D) The cash surrender value of the policy is guaranteed.
The policyowner has the option of investing the cash value in several investment accounts.
Which statement is true regarding the advanced premium tax credits for individuals and families under the Affordable Care Act? A) The tax credit is the same flat amount for individuals and families. B) The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable. C) The tax credit is only available to high-income individuals and families. D) The tax credit is an expenses that lowers taxable income.
The tax credit is based on income and is designed to limit the amount spent on health insurance premiums to make the insurance affordable.
What happens to the premiums for yearly renewable term insurance as an insured gets older? A) They increase at an increasing rate. B) They increase at a decreasing rate. C) They decrease at a constant rate. D) They remain level.
They increase at an increasing rate.
Which of the following statements about mandatory provisions in individual health insurance policies is true? A) Insurers are not permitted to place time limits on filing claims or providing proof of loss. B) The time limit on certain defenses provision prohibits the insurance company from denying a claim based on a fraudulent misstatement by the applicant after the policy has been in force three months. C) The usual length of the grace period is 180 days. D) Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.
Under the reinstatement provision, a health insurance policy that has lapsed can be put back in force.
Which of the following is a covered person under the medical payments coverage of the PAP? A) a family member of the named insured if struck by an auto while crossing the street B) a pedestrian struck by the named insured's auto C) the named insured while she is operating her car as a taxi D) a carjacker who is involved in an accident after stealing the insured's car
a family member of the named insured if struck by an auto while crossing the street
All of the following are considered to be a covered auto under the Personal Auto Policy EXCEPT A) a trailer owned by the insured. B) a temporary substitute auto loaned to the insured while her care is being repaired. C) a motorcycle owned by the insured. D) a newly acquired auto.
a motorcycle owned by the insured.
All of the following are covered autos under the liability section of the PAP EXCEPT A) a nonowned van which is driven by the insured on a regular basis. B) a trailer owned by the named insured. C) a borrowed auto used by the insured as a substitute for a stolen covered auto. D) a newly acquired auto which replaces a vehicle previously described in the policy.
a nonowned van which is driven by the insured on a regular basis.
Which of the following types of families is likely to have the least need for a large amount of life insurance? A) a blended family B) a traditional family C) a single person family D) a sandwiched family
a single person family
All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP EXCEPT A) a vehicle owned by an individual who is insured, but for less than the amount required by the state's financial responsibility law. B) a hit-and-run vehicle, the ownership of which cannot be determined. C) a vehicle owned by an individual who purchased just enough liability insurance to satisfy the state's financial responsibility law. D) a vehicle insured by a company which becomes insolvent before a claim can be paid.
a vehicle owned by an individual who purchased just enough liability insurance to satisfy the state's financial responsibility law.
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred: —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability
bodily injury liability
Problems with the health care system in the United States that led to implementation of the Affordable Care Act included 1. Rising healthcare expenditures 2. Considerable waste and inefficiency in the healthcare system A) I only B) II only C) both I and II D) neither I nor II
both 1 and 2
Purposes of the coinsurance provision in medical expense insurance policies include which of the following? to reduce premiums to prevent overutilization of policy benefits A) I only B) II only C) both I and II D) neither I nor II
both I and II
The insurance company's options for settling a collision loss to a covered auto under the PAP include which of the following? Pay the loss in money. Repair or replace the damaged auto. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Under the Affordable Care Act, which of the following statements are true? 1. Health insurers cannot use pre-existing conditions exclusions. 2. Health insurers cannot impose annual benefit limits and lifetime benefit limits. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Which of the following persons is (are) covered for liability insurance under the PAP? 1. a family member who drives a covered auto 2. a family member who occasionally drives a friend's auto A) I only B) II only C) both I and II D) neither I nor II
both I and II
Which of the following statements about high deductible health insurance plans is (are) true? Coverage under a high deductible health plan is necessary to establish a qualified health savings account (HSA). High deductible health plans provide a maximum limit on annual out-of-pocket expenses. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Which of the following statements about policies sold to preferred risks is (are) true? Preferred risks are people whose mortality experience (deaths per thousand at a given age) is expected to be more favorable than average. Insurers require preferred risks to purchase at least a minimum amount of life insurance, such as $250,000. A) I only B) II only C) both I and II D) neither I nor II
both I and II
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to Ken's car? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability
collision coverage
Tamara purchased a term insurance policy when she had high life insurance needs and limited income. Now Tamara can afford whole life insurance. What term life insurance provision will permit Tamara to switch her term insurance to whole life insurance without having to show that she is still insurable? A) renewal provision B) tax-free exchange provision C) conversion provision D) free look provision
conversion provision
The effect of an annual out-of-pocket limit in an individual medical expense policy is to A) limit the lifetime benefits payable under the policy. B) put a cap on annual benefits the insurer will pay. C) prevent the insured from receiving duplicate benefits if medical expenses are also covered under workers compensation insurance. D) cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses.
cover 100 percent of eligible medical expenses after an insured has incurred a specified amount of annual out-of-pocket expenses.
Dave purchased a life insurance policy. The policy is nonparticipating and the cash values are based on the insurer's present mortality, investment, and expense experience. After 2 years, the insurer will recalculate the premium based on the mortality, investment, and expense experience at that time. Dave purchased A) current assumption whole life. B) variable life insurance. C) universal life insurance. D) variable universal life insurance.
current assumption whole life.
Michael wants to make sure that life insurance proceeds are available to pay his outstanding mortgage balance if he dies. He purchased a type of life insurance in which the amount of coverage gradually declines, just as his outstanding mortgage balance gradually declines. This type of life insurance is called A) modified life insurance. B) decreasing term insurance. C) re-entry term insurance. D) current assumption whole life
decreasing term insurance.
Which of the following is a noneconomic cost associated with premature death? A) reduction in the standard of living B) loss of a parental role model C) additional expenses, such as uninsured medical bills D) loss of the deceased breadwinner's future earnings
loss of a parental role model
Kelly was hit by a car while she was walking to the park. She incurred $750 in medical costs at a hospital emergency room. Kelly has coverage for this charge under which of her Personal Auto Policy (PAP) coverages? A) bodily injury liability B) other-than collision C) medical payments D) collision
medical payments
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover Ken's medical expenses? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability
medical payments coverage
A whole life insurance policy in which premiums are reduced for an initial period (e.g. 3 years) and are higher thereafter is an example of a A) level-term policy. B) modified life policy. C) limited-payment whole life policy. D) variable life policy
modified life policy.
Which of the following statements about yearly renewable term insurance is (are) true? It requires evidence of insurability for renewal. It is most appropriate when an insured needs lifetime protection. A) I only B) II only C) both I and II D) neither I nor II
neither I nor II
Which of the following statements is (are) true with respect to the collision damage waiver on rented cars? It is inexpensive and is provided at no charge by most rental car companies. It waives the renter's liability for bodily injury liability arising out of use of the rented auto. A) I only B) II only C) both I and II D) neither I nor II
neither I nor II
The difference between the legal reserve of a whole life policy and the face amount of insurance is the A) cash value. B) net amount at risk. C) premium. D) dividend accumulations.
net amount at risk.
Individual medical expense insurance sold in the Health Insurance Marketplace is characterized by which of the following? A) narrow range of benefits B) no lifetime benefit limits C) no exclusions D) first-dollar coverage
no lifetime benefit limits
Most family heads need substantial amounts of life insurance. However, with limited income, money spent on life insurance reduces the amount of discretionary income available for other high-priority needs. What an insured person gives up when he or she purchases life insurance instead of using the premium dollars for other purposes is called the A) estimated cost of life insurance. B) net cost of life insurance. C) real (inflation-adjusted) cost of life insurance. D) opportunity cost of buying life insurance.
opportunity cost of buying life insurance.
Owen's car is insured under a Personal Auto Policy (PAP). A hail storm occurred one evening, and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto? A) property damage liability B) uninsured motorists property damage C) collision D) other-than-collision
other-than-collision
Alex, age 26, purchased a 20-payment whole life insurance policy. After Alex has made 20 premium payments, his life insurance policy is considered A) matured. B) reduced. C) expired. D) paid-up.
paid-up.
Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred. —The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages. —Ken incurred $5,000 in medical expenses. —The car that Ken hit was a total loss. Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to the car that Ken hit? A) bodily injury liability B) collision coverage C) medical payments coverage D) property damage liability
property damage liability
Jessica is an agent for LMN Life Insurance Company. She met with Brad, who was interested in purchasing life insurance. Jessica explained the various uses of life insurance, including income for Brad's wife during the 1- or 2-year period following Brad's death. This period is known as the A) dependency period. B) estate clearance period. C) blackout period. D) readjustment period.
readjustment period.
One provision of the Affordable Care Act is designed to benefit young adults up to age 26. This provision allows these young adults to A) remain covered under their parents' health insurance policies. B) receive a tax credit for their health insurance premium if they are unemployed. C) receive low-interest government loans to finance their health insurance. D) receive coverage under Medicare if they are not covered by a private health insurance plan.
receive low-interest government loans to finance their health insurance.
Prior to passage of the Affordable Care Act, insurers could go back to the date a health insurance policy became effective and render the policy void due to a clerical error. This practice, which is prohibited under the Affordable Care Act except in cases of fraud or intentional misrepresentation of a material fact, is called A) estoppel. B) retention. C) rescission. D) reformation.
rescission.
Tom and Nancy Boyle provide financial support for their two children. In addition, they provide financial support for Tom's aged father and Nancy's aged mother. The Boyle family can be described as a A) blended family. B) single-parent family. C) two-income earner family. D) sandwiched family.
sandwiched family.
All of the following are covered as supplementary payments under the liability section of the PAP EXCEPT A) the cost of an appeal bond in a lawsuit stemming from an auto accident. B) the cost of a bail bond for a traffic violation when no accident is involved. C) interest which accrues on a liability judgment covered by the policy. D) reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy.
the cost of a bail bond for a traffic violation when no accident is involved.
All of the following are insured persons under the liability coverage of the PAP EXCEPT A) a friend to whom the named insured loans a covered auto. B) the employer of the named insured for actions resulting from the named insured's use of a covered auto. C) the former spouse of the named insured who moved out of the home 2 years ago when the divorce was finalized. D) a relative of the named insured if a member of the same household.
the former spouse of the named insured who moved out of the home 2 years ago when the divorce was finalized.
After the Personal Auto Policy has been in force for 60 days (or is a renewal policy), all of the following are grounds for the insurer to cancel the policy EXCEPT A) nonpayment of premiums B) the insured's license to drive is suspended C) the insurer discovers material misrepresentation by the insured in the application process D) the insured received a traffic ticket
the insured received a traffic ticket
What is the purpose of the extended nonowned liability coverage endorsement to the PAP? A) to provide liability coverage for an insured's employer when an insured uses his or her auto for business purposes B) to provide liability coverage for an insured who occasionally operates a nonowned auto C) to provide liability coverage for anyone who loans a covered auto to another driver D) to provide liability coverage for an insured who operates a nonowned auto on a regular basis
to provide liability coverage for an insured who operates a nonowned auto on a regular basis
All of the following are methods used to fund the Affordable Care Act EXCEPT A) an excise tax on the sale of medical devices. B) reduced payments to Medicare Advantage plans. C) tort reform measures that reduce medical malpractice claims. D) savings in the Medicare and Medicaid programs from reduced fraud and abuse.
tort reform measures that reduce medical malpractice claims.
Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings? A) medical payments B) uninsured motorists C) underinsured motorists D) bodily injury liability
uninsured motorists
All of the following are historical reasons for the increase in health care expenditures in the U.S. EXCEPT A) cost insulation because of third-party payers. B) employer-sponsored health insurance. C) universal health insurance coverage. D) technological advances in health care.
universal health insurance coverage.
Ann is considering the purchase of a life insurance policy with these characteristics: flexible premium payments, the insurance and savings components are separate, the interest rate credited to the cash value is tied to a changing market interest rate but a minimum interest rate is guaranteed, and a monthly administrative fee is charged. Ann is considering buying A) whole life insurance. B) variable life insurance. C) universal life insurance. D) current assumption whole life.
universal life insurance.
