Your Money and Credit Exam 3
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?
$200,000 to Jack
A grace period permits a policyholder to retain full death protection even though the premium has not been paid for:
31 days.
________ is a health care plan that emphasizes cost control and preventive treatment.
A managed care plan
_____ can be both an advantage and a disadvantage of universal life insurance.
Flexible premiums
Which of the following is a basic, seldom-used homeowner's policy with very narrow coverage?
HO-1
Which of the following homeowners' policies provides coverage for damage caused by electrical current?
HO-2
________ insurance is a type of insurance that is issued in policies with small face amounts, often $1,000 or less.
Industrial life
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?
Medicaid
Which of the following is a characteristic of a universal life insurance policy?
No choice in how the accumulation account is invested
Which of the following leads to the payment of a higher insurance premium by the potential insured?
Obesity of the potential insured
________ is an effective way to handle small exposures to loss when insurance is too expensive.
Risk assumption
________ is the choice to accept and bear the risk of loss.
Risk assumption
Which of the following statements is true of the health reimbursement account (HRA)?
The amount of unused money in the health reimbursement account can be rolled over annually.
Which of the following is true of insurance underwriting?
Underwriters design rate classification schedules so that people pay premiums that reflect their chance of loss.
Universal life insurance is:
a combined investment plan and insurance policy.
An exclusive provider organization (EPO) is _____.
a managed care plan that reimburses members only when affiliated providers are used
A captive agent is:
an insurance agent who represents only one insurance company.
Group life insurance is:
an insurance that provides a master policy for a group.
The principle of indemnity will prevent:
an insured from collecting more than what he or she has lost.
An insurance company assigns more complex loss cases to a
claims adjustor
A personal liability umbrella policy typically includes:
coverage for auto-related liability losses in excess of the limits purchased in the automobile insurance.
Comprehensive automobile coverage refers to:
coverage for damage to an insured automobile from perils (with a few exceptions) other than collision.
An increase in the amount of the deductible will
decrease the amount of insurance premiums
Insurance is a tool that can reduce one's _____ risk.
economic
Employers set up a salary reduction agreement with the employees if:
employees need additional insurance benefits.
A captive agent typically represents two to ten different insurance companies.
false
A personal property floater and a personal liability umbrella policy offer similar coverage.
false
Disability insurance is available only when someone is completely incapable of returning to work during his or her lifetime.
false
Earthquakes are covered under most homeowner's insurance policies.
false
Generally, the primary purpose of life insurance is to provide a tax-advantaged investment plan.
false
Homeowner's co-insurance requires the insured to carry insurance protection equal to the market value of the house.
false
If an insured has a high-risk hobby, then he or she should expect to pay less for life insurance.
false
Increasing the amount of the deductible is the only way to bring down the cost of homeowner's insurance.
false
Insurance agents always disclose their commissions in an insurance policy.
false
Medicare and Medicaid are administered by hospitals and physicians.
false
Underwriters can predict whether or not you will suffer a loss this year.
false
Uninsured motorists protection usually provides protection to the insured's car if a hit-and-run incident occurs.
false
Families faced with the loss of a principal wage earner receive Social Security benefits _____.
from the government that are intended to provide basic, minimum support
A(n) ________ agent represents multiple insurance companies.
independent
It pays to comparison shop for insurance policies because of the
large variations in premiums and services
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.
limited payment whole life
The insurance designed to help with nursing home or in-home care due to chronic illness is called:
long-term care.
The probability of a loss occurring can be reduced by_____.
loss prevention
The settlement option chosen by most policyholders is:
lump sum.
It is not possible to avoid ________
most risks in your life
Insurance companies make profit by:
paying out less than the sum of the premiums and the earnings on them.
A personal liability umbrella policy is more likely to be opted for by
people with high incomes and high net worth
A _________ is a hybrid form of health maintenance organization (HMO) that allows members to go outside of the HMO network for care.
point-of-service (POS) plan
A coordination of benefits provision in a health care policy ______________ by collecting benefits in multiple payments for health care.
prohibits collecting more than 100 percent of covered charges
A _______ covers the cost of visits to a doctor's office or for a doctor's hospital visits, including consultation with a specialist.
regular medical expense insurance
An insured individual's right to continue a health insurance policy if he or she chooses is known as:
renewability.
A(n) _____ policy is a type of term insurance.
straight term
Long-term care is a term used to describe _____.
the delivery of medical care to persons with chronic medical conditions in a nursing home
While performing needs analysis, when determining the available resources to offset the economic needs, you would generally ignore:
the educational qualification of the children.
The liability coverage under a personal automobile policy is provided to:
the non-family members involved in the accident.
A homeowner's policy does not provide protection for:
the personal property of tenants.
Insurance companies use actuarial data to measure:
the risk of loss for a given population.
An individual's need for additional life insurance can be determined by looking at the difference between his or her family's available financial resources after his or her death and his or her family's total economic needs.
true
Generally, group insurance plans are more reasonably priced than individual policies.
true
Guaranteed renewable term insurance allows you to renew a policy for another term without qualifying medically.
true
Risk avoidance is attractive when the cost of avoidance is less than the cost of handling it some other way.
true
Suppose you carelessly, but unintentionally, knocked someone down a flight of stairs in your home. You would be covered by your homeowner's insurance.
true
The availability of group coverage through employee benefit programs should be considered when developing a life insurance program.
true
The federal government has introduced a subsidized flood insurance program for homeowners and tenants living in designated communities.
true
The need for life insurance increases with children.
true
Underwriters use life expectancy figures to look at overall longevity for various age groups and also consider specific factors related to an applicant's health, habits, and experiences.
true
Dependent children __________ will usually be covered by your health insurance policy.
up to a stated maximum age
Sales commissions and marketing expenses can increase the costs of a fully loaded _____ policy.
whole life insurance
Which of the following is true of long-term care insurance?
Many policies offer inflation protection riders for an additional premium.
To purchase a personal liability umbrella policy, the insured party must already have
relatively high liability limits on their homeowner's and auto coverage
Standard homeowner's policies will not include coverage for damage done by
flood
During the past few decades, the percentage of our income spent on health care:
has increased due to an aging U.S. population.
In order to predict the number of losses that will occur in a given time accurately, insurance companies must study a __________ numbers of cases.
large
Patrick's monthly take-home pay is $5,000. 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 _____.
$2,000
A $100,000/$300,000 bodily injury liability automobile policy could pay up to a total of ________ to all injured victims in one accident.
$300,000
Which of the following policy features allows the insured to increase coverage periodically without showing proof of insurability?
Guaranteed purchase option
Which of the following homeowners' policies provides coverage for the damage caused by the accidental discharge of water or steam?
HO-2
Which of the following homeowners' policies is best suited to a renter of an apartment?
HO-4
The _______ is a good homeowner's policy for a condominium owner.
HO-6
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?
Raising her deductible from $250 to $1,000
Which of the following is true of the multiple-of-earnings method?
The multiple-of-earnings method determines the amount of life insurance coverage needed by multiplying the gross annual earnings of the insured by some selected number.
_____ 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.
The needs analysis method
Which of the following is true of companies that sell insurance directly to consumers?
Their premiums are lower than for companies that sell insurance through agents.
Which of the following is true of the workers' compensation insurance?
Workers' compensation insurance compensates workers who are injured on the job or become ill through work-related causes.
A supplementary medical insurance (SMI) provides health care protection beyond the basic hospital coverage for:
anyone age 65 or over who pays premiums on a voluntary basis.
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.
inflation
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.
inflation
The _____ method is the most accurate method of determining the amount of life insurance coverage needed for an individual.
needs analysis
Replacement-cost coverage is the reimbursement of:
the cost of repairing or replacing damaged structures without deducting physical depreciation.