Chapter 10: Property and Motor Vehicle Insurance

if your home is insured for $100,000, and your homeowner's policy covers up to 75% for household belongings, how much coverage do you have for household belongings?

$75,000

which of the following are possible limits to the coverage for additional living expenses in a homeowner's insurance policy?

10% to 20% of the home's coverage full cost of temporary living expenses up to a year

which of the following are typical of the limits of coverage for personal belongings in a homeowner's insurance policy?

55% of the home coverage 75% of the home coverage 70% of the home coverage

asking questions such as which risks you can afford to take without having to back away from your goals is part of which step in the risk management planning process?

Develop a plan to reach your goals

(T/F) people's risk management needs typically remain unchanged throughout their lives.

False people's risk management needs change at various points in their lives.

(T/F) the main types of risks related to a home and an automobile are property damage and loss of income due to premature death.

False. home and automobile risks are related to property damage or loss and injuries or damage to the property of others.

which home insurance policy form is used for covering perils such as flood, earthquake, war, and nuclear.

HO-3

(T/F) Automobile insurance covers property and personal damage caused by the policyholder's car.

True

the best plans are flexible enough to handle changing _______ situations.

life or lifestyle

a deductible is a set amount that the policyholder must pay _______ on an insurance policy.

per loss

uncertainty or lack of predictability is called ______.

risk

an insurance company is a risk-________ business that agrees to pay for losses that may happen to someone it insures. This is found in the discussion of what is insurance at the beginning of the chapter.

sharing

______ risk, such as the risk of starting a business or gambling with your money, carries a chance of either loss or gain.

speculative

when a risk includes a chance of either loss or gain, it is called:

speculative risk

in general, young drivers (under _____) and those over ______ have more frequent and severe accidents.

25 70

In the past, most homeowner's policies contained a provision requiring that the building be insured for at least _____ of the replacement value.

80%

in the past, most homeowner's policies contained a provision requiring that the building be insured for at least _______ of the replacement value.

80%

(T/F) increasing your deductibles will increase your premiums for your homeowner's policy

False

(T/F) increasing your deductibles will increase your premiums for your homeowner's policy.

False increasing deductibles will decrease premiums

(T/F) the main bodily injury coverages are bodily injury liability, mortgage payments coverage, and uninsured motorist protection.

False. the main bodily injury coverages are bodily injury liability, medical payments coverage, and uninsured motorist protection.

(T/F) your homeowner's insurance covers damage to your home, other structures on your property, and your automobile.

False. your automobile is not covered.

if more claims have been filed in an area, home insurance rates for people living there will be _______.

Higher

_______ is the legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible.

Liability

Your ten year old son left his skateboard at the top of the stairs in your house. Your neighbor accidentally steps on it and falls down the steps and gets hurt. This is and example of:

Negligence.

(T/F) risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.

True

(T/F) the best risk management plans are flexible enough to handle life's changing situations.

True

(T/F) the coverage of Comprehensive Form HO-5 allows for the replacement costs for the contents of your home

True

wages loss insurance will reimburse you for:

any salary or income lost due to injury in an automobile accident

deciding not to buy collision insurance on your car is risk __________.

assumption or taking

self-insurance is a risk _______ strategy that requires the establishment of a monetary fund to cover the cost of a loss

assumption, taking, management, or assuming

an assigned risk pool of people who are unable to obtain _______ insurance

automobile

the coverage of comprehensive Form HO-5 allows for the replacement costs for the contents of your home and guaranteed replacement cost coverage on ______.

buildings or structures

personal property that is excluded from homeowner's insurance includes ________.

business property aircraft rental property

which of the following risks are covered by homeowner's insurance?

coverage for the financial risks associated with injuries to others coverage for the financial risks of damage to personal property coverage for your place of residence.

what are resources that may be available to you to mitigate the risks that you face?

family public programs personal assets

defective house wiring is an example of a(n) ________ that increases the chances of fire.

hazard

personal risks are uncertainties surrounding loss of _________ or life due to premature death, illness, disability, old age, or unemployment.

income

according to the text, the financial impact of retirement includes decreased:

income and unplanned living expenses

most of the money automobile insurance companies pay in claims goes for ________.

legal expenses other costs that arise when someone is injured medical expenses

________ is the legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible.

liability

which of the following strategies help reduce the financial impact of death?

life insurance estate planning social security survivor benefits.

______ is the failure to take reasonable or ordinary care in a situation.

negligence

an insurance policy requires the payment of an annual ______ as part of a contract to cover the risk. This is found in the discussion of what is insurance.

premium or fee

you shouldn't select a company based on _______ alone.

price

personal property that is excluded from homeowner's insurance includes _________.

rental property business property aircraft

Shifting of _____ is done through the purchase of an insurance policy.

risk

___________ is the chance of loss or inquiry.

risk

fewer accidents and less vandalism occur in _______ areas than in urban cities.

rural, country, or suburban

towing and emergency road service coverage pays for the cost of getting your vehicle to a _____________.

service station, but not for the cost of repairs.

The purpose of a financial responsibility law is to force drivers to _______.

show their ability to cover the costs of damage or injury from automobile accidents

Kenny is involved in an accident that was not his fault. His property damage amounted to $20,000, but the other driver's insurance only covers $15,000. Kenny's policy pays the rest because he has:

underinsured motorist coverage.

The main bodily injury coverages are:

uninsured motorist's protection medical payments coverage bodily injury liability

the strategies for reducing the financial impact of illness include:

use medicare purchase health insurance practice health-enhancing behaviors.

In general, ______ and those over ______ pay higher premiums

young drivers 70

Brad Duvall gets married and finds that after he gets married his insurance premiums drop by $300 per year. Which of the following automobile insurance factors is most likely the reason for the decrease?

Driver classification

personal risks are uncertain surrounding loss of income or life due to _________.

old age illness unemployment disability.

which of the following strategies can reduce the financial impact of retirement?

part-time work savings and investments pension and retirement accounts

medical payments coverage covers ______ in your car including friends, carpool members, and others who ride in your vehicle who may be injured in an accident.

passengers, people, persons, everyone, injuries, occupants, anyone, or other.

when you buy a car you have also bought a(n) _______ whenever you drive it.

peril

automobile insurance covers ________ and personal damage (bodily injury) caused by the policyholder's car.

property

the goals of insurance include minimizing personal, _______, and liability risks.

property

when there is only a chance for loss if a specified event occurs, a risk is called ________.

pure risk

which of the following accurately describes the split limits of 100/300 with bodily injury liability for automobile insurance?

$100,000 limit claim per person and $300,000 limit for each accident

Suppose Kenny is involved in an accident that was not his fault and the other driver has 50/100/25 coverage limits. Kenny's injuries amount to $20,000. How much will the other driver's policy cover for Kenny's claim?

$20,000

_______________ is an insurance claim settlement method in which the insured receives payment based on the current replacement cost of a damaged or lost item less depreciation.

Actual cash value

Jack Carter lives in Charleston and knows that in the past there have been earthquakes in the Charleston area. He wants to get insurance coverage against this type of loss. What type of insurance is Jack likely to need to cover this type of loss?

An endorsement

(T/F) Insurance for your home should cover the amount you paid for the home.

False it should cover the cost of rebuilding or repair, not the purchase price

(T/F) Comprehensive physical damage insurance for your car covers damage to your vehicle if you are at fault in an accident.

False. collision insurance covers your vehicle if you are at fault in an accident

(T/F) the amount you can recover with collision insurance is limited to the wholesale value of your vehicle.

False. coverage is limited to the retail value of the vehicle.

(T/F) insurance for your home should cover the amount you paid for the home

False. it should cover the cost of rebuilding or repair, not the purchase price.

David Black and his best friend are in a car accident with another vehicle and it is David's fault. David and his friend are both injured in the accident. Which part of David's automobile policy would most likely cover the cost of the injuries to David and his friend?

Medical payments coverage

Burglars break into your house and steal your stereo equipment, TV and VCR. Which part of your homeowner's insurance policy should cover the costs of the items you have lost?

Personal property coverage

Lester McCann is concerned because other students do not appear to be good drivers around the university. He decides to walk to campus so that his car is not damaged. Which risk management strategy is he employing?

Risk avoidance

Which of the following is a way you can get a discount on automobile insurance?

Take a driver's education class Maintaining good grades in school Insuring two or more cars with the same insurance company Installing an anti-theft device in your car **All of the above can qualify you for a discount on automobile insurance.**

(T/F) Life insurance replaces income lost when the policyholder dies

True

physical damage to a property is caused by hazards such as fire, wind, water, and smoke.

True

(T/F) completing driver training and maintaining a safe driving record will help reduce your automobile insurance premiums.

True a poor driving record will increase your premiums just like a safe driving record will help lower premiums

(T/F) a household inventory is a list or other documentation of personal belongings with purchase dates and cost information.

True and inventory can be a list, spreadsheet, or photo record.

(T/F) lending institutions require home mortgage borrowers to have home insurance

True as part of the loan agreement, mortgage borrowers must maintain sufficient home insurance.

(T/F): Home owner's insurance covers damages to your home due to many perils, such as fire and windstorm, and it also covers personal injuries received by persons on your property.

True it does include liability coverage if someone gets injured.

(T/F) completing driver training and maintaining a safe driving record will help reduce your automobile insurance premiums

True. a poor driving record will increase your premiums just like a safe driving record will help lower premiums.

(T/F) your driver classification is one of the main factors that affects the premium for your vehicle insurance.

True. good drivers pay lower premiums.

(T/F) Comparison shopping can usually help to lower the premiums on your homeowner's insurance policy.

True. studies show that premiums can be lowered by 30% or more by comparing companies.

A(n) _______________ is supplementary personal liability coverage that provides added protection against personal injury claims such as libel, slander defamation of character and invasion of privacy.

Umbrella policy

The method of claim settlement that pays you based on the current replacement cost of an item less depreciation is call the _________.

actual cash value method

the method of claim settlement that pays you based on the current replacement cost of an item less depreciation is called the _________.

actual cash value method

which of the following are covered by renter's insurance?

additional living expenses personal liability personal property

coverage included from homeowner's insurance includes all of the following except:

animals

what questions should you ask when deciding to file an auto insurance claim?

are you required to file all damages? was someone else involved? how much is your deductible? what recent claims have you had?

A(n) ______ risk pool consists of people who are unable to obtain automobile insurance.

assigned

the main bodily injury coverages are:

bodily injury liability uninsured motorist's protection medical payments coverage

what kind of insurance pays for damage to an automobile in case of an accident regardless of fault?

collision

what are some ways of reducing premiums on automobile insurance?

comparison shopping for automobile insurance maintaining a safe driving record completing driver training installing security devices

the risk of physical damage to your car such as fire, theft, falling objects, and hitting an animal are covered by _______ physical damage

comprehensive also glass breakage, vandalism, wind, hail, flood, tornado, lightning, earthquake, avalanche

which of the following best defines homeowner's insurance?

coverage for your residence and its financial risks

when purchasing insurance you can get the best value by selecting the appropriate ________ amount and being aware of _________ that affect insurance costs.

coverage or policy factors, aspects, conditions, variables, or risks

one question you should ask before filling an auto insurance claim is "how much is your __________?"

deductible

increasing you ________ lowers your premium.

deductible or deductibles

Your insurance ______ ______ is based on your gender, age, and driving record.

driver classification

Which of the following are negligent actions?

failing to remove large items from a stairway improperly supervising children in a swimming pool.

(T/F) The amount you can recover with collision insurance is limited to the wholesale value of your vehicle.

false. coverage is limited to the retail value of the vehicle.

(T/F) Medical payments coverage covers the costs of health care for people who were injured in the other automobile involved in an accident with your car.

false. medical payments coverage covers costs of health care for peoples in your car who are injured in an accident.

collision insurance pays for the damage to an automobile as a result of an accident regardless of __________.

fault

a _____ is state legislation that requires drivers to prove their ability to cover the cost of damage or injury caused by an automobile accident.

financial responsibility law

Home insurance covers the policyholder's place of residence and its associated _________, such as damage to personal property and injuries to others.

financial risks

a home located in an area where there is a history of high claims will have ______ premiums

high, higher, greater, larger, bigger, or increased

Expensive cars usually carry _____ premiums

higher

banks require home mortgage borrowers to have ______ insurance

home, property, homeowners, homeowner's, or house

as construction costs rise, you should _______ the amount of insurance coverage.

increase or raise

most homeowner's insurance policies have a built-in _______ clause that increases coverage as property values increase.

inflation or escalator

If you have a mortgage on your home, the bank will require property insurance in an amount that covers its financial _________. This is found in the discussion of home insurance cost factors.

investments, investment, contribution, contributions, property or interests

If you have a mortgage on your home, the bank will require property insurance in an amount that covers its financial ______. This is found in the discussion of home insurance cost factors.

investments, investment, contribution, contributions, property, or interests

Underinsured motorist coverage provides financial protection when another driver has insurance, but the coverage is _______ than the amount needed to cover the damages.

less, insufficient, inadequate, below, lesser, or lower

which of the following are factors in setting a driver classification?

marital status age and sex driving record

losses from floods and earthquakes are usually ______ by homeowner's insurance.

not covered

losses from floods and earthquakes are usually _______ by homeowner's insurance.

not covered

medical payments coverage covers _____ in your car including friends, carpool members, and other who ride in your vehicle who may be injured in an accident.

passengers, people, persons, everyone, injuries, occupants, anyone, or others

the main influences on the _____ paid for home and property insurance include location, type of structure, and policy type.

premium, premiums, or installment

the main influences on the ______ paid for home and property insurance include location, type of structure, and policy type.

premium, premiums, or installment

Personal risk, property risk, and liability risk are called ________ risk since there would be a chance of loss only if the specified events occurred

pure or insurable

your ______ is the place of residence used to determine your automobile insurance premiums.

rating territory

your insurance protection for your home should be based on the amount needed to ______ or repair your house and not the amount you originally paid for the home.

rebuild, build, replace, or fix

the amount you can collect with collision insurance is limited to the actual _____ value of the automobile at the time of the accident.

retail, cash, market, selling, sale, monetary, or resale

property covered under property damage liability insurance includes:

street signs lampposts buildings other property vehicles

losses from floods are not covered under homeowner's insurance, but by:

the National Flood Insurance Program

under the actual cash value (ACV) method, the payment you receive is based on:

the current replacement cost of a damaged or lost item less depreciation

Property damage liability protects you against financial loss when you damage:

the property of others

property damage liability protects you against financial loss when you damage:

the property of others

The main influences on the premium paid for home and property insurance include:

type of structure location of home policy type

the main influences on the premium paid for home and property insurance include:

type of structure location of home policy type coverage amount

what type of policy supplements are basic personal liability coverage and provides protection for injury claims?

umbrella policy

The main factors that influence premiums for automobile insurance are:

vehicle type, rating territory,& driver classification

the coverage of tenants form HO-4 covers damages to personal property from all of the following perils except:

war

the main types of risks related to a home and an automobile are ________.

your responsibility for damage to the property of others your responsibility for injuries to others damage or loss to your property

(T/F) when we make a decision to assume risk, we are essentially self-insuring

True this is true because we bear the entire risk if something happens.

which of these strategies help reduce the financial impact of a disability?

collecting disability income from a disability insurance policy collecting social security disability income Drawing upon saving and investments during your disability

which of the following strategies reduce the financial impact of property loss?

flood insurance automobile insurance homeowner's insurance security systems

the protection against possible loss that gives you peace of mind is called

insurance

additional living expense coverage pays for the cost of _______.

living in a temporary location while your home is being repaired.

The goals of insurance includes:

minimizing personal risks minimizing liability risks minimizing property risks

Fire, windstorms, robbery, accidents, and premature death are all _________ that can cause a loss. this is found in the discussion of types of risk.

perils or events

Which of the following financial losses can you insure against?

personal and property damange when driving loss of home or belongings catastrophic illness

you inherited a $25,000 ring from your grandmother. You should cover it with a(n) _________.

personal property floater

______ damages to a property is caused by events such as fire, wind, water, and smoke

physical

shifting of risk is done through the purchase of an insurance ________ from an insurance company

policy, coverage or plan

An insurance policy contract requires that the policyholder pay an annual amount, usually called a(n) ___________, to cover the risk. This is the cost of the policy

premium

personal risk, property risk, and liability risk are called _________ risk since there would be a chance of loss only if the specified events occurred

pure or insurable

when there is only a change for loss if a specified event occurs, a risk is called _______.

pure risk

tenants form HO-4 covers personal belongings from the perils of which of the following?

windstorm fire smoke

Choosing never to sky-dive is an example of risk ________.

avoidance

The four risk management methods include risk __________, risk __________, risk ________, and risk _______________.

avoidance reduction assumption shifting

when purchasing insurance you can get the best value by selecting the appropriate coverage amount and:

being aware of factors that affect insurance costs.

the financial impact of death includes:

final expenses loss of services loss of income

a personal property ________ for a homeowner's insurance policy requires a detailed description of the items covered and periodic _______ to verify the current value.

floater appraisals, evaluation, inventory, or appraisal

a basic risk management plan sets ________ to reduce the potential _______ of income due to premature death, illness, accident, or unemployment.

goals or objectives loss or risk

Understanding and managing risks can __________.

help you to provide better protection for you and your family

understanding and managing risks can _________.

help you to provide better protection for you and your family.

which of the following are covered by a homeowner's policy?

house personal property other structures

personal risks are uncertainties surrounding loss of _________ or life due to premature death, illness, disability, old age, or unemployment

income or wages

a basic risk management plan sets goals to reduce potential loss of one' _______, savings, and property due to personal liability.

income, earnings, or wages

Life insurance replaces ________ that would be lost if the policyholder died.

income, wages, earnings, money, or salary.

examples of the risk reduction technique of risk management include _______.

installing smoke alarms wearing seat belts in a car

a household ________ is a list or other documentation of personal belongings, with purchase dates and cost information

inventory or ledger

Hazards increase the likelihood of a(n) __________ through a peril.

loss

the financial impact of illness includes:

loss of income catastrophic hospital expenses.

the financial impact of disability includes which of the following?

loss of income loss of services increased expenses

Liability is the legal responsibility for the financial cost of another person's financial _________ or injuries.

loss, costs, losses, or cost

liability is the legal responsibility for the financial cost of another person's financial _______ or injuries.

losses, costs, loss or cost

an umbrella policy supplements your basic _______ liability coverage and provides protection for injury claims, such as libel, slander, defamation of character, and invasion of property.

personal

which of the following are examples of the risk reduction technique of risk management?

quitting smoking wearing seat belts

the connection between managing risks and maximizing your success can be best described by which of the following statements?

reducing risks and, therefore, financial loss improves your chances for economic, social, physical, and emotional well-being.

wearing your seatbelt or installing smoke alarms would belong to the risk ______ technique of risk management.

reduction or avoidance

insurance similar to homeowner's that is available for tenants is ________.

renter's insurance

the financial impact of property loss includes:

replacement cost of a stolen item cost to repair

an insurance company shares the ________ and assume financial responsibility for losses from an insured risk. this is found in the discussion of what is insurance toward the beginning of the chapter.

risk

an insurance company shares the ___________ and assumes financial responsibility for losses from an insured risk.

risk

a deductible is a combination of which of the following two risk management methods?

risk assumption risk shifting

which of the following are risk assumption actions?

self-insuring deciding not to purchase collision insurance.