Finance Ch 8

According to the text, the amount of property damage liability coverage that is suggested is:

$50,000 to $100,000.

HO-2

-(broad form) -covers wider range -falling objects and damage from ice, snow, sleet

Which of the following are risk assumption actions? Self-insuring Deciding not to purchase collision insurance Installing smoke detectors in all rooms Wearing a seat belt

-Self-insuring -Deciding not to purchase collision insurance

The coverage of HO-3 policies includes which of the following perils? Fire and lightning Nuclear accidents Theft Smoke War Windstorms Flood

-fire and lightning -theft -smoke -windstorms

Examples of risk reduction include:

-installing smoke alarms -wearing seat belts in a car

Hazard

A factor that increases the likelihood of loss through some peril.

Liability risks

Losses caused by negligence Resulting in injury or property damage

property damage liability

Motor vehicle insurance coverage that protects a person against financial loss when that person damages the property of others.

financial responsibility law

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

Premium

The amount of money a policyholder is charged for an insurance policy.

Policy

a written contract for insurance

HO-1

basic form

t/f: Homeowner's insurance does not cover injuries to people on property.

false

t/f: Insurance for your home should cover the amount you paid for the home.

false -insurance should be based on the amount of money you would need to rebuild/repair your house

Risk management is a ____-range planning process.

long

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

risk

Not eating a high fat diet and exercising lower the chances of illnesses. This is an example of:

risk reduction

The most common method of dealing with risk is to:

risk shift

Speculative risk

risk that carries a change of either loss or gain

Setting aside a special fund to make sure that you would cover yourself in the event of a loss is:

self-insurance

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 higher the deductible:

the more risk the insured is assuming

Insured

to be protected by a policy

t/f: Not buying flood insurance on a house is an example of risk assumption.

true

The main bodily injury coverages are: medical payments coverage uninsured motorist's protection collision coverage bodily injury liability

-bodily injury liability -medical payments -uninsured motorist's protection

Two standard renter's insurance policies

-broad form -comprehensive form

Pure risk

-insurable risk -personal, property, and liability risks -accidental and unintentional

insurance company

-insurer -A risk-sharing firm that assumes financial responsibility for losses that may result from an insured risk.

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

-location -type of structure -coverage amount and policy type

What are the most common risks?

-personal -property -liability

What is covered by renter's insurance?

-personal property protection -additional living expenses coverage -personal liability and related coverage

Which of the following are covered by renter's insurance? - flood damage -personal property -other structures -additional living expenses -personal liability

-personal property protection -additional living expenses coverage -personal liability and related coverage

What two types of damage does auto insurance cover?

-property damage -personal damage (bodily injury)

Self-insurance

-setting up a special fund, perhaps from savings, to cover the cost of a loss -like if you don't insure and older car

What does a homeowner's insurance policy cover?

1. The building in which you live and any other structures on the property 2. Additional living expenses 3. Personal property 4. Personal liability and related coverage 5. Specialized coverage

Household inventory

A list or other documentation of personal belongings, with purchase dates and cost information.

no-fault system

A motor vehicle insurance program in which drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

bodily injury liability

Coverage for the risk of financial loss due to legal expenses, medical costs, lost wages, and other expenses associated with injuries caused by an automobile accident for which the insured was responsible.

collision insurance

Motor vehicle insurance that pays for damage to the insured's vehicle when it is involved in an accident.

Deductible

The set amount that the policyholder must pay per loss on an insurance policy. -combo of risk assumption and risk shifting

Risk shifting

Transferring risk by buying insurance to cover potential losses.

What coverage pays for you to stay somewhere else in the event of fire or other damage to your home?

additional living expense coverage

Risk management

an organized plan for protecting yourself, family, property, etc

Peril

anything that may possibly cause a loss

Choosing never to drive to work, so you are not in an accident is an example of risk _____.

avoidance

The type of structure and the type of _______ materials used influence the cost of insurance coverage.

construction/ building

Additional living expenses that result from a home fire or other home damage are:

costs for you to stay in a motel or a rented apartment while your home is being fixed.

Broad form of renter's insurance

covers your personal property against perils specified in the policy, such as fires and thefts

A _____ is anything that increases the likelihood of loss through some peril.

hazard

The legal responsibility for the financial cost of another person's losses or injuries is known as:

liability

Personal risks

losses of property caused by perils like fire or theft, and hazards

Wage loss insurance

pays for any salary or income lost because of being injured in a vehicle accident

What are the types of pure/insurable risk?

personal, property, liability

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

property

Insurance

protection against possible financial loss

comprehensive physical damage coverage

protects you if your vehicle is damaged in a nonaccident situation like fire, theft, falling objects, vandalism, hail, flood, tornadoes, avalanche, earthquake

Comprehensive form of renter's insurance

protects your personal property against all perils not specifically excluded in the policy

Choosing not to participate at all in any kind of heavy physical activity is one way to protect yourself from injury. This is an example of:

risk avoidance

Which of the following are general risk management techniques? Risk investment Risk avoidance Risk speculation Risk reduction Risk assumption Risk shifting

risk avoidance risk reduction risk assumption risk shifting

Risk

the chance of loss or injury

Negligence

the failure to take ordinary or reasonable care to prevent accidents from happening

Coverage

the protection provided by the terms of an insurance policy

Policyholder

the purchaser of the policy

The main factors that influence premiums for automobile insurance are:

vehicle type, rating territory, and driver classification

Does homeowner's insurance cover plants and trees?

yes

All of the losses would be covered by homeowner's insurance except: loss to your property due to windstorm. injury to a visitor who fell on your ripped carpet. you accidentally injure yourself with a sharp blade at home. loss to your property due to fire.

you accidentally injure yourself with a sharp blade at home.