FNAN 300 Exam 2

A no-haggling dealer presents the price of a new car to be accepted or rejected as stated and is called a ___ dealer

Set price

Another name for temporary life insurance is

Term life insurance.

Your lifestyle affects your housing decision.

True

Negotiation activities are part of the ____ phase of the research-based buying process.

selection and purchase

This is a written guarantee from the manufacturer that specifies the conditions under which the product can be returned, replaced, or repaired.

warranty

A condominium is a form of housing in which the units in a building are owned by a nonprofit organization.

False

A landlord is responsible for paying renter's insurance.

False

The copayment provision deals with the amount that someone will pay for a bill such as 20% coinsurance.

False

The most common conventional mortgage is the 20-year ARM.

False

The purpose of an escrow account is to pay the points at closing.

False

Carrie bought a house five years ago for $150,000. At that time she borrowed $140,000 from her bank. The house is now worth $162,000. Her PMI will automatically be dropped when her mortgage balance drops to

$117,000.

Tim and Tammy are updating their financial plan and are concerned that they might not have enough life insurance coverage for their family, which includes two children, ages 4 and 10. They have determined that their annual income is $70,000 and their net worth is now $150,000. What is the amount of life insurance they should carry using the "nonworking" spouse method?

$140,000

Marcus can afford a monthly mortgage payment of $900. If he is eligible for a 30-year, 5% mortgage (where the mortgage factor is 5.37), how much of a mortgage loan can he afford?

$167,597.77

If you have a $150,000 30-year 5% mortgage, how much of your first monthly payment of $805.50 would go toward principal?

$180.50

Personal liability coverage does NOT protect

A housekeeper.

All of the following are acceptable types of documentation for a household inventory except

A listing of items and their details in your memory

Frank, age 38, was killed in a car accident. Which of the following riders provided an additional benefit for his heirs?

Accidental death benefit

Which of the following is a type of motor vehicle insurance available to drivers?

All of the above may be available to drivers

While evaluating alternatives, all of the following are appropriate questions you could ask before making a major purchase except

All of these are questions that should be asked.

Cameron, age 25, sustained a debilitating hand injury and was unable to perform his job as a viola player in the local orchestra for 45 days. His employer has a disability income insurance policy that pays 70% of take-home pay with an elimination period of 60 days and coverage to age 65. Given this information, which of the following is true for Cameron?

He will not be eligible for any disability income because his disability ended before the elimination period ended.

Steve's employer offers a health plan that stresses preventive services and covers routine immunizations and checkups, screening programs, and diagnostic tests. What kind of plan does his employer offer?

Health maintenance organization (HMO)

What is the most important part of an insurance agent's job?

Help you select the proper kind of protection within your financial boundaries.

Lonnie wanted to sell his house but didn't know what price to ask. He should consider all of the following except

His original cost

Which of the following households most likely has the greatest need for life insurance?

Household with children.

The dealer's cost is also known as the

Invoice price

The main goal when setting insurance goals is to

Minimize personal, property, and liability risks

Which of the following is NOT a type of health insurance available to individuals or employees?

Minor medical indemnity insurance

Which of the following is correct?

One question that should be asked when developing a risk management plan is "What do I need to insure?"

Trenton wants to buy a house but can provide only a 10% down payment. He probably will be required to have

PMI

This type of plan combines features of HMOs and PPOs. It uses a network of participating physicians and medical professionals who have contracted to provide services for certain fees.

Point-of-service (POS) plan

What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

Premium

Which of the following is TRUE about long-term care insurance?

The older you are when you enroll, the higher the annual premium.

Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?

The policy would provide a maximum of $100,000 for each person who was injured, and no more than $300,000 for total injuries of all parties in the accident.

A brick home will usually cost less to insure than a similar structure made of wood.

True

A disability policy with a longer elimination period typically charges lower premiums than a policy with a short elimination period.

True

An example of a peril is a robbery.

True

Georgia has a health insurance policy that includes a deductible of $500. If her total bill is $3,000, how much will her insurance pay?

$2,500

Georgia is considering between two health insurance policies. One includes a deductible of $600 and the other includes a coinsurance of 20%. If a bill is $4,000, how much will she be required to pay under the policy with the coinsurance?

$800

Who is most likely to use a home health care agency?

An elderly neighbor.

This health insurance provision lets your insurer make direct payments to your doctor or hospital.

Assigned benefits

Rising health costs are due to all of the following except

Baby boomers using fewer health care services.

Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his

Comprehensive physical damage coverage.

A service contract

Covers the repair costs of a product.

Which of the following is NOT a type of permanent life insurance?

Decreasing term

Which of the following is an account used to pay property taxes and homeowner's insurance?

Escrow

Quinn applied for a loan. He provided information about his finances and the home he plans to purchase. Results of the affordability mortgage calculation included all of the following except

Expected maintenance costs.

A home insured for $160,000 has 55% worth of coverage for household belongings, which is $112,000.

False

Administrative costs in the United States consume half of the health care dollars. spent.

False

All group health insurance plans provide the same level of protection.

False

An advantage of a second mortgage is that the interest rate subsidy from the home builder reduces the mortgage payments during the first few years of the loan.

False

Another name for a homeowner's insurance policy is an umbrella policy.

False

Collision insurance covers your vehicle against risks such as falling objects, hail, and other nonaccident situations.

False

During problem identification, a clear statement of a problem is "I need to have a car."

False

Home improvements will definitely increase the selling price of a house.

False

Homeowner's insurance excludes detached structures on your property.

False

Medicare typically covers routine checkups.

False

Mortgage points are paid to the lender at the end of the mortgage.

False

Service contracts on vehicles usually are wise financial decisions.

False

The United States has the fifth highest per capita medical expenditures of any country in the world.

False

The period before you can receive benefits in a disability plan is called the probationary period.

False

The phases of the buying process are problem identification, preshopping activities, evaluating alternatives, selection and purchase, and postpurchase activities.

False

Thomas bought a vehicle from a used car dealer. He returned it to the dealer because the transmission fell out 150 miles after he purchased it. The dealer refused to accept the return because the vehicle was sold "as is." This is an example of a limited warranty.

False

Most products come with some guarantee of quality. This type of warranty states that a defective product can be fixed or replaced during a reasonable amount of time.

Full warranty

If you are concerned that your disability insurer may try to cancel your coverage if your health becomes poor, you should look for a plan that offers

Guaranteed renewability.

Andrew is applying for insurance for his new home. Which of the following is correct?

He should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings.

Think about consumer complaints. Which of the following is correct?

If you don't get satisfaction from working with the company headquarters, you may get assistance from a mediator in order to avoid legal action.

Most products come with some guarantee of quality. This type of warranty covers the product's intended use or other basic understandings that are not in writing.

Implied warranty

While Paul was shopping for a new chainsaw, he found a great deal on a new drill and bought it. This is an example of

Impulse shopping

Heidi plans to purchase a pickup truck. The range available for negotiation is the difference between the sticker price and the

Invoice price

Which of the following is correct about the lemon law?

It applies to vehicles that have been serviced four times to correct the same problem in the first 12,000 miles.

The owner/landlord is known as the

Lessor

The settlement option that pays the life insurance proceeds to the beneficiary for as long as she or he lives is called

Life income option.

A variable operating cost for a vehicle is

Maintenance and repairs.

A reverse mortgage

Provides older home owners with tax-free income in the form of a loan that is repaid when the home is sold or the home owner dies.

A partial refund of the price of a product is called a

Rebate

If you choose to wear your seatbelt, you are using

Risk reduction

A handyman's special is a home that needs work and that you are able to get at a lower price

True

A health insurance policy that pays you back for actual expenses is called a reimbursement policy.

True

A health reimbursement account (HRA) is funded solely by your employer and gives you a pot of money to spend on health care.

True

A homeowner's insurance policy provides coverage for additional living expenses so you can stay somewhere else if a fire damages your home.

True

A service contract is frequently called an extended warranty even though service contracts are not warranties.

True

Consumer organizations, such as Consumer Reports, rate insurance companies on a regular basis.

True

Deductibles are a combination of risk assumption and risk shifting where the insured person pays the first part of the claim (deductible) and the rest of the claim is shifted to the insurance company.

True

If you have misplaced a life insurance policy, your state's insurance commission may be able to help you locate it

True

If you shop for insurance on the internet, the website is secure if the URL begins with "https:" or if the lock icon is in the address bar

True

Insurance is protection against possible financial loss.

True

Life insurance benefits may be used to pay off a home mortgage or other debts at the time of death.

True

Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage.

True

Premium payments are fixed with a variable life policy.

True

Renter's insurance protects the tenant by covering damage or theft to clothing, furniture, and stereo equipment.

True

Robby fell on some ice on Peter's front steps and broke his arm. This is an example of a risk covered by the personal liability portion of Peter's homeowner's policy.

True

With a guaranteed renewable provision in a health insurance policy, the insurer is permitted to raise premiums for all members of a group.

True

Workers are considered disabled if they have a physical or mental condition that prevents them from working and that is expected to last for at least 12 months or to result in death.

True

Various states are trying to reduce the time and cost of settling vehicle injury cases. One alternative is

Using the no-fault system.

As a result of being an armed services veteran, Dan should be eligible for a(n)

VA loan.

Which of the following allows an individual to receive an amount of income that will change based on the income received from stocks or other investments over a certain period of time, or over his or her life?

Variable annuity

Ricky has a conventional mortgage. He can monitor the reduction of his loan balance through his payments by using _____ information.

amortization

Craig wants to get his old car repaired, but he doesn't want to spend much money. He probably will NOT want to go to the most expensive repair service, which is from a(n)

car dealer

Price analysis is part of the ____ phase of the research-based buying process.

evaluating alternatives

When Sam applied for a loan, he was assured that his rate would not change if he closed within 30 to 90 days. Sam had a(n) ______ on the interest rate.

lock