Personal financial planning CH 10

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

True or false: Automobile insurance covers property and personal damage caused by the policyholder's car.

True

True or false: 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

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 financial losses can you insure against?

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

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

collision

Which of the following best defines homeowner's insurance?

coverage for your residence and its financial risks

Collision insurance pays for the damage to an automobile as a result of an accident regardless of

fault

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

floater, appraisal

Most homeowner's policies cover many perils, but not:

flood

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

hazard

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

higher

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

higher

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

house, other structures, personal property

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

insurance

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

inventory

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

loss

When you buy a car you have also bought a(n) ______ whenever you drive it.

peril

Fire, windstorms, robbery, accidents, and premature death are all BLANK that can cause a loss.

perils or events

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

policy type, type of structure, location of home.

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

premium

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

premium or fee

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

premiums

When there is only a chance for loss if a specified event occurs, a risk is called

pure risk

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

risk

Uncertainty or lack of predictability is called ______.

risk

the chance of loss or injury

risk

An insurance company is a risk-BLANK 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

BLANK 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

True or False: Physical damage to a property is caused by hazards such as fire, wind, water, and smoke.

true

True or false: A household inventory is a list or other documentation of personal belongings with purchase dates and cost information.

true

In general, ______ and those over ______ pay higher premiums.

young drivers; 70

True or false: A brick house would cost more to insure than a similar home made of wood. However, earthquake coverage is less expensive for a brick home than a wood dwelling.

False; A brick house would cost less to insure than a similar home made of wood. However, earthquake coverage is more expensive for a brick home than a wood dwelling

True or false: Your homeowner's insurance covers damage to your home, other structures on your property, and your automobile.

False; your automobile is not covered

Which home insurance policy form is used for covering perils such as flood, earthquake, war, and nuclear accidents?

HO-3

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

construction

Increasing your BLANK lowers your premium.

deductible

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

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

personal property floater

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

physical

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

property

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

pure or insurable

The method of settling claims that pays you the full cost of repairing or replacing the item is called the

replacement value method

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

The concept of BLANK means that your insurance company may try to recover the costs of your repairs through the other party's automobile insurance company.

subrogation

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

With the replacement value method of insurance coverage, you receive:

the full cost of repairing or replacing a damaged or lost item.

Subrogation means that the insurance company has a right to recover the amount it pays for the loss from

the person responsible for the loss