Chapter 10 Finance

Auto insurance premiums are generally reduced by a. choosing a higher deductible. b. buying a sporty "high powered" car. c. moving to a larger city. d. avoiding carpooling to work. e. all of the above

A

In order to collect under uninsured motorists coverage, three specific conditions must be in effect. They are: a. another motorist was at fault; this motorist has no available insurance coverage; and damages were incurred. b. another motorist was at fault; this motorist has insurance coverage; and damages were incurred. c. you were at fault; the other motorist has insurance coverage; and damages were incurred. d. you were at fault; the other motorist has no available insurance coverage; and damages were incurred. e. either a or d

A

Section I of a homeowner's insurance policy covers all of the following except a. personal liability b. dwelling c. other structures d. personal property

A

The Thomson's house burned to the ground! They felt they were adequately covered (see coverage below). Their car (market value $10,000) was in the garage and totally destroyed. How much will they be reimbursed for their auto from their HO-3 policy? Replacement value of house $80,000 ACV coverage on house 60,000 Deductible 300 ​ a. $0 b. $9,700 c. $6,000 d. $5,700 e. $8,000

A

The best place to buy automobile insurance is a. insurance agent b. auto dealer c. finance company d. state insurance commission e. none of the above

A

The form of homeowner's insurance that is incorrectly paired with the insured is a. HO-1, renter. b. HO-2, homeowner. c. HO-4, renter. d. HO-8, homeowner. e. HO-6, condominium owner.

A

The right of ____ gives the insurer the right to recover its costs from the at-fault party after the company has paid a claim to its insured. a. subrogation b. indemnity c. insurance interest d. coinsurance e. none of these

A

Which of the following best describes the personal property floater? a. An endorsement providing coverage for items of expensive personal property not adequately covered under the standard homeowners policy. b. An addition to the automobile policy intended to cover items of personal property that are often in or upon a covered automobile. c. A specialized inland marine policy covering boats and trailers used with boats. d. A liability policy that covers against liability caused by ownership or use of items of personal property. e. None of these

A

Which of the following losses is most likely to be covered under your auto liability insurance? a. a legal bill incurred by your insurer defending you from a claim related to an accident caused by your negligence. b. a medical bill for your injuries related to an accident that you caused. c. a medical bill for injuries to a passenger in your car arising from an accident in which you were not at fault. d. an auto shop bill for repairs of a car you own due to an accident caused by your negligence. e. an auto repair bill for repairs to the car of a driver who negligently caused an accident with you.

A

Your car is damaged by fire while parked in your garage. Protection would be provided by a. comprehensive auto coverage. b. property damage liability coverage. c. homeowner's personal property coverage. d. homeowner's dwelling unit coverage. e. auto collision coverage.

A

Your son left his skateboard at the bottom of the basement stairs. While going downstairs to change a broken light bulb, you step on the skateboard and break your ankle during the fall. Medical damages total $1,455. How much will your $140,000 homeowners' insurance policy pay for this accident? The policy has $100,000 comprehensive liability coverage and medical payments of $1,000/person. a. $0 b. $250 c. $500 d. $1,000 e. $1,455

A

Your standard HO policy will not include coverage for damage done by a. flood. b. windstorm. c. falling objects. d. fire. e. theft.

A

Auto insurance is needed primarily because of a. potential damage to auto. b. potential liability claims. c. lender's requirements. d. state law. e. federal requirements.

B

Carl and Alexandra purchased a $200,000 homeowners policy for their house in 1988. They have renewed the policy each year since and have replacement coverage. This policy has a $1,000 deductible. Their home now has a replacement value of $275,000. Last week they came home to find a small fire which caused the following damages: home $50,000 personal property 20,000 landscaping 7,000 ​ Assume Carl and Alexandra have a standard HO-3 policy with personal property covered at 50% and landscaping covered for 10%. How much will the insurance pay for the losses of their personal property and landscaping? a. $15,000 b. $ 9,700 c. $24,545 d. $27,000 e. $30,000

B

Co-insurance is a policy provision to discourage the policyholder from being a. overinsured. b. underinsured. c. insured only if specified by lending agency. d. insured with more than one company. e. insured by government agencies.

B

Collision protection pays for damage to a. non-auto property of insured. b. auto of insured. c. all autos in accident. d. auto of other party in accident. e. non-auto property of others damaged in accident.

B

Comprehensive automobile coverage refers to a. complete coverage including liability, medical payments, and damage to your auto. b. coverage for damage to an insured automobile from perils other than collision. c. coverage that adds items of property such as CB radios and telephones that are ordinarily excluded d. coverage for bodily injuries suffered in an automobile accident. e. none of the above.

B

The 80 percent co-insurance clause in a homeowner's policy would cause a reduction in the claim payment for a covered loss to the dwelling of $30,000 in which of the following cases? a. Policy dwelling limit of $75,000, replacement cost of dwelling $90,000, actual cash value of dwelling $85,000 b. Policy dwelling limit of $75,000, replacement cost of dwelling $100,000, actual cash value of dwelling $90,000 c. Policy dwelling limit of $90,000, replacement cost of dwelling $90,000, actual cash value of dwelling $90,000 d. Policy dwelling limit of $110,000, replacement cost of dwelling $110,000, actual cash value of dwelling $90,000 e. Policy dwelling limit of $120,000, replacement cost of dwelling $100,000, actual cash value of dwelling $90,000

B

The principle of indemnity would prevent: a. the act of one person from being imputed to another. b. an insured from collecting more than he lost. c. a negligent third party from being held liable for damages if the injured party was insured. d. a significant amount of loss control activity. e. an insurer from ever waiving it's right to subrogation.

B

Which Homeowners' policy is best suited for a resident of a rented apartment to cover that person's personal property? a. HO-3 b. HO-4 c. HO-5 d. HO-8 e. A Homeowners' policy will not apply since the real estate involved is not owned by the insured.

B

Which of the following would be insured for actual cash value under a standard HO-2 policy? a. The house b. Unscheduled personal property c. Scheduled personal property d. a and c e. a, b, and c

B

A standard HO policy covers damage from most weather-related perils except a. snow and freezing. b. windstorms and earthquakes. c. earthquakes and floods. d. floods and volcanic eruption. e. Freezing and volcanic eruption.

C

Common types of property that are subject to internal limits on homeowner's policies include a. musical instruments b. furniture c. jewelry d. clothing e. all of the above

C

Donna, who is single and 30 years old, has received several speeding tickets recently and was shocked by the effect on her auto insurance. Donna drives a 2004 Pontiac Firebird, 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 be advisable? a. Lower her liability limits to the minimum allowed in her state b. Drop her medical payments coverage c. Raise her deductible from $250 to $1,000 d. Drop her comprehensive coverage and keep collision only e. Drop everything from her policy except the liability insurance

C

If you have two insurance policies on the same property, the ____ clause explains how the two insurance companies will share the loss. a. principle of indemnity. b. co-insurance clause. c. other-insurance clause. d. companies' insurable interest. e. principle of subrogation.

C

Jake drove Amanda's truck to the football game because his car was broken. On the way home, Jake was involved in an accident that was his fault. The resulting liability damages totaled $85,000. Jake has $100,000 liability coverage on his car, and Amanda has $50,000 on her truck. How would the $85,000 liability damages be paid for this accident? a. $50,000 from Amanda's policy with no further payment b. $85,000 from Jake's policy c. $50,000 from Amanda's policy plus $35,000 from Jake's policy d. $50,000 from Amanda's policy plus $35,000 out of Jake's pocket e. $50,000 from Amanda's policy plus $35,000 out of Amanda's pocket.

C

Kevin, who has liability limits of $20,000/$40,000/$20,000 and a $500 collision deductible, is involved in an accident. Due to his negligence he runs into a Rolls Royce. Three people sustained bodily injuries in the Rolls Royce. The driver's injuries were worth $1,000,000, a passenger received injuries worth $12,500, and another passenger received injuries of $7,100. How much will the PAP pay for these bodily injuries? a. $20,000 b. $40,000 c. $39,600 d. $39,100 e. Some other amount

C

Maximum liability policy limits are determined by a. state law. b. auto type. c. the insured's choice. d. court proceedings. e. none of these.

C

Negligence results when a person a. is not insured. b. acts as a "reasonable person." c. fails to act as a "reasonable person." d. admits it. e. is more than 18 years old.

C

The asset most likely to be specifically itemized in a personal property floater is a. sofa. b. clothing. c. jewelry. d. garden equipment. e. all of these.

C

Your auto liability insurance shows bodily injury limits of $100,000/$300,000. This means a. $100,000 would be paid to the people in your automobile and the $300,000 to passengers in the other car. b. $100,000 is the limit per individual with $300,000 divided equally between the remaining passengers. c. $100,000 is the limit per individual with a $300,000 limit per accident. d. $100,000 is the limit per individual with $300,000 being paid to the driver of the other car. e. none of the above.

C

A homeowner's policy does not provide protection for the personal property of a. family members at home. b. family members while in college. c. guests. d. tenants. e. family members traveling.

D

A liability suit could result when a. lightning strikes your home. b. your son falls down the stairs of your home. c. your auto is stolen. d. your dog bites the neighbor. e. smoke from the fireplace fills your house.

D

A(n) ____ agent represents multiple insurance companies. a. captive b. business c. good d. independent e. employed

D

After packing up to return home for the holidays after the fall semester, Peter stopped at Double T bookstore to sell back his used textbooks. After collecting $25, he headed back to his pickup truck only to find a broken window, the truck broken into, and all his suitcases and personal property gone. The damages to his pickup would be covered by a. property damage liability auto coverage. b. uninsured motorist auto coverage. c. personal injury protection. d. comprehensive (other than collision) auto coverage. e. collision coverage.

D

All property insurance companies require you to show the following when making a claim: a. Proof of loss b. Personal property inventory c. Values at the time of inventory d. All of the above.

D

An automobile covered under a policy with a $500 collision deductible is damaged in a collision with a fence. It could be repaired for $15,000, replacement cost is $25,000, and the depreciation and physical condition deduction is $5,000. How much will the insurance company pay? a. $24,500 b. $7,500 c. $15,000 d. $14,500 e. Some other amount

D

Auto insurance companies may offer premium discounts for a. being a good student. b. installing anti-theft devices. c. taking a defensive driving course. d. all of these. e. none of these.

D

Factors that affect home insurance costs include a. type of structure. b. location of home. c. credit score. d. all of the above. e. ​both a and b.

D

If you have an outstanding loan on your car, the contract will require you to carry ____ insurance. a. bodily injury liability b. property damage liability c. medical payments d. collision and comprehensive e. all of these

D

Premium discounts may result from a. safe driving record and prompt premium payment. b. good grades and long-term employment. c. multiple auto ownership and good credit rating. d. safe driving record and good grades. e. long-term employment and prompt payment of traffic tickets.

D

Section I of the homeowner's insurance policy covers a. the home only. b. the house and the garage. c. liability of an insured. d. the home and its contents. e. liability and the house.

D

Section II of the homeowner's insurance contract covers a. libel. b. contractual wrongdoing. c. the house and contents. d. liability of the insured. e. none of these.

D

Some common liability risks include: a. driving a car b. entertaining guests at home c. being careless in performing professional duties d. all of the above

D

The advisable dollar coverage for any one auto accident is no less than a. $50,000. b. $100,000. c. $200,000. d. $300,000. e. $500,000.

D

The basic principles of property and liability insurance pertain to: a. types of exposure b. the principles of indemnity c. coinsurance d. all of the above

D

The condominium owner would choose an ____ policy. a. HO-2 b. HO-3 c. HO-4 d. HO-6 e. HO-8

D

The deductible on a standard homeowners' policy applies to a. coverage on the house. b. coverage on personal property. c. liability coverage. d. a and b e. a, b, and c

D

The principle of ____ states that an insured should not be compensated by an insurance company in an amount exceeding the economic loss. a. subrogation b. insurable interest c. coinsurance d. indemnity e. none of these

D

Tom visits George at his ranch. Although a novice on horseback, Tom decides to join George on a morning ride. George recommends that Tom ride an unbroken stallion named Satan. While mounting Satan, Tom is thrown headlong through the windshield of Tom's car. The damage to the car is $2,000 and Tom's own insurance pays him $1,500 ($500 deductible). Under what principle could Tom's insurance company sue George for his negligence? a. adhesion b. indemnity c. estoppel d. subrogation e. misrepresentation

D

What factor affects insurance premiums the most? a. Style of home b. Age of home c. Brick or wood exterior d. Credit score e. Detached or attached garage

D

You could save money on your car insurance premiums by a. buying a 4-door sedan rather than a high-performance vehicle. b. choosing a $1,000 deductible rather than a $100 deductible. c. moving to a small town with a low accident rate. d. b and c. e. none of these would make any difference.

D

After packing up to return home for the holidays after the fall semester, Tex stopped at Double T bookstore to sell back his used textbooks. After collecting $25, he headed back to his pickup truck only to find a broken window, the truck broken into, and all his suitcases and personal property gone. The loss of his personal property and suitcases would be covered by a. umbrella liability insurance. b. comprehensive (other than collision) auto coverage. c. property damage liability auto coverage. d. property damage to the property of others (homeowners' coverage). e. personal property off premises (homeowners' coverage).

E

Auto insurance premiums would be affected by a. the area in which you live. b. your driving record. c. type of automobile. d. the distance of your daily commute. e. all of these.

E

Generally, actual cash value is defined as a. replacement cost. b. original purchase price. c. market value. d. purchase cost minus depreciation. e. replacement cost minus depreciation.

E

Homeowners' insurance will cover which of the following? a. The meter reader bitten by Cujo, your poodle b. Your attached garage destroyed by Hurricane Ivan c. Your new Pontiac Transport minivan parked inside the garage d. a, b, and c e. a and b

E

Liability coverage provides payment to the a. insured for damage. b. family members of insured. c. holder of the auto loan. d. lawyer needed to defend criminal offense. e. nonfamily members involved in the accident.

E

Persons insured under Part B medical payments coverage include a. the named insured b. family members in the car. c. any guest occupying the car. d. a and b e. a, b, and c

E

The Thomson's house burned to the ground! They felt they were adequately covered (see coverage below). Their car (market value $10,000) was in the garage and totally destroyed. How much will the Thompsons be reimbursed for their home? Replacement value of house $80,000 ACV coverage on house 60,000 Deductible 300 ​ a. $80,000 b. $79,700 c. $63,700 d. $60,000 e. $59,700

E

The policy that pays based on replacement cost for the home is a. HO-1. b. HO-3. c. HO-5. d. HO-6. e. HO-8.

E

To reduce auto insurance premiums as your car depreciates in value, you should consider self-insuring which of the following risks? a. bodily injury liability b. collision c. property damage liability d. comprehensive (other than collision) e. b and d

E

Which of the following events would probably increase your auto premiums? a. Celebrating your 25th birthday b. Getting married c. Trading in your 2004 Mercedes for a 2005 Ford Escort d. Increasing your collision deductible e. None of the above

E

Who is eligible to receive benefits under Part B medical payments coverage of your automobile policy? a. Your daughter's friends riding in your car b. The driver of the car you hit c. The pedestrian you hit while crossing the street d. a and c e. All of the above

E

You just purchased an older home with a market value of $100,000 and a replacement value of $180,000. What HO form would meet your needs? a. HO-2 b. HO-3 c. HO-4 d. HO-6 e. HO-8

E