Finance Exam 3

Sally was driving her own car and collided with a pickup truck. Sally sustained $125,000 in injuries, and her passenger sustained $10,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident?

$110,000

Holly and Matt want to use the "nonworking" spouse method to determine the amount of life insurance coverage they need. If their two children are ages 9 and 5 years old, how much do they need?

$130,000

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

Cynthia was charged $300 for a specialist office visit. Her indemnity policy will pay $125. What amount will she have to pay?

$175

Stephanie is the wage earner in a "typical family" with $40,000 gross annual income. Use the easy method to determine how much insurance she should carry.

$196,000

Last month some of your friends were injured in an accident. Their total injuries were as follows: Brenda $ 85,000; Raquel $ $ 125,000; Louis $ 40,000 Coverage was 100/300/50. What was the total medical coverage in this accident?

$225,000

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 easy method?

$343,000

Larry has a health insurance policy that includes a deductible of $1,000 and a coinsurance of 20%. If his total bill is $7,000, how much will his insurance pay?

$4,800

Sandy went to the doctor three times, and each appointment cost $200. Her copayment was $25 per visit. How much was Sandy required to pay in total for her three visits?

$75

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

Marianne and Roger are in good health and have reasonably secure careers. Each earns $45,000 annually. They own a home with a $125,000 mortgage; they owe $25,000 for their car loans and have $22,000 in student loans. If one should die, they think that funeral expenses would be $12,000. What is their total insurance need using the DINK method?

$98,000 (funereal expenses + half of all loans and debts)

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 these may be available to drivers

The most common risks are

All of these are common risks.

Homeowner's insurance covers all of the following except

All of these are covered

Tom wanted to receive as many discounts on his home insurance as possible. Which of the following would NOT provide a discount?

All of these should provide a discount for Tom.

Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amber was driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Based on her experience, which of the following would be true?

Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.

Medical payments coverage applies to medical expenses of

Anyone who is injured in your vehicle, including you.

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

Assigned benefits

Homeowner's insurance covers all of the following except

Automobiles

A person who is named to receive the proceeds from a life insurance policy is a(n)

Beneficiary.

Motor vehicle bodily injury coverage typically includes all of the following except

Bodily injury liability of all expenses, no matter the cost, for the most injured

If you want to purchase term insurance, you will receive all of the following except

Cash value

Nancy is studying the health insurance plan options offered by her employer. She wants a policy that will have the insurance pay a percentage of her medical expenses after she meets her deductible. She should review the

Coinsurance.

The insurance that helps pay hospital, surgical, medical, and other bills with a low deductible is known as a(n)

Comprehensive major medical policy.

Albert left his vehicle parked on the street in the front of his house when he went on vacation. While he was gone, his street flooded and his car was severely damaged. This damage would be covered under his

Comprehensive physical damage coverage.

Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his

Comprehensive physical damage coverage.

Samantha was driving on the highway during a storm and hail dented her car. This damage would be covered under her

Comprehensive physical damage coverage.

A young employee is buying individual life insurance and is worried about the impact inflation will have on his life insurance coverage. Which of the following riders should he consider?

Cost-of-living protection

This life insurance is used to pay off certain debts, such as auto loans, in the event that you die before the debts are paid in full. Which of the following is not the best buy for the amount of protection offered for an individual?

Credit life

Jenny wants health insurance that sets the amount that she must pay toward medical expenses before the insurance starts paying benefits. She is concerned about a

Deductible

Donald and Charlene are married and do not have any children. They plan to ensure that the other will not be unduly burdened by debts in case one of them dies. Each plans to continue to work after the other one dies. Which method are they using to determine their life insurance needs?

Dual income, no kids method

Judy and James have a 4-year-old child. They plan to purchase life insurance using this formula: Current income × 7 × 70%. Which method are they using to determine their life insurance needs?

Easy method

Francisco and Maria have three children and want to complete a detailed worksheet to determine the amount of life insurance they need to purchase. They will consider factors such as Social Security and liquid assets. Which method are they using to determine their life insurance needs?

Family need method

Which of the following allows an individual to receive a fixed amount of income over a certain period of time, or over his or her life?

Fixed annuity

Pam just started working at XYZ Widget Company and finally wants to get insurance coverage through her employer. She does not want to take a medical exam to get coverage, because she has some underlying health conditions and is concerned that she might not qualify for a policy. Which of the following life insurance policies should she apply for?

Group Life

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.

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a

Hazard.

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

He should insure the building under the replacement value method to receive the full cost of repairing or replacing it.

Which of the following is correct?

Health insurance plans may reimburse an individual for hospital stays, doctors' visits, and medications.

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)

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

His coverage should be increased as construction costs rise.

The type of health insurance coverage that pays for some or all of the daily costs of room and board during a hospital stay is

Hospital expense.

Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium?

Increasing the amount of coverage

An insurance company will

Insure pure risk, but not speculative risk.

Of the following, which one is the most positive feature of whole life insurance for a person who wants a more structured way to save?

It builds cash value.

The type of health insurance coverage that takes up where basic health insurance coverage leaves off is

Major medical expense

The main goal when setting insurance goals is to

Minimize personal, property, and liability risks.

The failure to take ordinary or reasonable care to prevent accidents from happening is called

Negligence.

Jeanne wants to purchase a life insurance policy with guaranteed premiums. What kind of policy would she want to purchase?

Nonparticipating policy

After you have reached a certain limit that you must pay for the deductible and coinsurance, the insurance company covers 100% of any additional cost. This is called

Out-of-pocket limit.

You want to purchase a life insurance policy that pays a policy dividend. What kind of policy would you want to purchase?

Participating policy

What is the primary purpose of medical expense insurance?

Pay actual medical costs for illness or injury.

Anything that may possibly cause a loss is called a

Peril.

Personal property insurance covers

Personal property items up to 55-75% of the insured value of the home.

The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is

Physician expense.

This type of plan combines features of Health maintenance organizations 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

Which of the following provisions requires the policyholder to again qualify as an acceptable risk and pay overdue premiums with interest in order to put a lapsed policy back in force?

Policy reinstatement

Yvonne's employer offers a health plan that has a group of doctors and hospitals that agree to provide specified medical services to members at prearranged fees. This health plan offers some flexibility since members can either visit a physician from a list or go to their own doctors. What kind of plan does her employer offer?

Preferred provider organization (PPO)

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

Premium

Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. The damage to the telephone pole would be covered under Madeline's

Property damage liability coverage.

Patrick has an old car and wants to keep his insurance costs down, but he wants coverage in case he damages the property of others, including street signs and telephone poles. In order to minimize the financial impact of an accident he may cause, he should, at a minimum, carry which type of insurance?

Property damage liability coverage.

Which of the following is NOT correct about renter's insurance?

Renter's insurance covers the building and other structures on the site.

If you choose to take responsibility for the negative results of a risk, you are using

Risk assumption.

Which of the following is NOT one of the commonly used general risk management techniques?

Risk maximization

If you choose to wear your seatbelt, you are using

Risk reduction

If you choose to insure your home or your vehicle, you are using

Risk shifting

Fran is interested in purchasing a major medical policy that limits the total out-of-pocket amount that she will have to pay. She should consider a

Stop-loss provision.

The type of health insurance coverage that may specify the maximum payment amount for each type of operation is

Surgical expense.

Another name for temporary life insurance is

Term life insurance

Georgia was supposed to pay her premium by the 15th of the month. Which of the following provisions allows her to keep her coverage if she is a couple of weeks late with paying her premium (without penalty)?

The grace period

Liability is defined as

The legal responsibility for the financial cost of another person's losses or injuries.

Sandra is contacting several insurance companies to compare coverage for her home. Which of the following should NOT affect her premium?

The location of your employer.

The policy loan provision means that

The policy owner can borrow any amount up to the cash value of the policy.

Which of the following is NOT a feature of whole life insurance?

The policy will return all premiums if you survive to the end of the policy.

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.

Homeowner's insurance covers all of the following except

Theft of jewelry valued at $25,000.

Polly wants the opportunity to change the amount she pays for her annual premium through the life of her insurance policy without changing her coverage. Which of the following types of whole life policies would meet her needs?

Universal life

Megan wants to purchase a type of whole life insurance policy that will allow part of her premium to be invested in stock, bonds, or money market funds. Which of the following policies should she buy?

Variable life

Another name for permanent life insurance is

Whole life.

Katrina was injured in an accident at work. The benefits she will receive to cover part of her income will come from

Worker's compensation.

If you have a loss due to a flood,

You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered.

If you have a renewable term policy,

Your premium may increase if you continue it for another term because you will be older.

An insurance company is a _________ business that agrees to pay for losses that may happen to someone it insures.

risk-sharing

An insurance company is a _________ business that agrees to pay for losses that may happen to someone it insures.

risk-sharing.