Personal Finance

Karen and Mike currently insure their cars with separate companies, paying $900 and $1,100 a year. If they insured both cars with the same company, they would save 15 percent on the annual premiums. What would be the future value of the annual savings over 10 years based on an annual interest rate of 3 percent? A) $3,439.16 B) $403.17 C) $3,450.12 D) $3,425.16 E) $300

A) $3,439.16

Georgia, a widow, has take-home pay of $1,500 a week. Her disability insurance coverage replaces 65 percent of her earnings after a four-week waiting period. What amount would she receive in disability benefits if an illness kept Georgia from work for 14 weeks? A) $9,750 B) $13,650 C) $10,650 D) $10,750 E) $21,000

A) $9,750

Medical payments coverage under automobile insurance applies to medical expenses of: A) Anyone who is injured in your vehicle, including you. B) Anyone in your vehicle who is injured, except the driver. C) The driver, but no passengers who are injured. D) The owner of the vehicle, but not other passengers. E) The uninsured motorist who causes an accident.

A) Anyone who is injured in your vehicle, including you.

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: A) Deductible. B) Coinsurance. C) Vision care policy. D) Hospital indemnity policy. E) Dread disease policy

A) Deductible.

Anna contributes pretax dollars to an account managed by her employer for her health care expenses. If she does not spend all of her money by the end of the year, she may forfeit it. What kind of plan does she have? A) FSA B) HRA C) Medicaid D) Medicare E) Self-funded health plan

A) FSA

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a: A) Hazard. B) Self-insurance negligence. C) Pure peril. D) Premium. E) Speculative risk

A) Hazard

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? A) Property damage liability coverage B) Collision coverage C) Comprehensive physical damage coverage D) Bodily injury liability coverage E) Medical payments coverage

A) Property damage liability coverage

23. Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70 percent of the home's value, how much of her household belongings would be covered? A) $120,000 B) $210,000 C) $224,000 D) $300,000 E) $320,00

B) $210,000

A health insurance policy pays 85 percent of physical therapy costs after a deductible of $480. In contrast, an HMO charges $29 per visit for physical therapy. How much would a person save with the HMO if he or she had 10 physical therapy sessions costing $120 each? A) $588 B) $298 C) $290 D) $120 E) $1,438

B) $298

Assume your 10-year-old home originally cost $300,000. Unexpectedly, a fire totally destroys your home. Over the past 10 years, your home has increased in value by 20 percent and is now worth $360,000. Under the replacement value coverage, what will the insurance company pay you? A) $280,000 B) $360,000 C) $290,000 D) $330,000 E) $300,00

B) $360,000

Becky Fenton has 45/90/50 automobile insurance coverage. If two other people are awarded $85,000 each for injuries in an auto accident in which Becky was judged at fault, how much of this judgment would the insurance cover? A) $85,000 B) $90,000 C) $170,000 D) $45,000 E) $50,000

B) $90,000

A policy that pays you back for actual expenses is called: A) A coinsurance plan. B) A reimbursement plan. C) A deductible plan. D) An indemnity plan. E) A reasonable and customary plan

B) A reimbursement plan.

Brittany and Brandon are both charged $250 for an office visit to the same specialist. Brittany's reimbursement policy has a deductible of $300. Once she has met the deductible, the policy will cover the full cost of her visits. Brandon's indemnity policy will pay him $150, the maximum amount his plan provides for a visit to any specialist. Which of the following is correct? A) Brittany will pay less because the policy will cover up to $300 for her visit. B) Brittany will pay more because she must pay the entire bill since she has not met her deductible while Brandon will have part of his bill paid by his policy. C) Brandon will pay $150 and his insurance company will pay $100. D) Brandon will pay more because Brittany will have the first $300 paid by her policy. E) None of these choices is correct.

B) Brittany will pay more because she must pay the entire bill since she has not met her deductible while Brandon will have part of his bill paid by his policy.

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: A) Deductible. B) Coinsurance. C) Stop-loss provision. D) Hospital indemnity policy. E) Dread disease policy.

B) Coinsurance.

Monica's employer offers a health insurance plan with a very high deductible. In addition, her employer provides a fund for her to spend specifically on health care. What kind of plan does she have? A) FSA B) HRA C) HSA D) Medicare E) Self-funded health plan

B) HRA

Zach is applying for insurance for his new home. Which of the following is correct? A) He should base the amount of insurance on the price he paid for the new home. B) He should insure the building under the replacement value method to receive the full cost of repairing or replacing it. C) He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings. D) His personal belongings should automatically be covered with his home at 125 percent of his home's insured amount. E) His insured amount should remain the same as long as he lives in his house

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

Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium? A) Installing an alarm system B) Increasing the amount of coverage C) Installing smoke detectors or a fire extinguisher D) Increasing her deductible E) Installing dead-bolt lock

B) Increasing the amount of coverage

An insurance company will: A) Insure speculative and pure risks. B) Insure pure risk, but not speculative risk. C) Insure neither pure risk nor speculative risk. D) Insure speculative risk, but not pure risk. E) Insure all types of risks.

B) Insure pure risk, but not speculative risk

The failure to take ordinary or reasonable care to prevent accidents from happening is called: A) Hazard. B) Negligence. C) Peril. D) Premium. E) Risk

B) Negligence

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 a(n): A) Reimbursement. B) Out-of-pocket limit. C) Deductible. D) Internal limit. E) Indemnity

B) Out-of-pocket limit.

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: A) Uninsured motorist protection. B) Property damage liability coverage. C) Collision coverage. D) Comprehensive physical damage coverage. E) Bodily injury liability coverage

B) Property damage liability coverage.

Which of the following is NOT correct about renter's insurance? A) The broad form covers personal property against perils specified in the policy. B) Renter's insurance covers the building and other structures on the site. C) The comprehensive form protects personal property against perils not specifically excluded in the policy. D) Typical coverage pays only the actual cash value of one's losses. E) Renter's insurance is relatively inexpensive versus homeowner's insurance.

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

If you choose to wear your seat belt, you are using: A) Risk avoidance. B) Risk reduction. C) Risk assumption. D) Risk shifting. E) Risk increasing.

B) Risk reduction.

Liability is defined as: A) An insurance program for individuals and households. B) The legal responsibility for the financial cost of another person's losses or injuries. C) Negligence. D) A loss due to physical damage. E) Risk assumption.

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

28) Kurt Simmons has 65/120/20 auto insurance coverage. One evening, he lost control of his vehicle, hitting a parked car and damaging a storefront along the street. Damage to the parked car was $7,100, and damage to the store was $19,820. What amount will Kurt have to pay? A) $20,000 B) $26,920 C) $6,920 D) $7,100 E) $19,820

C) $6,920

Insurance that covers valuable items, such as an expensive musical instrument, is called: A) Buildings and other structures coverage. B) Homeowner's insurance. C) A personal property floater. D) Household inventory insurance. E) Personal liability insurance

C) A personal property floater.

Samantha was driving on the highway during a storm and hail dented her car. This damage would be covered under her: A) Uninsured motorist protection. B) Property damage liability coverage. C) Comprehensive physical damage coverage. D) Medical payments coverage. E) Bodily injury liability coverage

C) Comprehensive physical damage coverage.

Jacob is concerned that his out-of-pocket health care expenses will be quite high, so he is considering adding contributions to a tax-free account that he can use with his high-deductible policy to cover catastrophic expenses. What kind of plan does he have? A) FSA B) HRA C) HSA D) Medicare E) Self-funded health plan

C) HSA

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? A) He will receive disability income for 15 days. B) His employer will pay 70% of his current income for 40 years. C) He will not be eligible for any disability income because his disability ended before the elimination period ended. D) He will receive disability income for 45 days. E) His employer will estimate his average salary through age 65 to determine his disability income

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

Anything that may possibly cause a loss is called a: A) Hazard. B) Negligence. C) Peril. D) Premium. E) Speculation

C) Peril

Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and the skateboard crashed through her window. The windstorm was a: A) Hazard. B) Negligence. C) Peril. D) Premium. E) Risk

C) Peril

If you choose to take responsibility for the negative results of a risk, you are using: A) Risk avoidance. B) Risk reduction. C) Risk assumption. D) Risk shifting. E) Risk increasing

C) Risk assumption

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: A) Copay. B) Coinsurance. C) Stop-loss provision. D) Hospital indemnity policy. E) Dread disease policy.

C) Stop-loss provision.

26. Last month some of your friends were riding in a car together and were injured in an accident which was caused by another car. Their total injuries were as follows: Brenda $ 85,000 Raquel $ 125,000 Louis $ 40,000 The other car's insurance coverage was 100/300/50. What was the total medical coverage in this accident? A) $40,000 B) $85,000 C) $125,000 D) $225,000 E) $250,000

D) $225,000

Georgia is considering 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? A) $0 B) $120 C) $600 D) $800 E) $4,000

D) $800

Homeowner's insurance typically covers all of the following except: A) Personal property. B) Personal liability and related coverage. C) Additional living expenses. D) Automobiles. E) The building in which you live and any other structures on the property

D) Automobiles.

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: A) Uninsured motorist protection. B) Property damage liability coverage. C) Collision coverage. D) Comprehensive physical damage coverage. E) Bodily injury liability coverage.

D) Comprehensive physical damage coverage.

Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his: A) Uninsured motorist protection. B) Medical payments coverage. C) Collision coverage. D) Comprehensive physical damage coverage. E) Bodily injury liability coverage.

D) Comprehensive physical damage coverage.

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: A) Uninsured motorist protection. B) Property damage liability coverage. C) Collision coverage. D) Comprehensive physical damage coverage. E) The vehicle would not be covered because he was not in it when the damage occurred

D) Comprehensive physical damage coverage.

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: A) Duration of benefits to age 65. B) 70-80% of your take-home pay once you are determined to be disabled. C) Accident and sickness coverage. D) Guaranteed renewability. E) A short elimination period

D) Guaranteed renewability.

The type of health insurance coverage that may cover routine doctor visits, X-rays, and lab tests is: A) Dental expense. B) Surgical expense. C) Hospital expense. D) Physician expense. E) Major medical expense.

D) Physician expense.

Mark was severely injured while on vacation and expects to be unable to work for at least 12 months. Because of his injury, he should expect to be eligible for disability income from: A) A public income insurance program. B) Medicaid. C) Medicare. D) Social Security. E) Worker's compensation

D) Social Security.

The Tucker family has health insurance coverage that pays 75 percent of out-of-hospital expenses after a deductible of $1,180 per person. If one family member has doctor and prescription medication expenses of $3,100, what amount would the insurance company pay? A) $480 B) $3,500 C) $1,920 D) $3,100 E) $1,440

E) $1,440

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? A) $0 B) $3,500 C) $5,000 D) $3,000 E) $2,500

E) $2,500

25. Assume your 10-year-old home originally cost $300,000 and is expected to have a 50-year life. Unexpectedly, a fire totally destroys your home and the home is now worth $350,000. Under the actual cash value method, what will the insurance company pay you? A) $315,000 B) $350,000 C) $250,000 D) $300,000 E) $280,000

E) $280,000

The Carter family has health insurance coverage that covers 90% of out-of-hospital expenses once a deductible of $300 (per person) is paid. Chris Carter had a serious illness that required hospitalization, with total medical bills amounting to $55,000. Assume there was a stop-loss provision of $5,000. How much will the Carter family pay? A) $6,000 B) $5,770 C) $5,470 D) $5,240 E) $5,000

E) $5,000

The type of health insurance coverage that takes up where basic health insurance coverage leaves off is: A) Dental expense. B) Surgical expense. C) Hospital expense. D) Physician expense. E) Major medical expense

E) Major medical expense

Personal property insurance covers: A) The full value of jewelry valued at $25,000 that is stolen from your home. B) Furniture and appliances, but not clothing or some electronics. C) Clothing and some electronics, but not furniture and appliances. D) All items up to 200% of the insured value of the home. E) Personal property items up to 55-75 percent of the insured value of the home

E) Personal property items up to 55-75 percent of the insured value of the home

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? A) Timothy's injuries would be covered to $100 and property damage would be limited to $300. B) Nick's injuries would be covered to $50,000. C) Individually, Timothy's and Nick's injuries would be covered to $300,000 each. D) The total coverage for Timothy and Nick would be $100,000, and the driver who caused the accident would be covered to $50,000. E) 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.

E) 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.

Katrina was injured in an accident at work. The benefits she will receive to cover part of her income will come from: A) A public income insurance program. B) Her health insurance plan. C) Medicare. D) Social Security. E) Worker's compensation.

E) Worker's compensation.