Personal Finance Exam 2

_______ Provides for delivery of medical and personal care, other than hospital care, to persons with chronic medical conditions due to illness or frailty, Must be purchased through private providers. a. Long term care insurance b. short term care insurance c. life insurance d. health insurance

Long term care insurance

_____ is broad coverage for illnesses and catastrophic injuries a. Major medical insurance b. vision care c. dental services

Major medical insurance

_________ are designated doctors and hospitals provide services (some times limited choice), Plans hold down costs by controlling amount of care provided and emphasizing prevention, Charge monthly fees plus copayments a. Private health insurance b. government health insurance c. Traditional indemnity plans d. Managed care plans

Managed care plans

_____Health care program for people of low income that is jointly administered and funded by the federal and state governments, Eligibility and levels of coverage vary by state. a. Medicare b. Medicaid c. Workers comp

Medicaid

_______ Federally funded health insurance program, Covers those age 65+ and certain disabled persons, Does not cover everything,Patient liable for the difference in costs, Program in financial trouble; needs changes a. Medicare b. Medicaid

Medicare

______ is Multiply annual earnings by an arbitrary number a. Multiple earnings method b. Needs analysis method

Multiple earnings method

______ Estimate needs and examine available resources a. Multiple earnings method b. Needs analysis method

Needs analysis method

______ is the Insurance feature to give the whole life policyholder the right to cash value when canceled prior to death a. Cash value b. Nonforfeiture right

Nonforfeiture right

All of the following are useful ways to build a strong credit rating except a.Keep the total balance on your credit cards low compared to your total credit limit b.Use a mix of credit such as credit cards, retail cards, instead of just one type of credit c.Make payments on time. d.Open 8 credit card accounts all at once e.Maintain a long credit history

Open 8 credit card accounts all at once

_____Pays physician fees for nonsurgical hospital care, Includes consultation with specialists and lab test. a. Hospitalization coverage b. Surgical Expense c. Physician Expense

Physician Expense

_____ Combines features of HMOs and PPOs a. Health maintenance organization b. Preferred provider organization c. Point of service

Point of service

_______Several providers to choose from, Costs more than an HMO, More choices, fewer restrictions than an HMO, If you go to a non-PPO provider, you pay more a. Health maintenance organization b. Preferred provider organization c. Point of service

Preferred provider organization

______ Available to individuals or families, and Provided as group health insurance plans through various employers or bought individually. a. Private health insurance b. government health insurance c. Traditional indemnity plans

Private health insurance

______ are Traditional Indemnity Plans and Managed Care Plans a. Private health insurance plans b. Government health insurance plans

Private health insurance plans

______ Supplements other disability income sources, Normally provides 40-60% of income (up to 75%) a. Workers comp b. Employer plans c. Social Security d. Private income insurance plans

Private income insurance plans

______ Renew policy without evidence of insurability a. Renewability b. Convertibility

Renewability

Are issued by financial institutions. Features include line of credit dependent upon applicants financial status and ability to pay, cash advances and balance transfers, other services or rebates and interest rates and fees a. bank credit cards b. debt cards c. credit cards

Bank credit cards

Which of the following statements concerning the methods of providing life insurance is(are) correct? I. Term insurance is a form of life insurance in which the death proceeds are payable in the event of the insured's death during a specified period and nothing is paid if the insured survives to the end of that period. II. Term life insurance is sometimes known as pure insurance because it has no cash value. a. I only b. II only c. Both I and II d. Neither I nor II

Both I and II

______ is the accumulated refundable value of an insurance policy; results from the investment earnings on paid-in insurance premium. a. Cash value b. Nonforfeiture right

Cash Value

___ would not be considered taxable income. a.Child support payments b.Proceedings from an employer retirement plan c.Dividend income d. a and b e. a, b, and c

Child support payments

_____ is insured pays a portion of medical expenses after a deductible, Plan may include a stop-loss provision to cap out-of-pocket expenses a. Deductible b. Coinsurance c. Copayment d. Internal limits

Coinsurance

_____ is the use of credit for personal needs (except a home mortgage) by individuals and families. a. credit b. consumer credit

Consumer Credit

_______ are Level premiums paid until death or policy cancellation a. Continuous Premium b. Limited payment c. Single premium

Continuous Premium

_____ Convert to whole life policy without evidence of insurability a. Renewability b. Convertibility

Convertibility

______ Cost sharing in the form of a flat dollar amount you pay, such as $15 per office visit or $10 per prescription, NOT the same as co-insurance, which is a percentage of expenses a. Deductible b. Coinsurance c. Copayment d. Internal limits

Copayment

_____ is an arrangement to receive cash, goods, or services now and pay for them in the future. a. credit b. consumer credit

Credit

_______ is Decreasing term insurance, Pays off outstanding balance if borrower dies before repaid, Costly form of coverage a. term life insurance b. whole life insurance c. Universal life insurance d. Credit and mortgage life insurance

Credit and mortgage life insurance

______ Premiums remain the same while coverage decreases, Often used to provide for mortgage or other debt repayment a. Straight Term b. Decreasing term

Decreasing term

_____ is the initial amount not covered Determined on a calendar-year or per-incident basis. a. Deductible b. Coinsurance c. Copayment d. Internal limits

Deductible

____ is Temporarily postpone of payment on the loan, Eligible if at least half-time enrollment at a postsecondary school; economic hardship; unemployment; military services, No interest accrued on the subsided Stafford, and Perkins loan a. Deferment b. Forbearance

Deferment

Financial protection for dependents, protection from creditors, tax benefits and vehicle for savings are all benefits of?______ a. life insurance b. health insurance c. auto insurance d. fire insurance

Life insurance

____ is Level premiums paid for specified number of years, insurance in force until death a. Continuous Premium b. Limited payment c. Single premium

Limited Payment

_____ have open account credit offered by banks or other financial institutions, usually offer higher credit lines and lower interest rates than credit cards, access money by writing checks. a. Revolving credit lines b. Bank credit cards c. retail charge cards

Revolving credit lines

____ have frequent flyer programs, cash back programs, and other merchandise rebates. a. Rewards cards b. Secured credit cards c. Debit cards

Reward cards

____ is uncertainty with respect to economic loss a. Risk b. Insurance planning

Risk

_____ are backed by collateral in the form of a savings account opened at the financial institution that issues the card. a. Rewards cards b. Secured credit cards c. Debit cards

Secured credit cards

_____Interest is calculated based on principal only without compounding a. Simple interest method b. Discount method

Simple interest method

______ is calculated on outstanding (declining) balance each period a. Simple interest method on installment loans b. Add on method

Simple interest method on installment loans

______ is the lifetime coverage purchased with a single premium a. Continuous Premium b. Limited payment c. Single premium

Single Premium

_____ is a loan made for a specified period, at the end of which payment (principal + interest) is due in full. a. Single payment loan b. Installment loan

Single payment loan

_____ Covers total disability lasting > 12 months ; Starts in the 6th month Strict definition of disability to qualify. a. Workers comp b. Employer plans c. Social Security d. Private income insurance plans

Social Security

______Coverage remains the same while premiums increase with higher mortality rate, Annual renewable term policies, Level-premium term policies a. Straight Term b. Decreasing term

Straight term

______Pays cost of surgery in or out of hospital,Not all procedures are covered a. Hospitalization coverage b. Surgical Expense c. Physician Expense

Surgical Expense

Premiums become more costly as you get older and Does not build cash value are disadvantages of _______ a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Term life insurance

_______ are also called fee-for-service plans Typically allow for flexible choice of doctors and hospitals, The insurance company pays all or a set percentage of the fee after you have paid the annual deductible, You pay annual deductible plus a percentage of eligible costs a. Private health insurance b. government health insurance c. Traditional indemnity plans

Traditional indemnity plans

Flexible premium: lack of discipline to make the premium payments for desired benefit and protection, Charges or fees: eg. Front-end commission, investment expenses are disadvantages of______? a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Universal Life insurance

Flexible premium adjustment / death benefit when circumstances changes, and Savings feature: Accumulate cash value at the "current" rate of interest are advantages of? a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Universal life insurance

What can you do to reduce personal health care costs? a. Employers group plan b. Flexible spending amount c. Choose a higher deductible d. all of the above

all of the above (Employers group plan, Flexible spending amount, Choose a higher deductible)

Which of the following types of plans pay for some medical costs even when the insured decides to go out of the provider network (without a referral) for services? a.HMO b.PPO c.POS d. b and c

b and c

_____ protect you and dependents from losing your acquired assets, and shields you and your family from an interruption in earnings. a. basic purpose of insurance b. life insurance c. auto insurance d. fire insurance

basic purpose of insurance

It is not a good idea to use credit for a.Convenience b.durable expenses c.consumable goods that the payment schedule outlives the consumption goods. d.Investments e.improving one's credit score

consumable goods that the payment schedule outlives the consumption goods.

______ are loans made for specific purposes using formally negotiated contracts that specify the borrowing terms and repayment. Usually one-time transaction: usually for big-ticket items and specify terms for borrowing and repayment schedule a. consumer loans b. line of credit c. personal loans

consumer loans

______Covers necessary dental care and some dental injuries, Mostly offered through group insurance plans. a. Major medical insurance b. vision care c. dental service

dental service

______ are provided by the department of education to students, include both subsidized and unsubsidized loans with 1% loan origination fee. a. direct loans b. perkins loans c. parent loans

direct loans

______ reduces risk that will cause financial devastation a. risk b. insurance planning

insurance planning

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

jewelry.

Itemized non-business expenses do not include a.charitable contributions. b.state income taxes. c.residential mortgage interest. d.medical expenses. e.life insurance premiums.

life insurance premiums.

_______ are linked to a checking account to allow for a predetermined overdraw. a.overdraft protection lines b.Unsecured personal credit lines c. Home equity credit lines

overdraft protection lines

_____ is lent by by the department of education to parents to pay a childs education expenses, borrower must not have negative credit history, financial need, max amount is cost of attendance minus any other financial aid received, loan origination fees 4.3%. a. direct loans b. perkins loans c. parent loans

parent loans

Hospital indemnity policies would make payment for a. surgery. b. care at the doctor's office. c. private duty nursing care. d. prescriptions when not in hospital. e. per day hospital charges.

per day hospital charges.

____ is lent to universities to students, loan payments are made to the university, available to undergrad, graduate and professional students who show they need financial need, fixed interest rate of 5%, no interest charge until 9 months after graduation and no loan origination fee. a. direct loans b. perkins loans c. parent loans

perkins loans

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.

replacement cost minus depreciation.

_____ are the second largest type of credit cards, build loyalty, present credit limits a. rewards cards b. bank credit cards c. retail charge cards

retail charge cards

_____ have no interest charged until after 6 months after graduation or drop below half time student, only available to undergrads with financial needs, $5,500 a year depending on grade level and dependency status a. subsidized b. unsubsidized

subsidized

____ is finance charges calculated on original loan balance added to principal a. Simple interest method on installment loans b. Add on method

Add on Method

What are type of consumer loans? a. Auto loans b. Durable goods (Finance furniture, home appliances, TV, etc) c. Education loans d. Personal loans e. All of the above

All of the above (Auto loans, Durable loans, education loans and personal loans)

You can qualify for student loan forgiveness if? a. Death and permanent disability b. Teachers serving low-income communities c. Someone serves in the public service sectors d. Work full time in government and non-profit organizations. e. Make 120 qualifying monthly payments. f. All of the above

All of the above (Death and permanent disability, Teachers serving low-income communities,Someone serves in the public service sectors,Work full time in government and non-profit organizations, make 120 qualifying monthly payments.)

Consumer credit obligations include? a. open end account payment b. Consumer loans Excludes home mortgages d. all of the above

All of the above (open end account payment, consumer loan, exclude home mortgages)

__ would be an indication of overspending. a.Your checks are bouncing. b.Collection agencies are calling you frequently. c.All your credit cards are charged up to their limits. d.You have no cash reserves and must borrow for incidentals. e.All of the above.

All of the above.

___ is the Percentage cost of credit on a yearly basis, Key to comparing costs when shopping for rates a. Finance Charge b. Annual percentage rate c. Watch out fees

Annual percentage rate

______ Limits amount paid on certain expenses, even if the claim does not exceed overall policy limit a. Deductible b. Coinsurance c. Copayment d. Internal limits

Internal limits

_______ Provides families with weekly or monthly payments to replace income lost when insured is unable to work due to an illness, injury or disease, Most overlooked type of insurance, Young, healthy people don't consider the risks related to their future earning potential a. Long term care insurance b. short term care insurance c. Disability income insurance d. health insurance

Disability income insurance

_____ Interest (calculated on principal) is subtracted from loan amount and remainder goes to borrower Finance charges paid in advance APR will be higher than stated interest rate a. Simple interest method b. Discount method

Discount method

____ are federally sponsored loans which include direct, perkins and parent loans. a. Auto Loans b. Education loans c. personal loans d. Durable goods

Education Loans

_____ is short or long-term group disability policy, May require some vesting period on the job. a. Workers comp b. Employer plans c. Social Security d. Private income insurance plans

Employer plans

_______ is the total dollar amount you pay to use credit, Includes interest costs and fees like annual fees, late-payment fees, over the limit fees, balance transfer fees, foreign transaction fees etc. a. Finance Charge b. Annual percentage rate c. Watch out fees

Finance Charge

_____ is Temporarily stop or reduce loan payments for up to 12 months if not eligible for deferment, Interest is accrued on ALL loans. a. Deferment b. Forbearance

Forbearance

_____ are Medicare and Medicaid a. Private health insurance plans b. Government health insurance plans

Government health insurance plans

_______ Usually term insurance offered through employers as a fringe benefit Temporary providence of insurance with low benefit amount (often equal to about 1 year's salary), Additional coverage can be purchased, ood for those who may be virtually "uninsurable" a. term life insurance b. whole life insurance c. Universal life insurance d. Group Life insurance

Group Life insurance

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.

HO-4

______ Primary care physician, Contracts with selected care providers, Fixed pre-paid monthly premium, Usually pay small copayment to see doctor. a. Health maintenance organization b. Preferred provider organization c. Point of service

Health maintenance organization

______ are secured by equity in owner's home, interest tax deductible (if deductions are itemized) a.overdraft protection lines b.Unsecured personal credit lines c. Home equity credit line

Home equity credit line

______Pays a portion of per-day room and board charges, Use of hospital facilities,Selected other services a. Hospitalization coverage b. Surgical Expense c. Physician Expense

Hospitalization

_______A loan that is repaid in a series of fixed, scheduled payments rather than a lump sum. a. Single payment loan b. Installment loan

Installment loan

________ Allow policy-holders to flexibly adjust the premium and death benefit, Death protection plus savings feature, Premiums are "unbundled" into 2 accounts, Savings grow at current interest rate but is guaranteed to be more than a minimum rate. a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Universal life insurance

_____ are available on as-needed basis a.overdraft protection lines b.Unsecured personal credit lines c. Home equity credit lines

Unsecured personal credit lines

________ Provides death protection plus a savings or cash value feature, Cash value can be invested in mutual funds for greater possible return, Returns not guaranteed and actual death benefit can vary with the return on the investment account. Use with extreme caution! a. term life insurance b. whole life insurance c. Universal life insurance d. Variable life insurance

Variable life insurance

Less death protection than term for young people, Low return on savings, Loans repaid with interest,Tax penalties possible on early withdrawal, Outstanding loan subtracted from face value of policy upon death are disadvantages of _______? a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Whole life insurance

Savings vehicle, Borrow against cash value, Premiums remain constant, Cash value accumulates tax-free until redeemed are advantages of _______? a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Whole life insurance

_______ Designed to offer financial protection for the entire (whole) life of an individual, and the premiums are calculated assuming lifetime protection for the insured a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

Whole life insurance

_____ are premiums paid by employers for workers injured on the job Required by states; coverage varies. Coverage includes Medical, rehabilitation expenses, Disability income, Lump-sum payments for death, dismemberment Second-injury funds a. Medicare b. Medicaid c. Workers comp

Workers comp

_____ covers disability from on-the-job accident or illness a. Workers comp b. Employer plans c. Social Security d. Private income insurance plans

Workers comp

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 2002 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

aise her deductible from $250 to $1,000

Disability income insurance provides benefits that are designed to a. pay for hospital care costs from injuries. b. substitute for lost income. c. cover hospital care costs from illness. d. substitute for social security disability benefits. e. supplement retirement income for the elderly.

substitute for lost income.

Economical way for young families to purchase large amounts of life insurance and Provides for needs that will disappear over time are advantages of ________ a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

term life insurance

______ Benefit paid if insured dies during the policy period, when time period over, no more protection unless renewed, no savings component. a. term life insurance b. whole life insurance c. Universal life insurance d. other type of life insurance

term life insurance

Protect against economic loss in the event of serious accidents or illnesses and Protect against rising cost of health care is _________ a. the importance of healthy care b. the importance of life insurance c. the importance of insurance

the importance of healthy care

_____ is economically feasible for insurance companies to assume risk because they Combine losses from large numbers of people, Use past experience to calculate probability occurrence and amount of loss, Charge rates in proportion to risk level. a. insurance basics b. underwriting basics c. insurance

underwriting basics

____ has interest charged when the loan is disbursed with no grace period, borrowers can wait until 6 months after graduation to make payment but interest continues to accrue, available to undergrad, graduates and professionals, no financial need is required, $20,500 a year depending on grade level and dependency. a. subsidized b. unsubsidized

unsubsidized

_____ Exams, contact lenses, and glasses a. Major medical insurance b. vision care c. dental services

vision care