Risk Management and Insurance Topic Test (100%)

Rudy has been paying an annual homeowners insurance premium of $1,106.30 ($0.37 per $100 of value) since he first purchased his house. For the past six months, Rudy has completed some major improvements to his house to improve its overall value. If Rudy successfully adds $50,000 to the value of his house, what will his new annual homeowners insurance premium be?

$1,291.30

In order to lower his monthly auto insurance bill, Henry has decided to change his existing policy by increasing the deductible for both collision and comprehensive insurance to the highest amount permitted by his insurance company, AA Auto Insurance. His current monthly auto insurance bill, which includes a $250.00 deductible for collision and a $50.00 deductible for comprehensive, is $43.79. How will Henry's monthly auto insurance bill be affected by the change?

$12.48

Maria, age 28, wants to pay no more than $300 a year in life insurance. What is the face value of the largest 20-year term policy she can buy without spending more than $300 annually?

$158,000

Sherita, age 37, wants to pay no more than $750 a year in life insurance. If the annual life insurance premium rate (per $1,000 of face value) is $3.96, what is the largest 15-year term policy she can buy without spending more than $750 annually?

$189,000

Susan is paying $0.30 per $100 on her $483,000 home in homeowners insurance annually. If her annual homeowners insurance premium is divided into twelve equal monthly installments to be included on each of her monthly mortgage payments of $2,128.00, what is her total monthly payment?

$2,248.75

Because Bernard has some health issues, he must pay 15% more for life insurance. About how much more annually will a $115,000 10-year term insurance at age 35 cost Bernard than someone of the same age without health issues?

$24

After reviewing her driving record for the past 3 years, Cindy's insurance company offers her a good driver discount of 4.5%. Her original policy was based on the premiums listed below. What is her new annual premium including the discount?

$504.24

Bob's employer covers 23% of his family's annual health insurance premium. The balance of the premium is deducted in equal amounts from Bob's paycheck 26 times over the calendar year. If $185.30 is withheld from each of Bob's paychecks, what is his family's annual health insurance premium?

$6,256.88

Below is the information from a brochure for Fret-No-More Auto Insurance outlining the insurance coverage options they offer. To be considered "full" coverage, an insurance plan must include one level of coverage from each category. What is the annual premium for the full-coverage insurance plan with the highest coverage limits and the lowest deductibles available from Fret-No-More?

$831.92

What is the difference between a co-payment and co-insurance?

A co-payment is a flat fee for each service, and co-insurance is based on a percentage of the costs incurred.

Tina was involved in an accident in which she rear-ended another driver stopped at a stoplight. Tina is fully insured through her insurance company. Which of the following components of her insurance policy will cover the damages caused to Tina's car in the accident?

Collision

DeShawn is 38 years old and is married with 3 children, ages 2, 4, and 6. He makes $45,000 a year and is planning to retire when he turns 60. From the following three options, DeShawn decides to buy the $900,000 20 year term policy. Given DeShawn's scenario, assess whether Deshawn made a wise decision.

DeShawn's current policy will cover his family for an adequate period of time at his current salary.

Eva is 29 years old and has 2 children, ages 3 and 5. She makes $48,500 a year. Eva decides to buy a $400,000 10-year term policy and then renew the policy for another ten years afterwards. To renew the policy the insurance company charges an extra 40% to her premium rate. Given the options below, assess whether Eva made a wise decision.

Even with the extra charge for renewal, Eva's plan is the least expensive.

Renters insurance is different than homeowners insurance in that _____________.

Homeowners insurance protects the building of residence while renters insurance does not.

Susie is thinking about changing her auto insurance policy at Fret-No-More Auto Insurance. Her current policy includes the following options: $50/100,000 limit for bodily injury, $25,000 limit for property damage, $250 deductible for collisions, and $50 deductible for comprehensive. Which of the following changes would increase Susie's limits the most without increasing her monthly premium by more than $5.00?

Increase coverage on bodily to $100/300,000 and on property damage to $50,000.

Which of the following is not considered one of the four basic types of auto insurance?

Legal Responsibility

What is the basic difference between liability insurance and collision insurance?

Liability insurance covers damage that you cause, and collision insurance covers damage done to your vehicle.

Leroux Health Insurance is considering changing the options in one of their health care plans (Plan A) based on customer feedback that prescriptions and regular visits to the doctor are too expensive for the insured individual. How can Leroux reduce the costs of regular health care without driving up the price of their health care plan?

Reduce the co-pay amounts but increase the annual deductible so that the monthly premium can stay the same.

Which of the following acronyms does not represent a managed care plan?

SOR

Ben just purchased a house in an older neighborhood. After talking to several neighbors across the street, he found that he is paying much more in homeowners insurance than other homeowners in the neighborhood. Ben's house is about 30 years old. It is made of wood framing and stucco texture. It has all of its original plumbing and electrical work. The brick wall at the back of his backyard separates his yard from a drainage wash. Which of the following is not a reasonable argument for the insurance company to use to justify Ben's higher homeowners insurance premium?

The age and outdated structural design of the house implies that remodeling is likely. This warrants a higher premium.

Which of the following is something that should not be a consideration when choosing a health care plan?

The coverage the insured individual and family already receive in auto insurance.

Which of the following is something that will not affect your homeowners insurance premium?

The distance of the home from a school.

In a fee-for-service health insurance plan with a $6,500 annual deductible, ____________.

The insured individual must pay $6,500 in health care before the insurance company will begin to pay for his health care needs.

Which of the following statements is not something you should be thinking when considering changes in your auto insurance policy?

The premium you pay guarantees that you will never have to pay more than your deductible in the event of an accident.

Tara and Levi are trying to decide between homeowners insurance policies offered by two different agencies. AAA Insurance has offered to insure their home for an annual premium of $0.38 per $100 with a $500 deductible. Thompson's Insurance has offered to insure the same home for an annual premium of $0.26 per $100 with a deductible of $1,000. The house Tara and Levi purchased is valued at $425,000. Which of the following statements accurately describes the difference between the two plans?

Thomson's Insurance is cheaper even if Tara and Levi experience an incident that results in severe damage or loss to their home.