Ch 8 Smartbook

What is covered by renter's insurance?

-Additional living expenses -Personal liability -Personal property

General risk management techniques:

-Risk avoidance -Risk assumption -Risk reduction

Which of the following are risk assumption actions? -Wearing a seat belt -Self-insuring -Deciding not to purchase collision insurance -Installing smoke detectors in all rooms

-Self-insuring -Deciding not to purchase collision insurance

A deductible is a set amount that a policyholder must pay:

-per loss on an insurance policy. -for assuming risk. -for risk shifting.

Examples of risk reduction:

-wearing seatbelt in a car -installing smoke alarms

1. Ross has 50/100/50 vehicle liability insurance coverage with a $847 deductible. What do the numbers refer to? 2. The bills from the injuries to the person in the parked car were $50,694, the damage to the car was $15,278, and the damage to the store was $25,416. How much of the total will insurance cover? 3. How much is ross responsible for?

1. First number/ limit that will be paid to one person in an accident Second number/ limit that will be paid to all person in an accident Third number/ limit for payment for damage of property of others in an accident 2. Insurance payment = 50k for injuries + car damage + store damage - deductible..... 50,000 + 15,278 + 25,416 - 847 = 89,847. 3. total Ross has to pay = deductible + total owed to victim - 50k 847 + 50,694 - 50,000 = 1,541.

What types of events are considered to be part of a comprehensive risk management plan?

Disability Liability Death Property loss Illness

Purchasing insurance is the only way to manage risk.

False

Risk management needs are the same throughout one's life.

False

Homeowner's insurance does not cover injuries to people on property.

False **Homeowner's insurance is coverage for your place of residence and its associated financial risks, such as damage to personal property and injuries to others.

Insurance is a protection against possible _______ loss, and provides protection against many ________.

Financial, risks

Which of the following is true of your personal insurance program? -It should be set up late in life to ensure you do not need to change it. -It will remain the same throughout your life. -It should change along with your needs and goals.

It should change along with your needs and goals.

Which of the following are risk avoidance actions? -Not buying collision insurance for an older car because it is too expensive -Risk optimization -Risk maximization -Driving consistently to ensure you get better at handling your vehicle -Making sure you do not face product failure by not manufacturing new products

Making sure you do not face product failure by not manufacturing new products

Which of the following are covered by a homeowner's policy?

Other structures A house Personal property

Setting aside a special fund to make sure that you would cover yourself in the event of a loss is:

Self-insurance

The coverage of HO-3 policies includes which perils?

Smoke Windstorms Fire and lightning Theft

Not buying flood insurance on a house is an example of risk assumption.

True

Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.

True

When we set up a special fund to cover the cost of a loss, we are self-insuring.

True

You can be held legally responsible for another person's injury or damage even if it was not your fault.

True

Wage loss insurance will reimburse you for:

any salary or income lost due to injury in an automobile accident

Choosing never to drive to work, so you are not in an accident is an example of risk _____.

avoidance

The two standard renter's insurance policies are broad form and _____ form.

comprehensive

The type of structure and the type of ________ materials used influence the cost of insurance coverage.

construction/building

Additional living expenses that result from a home fire or other home damage are:

costs for you to stay in a motel or a rented apartment while your home is being fixed.

In a no- _________ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

fault

Most homeowner's policies cover many perils, but not:

flood

Which of the following is an example of a detached structure that is covered under homeowner's insurance? -covered front porch -camper -basement -garage

gargage

A __________ is anything that increases the likelihood of loss through some peril.

hazard

Defective house wiring is an example of a:

hazard *Not correcting the defective wiring if it is known would be negligence.

___________ is protection against possible financial loss that allows you to be prepared for the worst.

insurance

A household __________ is a list or other documentation of personal belongings, with purchase dates and cost information.

inventory

The legal responsibility for the financial cost of another person's losses or injuries is known as:

liability

Risk management is a ______ -range planning process.

long

__________ is the failure to take ordinary or reasonable care in a situation.

negligence

In a ______ system, drivers involved in accidents collect medical expenses, lost wages, and related injury costs from their own insurance companies.

no-fault

A _____ is the cause of a possible loss

peril

Comprehensive insurance for your car covers _________ damage to your car from such risks as fire, theft, falling objects, and hitting an animal.

physical

The two main categories of automobile coverage are:

property damage, bodily injury

Automobile insurance covers _______ damage and personal damage (bodily injury) caused by the policyholder's car.

property/vehicle/physical

Your insurance protection for your home should be based on the amount needed to _______ or repair your house and not the amount you originally ________ for the home.

replace, paid

Shifting of ______ is done through the purchase of an insurance policy.

risk

Choosing not to participate at all in any kind of heavy physical activity is one way to protect yourself from injury. This is an example of:

risk avoidance

Not eating a high fat diet and exercising lower the chances of illnesses. This is an example of:

risk reduction

The most common method of dealing with risk is to:

risk shift

Towing and emergency road service coverage pays for the cost of getting your vehicle to a:

service station but not for the cost of repairs.

The higher the deductible:

the more risk the insured is assuming

According to the text, your homeowner's insurance covers damage to your home and any other structures on your property.

true

The best risk management plans are flexible enough to handle life's changing situations.

true

The main bodily injury coverages are bodily injury liability, medical payments coverage, and uninsured motorist's protection.

true

The main factors that influence premiums for automobile insurance are:

vehicle type, rating territory, and driver classification

According to the text, you should consider automobile insurance coverage of $50,000 up to $ ________ for property damage liability.

100,000