True / False Questions
23. (p. 41) A job tends to have less of a long-term commitment to a field than a career. TRUE
24. (p. 53) Education, training, and the demands for a person's skills are major influences on salary. TRUE
25. (p. 56) A tax-exempt employee benefit is usually more advantageous than a tax-deferred benefit.
TRUE
Multiple Choice Questions
26. (p. 41) A commitment to a profession that requires continued training and offers a clear path for occupational growth is a(n):
A. apprenticeship.
B. job.
C. internship.
D. career.
E. cooperative employment experience.
27. (p. 56, 16-18 (Chap. 1)) To assess the current value of a lump-sum retirement benefit that will be received in 10 years, use the ____________ calculation.
A. present value of annuity
B. present value of a single amount
C. future value of an annuity
D. future value of a single amount
28. (p. 56) Barb Hotchkins is in the 28 percent tax bracket. A tax-exempt employee benefit with a value of $500 would have a tax-equivalent value of:
A. $694.
B. $528.
C. $500.
D. $360.
E. $140.
29. (p. 56) Tax-deferred employee benefits are
A. not subject to federal income tax.
B. not subject to state income tax.
C. taxed at some future time.
D. are taxed at a special rate.
30. (p. 56) ____________________ is a benefit on which you pay no taxes.
A. Networking
B. Vesting
C. A tax deferred benefit
D. A tax exempt benefit
E. An opportunity cost
The answers for the next four chapters are at the end of this document.
Chapter 10 Home and Automobile Insurance
True/False Questions
T F 1. The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks.
T F 2. Personal risks, property risks, and liability risks are types of speculative risks.
T F 3. The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization.
T F 4. Vicarious liability refers to the failure to take ordinary or reasonable care in a situation.
T F 5. Personal belongings that have a high value require coverage with a personal property floater.
T F 6. The purpose of a household inventory is to provide evidence of items covered by home insurance.
T F 7. Increased liability insurance is available with an umbrella policy.
T F 8. Medical payments coverage in a home insurance policy is designed to pay for legal action taken against a homeowner who may be legally responsible for injury or property damage of others.
T F 9. The Comprehensive Form of homeowner's insurance includes coverage for damage due to floods.
T F 10. Replacement cost for settling property insurance claims is less costly than the actual cash value method.
T F 11. A home made of wood is more expensive to insure than a comparable brick structure.
T F 12. The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage.
T F 13. Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.
T F 14. Property damage liability coverage would pay for damage to another vehicle for which you were at fault.
T F 15. The driver classification category is based on automobile style, model, and value of the vehicle.
Multiple Choice Questions
16. Peril is defined as:
A) the refusal by an insurance company to pay for the covered loss.
B) the cause of risk.
C) the cause of a possible loss.
D) an uncertainty as to loss.
17. Defective house wiring is an example of a:
A) hazard.
B) peril.
C) risk.
D) speculation.
18. Starting a small business that may or may not succeed is an example of ___________ risk.
A) speculative
B) pure
C) commercial
D) personal
E) liability
19. Using a home security system is an example of ____________ risk.
A) shifting
B) accepting
C) reducing
D) sharing
E) transferring
20. Wearing a seat belt in an automobile to protect yourself against injury is an example of ____________ risk.
A) reducing
B) assuming
C) pooling
D) shifting
E) avoiding
21. High winds cause damage to trees, shrubs, and other plants. This insurance claim would be covered under the ____________ component of homeowner's insurance.
A) additional living expenses
B) personal property
C) building and other structures
D) personal liability
E) property damage
22. The additional living expenses component of a home insurance policy is designed to:
A) pay for temporary housing while your home is repaired.
B) cover damage to property while away from home.
C) reimburse a homeowner for damage done by a visitor.
D) pay for medical expenses of people injured on your property.
E) pay for repairs caused by fire or other hazards.
23. Renter's insurance would include coverage for:
A) flood damage.
B) personal property.
C) building and other structures.
D) umbrella liability.
E) earthquake damage.
24. Which of the following are not covered by renter's insurance?
A) medical expenses for injuries to visitors
B) fire damage of the building's roof
C) additional living expenses
D) accidental damage to the property of others
E) cost of legal action due to personal liability
25. Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?
A) $100
B) $150
C) $200
D) $350
E) $400
26. Which of the following insurance policy provisions requires that the insured must pay for part of the loss of a claim if the property is not insured for the specified percentage of replacement value?
A) personal property floater
B) an endorsement
C) coinsurance clause
D) umbrella coverage
E) assigned risk clause
27. The ____________ method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.
A) replacement value
B) actual cash value
C) umbrella
D) endorsement
E) personal property floater
28. Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay?
A) $250
B) $350
C) $450
D) $600
E) not able to determine from this information
29. The 100 in 100/300/50 refers to:
A) property damage liability coverage.
B) the amount of the deductible.
C) collision coverage.
D) the total coverage for an accident.
E) the limit for bodily injury claims that can be paid to one person.
30. The 25 in 50/100/25 refers to ____________ coverage.
A) collision
B) bodily injury liability
C) comprehensive physical damage
D) medical payments
E) property damage liability
31. Which of the following coverages would pay for damage to your automobile in an accident for which you were at fault?
A) property damage liability
B) collision
C) comprehensive physical damage
D) no-fault insurance
E) assigned risk pool coverage
32. Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?
A) $150,000
B) $100,000
C) $50,000
D) None. The total amount would be covered by insurance
33. Which of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?
A) rating territory
B) assigned risk pool
C) no-fault system
D) driver classification
34. Susan Bize owns a home in Edmond, Oklahoma. She has a coffee maker in the home that has been recalled because it is likely to start fires. The coffee maker is an example of:
A) A peril
B) A hazard
C) A risk
D) A premium
E) None of the above
Chapter 11 Health and Disability Insurance
True/False Questions
35. T F The United States has the lowest per capita medical expenditures of any industrialized country in the world.
36. T F The number of Americans without basic health insurance has been decreasing since the 1980s.
37. T F Most people are more likely to lose their income due to death than due to disability.
38. T F The fact is that for all age groups disability is more likely than death.
39. T F Group health insurance plans comprise more than 85 percent of all health insurance issued by health and life insurance companies.
40. T F Group health insurance will cover you but not your immediate family.
41. T F Very few group health policy contracts have a coordination of benefits provision.
42. T F Disability income insurance benefits provide regular cash income lost by employees as the result of an accident, illness, or pregnancy.
43. T F Just about every worker is covered by disability income insurance.
44. T F Disability benefits begin on the first day you are disabled.
45. T F A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.
46. T F A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount.
47. T F Long-term care insurance was virtually unknown 25 years ago, but now it is growing faster than any other form of insurance.
Multiple Choice Questions
48. Which country has the highest per capita medical expenditures of any industrialized country in the world?
A) Australia
B) Britain
C) Canada
D) Denmark
E) U.S.A.
49. What can you do to reduce your health care costs?
A) Stay well.
B) Gain a little extra weight.
C) Smoke and drink.
D) Live dangerously.
E) Don't seek medical care.
50. Which type of health insurance policy may not cover all of your health insurance needs or may deny benefits if you lose your job?
A) group health
B) individual health
C) Basic health
D) Comprehensive medical
E) Disability income
51. Which type of insurance provides for the partial replacement of income lost by employees as a result of an accident, illness, etc.?
A) Comprehensive major medical
B) major medical expense
C) physician's expense
D) Disability income
E) surgical expense
52. With disability income insurance, benefits usually begin:
A) on the first day of disability.
B) Between 30 and 90 days after the disability occurs.
C) on the 10th day of disability.
D) one year after the start of the disability.
53. Julie Cumbie is playing softball and gets hurt sliding into second base. She gets an x-ray at her doctor’s office to make sure her ankle isn’t broken. Which part of her basic insurance coverage should help pay for this x-ray?
A) Hospital Expense Insurance
B) Surgical Expense Insurance
C) Physician Expense Insurance
D) Major Medical Expense Insurance
E) None of the above
54. Sophie Bennett must pay $500 in doctors visits before her insurance company will make any payments for doctors visits. This is called:
A) Coordination of benefits
B) Deductible
C) Coinsurance
D) Stop-Loss provision
E) Major medical expense insurance
55. Sophie Bennett has met the deductible for her doctor’s visits. However, her insurance company requires her to pay 20% of all expenses above this deductible amount. This clause is called:
A) Coordination of benefits
B) Add on expenses
C) Coinsurance
D) Stop-Loss provision
E) Major medical expense insurance
F)
Chapter 12 Life Insurance
True/False Questions
56. T F Life insurance proceeds may be used to provide an education or income for children.
57. T F Single persons living alone have little or no need for life insurance.
58. T F Households with small children most often have the greatest need for life insurance
59. T F The first step in buying insurance is to determine whether you really need life insurance.
60. T F The easy method of determining life insurance is based on the rule of thumb that a "typical family" will need about 70 percent of wage-earner's salary for seven years.
61. T F The DINK (Duel Income No Kids) method of determining life insurance needs assumes that the spouse will continue to work after husband's/wife's death.
62. T F The " family need" method of determining life insurance need provides a thorough estimation of life insurance needs.
63. T F A term insurance policy pays a benefit only if you die during the period that the policy covers.
64. T F The premium for the whole life policy increases with your age.
65. T F Universal life, variable life, and adjustable life are types of term life insurance.