Test 4 Spring 2013 Chapters 10-11
True / False Questions
1.(p.309)The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks.TRUE
2.(p.310)Personal risks, property risks, and liability risks are types of speculative risks.
FALSE
3.(p.310)The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization.TRUE
4.(p.311)Self-insurance is the process of establishing a monetary fund that can be used to cover the cost of a loss.TRUE
5.(p.316)Homeowner's insurance refers to coverage also available to condominium owners.
TRUE
6.(p.317)Personal belongings that have a high value require coverage with a personal property floater.TRUE
7.(p.317)The purpose of a household inventory is to provide evidence of items covered by home insurance.TRUE
8.(p.319)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.FALSE
9.(p.322)Replacement cost for settling property insurance claims is less costly than the actual cash value method.FALSE
10.(p.323)A home made of wood is more expensive to insure than a comparable brick structure. TRUE
11.(p.326)The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage.FALSE
12.(p.326)Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.TRUE
13.(p.327)Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage. FALSE
14.(p.327)Property damage liability coverage would pay for damage to another vehicle for which you were at fault. TRUE
15.(p.330)The driver classification category is based on automobile style, model, and value of the vehicle. FALSE
16.(p.331)The purpose of an assigned risk pool is to assist people with poor driving records in obtaining automobile insurance coverage. TRUE
Multiple Choice Questions
17.(p.309)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.
18.(p.309)Defective house wiring is an example of a:
A.hazard.
B.peril.
C.risk.
D.speculation.
19.(p.310)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
20.(p.310)Using a home security system is an example of ______risk.
A.shifting
B.accepting
C.reducing
D.sharing
E.transferring
21.(p.315)The legal responsibility for the financial cost of another person's losses or injuries is referred to as:
A.theft.
B.robbery.
C.liability.
D.assigned risk.
E.collusion.
22.(p.315)If a homeowner leaves toys on stairs that results in injury to a delivery person, this may be ruled as:
A.vicarious liability.
B.negligence.
C.assigned risk.
D.umbrella coverage.
E.coinsurance.
23.(p.316)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
24.(p.316)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.
25.(p.317)Which of the following is considered personal property for home insurance coverage?
A.an automobile
B.a garage
C.furniture
D.a house
E.trees and shrubs
26.(p.319)Most home insurance policies provide coverage for:
A.earthquake damage.
B.flood damage.
C.an umbrella liability.
D.personal property floaters.
E.medical payments.
27.(p.319)Renter's insurance would include coverage for:
A.flood damage.
B.personal property.
C.building and other structures.
D.umbrella liability.
E.earthquake damage.
28.(p.319)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
29.(p.322)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
30.(p.322)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
31.(p.322)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
32.(p.326)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.
33.(p.327)Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?
A.assigned risk pool
B.financial responsibility coverage
C.comprehensive system
D.no-fault insurance
E.uninsured motorists protection
34.(p.327)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
35.(p.327)Which of the following types of coverage 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
36.(p.328)Comprehensive coverage would cover financial losses due to:
A.injuries caused by a driver without insurance.
B.damage to your car in an accident for which you were at fault.
C.damage to your car caused by wind or hail.
D.legal action against you for an accident.
E.damage to a neighbor's tree with your car.
37.(p.326)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
38.(p.330)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
39.(p.309)Nick Rodr owns a home in Edmond, Oklahoma and pays $665 per year in insurance on the home. The $665 is an example of:
A.A peril
B.A hazard
C.A risk
D.A premium
E.A liability
40.(p.310)Kevin Brown rides his bicycle to work so that he doesn't have to worry about getting in a car accident. How is Kevin managing his risk?
A.Risk Avoidance
B.Risk Reduction
C.Risk Assumption
D.Risk Shifting
E.Risk Creation
41.(p.310)Larry Foster has bought a car with front and side airbags and antilock brakes. How is Larry managing his risk?
A.Risk Avoidance
B.Risk Reduction
C.Risk Assumption
D.Risk Shifting
E.Risk Development
42.(p.310)Peter Jacobs has set aside $5000 in case he has an accident in his 1980 Honda Civic. He does not have collision insurance on this car. How is Peter managing his risk?
A.Risk Avoidance
B.Risk Reduction
C.Risk Assumption
D.Risk Shifting
E.Risk Creation
43.(p.327)Georgia Owen has been responsible for an accident and her car has been totaled. What part of Georgia's automobile insurance would cover the damage to her car?
A.Bodily Injury Liability
B.Medical Payments Coverage
C.Property Damage Liability
D.Collision
E.Comprehensive Physical Damage
44.(p.326)The 500 in 200/500/50 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 in total.
True / False Questions
45.(p.342)The best way to avoid the high cost of illness is to stay well.TRUE
46.(p.344)Group health insurance plans comprise over 80 percent of all health insurance issued by health and life insurance companies.TRUE
47.(p.344)Group health insurance will cover you but not your immediate family.FALSE
48.(p.345)Very few group health policy contracts have a coordination of benefits provision.
FALSE
49.(p.346)A deductible provision requires the policyholder to pay a basic amount before the policy benefits begin.TRUE
50.(p.356)A coinsurance provision requires the policyholder to share the expenses beyond the deductible amount. TRUE
51.(p.346)A stop-loss provision requires the policyholder to pay up to a certain amount, after which the insurance company pays 100 percent of all remaining covered expenses.TRUE
52.(p.347)Dread disease and cancer policies are usually very good values.FALSE
53.(p.358)Public opinion polls consistently show that Americans are happy with the nation's health care system. FALSE
54.(p.365)Just about every worker is covered by disability income insurance.FALSE
55.(p.365)Most people are more likely to lose their income due to death than due to disability.
FALSE
Multiple Choice Questions
56.(p.344)Most health insurance policies in the United States are sold to:
A.victims of communicable diseases.
B.individuals with families.
C.single individuals with no dependents.
D.Employees and their dependents.
E.Employers, who in turn offer the benefits to employees.
57.(p.345)Nathanial Drummond has three different insurance policies. He has been injured in an accident and has incurred $30,000 in medical bills. There is a clause in all of his insurance contracts the makes sure that he receives no more than $30,000 in payments from his insurance companies. This clause is called:
A.Coordination of benefits
B.Deductible
C.Coinsurance
D.Stop-Loss provisions
E.Major medical expense insurance
58.(p.346)Sophie Bennett must pay $500 in doctor's 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
59.(p.346)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
60.(p.346)Sophie Bennett has met the deductible for her doctor's visits. She has also paid out 20% of all expenses above this deductible amount. She has paid a total of $5000 in doctor's visits. At this point there is a clause in her insurance contract that make her insurance company pay for 100% of all expenses. What clause is this likely to be?
A.Coordination of benefits
B.Add on expenses
C.Coinsurance
D.Stop-Loss provision
E.Major medical expense insurance
61.(p.347)Joan Wilder receives a phone call from a salesman who tries to sell her an insurance policy by scaring her about her high risk of death from this disease. She knows that this type of insurance policy has a notoriously poor value so she politely declines. What type of insurance policy did this salesman likely try to sell her?
A.Comprehensive Major Medical Insurance
B.Hospital Indemnity Policy
C.Long Term Care Insurance
D.Cancer Insurance Policy
E.None of the choices
62.(p.350)Benjamin Northcutt has an insurance policy that does not cover cosmetic surgery like the nose job he would like to have. What provision in his insurance policy would specify this?
A.Eligibility
B.Assigned Benefits
C.Benefit Limits
D.Guaranteed Renewable
E.Exclusions and Limitations
63.(p.346)Which one of the following provisions requires that the policyholder pay a basic amount before the policy benefits begin?
A.Coinsurance
B.stop loss
C.Deductible
D.self insurance
E.incontestable
64.(p.365)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
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