Chapter 8 Personal Finance

b 38. An individual who purchases insurance isA. The insurance company.B. A policyholder.C. An insurer.D. A victim.E. An employer.
c 39. What is the fee that a policyholder pays when an insurance company agrees to take on the risk?A. CoverageB. InsuredC. PremiumD. PerilE. Risk
c 40. Insurance allows someone toA. Reduce risk.B. Assume risk.C. Shift risk.D. Avoid risk.E. Eliminate risk.
a 41. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. Theskateboard was aA. Hazard.B. Negligence.C. Peril.D. Premium.E. Risk.
b 42. Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. Thefact that Barbara didn’t put away the skateboard is calledA. Hazard.B. Negligence.C. Peril.D. Premium.E. Risk.
c 43. Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through herwindow. The windstorm was aA. Hazard.B. Negligence.C. Peril.D. Premium.E. Risk.
d 44. The most common risks areA. Personal risks.B. Property risks.C. Liability risks.D. All of these are common risks.E. None of these are common risks.
c 45. Anything that may possibly cause a loss is called aA. Hazard.B. Negligence.C. Peril.D. Premium.E. Speculation.
b 46. The failure to take ordinary or reasonable care to prevent accidents from happening is calledA. Hazard.B. Negligence.C. Peril.D. Premium.E. Risk.
b 47. An insurance company willA. Insure speculative and pure risks.B. Insure pure risk, but not speculative risk.C. Insure neither pure risk nor speculative risk.D. Insure speculative risk, but not pure risk.E. Insure all types of risks.
e 48. Which of the following is NOT one of the commonly used general risk management techniques?A. Reduce riskB. Assume riskC. Shift riskD. Avoid riskE. Increase risk
a 49. If you choose to avoid the risk of a traffic accident by not driving to work, you are usingA. Risk avoidance.B. Risk reduction.C. Risk assumption.D. Risk shifting.E. Risk increasing.
b 50. If you choose to wear your seatbelt, you are usingA. Risk avoidance.B. Risk reduction.C. Risk assumption.D. Risk shifting.E. Risk increasing.
c 51. If you choose to take responsibility for negative results of a risk, you are usingA. Risk avoidance.B. Risk reduction.C. Risk assumption.D. Risk shifting.E. Risk increasing.
d 52. If you choose to insure your home or your vehicle, you are usingA. Risk avoidance.B. Risk reduction.C. Risk assumption.D. Risk shifting.E. Risk increasing.
e 53. An insurance programA. Should be constant through one’s life.B. Should change along with needs and goals.C. Should minimize personal property and liability risks.D. Should be constant through one’s life, and should minimize personal property and liability risks.E. Should minimize personal property and liability risks, and change along with one’s needs and goals.
e 54. Which of the following questions should one ask when developing a risk management plan?A. What do I need to insure?B. How much should I insure something for?C. What kind of insurance should I buy?D. Whom should I buy insurance from?E. All of these questions should be asked when developing a risk management plan.
d 55. Which of the following is correct?A. The best risk management plan is constant through one’s life.B. Once a plan is set up, it should be reviewed every 10 years.C. A solid risk management plan works well without insurance as a component.D.One question that should be asked when developing a risk management plan is “What do I need toinsure?”E. The main goal of insurance should be to maximize personal, property, and liability risks.
d 56. The two basic types of risk that people face regarding their personal property areA. Basic and criminal.B. Physical damage and destruction.C. Destruction and basic.D. Physical damage and damage caused by criminal behavior.E. Negligence and criminal behavior.
b 57. Liability is defined asA. An insurance program for individuals and households.B. The legal responsibility for the financial cost of another person’s losses or injuries.C. Negligence.D. A loss due to physical damage.E. Risk assumption.
d 58. Homeowner’s insurance covers all of the following exceptA. Personal property.B. Personal liability.C. Additional living expenses.D. Automobiles.E. Building and other structures on the property.
e 59. Homeowner’s insurance covers all of the following exceptA. A detached garage.B. Trees and shrubs.C. A tool shed.D. Personal property.E. All of these are covered.
b 60. Homeowner’s insurance covers all of the following exceptA. Three months in a hotel after a house fire.B. Theft of a diamond necklace valued at $25,000.C. A three-year-old television.D. A fire that damages your neighbor’s roof that was caused by a spark from your grill.E. Medical costs for a visitor who slipped on your steps and broke his ankle.
d 61. The best place to keep a household inventory isA. On a bookshelf in the family room.B. In the freezer.C. In the attic.D. In a safe deposit box.E. In the garage.
e 62. All of the following are acceptable types of documentation for a household inventory exceptA. Photographs with dates purchased and values of objects listed on the backs.B. Video recordings of assets.C. Written listings of items, purchase prices, and assets.D. Computerized spreadsheets with details about the items and their ages and costs.E. A listing of items and their details in your memory.
c 63. Insurance that covers valuable items, such as an expensive harp, is calledA. Buildings and other structures coverage.B. Homeowner’s insurance.C. Personal property floater.D. Household inventory insurance.E. Personal property insurance.
e 64. Personal property insurance coversA. All personal property.B. Furniture and appliances, but not clothing or some electronics.C. Clothing and some electronics, but not furniture and appliances.D. All items up to 200% of the insured value of the home.E. Personal property items up to 55-75% of the insured value of the home.
e 65. Personal liability coverage does NOT protectA. An occasional babysitter.B. The homeowner.C. A visitor.D. Members of the homeowner’s family.E. A housekeeper.
e 66. A policy that supplements your basic personal liability coverage is called a(n)A. Endorsement.B. Homeowner’s insurance.C. Medical payments coverage.D. Supplementary policy.E. Umbrella policy.
a 67. When Stanley was visiting Elaine, he tripped on her front porch step and sprained his ankle. His injurieswere covered byA. Elaine’s medical payments coverage.B. Stanley homeowner’s policy.C. Elaine’s health insurance coverage.D. Elaine’s life insurance policy.E. The insurance policy of the mason who installed the front porch step 15 years ago.
b 68. If you have a loss due to a flood,A. Your homeowner’s insurance should normally cover the loss.B.You need to have purchased special coverage if you live in an area that has frequent floods in order tobe covered.C.FEMA (Federal Emergency Management Agency) will automatically provide coverage if this is yoursecond flood loss.D. You need an umbrella policy for coverage.E.Your additional living expenses coverage will apply if you move to an area that has not flooded in oneyear.
b 69. Which of the following is NOT correct about renter’s insurance?A. The broad form covers personal property against perils specified in the policy.B. Renter’s insurance covers the building and other structures on the site.C.The comprehensive form protects personal property against perils not specifically excluded in thepolicy.D. Typical coverage pays only the actual cash value of one’s losses.E.Renter’s insurance includes personal property protection, additional living expenses, and personalliability.
e 70. Homeowner’s insurance includes all of the forms listed here exceptA. HO-1.B. HO-2.C. HO-5.D. HO-6.E. HO-8.
d 71. Home insurance policies include coverage for all of the following exceptA. Credit card fraud.B. The cost of removing damaged property.C. Temporary repairs after a loss to prevent further damage.D. Business property.E. Emergency removal of property to protect it from damage.
d 72. Vincent is applying for insurance for his new home. Which of the following is correct?A. He should base the amount of insurance on the price he paid for it.B. He should insure the building for 75% of its replacement cost.C.He should use the actual cash value method for settling claims to receive the full cost of repairing orreplacing his personal belongings.D.His personal belongings should automatically be covered with his home at 55-75% of his home’sinsured amount.E. His insured amount should remain the same as long as he lives in his house.
a 73. Yogi is applying for insurance for his new home. Which of the following is correct?A. He should base the amount of insurance on the price to rebuild or repair it.B. He should insure the building for 75% of its replacement cost.C.He should use the actual cash value method for settling claims to receive the full cost of repairing orreplacing his personal belongings.D.His personal belongings should automatically be covered with his home at 125% of his home’s insuredamount.E. His insured amount should remain the same as long as he lives in his house.
b 74. Zach is applying for insurance for his new home. Which of the following is correct?A. He should base the amount of insurance on the price he paid for it.B.He should insure the building for its replacement value to receive the full cost of repairing or replacingit.C.He should use the actual cash value method for settling claims to receive the full cost of repairing orreplacing his personal belongings.D.His personal belongings should automatically be covered with his home at 125% of his home’s insuredamount.E. His insured amount should remain the same as long as he lives in his house.
c 75. Andrew is applying for insurance for his new home. Which of the following is correct?A. He should base the amount of insurance on the price he paid for it.B. He should insure the building for 75% of its replacement cost.C.He should use the replacement value method for settling claims to receive the full cost of repairing orreplacing his personal belongings.D.His personal belongings should automatically be covered with his home at 125% of his home’s insuredamount.E. His insured amount should remain the same as long as he lives in his house.
e 76. Barnaby is applying for insurance for his new home. Which of the following is correct?A. He should base the amount of insurance on the price he paid for it.B. He should insure the building for 75% of its replacement cost.C.He should use the actual cash value method for settling claims to receive the full cost of repairing orreplacing his personal belongings.D.His personal belongings should automatically be covered with his home at 125% of his home’s insuredamount.E. His policy should automatically increase coverage as construction costs rise.
e 77. Sandra is contacting several insurance companies to compare coverage for her home. Which of thefollowing should NOT affect her premium?A. Alarm systemB. Amount of coverageC. Type of structureD. DeductibleE. Proximity to a school
b 78. Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of thefollowing should NOT reduce her premium?A. Installing an alarm system.B. Increasing the amount of coverage.C. Installing smoke detectors or a fire extinguisher.D. Increasing her deductible.E. All of these should reduce her premium.
e 79. Tom wanted to receive as many discounts on his home insurance as possible. Which of the followingwould NOT provide a discount?A. Smoke detector.B. Fire extinguisher.C. Deadbolt locks.D. Alarm systems.E. All of these should provide a discount for Tom.
d 80. Motor vehicle crashes cost more than ______ in lost wages and medical bills every year.A. $10,000B. $750,000C. $12 millionD. $150 billionE. $2 trillion
e 81. Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amberwas driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Basedon her experience, which of the following would be true?A.Amber’s insurance company should refuse coverage of her medical payments because she was notdriving in her own vehicle.B.The insurance company of the owner of the sideswiped car should pay for all damages since the carwas illegally parked.C.Amber’s insurance should not cover any damage since she carried liability, collision, andcomprehensive coverage.D. The bicyclist should cover his own medical expenses because he was at fault for riding on the road.E.Amber’s insurance policy should cover any property damage claims since she was driving Bradley’s carwith his permission.
d 82. Motor vehicle coverage typically includes all of the following exceptA. Most legal expenses.B. Bodily injury liability up to a specific level for all injured in an accident.C. Medical payments up to a policy limit.D. Bodily injury liability of all expenses, no matter the cost, for the most injured.E. Uninsured motorist’s protection.
a 83. Medical payments coverage applies to medical expenses ofA. Anyone in your vehicle, including you.B. Anyone in your vehicle who is injured, except the driver.C. The driver, but no passengers who are injured.D. The owner of the vehicle, but not other passengers.E. The uninsured motorist who causes an accident.
b 84. Paul was driving his kids to a piano lesson in a 2005 minivan. While driving, he was hit by an uninsuredmotorist. Although Paul and his kids had only minor injuries, their vehicle was totaled. Based on thisinformation, which of the following is correct?A. The uninsured motorist needs to purchase insurance after the fact.B. Paul’s uninsured motorist’s protection should cover medical expenses for Paul and his kids.C. The uninsured motorist will be required to purchase a new minivan for Paul’s family.D.It is likely that the uninsured motorist will not receive any citations or fines because she did not haveinsurance.E.In all states, Paul’s uninsured motorist’s coverage must cover damage to all vehicles involved in theaccident.
e 85. Timothy was driving his friend Nick to football practice. While driving, he was hit by a driver who hadcoverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information,which of the following is correct?A. Timothy’s injuries would be covered to $100 and property damage would be limited to $300.B. Nick’s injuries would be covered to $50,000.C. Individually, Timothy and Nick’s injuries would be covered to $300,000 each.D.The total coverage for Timothy and Nick would be $100,000, and the driver who caused the accidentwould be covered to $50,000.E.The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000for total injuries sustained in the accident.
c 86. Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metalpunctured her gas tank. This damage would be covered under herA. Uninsured motorist’s protection.B. Property damage liability policy.C. Collision policy.D. Comprehensive physical damage policy.E. Bodily injury liability policy.
b 87. Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. Thedamage to the telephone pole would be covered under Madeline’sA. Uninsured motorist’s protection.B. Property damage liability policy.C. Collision policy.D. Comprehensive physical damage policy.E. Bodily injury liability policy.
c 88. Henry was driving at dusk and hit a deer running across the road. His damage would be covered underhisA. Uninsured motorist’s protection.B. Property damage liability policy.C. Collision policy.D. Comprehensive physical damage policy.E. Bodily injury liability policy.
a 89. Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize thefinancial impact of an accident he may cause, he should, at a minimum, carry which type of insurance?A. Property damage liability.B. Collision.C. Comprehensive physical damage.D. All of these are required for all vehicles.E. No coverage is required for any driver in the United States.
d 90. Al left his vehicle parked on the street in the front of his house when he went on vacation. While he wasgone, his street flooded and his car was severely damaged. This damage would be covered under hisA. Uninsured motorist’s protection.B. Property damage liability policy.C. Collision policy.D. Comprehensive physical damage policy.E. Bodily injury liability policy.
d 91. Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car hadbeen vandalized. This damage would be covered under hisA. Uninsured motorist’s protection.B. Property damage liability policy.C. Collision policy.D. Comprehensive physical damage policy.E. The vehicle would not be covered because he was not in it when the damage occurred.
c 92. Various states are trying to reduce the time and cost of settling vehicle injury cases. One alternative isA. Omitting uninsured motorist’s protection.B. Requiring the driver to pay all medical expenses.C. Using the no-fault system.D. Requiring emergency road service coverage.E. Having the state pay for driver’s insurance.
d 93. Which of the following is NOT a type of motor vehicle insurance available to drivers?A. Wage loss insuranceB. Emergency road service coverageC. Rental reimbursement coverageD. All of these may be available to driversE. Nonel of these is optional.
d 94. Which of the following is NOT correct?A. If you live in a rural area, your auto insurance premium will likely be lower than if you live in a city.B.In general, young drivers (under 25) and elderly drivers (over 70) have more frequent and more seriousaccidents.C. Multiple accidents or traffic violations can increase insurance rates.D. The number of small claims you have should not affect your premium.E. Your credit score can cause your premium to change.
c 95. Which of the following should reduce your auto insurance premium?A. Celebrate your 70th birthdayB. Get a speeding ticketC. Get good grades in collegeD. Move from a farm to a cityE. Start smoking
b 96. Cheyenne has a home insured for $300,000. It would cost $320,000 to rebuild her home. If she has homeinsurance that provides personal property coverage at 70% of value, how much of her belongings wouldbe covered?A. $120,000B. $210,000C. $224,000D. $300,000E. $320,000
c 97. Sally was driving her own car and collided with a pickup truck. Sally sustained $125,000 in injuries, andher passenger sustained $10,000 in injuries. If her coverage was 100/300/50, what are the total medicalexpenses the insurance company would pay for this accident?A. $1,000B. $100,000C. $110,000D. $125,000E. $135,000

Leave a Reply

Your email address will not be published. Required fields are marked *