Deck 9: Risk Management

Question 1

Calculate cost and refund (use table in text if needed):

Answer 1

A. $224; B. $156; C. $600; D. $200

Question 2

Answer 2

.

Question 3

Calculate Joe Wheel's auto premium:

Answer 3

$768

Question 4

Calculate Joe Wheel's auto premium.

Answer 4

Question 5

The face amount is the amount stated in the policy.

Question 6

Term insurance builds up no cash value.

Question 7

A 09-year endowment does not build up any cash value by the end of year 5.

Question 8

Complete the cost of the premium for fire insurance:

Question 9

Nonforfeiture values could result in the insured being paid the cash value of the policy and the policy being terminated.

Question 10

Twenty-payment life requires premiums for 20 years although the insured is protected till death.

Question 11

Term insurance would pay the face amount of the policy in case of the death of the insured.

Question 12

The beneficiary pays the insurance to the insured.

Question 13

The premium is the payment(s) that is made to pay for the cost of an insurance policy.

Question 14

All premiums for universal life remain the same.

Question 15

The one receiving the insurance coverage is the insured.

Question 16

Calculate the annual total auto premium from the following. There is compulsory insurance.

Question 17

Universal life provides whole life protection.

Question 18

Buying flight insurance at an airport is an example of straight-life insurance.

Question 19

Calculate Joe Brake's auto premium:

Question 20

Premiums for straight-life insurance are higher than premiums for term insurance.

Question 21

Permanent protection is provided by term insurance.

Question 22

The premium for fire insurance is found by the insured value divided by 100 times the table rate.

Question 23

Term insurance:

A) Is more expensive than straight-life
B) Builds up cash value
C) Pays more than the face amount
D) Provides temporary protection
E) None of these

Question 24

If the insurance company cancels a fire insurance policy, the refund to the insured will be less than if the insured cancels the policy.

Question 25

The actual amount of insurance carried is called the face value.

Question 26

Insurance required to meet coinsurance is the coinsurance rate times the replacement value.

Question 27

The short rate cancellation table is used if the insured cancels the policy.

Question 28

In terms of premium cost, the most expensive type of insurance is:

A) Term
B) Straight-life
C) 09-payment life
D) 09-year endowment
E) None of these

Question 29

The one named in the policy to receive the insurance proceeds in case of the death of the one taking out the policy is the:

A) Insured
B) Insurer
C) Beneficiary
D) Both insured and beneficiary
E) None of these

Question 30

Reduced paid-up insurance means the policy continues for life at a reduced face amount.

Question 31

The cash value of a life insurance policy is a cheap source of money.

Question 32

All states have the same compulsory insurance.

Question 33

As a result of few suits as well as high operating costs, no-fault has reduced some premium costs.

Question 34

As a result of coinsurance, the insurance company might pay more than face value.

Question 35

Lowering deductibles for collision will result in increased premiums.

Question 36

10/20 of bodily injury means that an insurance company will pay up to $20,000 per person up to a total of 10 people for bodily injury.

Question 37

No-fault insurance does not reduce premiums for collision, property damage, or comprehensive.

Question 38

Compulsory liability insurance includes bodily injury and property damage.

Question 39

Extended term insurance means the policy continues but at a face amount that is less than the original policy.

Question 40

Which one of the following builds up no cash value?

A) Universal life
B) Straight-life
C) Term
D) 09-payment life
E) None of these

Question 41

A falling object that dents a car would be covered under comprehensive insurance.

Question 42

Calculate the amount the insurance company will pay:
A. ______________
B. ______________

Question 43

Al Smith, who lives in territory 5, carries 10/20/5 compulsory liability insurance along with optional collision that has a $300 deductible. Al, who was at fault in an accident, caused $4,000 damage to the other auto as well as $900 damage to his own car. Also, the courts awarded $15,000 and $7,000, respectively, to the two passengers in the other car for personal injuries. Al is responsible to pay a total of:

A) $5,000
B) $5,600
C) $600
D) $3,000
E) None of these

Question 44

Reduced paid-up insurance:

A) Buys protection with paying new premiums
B) Continues for 20 years
C) Results in a face amount less than the original amount
D) Means original face amount is continued for a certain number of years
E) None of these

Question 45

Abby Kaminsky, age 32, has decided to take out a limited payment life policy. She chose this since she expects her income to decline in future years. Abby has decided to take out a 20-year payment life policy with a coverage amount of $200,000. Her annual premium will be:

A) $1,158
B) $2,316
C) $2,136
D) $1,518
E) None of these

Question 46

Calculate Joe Wheel's Auto premium:

Question 47

Matt Miller, age 28, takes out $50,000 of straight-life insurance. His annual premium is $418.20. At the end of 20 years, the cash value of his policy is:

A) $13,250
B) $26,000
C) $26,500
D) $30,000
E) None of these

Question 48

A premium for fire insurance could be lower than someone else's if:

A) Building is wood
B) Roof is not fire resistant
C) Building is close to a fire hydrant
D) Goods within store are flammable
E) None of these

Question 49

The property of Lance's Garage is worth $90,000. Lance has a fire insurance policy of $40,000 that contains an 80% coinsurance clause. On a fire that causes $60,000 of damage, the insurance company pays:

A) $27,777.78
B) $27,777.87
C) $33,333.33
D) $33,334. 00
E) None of these

Question 50

Collision and comprehensive:

A) Only pay the insurer
B) Only pay the insured
C) Are compulsory insurance
D) Have no deductibles
E) None of these

Question 51

Bill Blum insured his hardware store with a fire insurance policy for $88,000 at a cost of $.84 per $100. Ten months later his insurance company canceled his policy as a result of failure to correct a fire hazard. The cost of the policy to Bill was:

A) $739.20
B) $793.20
C) $591.36
D) $616.00
E) None of these

Question 52

The insurance required to meet coinsurance is:

A) 80% * face value
B) 80% * replacement value
C) 80% * actual loss
D) Insurance carried divided by 80%
E) None of these

Question 53

Calculate cost and refund (use table in text if needed):

Question 54

An auto insurance premium may be partially based on:

A) Attitude of driver
B) Expected life of car
C) Make of car
D) Number of years one expects to drive a car
E) None of these

Question 55

Howard Hane had taken out a $130,000 fire insurance policy for his new restaurant at a rate of $.82 per $100. Nine months later, Howard canceled the policy and decided to move his store to a new location. The cost of the premium to Howard is:

A) $1,066
B) $863.46
C) $1,606
D) $836.64
E) None of these

Question 56

Complete the cost of the premium for fire insurance:

Question 57

Given the following information, the total annual premium is: Sam Montgomery: territory 5
Classified driver 17
Car age 4 Symbol 5
State has compulsory insurance and the following options:

A) $791
B) $918
C) $971
D) $298
E) None of these

Question 58

Jay Miller insured his pizza shop for $200,000 for fire insurance at an annual rate per $100 of $.49. At the end of 10 months, Jay canceled the policy since his pizza shop went out of business. The refund to Jay is:

A) $980
B) $852.60
C) $127.40
D) $186.20
E) None of these

Question 59

If the insured cancels a fire insurance policy after seven months, the refund will be:

A) 67%
B) 7/12 of policy
C) 5/12 of policy
D) 33%
E) None of these

Question 60

Lee's toy store is worth $400,000 and is insured for $300,000. Assuming an 80% coinsurance clause and a fire that caused $190,000 of damage, the liability of the insurance company is:

A) $142,500
B) $124,500
C) $187,125
D) $178,125
E) None of these

Question 61

Round all answers to nearest cent (as appropriate).
LIFE INSURANCE
Calculate annual premium:

Question 62

Question 63

Melissa Toby, age 36, bought a straight-life insurance policy for $80,000. Calculate her annual premium. If after 20 years she no longer pays premiums, what nonforfeiture options are available to her?

Question 64

Question 65

Question 66

Question 67

Ann Rill insured her dress shop for $75,000 of fire insurance at an annual rate per $100 of $.63. At the end of nine months, Ann canceled the policy since her dress shop went out of business. What was the cost of Ann's premium as well as her refund?

Question 68

The property of Vin's Garage is worth $400,000. Vin has a fire insurance policy of $160,000 that contains an 80% coinsurance clause. What will the insurance company pay on a fire that causes $180,000 of damage? If Vin met the coinsurance, how much would the insurance company pay?

Question 69

Joan's Hardware Shop is worth $40,000 and is insured for $30,000. Assuming an 80% coinsurance clause, what would the insurance company pay if a fire caused $20,000 of damage to the shop?

Question 70

Melissa Sorez, age 42, takes out a $300,000 five-year term insurance policy. What is her annual premium? At the end of three years, what is the amount of cash value that has built up?

Question 71

What is the cash value of the policy at the end of 20 years?

Question 72

What is the cash value of the policy at the end of 15 years?

Question 73

Jim Rivera bought a new car and carried only compulsory insurance. On a trip to Washington, he hit a car, injuring the couple inside. Jim's car had damage of $1,800, and the car struck had damage of $1,700. After a lengthy court battle, the couple struck by Jim were awarded personal injury judgments of $16,000 and $8,800, respectively. What did the insurance company pay, and what was Jim's responsibility?

Question 74

Matt Clark, age 27, decided to take out a limited payment life policy. He chose this because he expects his income to decline in future years. Matt decided to take out a 09-year payment life policy with a coverage amount of $90,000. Calculate his annual premium. If he stops paying premiums after 15 years, what will his cash value be?

Question 75

Calculate the cost of the premium:

Question 76

Question 77

Al Lize, who lives in territory 5, carries 10/20/5 compulsory liability insurance, along with optional collision that has a $100 deductible. Al, who was at fault in an accident, caused $2,200 damage to the other auto and $900 damage to his own car. Also, the courts awarded $18,000 and $9,000, respectively, to the two passengers in the other car for personal injuries. How much does the insurance company pay, and what is Al's share of the responsibility?
Insurance company $22,000; Al pays $8,100

Question 78

Jim Leary insured his bookstore with a fire insurance policy of $90,000 at a cost of $.58 per $100. Eight months later his insurance company canceled the policy because of failure to correct a fire hazard. What did Jim have to pay for the eight months of coverage?

Question 79

Question 80

Jim Smith, age 25, buys a straight-life policy for $105,000. What is his annual premium? If after 15 years he no longer wants to pay the premium, what nonforfeiture values are available to him?