Deck 11: Auto and Homeowners Insurance

Question 1

Insurance is not a good option for managing risk when

A)the probability of loss is very small.
B)the benefits outweigh the costs.
C)you want to protect your existing and future net worth.
D)there is a likelihood that an event will cause a large financial loss.

Answer 1

the probability of loss is very small.

Question 2

In the context of insurance,the term liability is used to mean that you may be required to pay someone for damages that you caused.

Answer 2

True

Question 3

Insurance agents who work for one particular company are called

A)company agents.
B)captive agents.
C)independent agents.
D)freelance agents.

Answer 3

captive agents.

Question 4

________ is not a suggested risk management method.

A)Avoiding risks
B)Ignoring risks
C)Accepting risks
D)Insuring against risks

Question 5

Independent insurance agents are those that work for one particular company.

Question 6

Lessening your exposure to an illness by getting periodic health checkups is an example of

A)avoiding risks.
B)reducing risks.
C)accepting risks.
D)transferring risks.

Question 7

Insurance protects you against potential financial losses or liability that result from unexpected events.

Question 8

People are more willing to purchase or increase their insurance coverage when

A)economic conditions are favorable and incomes are lower.
B)economic conditions are favorable and incomes are higher.
C)economic conditions are weak and incomes are lower.
D)None of the above.

Question 9

In general,insurance companies generate their revenues from

A)receiving payments for policies.
B)investing the proceeds of premiums until the funds are needed to cover losses.
C)Both A and B are correct.
D)the increases in value of their corporate stock.

Question 10

Insurance can protect your existing net worth and also increase the likelihood that you will be able to increase your net worth in the future.

Question 11

Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is very low and the potential financial loss due to the event is small?

A)Avoid risk
B)Reduce risk
C)Accept risk
D)Insure against risk

Question 12

Insurance should be considered even when there is a small likelihood than an event will cause a financial loss.

Question 13

The first step in the risk management process is to insure against risk.

Question 14

Which of the following is not a service company that would rate the financial condition of insurance companies?

A)A)M.Best
B)Kelly's Blue Book
C)Moody's Investor Services
D)Standard and Poor's Corporation

Question 15

In general,insurance companies generate their revenue from receiving payments for policies and from earning a return from investing the proceeds until the funds are needed to cover claims.

Question 16

Since insurance companies rely mostly on their premiums to cover claims,they price their insurance policies to reflect the probability of a claim and the size of the claim.

Question 17

One method of managing risk is to accept risk by seeking to limit your exposure to a financial loss.

Question 18

The most popular forms of insurance for individuals are property and casualty,life insurance,and health insurance.

Question 19

Underwriters for an insurance company do not

A)market insurance policies.
B)calculate the risks of specific policies.
C)decide what insurance policies to offer.
D)decide what premiums to charge.

Question 20

The decision to obtain insurance should be determined by weighing its costs and benefits.

Question 21

Collision and comprehensive coverage is optional in most states except if you are financing your car in which case you must have this coverage to protect the lender.

Question 22

Some credit cards provide you with collision and comprehensive insurance benefits if you use that card to pay for car rentals.

Question 23

Which of the following is not true about the state financial liability laws?

A)They require individuals who drive cars to purchase a minimum amount of liability insurance.
B)They are the same for all states.
C)They may require proof of insurance to register a car.
D)They may require proof of insurance when drivers are involved in an accident.

Question 24

Which of the following is not true regarding medical payments coverage?

A)It covers both family and non-family members.
B)It is not recommended or needed if you have health insurance.
C)It may even cover funeral expenses.
D)Insurance professionals recommend coverage of about $10,000 per person.

Question 25

The 100 in 100/300/50 refers to the

A)property damage liability coverage.
B)limit for bodily injury claims that can be paid to one person.
C)amount of the deductible.
D)total coverage for an accident.

Question 26

In general,the cost of comprehensive and collision insurance is the most expensive part of your automobile policy representing about 60% of the costs.

Question 27

Collision coverage is normally limited to the car itself and not to items that were damaged while in the car.

Question 28

The bodily injury liability coverage of your automobile policy will not pay for

A)medical expenses of those in the other car for an accident which you caused.
B)lost wages of those in the other car for an accident which you caused.
C)injuries to others in your car due to an accident for which you were at fault.
D)pain and suffering lawsuit awards to those in another car due to an accident you caused.

Question 29

Which of the following would pay for medical care for people who were injured in your automobile as a result of an accident that was your fault?

A)Medical payments
B)Bodily injury liability
C)Collision
D)Comprehensive

Question 30

Given the large number of uninsured drivers,uninsured motorist coverage is needed.

Question 31

Independent insurance agents

A)work for just one insurance company.
B)represent many different insurance companies.
C)work for only two or three companies.
D)are self-employed and represent their own companies.

Question 32

If you have good health insurance,you should probably not take out medical payments coverage on your automobile policy.

Question 33

The comprehensive or collision premium of a Rolls-Royce in relationship to a Chevy

A)will be higher because a Rolls-Royce costs more than a Chevy.
B)will be lower because Rolls-Royce drivers will be more careful.
C)depends on the state insurance rate structure in which the car is insured.
D)is a poor investment.

Question 34

Medical payments coverage insures against costs of medical care for you and other passengers in your car when you are at fault in an accident.

Question 35

Legal expenses incurred by an insurance company when defending you against a lawsuit are deducted from your limits of liability coverage.

Question 36

Property damage liability covers damages to your car from accidents that are your fault.

Question 37

Liability insurance coverage would cost more for an expensive car than for an inexpensive car of the same age.

Question 38

The deductible is the amount of damage that you are responsible for paying on your car before any coverage is provided by the insurance company.

Question 39

Most states have financial responsibility laws that require individuals who drive cars to purchase a minimum amount of liability insurance.

Question 40

The 25 in 50/100/25 refers to ________ coverage.

A)collision
B)bodily injury liability
C)comprehensive physical damage
D)property damage liability

Question 41

Once drivers are labeled as "high risk," they will not be able to get automobile insurance at any price.

Question 42

Since insurance is a regulated industry,the rates for automobile policies are relatively the same among different companies operating in a state.

Question 43

To significantly reduce your automobile insurance premiums and still have adequate coverage,you should

A)take the minimum levels of liability coverage.
B)raise the deductibles on comprehensive and collision.
C)waive medical payments coverage.
D)waive uninsured motorist coverage.

Question 44

The ________ is the amount that you will need to pay if your car is damaged in an accident that was your fault.

Question 45

Your car collides with a vehicle that has just run a red light,and your policy limits are 200/300/100.What is the maximum coverage under your policy for damages to the vehicle that you struck?
(a)$200,000
(b)$300,000
(c)$100,000
(d)Zero

Question 46

All of the following statements about uninsured motorist coverage are true except

A)this coverage is recommended since many drivers are uninsured.
B)it applies to accidents caused by a hit-and-run driver.
C)it replaces bodily injury liability when you are at fault.
D)it pays when a driver who is at fault has an insurance company that goes bankrupt

Question 47

A deductible is an amount

A)the person at fault will pay.
B)not paid by the insurance company.
C)if increased will increase the premium.
D)mandated by state law.

Question 48

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)damage to a neighbor's tree with your car.

Question 49

Younger drivers,especially males,between the ages of 16 and 25 are more likely to get in accidents,and therefore pay higher insurance premiums.

Question 50

In general,the most expensive part of your automobile policy is ________ coverage.

A)liability
B)comprehensive and collision
C)medical payments
D)uninsured motorist

Question 51

A deductible of $300 requires

A)the insurance company to pay the first $300 at 100 percent of damages.
B)you to pay the first $300 of damages.
C)the insurance company to pay the first $300 at 80 percent of damages.
D)the insurance company of the party at fault to pay.

Question 52

The coverage that is designed to protect you if you cause an accident where the driver or passenger of the other car sustains injuries and sues you is called ________.

Question 53

Your automobile insurance policy contains policy limits of 200/300/100.If you have an accident in which you are deemed at fault and two people sustain bodily injury that result in combined claims of $450,000,how much of the claim will not be covered under your insurance policy?
(a)$250,000
(b)$150,000
(c)$350,000
(d)$450,000

Question 54

If you have an accident resulting in $2,000 damage to your car and have $500 deductible collision coverage,which of the following statements is true?

A)Your insurance company will pay $2,000.
B)You will pay $1,500.
C)You will pay the first $500 and your insurance company will pay $1,500.
D)You and your insurance company will split the $2,000 damage,each paying $1,000.

Question 55

Which of the following statements is not true concerning comprehensive and collision insurance?

A)If you are financing a car,this insurance is required by the lender.
B)Financially,it is advisable to take out the lowest deductible possible.
C)You may want to drop this coverage on an older car that is not being financed.
D)The deductible is really a form of self insurance.

Question 56

If an insurance policy carries a $250 deductible and an accident results in the following losses,what will be the reimbursement from the insurance company under your collision and comprehensive coverage?
∙ Replacement of trailer hitch $200
∙ Replacement of rear bumper $150
∙ Replacement of computer being carried in back seat $300
∙ Replacement of rear windshield $100
(a)$200
(b)$250
(c)450
(d)750

Question 57

Additional coverage on your automobile insurance policy can be purchased for

A)the cost of a rental car while your car is being repaired.
B)the protection of valuables you are carrying in your car.
C)the cost of towing,even if the problems are not the result of an accident.
D)Both A and C are correct answers.

Question 58

What do policy limits of 200/300/100 on an automobile insurance policy mean?

Question 59

What three insurance components do automobile and homeowner's policies usually have in common?

Question 60

The amount of damage that you will be required to cover if your car is involved in an accident that is your fault is your

A)deductible.
B)co-payment.
C)premium.
D)fair share.

Question 61

List four ways to reduce your automobile insurance premiums.

Question 62

Homeowner's insurance provides insurance in the event of property damage or personal liability relating to home ownership,but not theft.

Question 63

Auto insurance rates are based upon

A)whether you keep your car in the garage or not.
B)your marital status.
C)the number of miles and the type of driving you do each year.
D)the condition of your vehicle.

Question 64

More than half of every dollar of auto insurance premiums received by insurance companies is used to cover costs associated with lawsuits.

Question 65

All other things being equal,which of the following people would have the lowest insurance rates?

A)A person living in a small town compared to a large one
B)A person who drives his or her car to work rather than for pleasure
C)A person with a speeding ticket versus a person with three parking tickets
D)A person with a car alarm versus a person with anti-lock brakes and airbags

Question 66

Some states have implemented ________ insurance programs which do not hold a specific driver liable for causing an accident.

Question 67

Which of the following features on your car will not result in lower premiums?

A)Anti-lock brakes
B)Mercury vapor headlights
C)Air bags
D)All of the above will reduce your premiums.

Question 68

Auto insurance can be very expensive if you

A)have a new car.
B)are a male under 25.
C)have not taken a driver training course.
D)have an older car without air bags.

Question 69

Of the following statements,which is not true regarding no-fault insurance?

A)Not all states have no-fault insurance
B)It helps determine which driver is at fault and which has no-fault
C)It is intended to avoid costly legal battles
D)It penalizes drivers who cause accidents

Question 70

Automobile insurance rates have risen recently in part due to fraud.Some common forms of fraud include faking

A)an accident or injury.
B)a person's name or relationship to the injured person.
C)ownership of a car.
D)All of the above.

Question 71

Which of the following would be considered the most high-risk driver?

A)Nineteen year old female
B)Nineteen year old male
C)Twenty-eight year old female
D)Twenty-eight year old male

Question 72

One of the problems with no-fault automobile insurance is that it

A)results in higher court costs.
B)results in higher jury awards to victims.
C)doesn't penalize drivers who cause accidents to the degree that they should be.
D)hasn't resulted in lower costs to insurance companies or lower auto insurance premiums.

Question 73

A cash value home insurance policy pays the actual costs of replacing the damaged property.

Question 74

Auto insurance rates are based upon all but your

A)age.
B)height and weight.
C)driving record.
D)gender.

Question 75

All of the following may qualify for an auto discount except

A)high grades.
B)a driver's training program.
C)several cars insured with the same company.
D)under 25 years old.

Question 76

It is a good idea to list all of your personal assets,estimate the market value of each item,and then film the contents of your house with a video camera to be able to show proof of their existence.

Question 77

States with no-fault insurance programs do not hold specific drivers liable for causing accidents.

Question 78

You can use the Internet to obtain

A)estimates on auto insurance rates.
B)new car prices.
C)blue book values on used vehicles.
D)All of the above.

Question 79

Auto insurance discounts are given for all except which of the following?

A)Anti-lock brakes
B)Alarms
C)Leather seats
D)Airbags

Question 80

The factor that will not reduce your insurance rate is

A)increasing your deductible.
B)paying all speeding tickets promptly.
C)purchasing older,less expensive vehicles.
D)moving to a less risky town.