Deck 9: Protecting Your Wealth - Auto and Homeowners Insurance

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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 6

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 7

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

Question 8

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

Question 9

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

Question 10

Given the large number of uninsured drivers, no-fault accident coverage is now standard.

Question 11

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

Question 12

Insurance brokers are able to represent many different companies to obtain more economical coverage.

Question 13

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

Question 14

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 15

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 16

The first step in the risk management process is to define and recognize your exposure to risk.

Question 17

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

Question 18

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

Question 19

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.

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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 25

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

Question 26

If your neighbour falls down the steps in your home and sues, you could be held responsible for his or her injuries.

Question 27

A higher deductible reduces the amount of coverage provided by homeowner's insurance, and therefore results in a lower insurance premium.

Question 28

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

Question 29

You can reduce risk by avoiding ownership of property.

Question 30

While renter's insurance does protect your property, it does not cover liability in the event that a friend or neighbour is injured while at your apartment.

Question 31

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 32

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

Question 33

Renter's insurance covers your possessions and the structure of the house or condo you are renting.

Question 34

Liability is used to mean that you may be qualified to receive compensation from someone who caused the damage.

Question 35

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

Question 36

You can avoid risk by purchasing a small home rather than a large one.

Question 37

An HDTV was purchased for $6500 and is now three years old. If it is stolen and it is assumed to have a life of five years, the insurance company will settle for $3000.

Question 38

Bodily injury liability coverage is meant to protect you against liability associated with injuries you cause to others.

Question 39

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

Question 40

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 41

If you are in an auto accident, you should always collect the other party's chequing account information.

Question 42

You may be able to purchase an umbrella personal liability policy for about $200 per year for coverage of $1 million.

Question 43

Some personal assets are very valuable and not fully covered by your homeowner's policy. You may need to obtain full comprehensive coverage.

Question 44

Using one insurer for all types of insurance will not reduce your homeowner's insurance premium.

Question 45

Refusing to go bungee jumping is

A)avoiding risk.
B)accepting risk.
C)transferring risk.
D)sharing risk.

Question 46

Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is 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 47

Homeowner's insurance also covers medical payments, voluntary property damage, and loss of income to the policyholder.

Question 48

The risk management method that is not recommended is

A)avoiding risks.
B)ignoring risks.
C)accepting risks.
D)sharing risks.

Question 49

Most provincial governments run auto insurance administration privately, except British Columbia and Alberta.

Question 50

If you are in an auto accident, the first thing you should do is contact the police immediately.

Question 51

Which of the following is the best example of the need to share versus accept risk?

A)You cause a car accident and damage your Honda Civic.
B)You cause a car accident and destroy your Maserati.
C)You cause a car accident and cause permanent disability to a third person.
D)You cause a car accident and damage your Honda Civic and a very expensive car.

Question 52

Insurance is the least likely option for managing risk when

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

Question 53

In general, insurance companies generate their revenues from

A)overestimating the value of client claims and keeping the difference as profit.
B)investing the proceeds of premiums until the funds are needed to cover claims.
C)selling a lot of certain kinds of highly profitable insurance products.
D)only insuring people who are low risk to claim.

Question 54

Running an amber traffic light in your car is

A)avoiding risk.
B)accepting risk.
C)careless risk.
D)timing risk.

Question 55

If Peter drives his car and causes a minor injury to John, Peter can use his bodily injury liability coverage to cover medical bills and economic loss that John suffers.

Question 56

Named perils coverage protects the automobile against only those events named in the auto insurance policy.

Question 57

Comprehensive coverage insures Peter against damage to his car that results from something such as a flood and theft.

Question 58

Insurance agents for an insurance company

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 59

Lessening your exposure to the flu by getting the flu vaccine is an example of

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

Question 60

Underwriters for an insurance company

A)calculate the risks of specific insurance requests from the public.
B)find the best policy to meet a client's insurance needs.
C)recommend insurance policies that fit customers' needs.
D)invest the premiums of policies to make their company a profit.

Question 61

If you cause an accident resulting in $2000 damage to your car and have collision coverage with $500 deductible, which of the following statements is true?

A)Your insurance company will pay $2000 and your insurance premiums will go up $500.
B)You will pay $1500.
C)Your insurance company will pay $1500.
D)The other insurance company will pay $500 and our company will pay $1500.

Question 62

Insurance agents who work for one particular company are called

A)company agents.
B)captive agents.
C)independent agents.
D)insurance brokers.

Question 63

In which of the following scenarios would your auto insurance coverage be in effect?

A)You have family protection coverage and are hit by an uninsured motorist.
B)You take your damaged car straight to your friend's autobody repair shop for repair.
C)You drive your car parents' car without permission and get in an accident.
D)Insurance claims would be covered in all these scenarios.

Question 64

Comprehensive coverage would cover financial losses due to

A)damage to your car caused by a hit and run collision.
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 neighbour's fence caused by your car.

Question 65

Which of the following is true about pure no-fault insurance?

A)No one is deemed to be at fault when an accident occurs.
B)You cannot sue the the at-fault driver for pain and suffering and economic loss.
C)It is the most cost effective insurance because there are no legal expenses.
D)The dollar value of accident benefits is much lower.

Question 66

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)transfer amount.

Question 67

The comprehensive or collision premium on 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 province's insurance rates.
D)depends on the individual insurance company's rating system.

Question 68

Who will cover the costs to repair your car if you are involved in an accident caused by another driver?

A)The person at fault will pay.
B)Your insurance will pay the damages except for the deductiible which the other person's insurance company should pay.
C)The at fault driver's insurance company will pay if they have insurance.
D)The at fault driver's insurance company will pay for the main damages except for the deductible, which will be paid by the at fault driver.

Question 69

Auto insurance rates are based on all but your

A)vehicle use.
B)height and weight.
C)driving record.
D)sex.

Question 70

Auto insurance rates are based on

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

Question 71

Which of the following is the appropriate action to take in the event of an accident?

A)If possible, move your car out of traffic and collect information using an accident checklist.
B)As long as no one is injured, remain in place and contact your insurance company to come and document the specifics so they can determine fault.
C)Contact the police immediately and stay where you are regardless of how minor the accident was.
D)If you feel the other driver might be guilty of a Criminal Code offence such as drunk driving, conduct a Citizen's arrest.

Question 72

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

A)Accident benefits
B)Bodily injury liability coverage
C)Insured automobile coverage
D)Third party liability coverage

Question 73

Which of the following statements about uninsured motorist coverage is true?

A)This coverage applies to bodily injury when you are in an accident with an uninsured driver, regardless of who was at fault.
B)It does not apply to accidents caused by a hit-and-run driver.
C)It replaces bodily injury liability when an accident is caused by another driver who is not insured.
D)It does not pay out when a driver who is at fault has an insurance company that goes bankrupt.

Question 74

If you live in a Province with private auto insurance, it can be very expensive if you

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

Question 75

One of the advantages of no-fault automobile insurance is that

A)it does not use the legal system so the overall costs are much lower.
B)it results in higher jury awards to victims.
C)the injured receive immediate medical treatment through their own insurance.
D)the drivers who are at fault face no penalties for their risky behaviours.

Question 76

Which of the following statements is 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 not want to drop this coverage on an older car that is not being financed.
D)The deductible is really a form of transferring insurance.

Question 77

For auto insurance, which area has the highest level of insurance coverage required by law?

A)Comprehensive coverage
B)Accident benefits coverage
C)Uninsured motorist coverage
D)Third party liability coverage

Question 78

Additional coverage on your automobile insurance policy can be purchased for

A)the cost of a rental car while you are having the oil changed.
B)the protection of valuables you are carrying in your car.
C)reupholstering a worn driver's seat.
D)repainting the vehicle before preparing to trade it in.

Question 79

Independent insurance agents, sometimes called brokers,

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 80

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.