Deck 8: Home and Automobile Insurance

Question 1

Samuel should buy insurance in order to eliminate his risk of losses.

Answer 1

False

Question 2

An example of a peril is defective wiring.

Answer 2

False

Question 3

Caroline was found liable in an accident. This is usually not due to negligence on her part.

Answer 3

False

Question 4

Risk management is an organized plan for protecting yourself, your family, and your property.

Question 5

The National Flood Insurance Program makes flood and earthquake insurance available for all homeowners.

Question 6

Robby fell on some ice on Peter's front steps and broke his arm. This is an example of a risk covered by the personal liability portion of Peter's homeowner's policy.

Question 7

Once a risk management plan is put into action, it should remain the same even as family needs change.

Question 8

A homeowner's insurance policy provides coverage for additional living expenses so you can stay somewhere else if a fire damages your home.

Question 9

Another name for a homeowner's insurance policy is an umbrella policy.

Question 10

Risk avoidance is an organized plan for protecting yourself, your family, and your property.

Question 11

Defective house wiring is a hazard that increases the chance that a fire will start.

Question 12

Homeowner's insurance excludes detached structures on your property.

Question 13

One of the four questions that should be asked when developing a risk management plan is "What do I need to insure?"

Question 14

A household inventory should be stored in a home office.

Question 15

Jim and Sandy are developing a personal insurance program. One of their goals should be to reduce the possible loss of income due to fire or theft.

Question 16

Insurance is protection against possible financial loss.

Question 17

An insurance claim is a request for payment to cover financial losses.

Question 18

The first step in developing a personal insurance program is to set insurance goals.

Question 19

An example of a peril is a robbery.

Question 20

A landlord is responsible for paying renter's insurance.

Question 21

If you live in a large city, you should expect to pay a higher premium for your auto insurance than someone who lives in a rural area.

Question 22

The actual cash value method of settling claims is based on the replacement cost of an item less depreciation.

Question 23

Collision insurance covers your vehicle against risks such as falling objects, hail, and other nonaccident situations.

Question 24

An assigned risk pool includes people who are able to obtain auto insurance due to a great driving record.

Question 25

Angela should decrease her deductible from $1,000 to $250 in order to reduce her home insurance premium.

Question 26

It is illegal to use a credit score to determine the premium to charge an individual.

Question 27

If you need information to compare Acme Home Insurance and Zebra Home Insurance, you should contact the state insurance commissioner or a consumer organization that deals with insurance.

Question 28

Towing and emergency road service coverage includes coverage for a tow to a service station as well as repairs to make the vehicle drivable.

Question 29

A brick home will usually cost less to insure than a similar structure made of wood.

Question 30

If you are borrowing money to buy a home, the lender will require that homeowners purchase home (property) insurance.

Question 31

Deductibles are a combination of risk assumption and risk shifting where the insured person pays the first part of the claim (deductible) and the rest of the claim is shifted to the insurance company.

Question 32

If you drive a model of vehicle that is frequently stolen, you will probably pay a higher premium for your auto insurance.

Question 33

Uninsured motorist's protection automatically covers you and your family members as well as damage to the vehicle itself.

Question 34

A home insured for $160,000 has 55% worth of coverage for household belongings, which is $112,000.

Question 35

Renter's insurance is quite expensive while mobile home insurance is relatively inexpensive.

Question 36

Computers and other equipment used in a home-based business are not usually covered by a home insurance policy.

Question 37

One way to keep auto insurance rates down is to insure each vehicle you own with a different insurer.

Question 38

Sam's house should be insured for the amount he originally paid for it.

Question 39

Every state in the United States has a law requiring people to carry motor vehicle insurance.

Question 40

Motor vehicle insurance falls into two categories: protection for bodily injury and protection for property damage.

Question 41

If you choose to wear your seatbelt, you are using

A) Risk avoidance.
B) Risk reduction.
C) Risk assumption.
D) Risk shifting.
E) Risk increasing.

Question 42

Which of the following is correct?

A) The best risk management plan is one that does not change throughout 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 to insure?"
E) The main goal of insurance should be to maximize personal, property, and liability risks.

Question 43

If you choose to take responsibility for the negative results of a risk, you are using

A) Risk avoidance.
B) Risk reduction.
C) Risk assumption.
D) Risk shifting.
E) Risk increasing.

Question 44

Which of the following is NOT one of the commonly used general risk management techniques?

A) risk reduction
B) risk assumption
C) risk shifting
D) risk avoidance
E) risk increase

Question 45

Barbara left a skateboard on her front steps. A windstorm swept the skateboard up and through her window. The windstorm was a

A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Risk.

Question 46

You can save no more than 30% on homeowner's insurance by comparing rates from several companies.

Question 47

An individual who purchases an insurance policy is called

A) The insurance company.
B) A policyholder.
C) An insurer.
D) A victim.
E) An employer.

Question 48

An insurance company will

A) 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.

Question 49

What is the fee that a policyholder pays when an insurance company agrees to take on the risk?

A) Coverage
B) Insured
C) Premium
D) Peril
E) Risk

Question 50

The main goal when setting insurance goals is to

A) Increase possible loss of income caused by illness.
B) Increase possible loss of property caused by perils.
C) Maximize personal property and liability risks.
D) Keep the coverage constant or unchanged throughout one's life.
E) Minimize personal, property, and liability risks.

Question 51

The most common risks are

A) Personal risks.
B) Property risks.
C) Liability risks.
D) All of these are common risks.
E) None of these are common risks.

Question 52

If you choose to insure your home or your vehicle, you are using

A) Risk avoidance.
B) Risk reduction.
C) Risk assumption.
D) Risk shifting.
E) Risk increasing.

Question 53

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.

Question 54

Anything that may possibly cause a loss is called a

A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Speculation.

Question 55

An insurance company is a _________ business that agrees to pay for losses that may happen to someone it insures.

A) risk-reducing.
B) risk-assuming.
C) risk-sharing.
D) risk-avoiding.
E) risk-eliminating.

Question 56

The failure to take ordinary or reasonable care to prevent accidents from happening is called

A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Risk.

Question 57

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The skateboard was a

A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Risk.

Question 58

If you choose to avoid the risk of a traffic accident by not driving to work, you are using

A) Risk avoidance.
B) Risk reduction.
C) Risk assumption.
D) Risk shifting.
E) Risk increasing.

Question 59

Consumer organizations, such as Consumer Reports, rate insurance companies on a regular basis.

Question 60

Barbara left a skateboard on her front steps. Her neighbor tripped on the skateboard and was injured. The fact that Barbara didn't put away the skateboard is called

A) Hazard.
B) Negligence.
C) Peril.
D) Premium.
E) Risk.

Question 61

Home insurance policies include coverage for all of the following except

A) 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.

Question 62

Insurance that covers valuable items, such as an expensive musical instrument, is called

A) Buildings and other structures coverage.
B) Homeowner's insurance.
C) Personal property floater.
D) Household inventory insurance.
E) Personal liability insurance.

Question 63

Personal liability coverage does NOT protect

A) An occasional babysitter.
B) The cost of legal defense.
C) A guest.
D) Members of the homeowner's family who accidentally break a neighbor's antique lamp.
E) A housekeeper.

Question 64

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 the policy.
D) Typical coverage pays only the actual cash value of one's losses.
E) Renter's insurance is relatively inexpensive.

Question 65

The two basic types of risk that people face regarding potential property losses are

A) 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.

Question 66

Personal property insurance covers

A) The theft of jewelry valued at $25,000.
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.

Question 67

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 the new home.
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 or replacing his personal belongings.
D) His personal belongings should be covered with his home at 125% of his home's insured amount.
E) His insured amount should remain the same as long as he lives in his house.

Question 68

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.

Question 69

Homeowner's insurance covers all of the following except

A) Furniture.
B) Theft of jewelry valued at $25,000.
C) Appliance.
D) Clothing.
E) Rental rug cleaner.

Question 70

The best place to keep a household inventory is

A) 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.

Question 71

Liability is defined as

A) 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.

Question 72

When Stanley was visiting Elaine, he tripped on her front porch step and sprained his ankle. His injuries were covered by

A) 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.

Question 73

All of the following are acceptable types of documentation for a household inventory except

A) Photographs with dates purchased and values of objects listed on the backs.
B) Video recordings of your home and its contents.
C) Receipts, serial numbers, brand names, and proof of value documents.
D) Household inventory form from your insurance agent with purchase dates and costs.
E) A listing of items and their details in your memory.

Question 74

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 or replacing his personal belongings.
D) His personal belongings should be covered with his home at 125% of his home's insured amount.
E) His insured amount should remain the same as long as he lives in his house.

Question 75

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 the new home.
B) He should insure the building under the replacement value method to receive the full cost of repairing or replacing it.
C) He should use the actual cash value method for settling claims to receive the full cost of repairing or replacing his personal belongings.
D) His personal belongings should automatically be covered with his home at 125% of his home's insured amount.
E) His insured amount should remain the same as long as he lives in his house.

Question 76

Homeowner's insurance covers all of the following except

A) A detached garage.
B) Trees and shrubs.
C) A toolshed.
D) Personal property.
E) All of these are covered.

Question 77

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 or replacing his personal belongings.
D) His personal belongings should be covered with his home at 55-75% of his home's insured amount.
E) His insured amount should remain the same as long as he lives in his house.

Question 78

Homeowner's insurance covers all of the following except

A) Personal property.
B) Personal liability and related coverage.
C) Additional living expenses.
D) Automobiles.
E) Building in which you live and any other structures on the property.

Question 79

If you have a loss due to a flood,

A) Your homeowner's insurance should normally cover the loss.
B) You must have already purchased special coverage if you live in an area that has frequent floods in order to be covered.
C) FEMA (Federal Emergency Management Agency) will automatically provide coverage if this is your second 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 one year.

Question 80

Homeowner's insurance includes all of the forms listed here except

A) HO-1.
B) HO-2.
C) HO-5.
D) HO-6.
E) HO-8.