Deck 5: Health, Homeowners, Automobile, and Liability Insurance: Structure, Concepts, and Planning

Question 1

Name the key sources that provide information on insurance against significant risks.

Answer 1

These sources include National Insurance Consumer Helpline, Insurance Information Institute, Health Insurance Association of America, American Council of Life Insurance, Federal Emergency Management Agency, Federal Insurance and Mitigation Administration, National Insurance Consumer Organization, National Association of Life Underwriters, Association of Health Insurance Agents, and Standard & Poor's.

Question 2

In customizing a long-term care policy for the client, what range of services can be considered?

Answer 2

Services that might be covered under the policy include: skilled nursing care, intermediate nursing care, custodial care, home care, assisted living, life care facilities, adult day care, and Alzheimer's care. Most comprehensive long-term health care policies (a) permit the beneficiaries to receive custodial care in a nursing home without prior hospitalization, either with a rider or as a benefit in the basic premium; (b) cover Alzheimer's disease and other organic brain disorders; (c) are guaranteed renewable; and (d) include some coverage for home health care.

Question 3

Describe the planning strategies with respect to auto insurance.

Answer 3

Planning for auto insurance coverage involves making sure that the existing coverages compare favorably with the desired limits. These coverages can be conveniently grouped into the following categories: liability insurance, collision coverage, comprehensive coverage, uninsured motorist coverage, medical payment coverage, and no-fault insurance.

Question 4

Describe the salient features of Medicare insurance.

Question 5

Describe the major types of health insurance.

Question 6

It is asserted that people should insure against significant risks while assuming small risks themselves. Do you agree with this assertion?

Question 7

What are the major parts of a personal auto policy?

Question 8

Explain the essential features of no-fault insurance.

Question 9

Why do insurance experts argue that there are important gaps in Medicare?

Question 10

What are some of the important features of a good disability policy?

Question 11

Contrast any job vs. own occupation definition of disability insurance.

Question 12

Are there significant gaps in Medicare coverage? How can these gaps be filled?

Question 13

Explain the systematic basis for insuring unscheduled personal property.

Question 14

Explain the following statement: "The answer to the escalating health care costs is the use of self-funded employee health benefits."

Question 15

Describe the standardized homeowner policy? Which policy type is most economical?

Question 16

What is umbrella liability insurance? What are the essential components?

Question 17

When would long-term care benefits typically be available? What conditions need to be met?

Question 18

Contrast HMOs with PPOs.

Question 19

What is a coinsurance clause?

Question 20

Describe the planning process in regard to homeowner's insurance.

Question 21

Question 5. Major medical insurance:

A) Covers hospital expenses only
B) Typically requires that the patient satisfy a deductible and/or coinsurance clauses
C) Covers only illnesses
D) Is a comprehensive plan that covers all hospital and major surgical expenses
E) Pays before a patient's basic medical coverage begins

Question 22

A Preferred Provider Organization PPO:

A) Is presently available to all employees
B) Requires an employee to see a specific doctor
C) Prepays all medical expenses
D) Provides a partial reimbursement if the employee uses a specific doctor or hospital outside of the approved list
E) None of the above statements are true

Question 23

The Brown family is confused by the claims and counterclaims of SelectCare (an HMO organization) and Blue Cross and Blue Shield. Both policies will cost the same but SelectCare has the special appeal of "it being completely free for unlimited coverage." Can you help sort out the confusion for the Brown family?

Question 24

Question 8. Medicare health insurance Part A):

A) Does not require a deductible to be satisfied
B) Does not provide skilled nursing services
C) Is essentially a hospital insurance
D) Requires a quarterly premium payment
E) None of the above

Question 25

Question 6. Your patient's health insurance policy requires an annual $200 deductible, an 80 percent coinsurance provision and a $2,000 out-of-pocket cap on medical expenses recognized by the insurer. If the total surgery bill was $15,000, how much will the insurance company pay? Assume that this is the first medical expense of the calendar year.

A) $11,800
B) $12,000
C) $12,800
D) $13,000
E) $15,000

Question 26

Question 13. Private long-term health care coverage:

A) Fills many of the gaps in Medicare coverage
B) Should have such features as guaranteed renewability, home care, inflation protection, and Alzheimer's coverage
C) May include such features as waiver of premiums in the event of disability, an inflation rider, guaranteed renewability, and level premium for life
D) Can be expensive for some people who need it
E) All of the above are true statements

Question 27

Question 15. Which of the following homeowner's policies offers the most protections?

A) HO-2
B) HO-3
C) HO-1
D) HO-5
E) HO-6

Question 28

Question 7. Which of the following statements) isare) incorrect? I. For people age 65 and older, Medicare is a major source of medical insurance coverage
II) Part B covers certain hospital costs and home health care
III) Medicare does not cover all medical costs
IV) Gaps in Medicare's coverage are insignificant
V) Part A covers, among other items, post-hospital skilled nursing home care, and blood

A) II and IV
B) I
C) II and IV
D) III and IV
E) II, III, and IV

Question 29

Question 10. Your client is single and just getting started in his career. Which of the following short-term disability insurance policies would help lower the premium cost?

A) Purchase a policy that replaces 80 percent of pre-retirement income rather than one that replaces 70 percent.
B) Purchase a policy that provides for residual disability rather than one that only provides for full disability.
C) Purchase a policy with an "own occupation" definition for disability rather than one that defines disability as "any occupation."
D) Purchase a policy with a longer elimination period rather than one with a shorter elimination period.

Question 30

Question 14. Your client's eligibility for long-term care benefits is based on an inability to perform two of the seven activities of daily living ADL). Which of the following isare) not considered an activitys) of daily living?

A) Eating
B) Bathing, toileting and continence
C) Walking
D) Hearing and seeing
E) Transferring and dressing

Question 31

Question 2. Blue Cross/Blue Shield health insurance plans:

A) Pay based on the indemnity principle
B) Offer coverage on a pre-paid basis
C) Do not require the insured to satisfy deductibles or coinsurance clauses
D) Only pay for services with participating hospitals and doctors
E) Are profit-oriented

Question 32

Pamela Brown, a successful business woman, has expressed great surprise upon hearing that her disability insurance policy, which offers a $4,500 monthly benefit, would cost her $4,500 per year. She believes that this is a sham because, as she puts it, she can buy a $500,000 life insurance policy for an annual premium of $4,500. What is your best strategy to handle this rather awkward situation?

Question 33

Dr Jeff Emrich has never heard of an umbrella policy. He is a highly successful medical professional but hates to buy any type of insurance. You believe that Jeff needs an umbrella policy but you are uncomfortable bringing up the subject. Do you have any ideas about how best to approach this client?

Question 34

Question 1. Which of the following is a major type of health insurance organization?

A) Standard & Poor's
B) Federal Emerging Management Agency
C) Preferred Provider Organizations, or PPO's
D) Health Insurance Association of America
E) Medicare Incorporated

Question 35

Question 9. Medicare health insurance Part B):

A) Is financed solely by Social Security taxes
B) Pays only in-hospital patient care
C) Always has an annual deductible amount
D) Is hospital insurance
E) None of the above are true statements

Question 36

Question 11. Worker's compensation insurance:

A) Have different rules within each state
B) Pay wages for injured workers only
C) Are federally funded for all workers
D) Do not provide medical coverage
E) None of the above are true statements

Question 37

Question 3. A Blue Cross/Blue Shield health insurance plan is an example of:

A) A service plan with payment to the patient
B) A service plan with payment to the provider
C) An indemnity plan with payment to the patient
D) An indemnity plan with payment to the provider
E) None of the above are true statements

Question 38

Roger Stern is in serious financial difficulty as a result of his buying a very expensive home. Since his family (wife and a two-year-old son) is in excellent health, and Roger needs to drastically cut his budget, he has decided to cancel his major medical insurance for five years. Do you have any suggestion for Roger?

Question 39

Sam Burke, a state farm agent, has impressed upon Roger Smith that the special form is always the best homeowner's policy because it covers so much more. Do you agree?

Question 40

Question 12. Joe's employer provides disability income benefits for all employees. The employer, not the employee, pays the entire premium. Disability income benefits received under this non-contributory plan are:

A) Taxed at capital gain rates
B) Tax free
C) Taxed at ordinary income rates
D) Taxed at disability income rates

Question 41

Question 29. An umbrella liability policy:

A) Requires the insured to have specified amounts of underlying coverage
B) Provides excess coverage over a specified amount
C) Provides excess coverage over underlying insurance
D) Covers the risk that your liability insurance limits may be inadequate
E) Includes all of the above

Question 42

Question 19. You have a $100,000 typical homeowner's policy on your home. Your household goods within the residence) are insured for:

A) 50-70% of policy value, depending on the insurer's provision
B) $100,000 with no restrictions
C) $100,000 with restrictions on some items
D) 10% of policy value

Question 43

Question 27. Which of the following is an advantage of choosing an auto insurance policy that has a higher deductible?

A) Increased total protection
B) More extensive coverage against lawsuits
C) Lower premiums
D) Better all around coverage
E) None of the above are true statements

Question 44

Question 30. Which of the following policies does not provide liability insurance protection?

A) Homeowner's
B) Disability
C) Automobile
D) Umbrella
E) All of the above provide liability protection

Question 45

Question 20. To keep a homeowner's policy up-to-date, one should purchase which type of policy?

A) Personal liability
B) HO-2
C) HO-3
D) Inflation guard
E) Automatic payment

Question 46

Question 18. Your client owns a $500,000 HO-5 policy on their home. They experienced extensive damage on the unattached garage. Assuming that the couple does not own an endorsement for additional coverage what is the standard limit of coverage on the loss?

A) $50,000
B) $100,000
C) $150,000
D) $250,000
E) $500,000

Question 47

Question 17. A HO-4 policy:

A) Does not cover additional living expenses
B) Is written for someone living in a rented dwelling
C) Provides no liability coverage
D) Is designed for older houses
E) Does not provide any of the above coverages

Question 48

Question 22. Automobile liability insurance policies:

A) Cover the breadwinner for all litigation and medical expenses
B) Cover a wife's liability to her husband if she smashes his car
C) Only cover if you are driving your own car, or a car you lease, or a car you are authorized to drive
D) Reimburse for lost wages while you are contesting your case in a court
E) Do not cover legal fees

Question 49

Question 26. In auto insurance jargon, 250/500 means the insurance company is liable for up to:

A) $250 for all pedestrians; $500 for all victims
B) $250,000 for one victim; $500,000 for all victims
C) $250,000 for pedestrians; $500,000 for all victims
D) $250 for one victim; $500 for all victims
E) $250,000 for driver; $500,000 for the driver's family

Question 50

Question 21. A good friend gives you a racquetball racquet and a handbag, which are subsequently stolen out of the trunk of your automobile. These items are covered under which type of policy?

A) Auto comprehensive
B) Special rider
C) Umbrella
D) Homeowner's
E) None of the above covers theft

Question 51

Question 23. Property damage liability insurance Part A under an auto policy) will not cover:

A) Any damage to your own car
B) Damage to a friend's home if you accidentally drive through it
C) Damage to a friend's car if your son runs it over
D) Damage to items in your friend's car if you damage them with your car
E) Any of the above items

Question 52

Question 25. You own an auto liability policy with 150/250/50 limits. You accidentally run into a 45-foot semi-trailer. The trailer is totally destroyed and was valued at $70,000. After your insurance company settles your claim, you would still owe:

A) $0
B) $10,000
C) $20,000
D) $30,000
E) None of the above are correct answers

Question 53

Question 16. An HO-6 homeowner's policy is designed specifically for:

A) Condominium owners
B) Cooperative owners
C) Mobile home owners
D) Renters
E) None of the above

Question 54

Question 28. "No-fault" auto insurance:

A) Has raised auto insurance rates in all states
B) Excludes possible litigation in all cases except death
C) Theoretically shortens the collection process and reduces legal settlement fees
D) Is predominately used in all states
E) None of the above

Question 55

Question 24. Your dependent child is driving a friend's automobile with the friend's permission) and is involved in an accident. Which of the following provides the best answer?

A) The friend's liability insurance would cover any damages
B) No coverage exists unless your child has his own personal policy
C) Coverage is not available for this situation
D) Your liability coverage would pay the damages
E) It's probably time to scold your son for his carelessness