PF Ch. 8 Mult. Choice ?’s – Flashcards
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An individual who purchases insurance is: a. The insurance company b. A policyholder c. An insurer d. A victim e. An employer
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A policyholder
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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
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Premium
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Insurance allows someone to: a. Reduce risk b. Assume risk c. Shift risk d. Avoid risk e. Eliminate risk
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Shift risk
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Barbara left a skateboard on her front steps. Her neighbor then tripped on the skateboard and was injured. The skateboard is a: a. Hazard b. Negligence c. Peril d. Premium e. Risk
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Hazard
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Barbara left a skateboard on her front steps. Her neighbor then tripped on the skateboard and was injured. The fact that she didn't put away the skateboard is called: a. Hazard b. Negligence c. Peril d. Premium e. Risk
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Negligence
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Barbara left a skateboard on her front steps. A windstorm then swept the skateboard up and through her window. The windstorm is a: a. Hazard b. Negligence c. Peril d. Premium e. Risk
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Peril
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The most common risks are: a. Personal risks b. Property risks c. Liability risks d. All of the above are common risks e. None of the above are common risks
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All of the above are common risks
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Anything that may possibly cause a loss is called a: a. Hazard b. Negligence c. Peril d. Premium e. Speculation
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Peril
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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
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Negligence
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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
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Insure pure risk, but not speculative risk
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Which of the following is NOT one of the commonly used general risk management techniques? a. Reduce risk b. Assume risk c. Shift risk d. Avoid risk e. Increase risk
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Increase risk
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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
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Risk avoidance
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If you choose to wear your seat belt, you are using: a. Risk avoidance b. Risk reduction c. Risk assumption d. Risk shifting e. Risk increasing
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Risk reduction
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If you choose to take responsibility for negative results of a risk, you are using: a. Risk avoidance b. Risk reduction c. Risk assumption d. Risk shifting e. Risk increasing
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Risk assumption
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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
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Risk shifting
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An insurance program: a. Should be constant through one's life b. Should change along with needs and goals c. Should minimize personal property and liability risks d. A and C are correct e. B and C are correct
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B and C are correct
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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. Who should I buy insurance from? e. All of the questions should be asked when developing a risk management plan
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All of the questions should be asked when developing a risk management plan
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Which of the following is correct? a. The best risk management plan is constant through 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 risk
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One question that should be asked when developing a risk management plan is: What do I need to insure?
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The two basic types of risk that people face regarding their personal property 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
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Physical damage and damage caused by criminal behavior
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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
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The legal responsibility for the financial cost of another person's losses or injuries
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Homeowner's insurance covers all except: a. Personal property b. Injuries to others c. Additional living expenses d. Automobiles e. Other structures on the property
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Automobiles
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Homeowners insurance covers all except: a. A detached garage b. Trees and shrubs c. A tool shed d. Personal property e. All of these are covered
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All of these are covered
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Homeowners insurance covers all except: a. Three months in a hotel after a house fire b. A diamond necklace valued at $25,000 c. A three year old television d. A fire that damages your neighbor's roof that was caused by a park from your grill e. Medical costs for a visitor who slipped on your steps and broke his ankle
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A diamond necklace valued at $25,000
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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
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In a safe deposit box
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All of the following are acceptable types of documentation for a household inventory except: a. Photographs with date purchased and value of objects listed on the back. b. Video recording of assets. c. Written listing of items, purchase prices and assets. d. Computerized spreadsheet with details about the items, age and cost. e. A listing of items and their details in your memory.
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A listing of items and their details in your memory.
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Insurance that covers valuable items, such as an expensive harp, is called: a. Buildings and other structures coverage b. Homeowner's insurance c. Personal property floater d. Household inventory insurance e. Personal property insurance
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Personal property floater
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Personal property insurance covers: a. All personal property 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 percent of the insured value of the home e. Personal property items up to 55-75 of the insured value of the home
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Personal property items up to 55-75 of the insured value of the home
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Personal liability coverage does NOT protect: a. An occasional babysitter b. The homeowner c. A visitor d. Members of the homeowner's family e. A housekeeper
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A housekeeper
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A policy that provides supplemental 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
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Umbrella policy
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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 payment 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 fifteen years ago
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Elaine's medical payment coverage
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If you have a loss due to a flood: a. Your homeowner's insurance should cover the loss. b. You need to have 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.
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You need to have purchased special coverage if you live in an area that has frequent floods in order to be covered.
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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 includes personal property protection, additional living expenses, and personal liability.
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Renter's insurance covers the building and other structures on the site.
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Homeowner's insurance includes all of the forms listed except: a. HO-1 b. HO-2 c. HO-5 d. HO-6 e. HO-8
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HO-8
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Home insurance policies include coverage for all except: a. Credit card fraud b. The cost of removing damaged property after damage c. Temporary repairs after a loss to prevent further damage d. Business property e. Emergency removal of property to protect if from damage
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Business property
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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 percent of the replacement. 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 55 percent to 75 percent of his home's insured amount. e. His insured amount should remain the same as long as he lives in his house.
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His personal belongings should automatically be covered with his home at 55 percent to 75 percent of his home's insured amount.
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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 it. b. He should insure the building for 75 percent of the replacement. 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 percent of his home's insured amount. e. His insured amount should remain the same as long as he lives in his house.
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He should base the amount of insurance on the price to rebuild or repair it.
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Zach is applying for insurance for his new home. Which of the following is most correct?: a. He should base the amount of insurance on the price he paid for it. b. He should insure the building for full replacement coverage. 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 percent of his home's insured amount. e. His insured amount should remain the same as long as he lives in his house.
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He should insure the building for full replacement coverage.
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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 percent of the replacement. 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 automatically be covered with his home at 125 percent of his home's insured amount. e. His insured amount should remain the same as long as he lives in his house.
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He should use the replacement value method for settling claims to receive the full cost of repairing or replacing his personal belongings.
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Barnaby 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 percent of the replacement. 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 percent of his home's insured amount. e. His policy should automatically increase coverage as construction costs rise.
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His policy should automatically increase coverage as construction costs rise.
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Sandra is contacting several companies to compare coverage for her home. Which of the following should NOT affect her premium?: a. Alarm system b. Amount of coverage c. Composition of her home d. Deductible e. Location to a school
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Location to a school
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Cindy was contacted by her home insurance agent to discuss ways to decrease her premium. Which of the following should NOT reduce her premium?: a. Installing an alarm system b. Increasing the amount of coverage d. Increasing her deductible e. All of the above should reduce her premium
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Increasing the amount of coverage
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Motor vehicle crashes cost more than _____ in lost wages and medical bills every year: a. $10,000 b. $750,000 c. $12 million d. $240 billion e. $2 trillion
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$240 billion
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Amber had permission from Bradley to borrow his car to run some errands. Unfortunately, while Amber was driving, she looked down to change songs on her iPod and sideswiped a car and hit a bicyclist. Based on her experience, which of the following would be true?: a. Amber's insurance company should refuse coverage of her medical payments because she was not driving in her own vehicle. b. The insurance company of the owner of the sideswiped car should pay for all damages since the car was illegally parked. c. Amber's insurance should not cover any damage since she carried liability, collision, and comprehensive coverage. d. The bicyclist should cover his own medical expenses because he was at fault for riding on the road. e. Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.
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Amber's insurance policy should cover any property damage claims since she was driving Bradley's car with his permission.
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Motor vehicle coverage typically includes all except: a. Most legal expenses b. Bodily injury liability up to a specific level for all injured in an accident c. Medical payments up to policy limit d. Bodily injury liability of all expenses, no matter the cost, for the most injured e. Uninsured motorist's protection
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Bodily injury liability of all expenses, no matter the cost, for the most injured
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Medical payments coverage applies to medical expenses of: a. Anyone in your vehicle, including you b. Anyone in your vehicle who is injured, except the driver c. The driver, but no passengers who are injured d. The owner of the vehicle, but not other passengers e. The uninsured motorist who causes an accident
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Anyone in your vehicle, including you
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Paul was driving his kids to a piano lesson in a 2005 minivan. While driving, he was hit by an uninsured motorist. Although Paul and his kids had only minor injuries, their vehicle was totaled. Based on this information, which of the following is correct?: a. The uninsured motorist needs to purchase insurance, after the fact b. Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids c. The uninsured motorist will be required to purchase a new minivan for Paul's family d. It is likely that the uninsured motorist will not receive any citations or fines because she did not have insurance e. In all states, Paul's uninsured motorist's coverage must cover damage to all vehicles involved in the accident
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Paul's uninsured motorist's protection should cover medical expenses for Paul and his kids
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Timothy was driving his friend Nick to football practice. While driving, he was hit by driver who had coverage of 100/300/50. Tim and Nick each suffered some physical injuries. Based on this information, which of the following is correct?: a. Timothy's injuries would be covered to $100 and property damage would be limited to $300. b. Nick's injuries would be covered to $50,000. c. Individually, Timothy and Nick's injuries would be covered to $300,000 each. d. The total coverage for Timothy and Nick would be $100,000, and the driver who caused the accident would be covered to $50,000. e. The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for injuries sustained in the accident.
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The policy would provide a maximum of $100,000 for each of the injured, and no more than $300,000 for injuries sustained in the accident.
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Sammy was driving on the highway and drove over a piece of metal that was on the highway. The metal punctured her gas tank. This damage would be covered under her: a. Uninsured motorist's protection b. Property damage liability c. Collision d. Comprehensive physical damage e. Bodily injury liability
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Collision
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Madeline had a severe allergy attack and crashed her car into a telephone pole while sneezing. The damage to the telephone pole would be covered under Madeline's: a. Uninsured motorist's protection b. Property damage liability c. Collision d. Comprehensive physical damage e. Bodily injury liability
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Property damage liability
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Henry was driving at dusk and hit a deer running across the road. His damage would be covered under his: a. Uninsured motorist's protection b. Property damage liability c. Collision d. Comprehensive physical damage e. Bodily injury liability
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Collision
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Patrick has an old beater car and wants to keep his insurance costs down. In order to minimize the financial impact of an accident he may cause he should, at a minimum, carry which type of insurance?: a. Property damage liability b. Collision c. Comprehensive physical damage d. All of the above are required for all vehicles e. No coverage is required for any driver in the United States
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Property damage liability
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Al left his vehicle parked on the street in the front of his house when he went on vacation. While he was gone, his street flooded and his car was severely damaged. This damage would be covered under: a. Uninsured motorist's protection b. Property damage liability c. Collision d. Comprehensive physical damage e. Bodily injury liability
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Comprehensive physical damage
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Zachary lived in a neighborhood that was known for gang activity. One day, he noticed that his car had been vandalized. This damage would be covered under his: a. Uninsured motorist's protection b. Property damage liability c. Collision d. Comprehensive physical damage e. The vehicle would not be covered because he was not in it when the damage occured
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Comprehensive physical damage
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Various states are trying to reduce the time and cost of settling vehicle injury cases. One of those alternatives is: a. Omitting uninsured motorist's protection b. Requiring the driver to pay all medical expenses c. Using the no-fault system d. Requiring emergency road service coverage e. Having the state pay for driver's insurance
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Using the no-fault system
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Which of the following is NOT a type of motor vehicle insurance available to drivers?: a. Wage loss insurance b. Emergency road service coverage c. Rental reimbursement coverage d. All of the above may be available to drivers e. None of the above are optional
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All of the above may be available to drivers
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Which of the following is NOT correct?: a. If you live in a rural area, your auto insurance premium will likely be lower than if you live in a city b. In general, young drivers (under 25) and elderly drivers (over 70) have more frequent and more serious accidents c. Multiple accidents or traffic violations can increase insurance rates d. The number of small claims you have should not affect your premium e. Your credit score can cause your premium to change
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The number of small claims you have should not affect your premium
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Which of the following should reduce your auto insurance premium?: a. Celebrate your 70th birthday b. Get a speeding ticket c. Get good grades in college d. None from a farm to a city e. Start smoking
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Get good grades in college
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Cheyenne has a home insured for $400,000. It would cost $420,000 to rebuild her home. If she has home insurance that provides personal property coverage at 70 percent of value, how much of her belongings would be covered?: a. $120,000 b. $280,000 c. $294,000 d. $400,000 e. $420,000
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$280,000
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Sally was driving her own car and collided with a pick-up truck. Sally sustained $150,000 in injuries and her passenger sustained $1,000 in injuries. If her coverage was 100/300/50, what are the total medical expenses the insurance company would pay for this accident?: a. $1,000 b. $100,000 c. $101,000 d. $150,000 e. $151,000
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$101,000
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Last month, some of your friends were injured in an accident. Their total injuries were as follows: • Brenda - $75,000 • Raquel - $150,000 • Louis - $25,000 Coverage was 100/300/50. What was the total medical coverage in this accident?: a. $25,000 b. $75,000 c. $100,000 d. $200,000 e. $300,000
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$200,000
