Ch9 Risk Management The Role Of Insurance Test Bank - Test Bank | Personal Finance Intro 2e by John E. Grable. DOCX document preview.
Introduction to Personal Finance, 2e (Grable)
Chapter 9 Risk Management: The Role of Insurance
1) Which of the following is a factor that determines your health?
A) Health behavior.
B) Social circumstances.
C) Genetic disposition.
D) All of the choices are correct.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
2) Which of the following factors affects your health the most?
A) Health behavior.
B) Social circumstances.
C) Genetic disposition.
D) Medical care.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
3) Which of the following factors affects your health the least?
A) Health behavior.
B) Social circumstances.
C) Genetic disposition.
D) Medical care.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
4) Which of the following is a way people transfer risk of loss to another party?
A) Insurance.
B) Risk avoidance.
C) Assurance.
D) Risk acceptance.
Diff: 2
LO: 9.1, Section 9.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
5) Which of the following refers to the total cost of owning and using of insurance?
A) Deductible.
B) Premium.
C) Copayment.
D) All the choices are correct.
Diff: 2
LO: 9.1, Section 9.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
6) Which of the following refers to the amount that you must pay on a claim before insurance comes into play?
A) Transfer risk.
B) Deductible.
C) Premium.
D) Copayment.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
7) Which of the following refers to a cost-sharing amount with the insurance company?
A) Transfer risk.
B) Deductible.
C) Premium.
D) Copayment.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
8) How does risk affect insurance premiums?
A) As risk increases, premiums increase.
B) As risk increases, premiums decrease.
C) As risk decreases, premiums increase.
D) Risk doesn't affect premiums.
Diff: 2
LO: 9.1, Section 9.1
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
9) Which of the following refers to compensating individuals only up to the value of their loss?
A) Premium.
B) Indemnity.
C) Deductible.
D) Copayment.
Diff: 1
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
10) Which government entity has provided subsidized flood insurance to persons living in areas that have a history of flooding?
A) Government Employees Insurance Company (GEICO).
B) Old Age, Survivors, and Disability Insurance (OASDI).
C) Federal Emergency Management Agency (FEMA).
D) Federal Home Loan Mortgage Corporation (FHLMC).
Diff: 2
LO: 9.1, Section 9.1
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
11) What should you do if the severity of risk is high and the frequency of the risk event occurring is high?
A) Purchase insurance.
B) Accept the risk.
C) Avoid the risk.
D) Manage the risk.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
12) What should you do if the severity of risk is high and the frequency of the risk event occurring is medium?
A) Purchase insurance.
B) Accept the risk.
C) Avoid the risk.
D) Manage the risk.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
13) What should you do if the severity of risk is high and the frequency of the risk event occurring is low?
A) Purchase insurance.
B) Accept the risk.
C) Avoid the risk.
D) Manage the risk.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
14) What should you do if the severity of risk is low and the frequency of the risk event occurring is high?
A) Purchase insurance.
B) Accept the risk.
C) Avoid the risk.
D) Manage the risk.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
15) What should you do if the severity of risk is medium and the frequency of the risk event occurring is medium?
A) Purchase insurance.
B) Accept the risk.
C) Avoid the risk.
D) Manage the risk.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
16) Which of the following is a financial tool that allows individuals to manage the unpredictable and potentially excessive costs associated with healthcare?
A) Health insurance.
B) Life insurance.
C) Disability insurance.
D) PAP insurance.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
17) How many visits to the emergency room do people make each year?
A) Under 50 million
B) 50-100 million
C) 100-200 million
D) Over 200 million
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
18) What is the average annual number of doctor office visits in for young working-age adults (ages 18–44)?
A) Less than 1
B) 1 to 3
C) 3 to 5
D) More than 5
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
19) What is the average cost of a routine hospital stay?
A) Less than $500
B) $500-$1,000
C) $1,000-10,000
D) More than $10,000
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
20) Which of the following is available to those who are age 65 or older?
A) Medicaid.
B) Medicare.
C) State Children's Health Insurance.
D) Affordable Care Act.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
21) Which of the following is a state-administered health insurance designed to provide coverage for individuals and families with low incomes and limited financial assets?
A) Medicaid.
B) Medicare.
C) State Children's Health Insurance.
D) Affordable Care Act.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
22) Which of the following provides free or low-cost insurance for children in working families with low to moderate income?
A) Medicaid.
B) Medicare.
C) State Children's Health Insurance.
D) Affordable Care Act.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
23) Which of the following is the amount that the insured individual must pay before the health insurance company will contribute any funds to pay the medical bills?
A) Premium.
B) Copayment.
C) Deductible.
D) Coinsurance.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
24) Which of the following is the prorated sharing of costs between the insured individual and the health insurance company?
A) Premium.
B) Copayment.
C) Deductible.
D) Coinsurance.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
25) Which of the following is the most flexible, and costly, type of coverage available?
A) Insurance.
B) Managed care plan.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff: 1
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
26) Which of the following is a popular form of managed care?
A) Point of service plan.
B) Preferred provider organization.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
27) Which of the following allows the insured to use the services of different hospitals, clinics, and doctors without prior permission?
A) Insurance.
B) Managed care plan.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff:
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
28) Which of the following provides care through a network of physicians and hospitals located in a specified geographic area?
A) Insurance.
B) Preferred provider organization.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
29) Which of the following types only includes the use of doctors, specialists, clinics, and hospitals in the plan's network?
A) Exclusive provider organization.
B) Preferred provider organization.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
30) Which of the following is a type of coverage designed to reduce yearly premiums by providing an incentive to the insured to pay more upfront medical expense out of pocket?
A) Consumer-driven plan.
B) Preferred provider organization.
C) Fee-for-service plan.
D) Health maintenance organization.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
31) What is the federal law that requires health insurers to continue coverage of a terminated employee at nearly the same total premium cost?
A) COBRA.
B) HIPAA.
C) ERISA.
D) FICA.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
32) Sally just got laid off from her job at a large corporation. She has diabetes and is concerned about healthcare costs while unemployed. Her monthly healthcare insurance premiums were $325 and her former employer's share of the plan accounted for the same amount. What would be her maximum monthly premium to continue coverage?
A) $325.00.
B) $331.50.
C) $650.00.
D) $663.00.
Diff: 2
LO: 9.2, Section 9.2
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
33) Who can contribute to a health savings account (HSA)?
A) Individuals who participate in a high-deductible health plan.
B) Individuals who earn less than the maximum income levels set by the IRS.
C) Individuals who participate in a managed care health plan.
D) Individuals who participate in a low-deductible health plan.
Diff: 2
LO: 9.2, Section 9.2
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
34) Which is a characteristic of a flexible spending account (FSA)?
A) FSA allows you to put money aside on a pretax basis each year subject to annual maximums set by the IRS that must be used toward qualified medical and dental expenses typically within the calendar year.
B) FSA allows you to put money aside on an after-tax basis each year subject to annual maximums set by the IRS that must be used toward qualified medical and dental expenses typically within the calendar year.
C) The use of FSAs is limited to those with high-deductible health plans, and any money that remains in the account can continue to grow on a tax-deferred basis and used anytime to pay medical expenses on a tax-free basis.
D) The use of FSAs is limited to those with high-deductible health plans, and any money that remains in the account must be used toward qualified medical expenses typically within the calendar year.
Diff: 2
LO: 9.2, Section 9.2
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
35) Which of the following is a governmental comprehensive health insurance program that provides essential medical care to the neediest in society?
A) COBRA.
B) Medicaid.
C) Medicare.
D) Social Security.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
36) Which of the following is a requirement of a disability as defined by the Social Security Administration?
A) You cannot do the work you did before an accident or illness.
B) You cannot readjust your skills because of your medical condition.
C) Your disability has or is expected to last for at least one year or until death.
D) All of the choices are correct.
Diff: 2
LO: 9.3, Section 9.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
37) Which of the following means that you will be considered disabled if you are unable to perform the material and substantial duties of your occupation?
A) Any occupation.
B) Own occupation.
C) Selective occupation.
D) Modified-own occupation disability.
Diff: 2
LO: 9.3, Section 9.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
38) What percent of Americans could pay their bills or meet expenses if they were to become disabled and not return to work?
A) More than 50%.
B) More than 40%.
C) Less than 40%
D) Less than 20%.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
39) How many credits are required to be qualified for Social Security disability benefits?
A) 5.
B) 10.
C) 15.
D) 20.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
40) How many Social Security disability benefit credits per year can you earn for every year worked?
A) 2.
B) 3.
C) 4.
D) 5.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
41) Which of the following will replace a portion of your salary for 3, 6, or 12 months if you cannot work?
A) Social Security.
B) Short-term disability insurance.
C) Long-term disability insurance.
D) Health insurance.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
42) Which of the following will replace a portion of your salary after you cannot work for 6 to 12 months?
A) Social Security.
B) Short-term disability insurance.
C) Long-term disability insurance.
D) Health insurance.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
43) Which type of disability insurance should you purchase?
A) Any occupation.
B) Own occupation.
C) Modified-own occupation disability.
D) Own occupation or modified-own occupation disability.
Diff: 2
LO: 9.3, Section 9.3
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
44) Which of the following refers to the amount of time between the disability occurring and the insurance company paying the claim?
A) Any occupation.
B) Own occupation.
C) Co-insurance period.
D) Elimination period.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
45) Mia's gross income is $50,000 per year. How much long-term disability insurance should she purchase?
A) $50,000.
B) $25,000.
C) $32,500.
D) $20,000.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
46) Max's gross income is $30,000 per year. How much long-term disability insurance should he purchase?
A) $30,000.
B) $25,000.
C) $20,000.
D) $19,500.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
47) Jorge's gross income is $80,000 per year. How much long-term disability insurance should he purchase?
A) $50,000.
B) $60,000.
C) $52,000.
D) $80,000.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
48) Mia's gross income is $50,000 per year. She has a long-term care disability policy. How much does she need in her emergency fund to cover short-term expenses?
A) $50,000.
B) $25,000.
C) $32,500.
D) $16,250.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 3
49) Max's gross income is $70,000 per year. He has a long-term care disability policy. How much does he need in his emergency fund to cover short-term expenses?
A) $70,000.
B) $35,000.
C) $45,500.
D) $22,750.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 3
50) Jorge's gross income is $80,000 per year. He has a long-term care disability policy. How much does he need in his emergency fund to cover short-term expenses?
A) $80,000.
B) $40,000.
C) $26,000.
D) $52,000.
Diff: 2
LO: 9.3, Section 9.3
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 3
51) Approximate annual disability premium costs are associated with different
A) age and health situations.
B) age and occupations.
C) health situations and occupations.
D) age, health situation and occupations
Diff: 1
LO: 9.3, Section 9.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
52) Which of the following is correct about employer-provided disability insurance?
A) The policy cannot be canceled by the insurance company
B) The insurance company will return all or a portion of your premiums if no claims are made
C) All benefits received in the case of disability will be fully taxable
D) All benefits received in the case of disability will be tax-free
Diff: 2
LO: 9.3, Section 9.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
53) Which is not a disability insurance rider?
A) Guaranteed renewability provision
B) Return of premium
C) Partial disability
D) Workers’ compensation
Diff: 2
LO: 9.3, Section 9.3
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
54) Sam fell off a rafter while constructing a chimney on a house that his employer is contracted to construct. He broke his leg; however, he is healthy and able to catch up on his personal taxes. Which insurance benefit would he be able to collect?
A) Social Security disability
B) Medicare
C) Disability insurance (any-occupation)
D) Workers’ Compensation (did not pay premium)
Diff: 2
LO: 9.3, Section 9.3
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
55) Which of the following refers to the person who makes premium payments?
A) Policy owner.
B) Insured.
C) Insurable interest.
D) Beneficiary.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
56) Which of the following refers to the person who must die for the life insurance policy to pay off?
A) Policy owner.
B) Insured.
C) Insurable interest.
D) Beneficiary.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
57) Which of the following refers to the person who receives the policy death benefit when the insured dies?
A) Policy owner.
B) Insured.
C) Insurable interest.
D) Beneficiary.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
58) Which of the following means that if the insured individual were to die unexpectedly, the policy owner would suffer a financial loss?
A) Policy interest.
B) Insurable loss.
C) Insurable interest.
D) Beneficiary interest.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
59) Which of the following refers to individuals who will receive the death benefit if the primary beneficiary dies before the policy owner?
A) Primary beneficiary.
B) Insured contingent.
C) Insurable interest.
D) Contingent beneficiary.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
60) Which of the following is a type of life insurance?
A) Health insurance.
B) Term-life insurance.
C) Cash-value life insurance.
D) Both term-life insurance and cash-value life insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
61) Which of the following provides a death benefit if the insured individual dies before reaching a predetermined age?
A) Health insurance.
B) Term-life insurance.
C) Cash-value life insurance.
D) Both term-life insurance and cash-value life insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
62) Which of the following needs to be purchased yearly?
A) Annual renewable term insurance.
B) All types of term-life insurance.
C) Cash-value life insurance.
D) Level term insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
63) Which of the following allows you to invest the cash value in mutual funds?
A) Variable life insurance.
B) Term-life insurance.
C) Universal life insurance.
D) Whole life insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
64) Which of the following ensures that your policy premiums will be paid if you were to become disabled?
A) Disability premium waiver.
B) Disability insurance benefit provision.
C) Convertibility provision.
D) Guaranteed renewability provision.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
65) Which of the following allows you to convert a cash-value policy in the future without having to provide proof of insurability?
A) Disability premium waiver.
B) Convertible waiver.
C) Convertibility provision.
D) Guaranteed renewability provision.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
66) Which of the following permits you to extend your policy without having to take a medical exam?
A) Disability premium waiver.
B) Medical premium waiver.
C) Convertibility provision.
D) Guaranteed renewability provision.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
67) Which of the following is a significant disadvantage of a cash-value policy?
A) Death benefit is taxable because of the savings component.
B) Preserves insurability.
C) Provides estate liquidity.
D) Costs more than term policies.
Diff: 2
LO: 9.4, Section 9.4
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
68) Which of the following earns a fixed rate of return?
A) Annual renewable term insurance.
B) Term-life insurance.
C) Whole life insurance.
D) Universal life insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
69) Which of the following pays a higher return?
A) Annual renewable term insurance.
B) Term-life insurance.
C) Whole life insurance.
D) Universal life insurance.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
70) Ryan and Amy recently got married and just bought their first home for $500,000. They both have to work to maintain their $400,000 mortgage. Ryan earns $35,000 and Amy earns $45,000 per year. Based on the income multiplier estimation, how much life insurance should they have?
A) $350,000 policy on Ryan and $450,000 policy on Amy.
B) $350,000 policy on Amy and $450,000 policy on Ryan.
C) $400,000 policy on Amy.
D) $400,000 policy on Ryan.
Diff: 2
LO: 9.4, Section 9.4
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
71) Doug and Cheryl have a newborn child and are shopping for life insurance. Doug earns $100,000 a year and Cheryl cares for their child. They have a $300,000 mortgage with 20 years remaining and are concerned if something were to happen to Doug, how their family can manage. If they wish to cover the family expenses until the child turns 20, approximately how much term insurance would they purchase? (Assume the expected annual return is 6%.)
A) $846,992
B) $1,000,000
C) $1,146,992
D) $1,300,000
Diff: 3
LO: 9.4, Section 9.4
Bloom: S
AACSB / IMA: none; none
AICPA: FC: none
Min: 4
72) Which of the following is a characteristic of a personal automobile policy?
A) Pays medical expenses and property damages to others harmed in the accident you caused.
B) Provides a financial safety net in case you are at fault in causing significant physical, bodily, or emotional harm to others.
C) Provides a financial safety net in case an uninsured or underinsured driver causes you significant financial loss from a car accident.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
73) Which of the following is a factor that could increase your auto insurance premium?
A) Being male.
B) Being younger than age 25.
C) Living in a city.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
74) Which of the following is a factor that decreases your premium?
A) Being male.
B) Being younger than age 25.
C) Living in a city.
D) Being a good student.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
75) Which of the following is a factor that could increase your auto insurance premium?
A) Using your car for commuting to school/work.
B) Having a good driving record.
C) Having a high credit score.
D) Taking a defensive driving course.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
76) Which of the following is intended to pay for medical costs, funeral expenses, lost wages, punitive damages, car rentals, repairs, and compensation for pain and suffering for people in the other car involved in an accident?
A) Collision coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
77) Which of the following is intended to pay for your car's repairs when involved in a moving vehicle accident?
A) Collision coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
78) Which of the following is intended to pay for damage to your vehicle caused by an event, such as a tree falling on the parked car?
A) Collision coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
79) Which of the following is an example of an event that could trigger a comprehensive claim?
A) Hail storm.
B) Broken windshield from flying road debris.
C) Vandalism.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
80) Which of the following insures you, your family, passengers, and others who drive your car with permission?
A) Collision coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of the choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
81) Which of the following requires you to pay the policy deductible when you make a claim?
A) Liability coverage and collision coverage.
B) Liability coverage.
C) Liability coverage and comprehensive coverage.
D) Collision coverage and comprehensive coverage.
Diff: 1
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
82) Which of the following will provide additional coverage that will pay your medical and property damage expenses above what someone else's policy pays?
A) Collision coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) Uninsured/underinsured motorist coverage.
Diff: 1
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
83) Which of the following insures the amount between what you owe on your car and what the car is worth?
A) Collision coverage.
B) Liability coverage.
C) Gap coverage.
D) Uninsured/underinsured motorist coverage.
Diff: 1
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
84) Which of the following refers to the cost of insurance?
A) Premium.
B) Deductible.
C) Comprehensive coverage.
D) Liability coverage.
Diff: 1
LO: 9.5, Section 9.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
85) Which of the following refers to the amount you must pay before the insurance company makes a payment on a claim?
A) Premium.
B) Deductible.
C) Comprehensive coverage.
D) Liability coverage.
Diff: 1
LO: 9.5, Section 9.5
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
86) Which of the following is more expensive with higher coverage?
A) Gap coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of the choices are correct
Diff: 2
LO: 9.5, Section 9.5
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
87) Derek has a PAP policy with 25/50/10 split limits. How much is he insured, if he crashes into his neighbor’s fence and garden?
A) $10,000
B) $25,000
C) $50,000
D) $85,000
Diff: 2
LO: 9.5, Section 9.5
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
88) Susan has a PAP policy with 25/50/10 split limits. How much is she insured in the event she hits a pedestrian crossing the road?
A) $10,000
B) $25,000
C) $50,000
D) $85,000
Diff: 2
LO: 9.5, Section 9.5
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
89) Vic has a PAP policy with 25/50/10 split limits. How much is he insured in the event he hits a family of three crossing the road?
A) $30,000
B) $50,000
C) $75,000
D) $150,000
Diff: 2
LO: 9.5 Section 9.5
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
90) Which of the following is anything that causes you to experience a loss?
A) Peril.
B) Hazard.
C) Event.
D) Liability.
Diff: 1
LO: 9.6, Section 9.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
91) Which of the following is a situation or condition that makes the probability of a peril occurring more likely?
A) Outcome.
B) Hazard.
C) Event.
D) Liability.
Diff: 1
LO: 9.6, Section 9.6
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
92) Which of the following is an example of a peril?
A) A hail storm caused damage to your home.
B) You live on the beach.
C) Your drive a long commute.
D) You smoke.
Diff: 2
LO: 9.6, Section 9.6
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
93) Which of the following is a factor to consider when it comes to buying insurance?
A) The perils that you face as a homeowner or tenant.
B) The probability of loss occurring.
C) Your budget and how much you can spend on insurance premiums.
D) All of the choices are correct.
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
94) What should you do if the severity of a risk is high and the frequency of the risk event occurring is high?
A) Avoid the risk.
B) Manage the risk.
C) Purchase insurance.
D) Accept the risk.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
95) What should you do if the severity of risk is low and the frequency of the risk event occurring is low?
A) Avoid the risk.
B) Manage the risk.
C) Purchase insurance.
D) Accept the risk.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
96) What should you do if the severity of a risk is medium and the frequency of the risk event occurring is medium?
A) Avoid the risk.
B) Manage the risk.
C) Purchase insurance.
D) Accept the risk.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
97) What should you do if the severity of a risk is medium and the frequency of the risk event occurring is low?
A) Avoid if possible.
B) Manage the risk.
C) Purchase insurance.
D) Accept the risk.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
98) What should you do if the severity of a risk is low and the frequency of the risk event occurring is high?
A) Avoid if possible.
B) Manage the risk.
C) Purchase insurance.
D) Accept the risk.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 2
99) Which of the following is an example of an event that is high risk and high probability of occurring?
A) Smoking in bed causes a fire.
B) Hail damage totals a car.
C) Loss of lawn as a result of minor drought.
D) Failure of air conditioning unit damages furniture.
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
100) Which of the following is an example of an event that is high risk and low probability of occurring?
A) House fire from lightning strike.
B) Accident occurring while texting and driving.
C) Loss of lawn as a result of a minor drought.
D) Failure of air conditioning unit.
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
101) Which of the following is an example of an event that is low risk and low probability of occurring?
A) House fire from lightning strike.
B) Rain damage to car from window left open.
C) Loss of lawn as a result of a minor drought.
D) Accident occurring while texting and driving.
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
102) Which of the following is an example of an event that is low risk and medium probability of occurring?
A) House fire from lightning strike.
B) Rain damage to car from window cracked open.
C) Loss of lawn as a result of a major drought.
D) Failure of air conditioning unit in the summer.
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
103) Which of the following will only pay if your loss is caused by something specifically listed in the policy?
A) Homeowner's coverage policy (HO policy).
B) Named perils policy.
C) All-risk HO policy.
D) Liability policy.
Diff: 1
LO: 9.6, Section 9.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
104) Which of the following will typically pay for any loss unless the peril is explicitly excluded in the policy?
A) Special perils HO policy.
B) Named perils policy.
C) All-risk HO policy.
D) Liability policy.
Diff: 1
LO: 9.6, Section 9.6
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
105) What kind of insurance policy provides comprehensive liability protection that can supplement your existing property and casualty coverage?
A) Comprehensive PAP
B) Comprehensive Split level
C) Umbrella
D) No-Fault
Diff: 1
LO: 9.6, Section 9.6
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
106) Billy rents an apartment in a high-rise building. A fire started from a neighbor’s cigarette caused damage to his unit. He anticipates $8,000 in personal belongings damaged and $22,000 in building repair. What type of insurance should he have to protect himself from a situation like this?
A) Named perils HO insurance
B) Special perils HO insurance
C) Personal property floater insurance
D) Renter’s insurance
Diff: 2
LO: 9.6, Section 9.6
Bloom: Ap
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
107) Which of the following is an activity of daily living?
A) Fixing your own food.
B) Bathing yourself.
C) Dressing yourself.
D) All of the choices are correct.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
108) Which of the following transfers the potential financial risk associated with the personal physical care needs of otherwise healthy people?
A) Liability insurance.
B) Long-term care insurance.
C) Comprehensive insurance.
D) Health insurance.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
109) Which of the following is usually considered when examining the need for long-term care?
A) Unable to perform one activity of daily living.
B) Unable to perform two activities of daily living.
C) Can perform all activities of daily living.
D) Activities of daily living do not apply to long-term care.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
110) Which of the following refers to the waiting phase between the time the insured individual qualifies for long-term care benefits and when the insurance carrier begins providing benefits?
A) Time period.
B) Grace period.
C) Elimination period.
D) Benefit period.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
111) Which of the following specifies the length of time that long-term care expenses will be paid?
A) Time period.
B) Benefit limit.
C) Elimination period.
D) Benefit period.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
112) Which of the following specifies the maximum dollar amount the policy will pay?
A) Time period.
B) Benefit limit.
C) Elimination period.
D) Benefit period.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
113) Which of the following is a government-provided health insurance program?
A) UnitedHealthcare.
B) Americare.
C) Medicare.
D) Social Security.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
114) Which of the following should you consider when deciding when to purchase long-term care insurance?
A) Age.
B) Health.
C) Emergency savings.
D) All of the choices are correct.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
115) At what age might a long-term care policy premium be too expensive?
A) 40.
B) 50.
C) 60.
D) 70.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
116) At what age should you start to consider purchasing a long-term care policy?
A) 20.
B) 40.
C) 50.
D) 70.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
117) What percent of adult day-care center residents are younger than age 65?
A) Less than 33%.
B) Less than 23%.
C) More than 23%.
D) More than 33%.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
118) What percent of nursing residents are younger than age 65?
A) 15%.
B) 23%.
C) 30%.
D) 3%.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
119) What percent of the elderly receive long-term care assistance from family and friends?
A) 28%.
B) 48%.
C) 58%.
D) 78%.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
120) What percent of the elderly receive a combination of long-term care assistance from family and friends and paid services?
A) 10%.
B) 14%.
C) 12%.
D) 8%.
Diff: 1
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
121) What is the approximate national median cost for an assisted living center per year?
A) $48,600.
B) $52,600.
C) $90,000.
D) $102,00.
Diff: 3
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
122) What is the approximate national median cost for a home health aide per year?
A) $48,600.
B) $52,600.
C) $90,000.
D) $102,00.
Diff: 3
LO: 9.7, Section 9.7
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
______________________________________________________________________________
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