Life, Fire, And Auto Insurance Chapter.9 Full Test Bank

Chapter 9

Life, Fire, and Auto Insurance

True/False Questions
 

1. The one receiving the insurance coverage is the insured. 
True    False

2. The beneficiary pays the insurance to the insured. 
True    False

3. The face amount is the amount stated in the policy. 
True    False

4. The premium is the payment(s) that is made to pay for the cost of an insurance policy. 
True    False

5. All premiums for universal life remain the same. 
True    False

6. Permanent protection is provided by term insurance. 
True    False

7. Term insurance would pay the face amount of the policy in case of the death of the insured. 
True    False

8. Buying flight insurance at an airport is an example of straight-life insurance. 
True    False

9. Term insurance builds up no cash value. 
True    False

10. Premiums for straight-life insurance are higher than premiums for term insurance. 
True    False

11. Twenty-payment life requires premiums for 20 years although the insured is protected till death. 
True    False

12. A 09-year endowment does not build up any cash value by the end of year 5. 
True    False

13. Universal life provides whole life protection. 
True    False

14. Nonforfeiture values could result in the insured being paid the cash value of the policy and the policy being terminated. 
True    False

15. Extended term insurance means the policy continues but at a face amount that is less than the original policy. 
True    False

16. Reduced paid-up insurance means the policy continues for life at a reduced face amount. 
True    False

17. The cash value of a life insurance policy is a cheap source of money. 
True    False

18. The premium for fire insurance is found by the insured value divided by 100 times the table rate. 
True    False

19. The short rate cancellation table is used if the insured cancels the policy. 
True    False

20. If the insurance company cancels a fire insurance policy, the refund to the insured will be less than if the insured cancels the policy. 
True    False

21. Insurance required to meet coinsurance is the coinsurance rate times the replacement value. 
True    False

22. The actual amount of insurance carried is called the face value. 
True    False

23. As a result of coinsurance, the insurance company might pay more than face value. 
True    False

24. All states have the same compulsory insurance. 
True    False

25. Compulsory liability insurance includes bodily injury and property damage. 
True    False

26. 10/20 of bodily injury means that an insurance company will pay up to $20,000 per person up to a total of 10 people for bodily injury. 
True    False

27. Lowering deductibles for collision will result in increased premiums. 
True    False

28. A falling object that dents a car would be covered under comprehensive insurance. 
True    False

29. No-fault insurance does not reduce premiums for collision, property damage, or comprehensive. 
True    False

30. As a result of few suits as well as high operating costs, no-fault has reduced some premium costs. 
True    False

Multiple Choice Questions
 

31. The one named in the policy to receive the insurance proceeds in case of the death of the one taking out the policy is the: 
A. Insured
B. Insurer
C. Beneficiary
D. Both insurer and beneficiary
E. None of these

32. Term insurance: 
A. Is more expensive than straight-life
B. Builds up cash value
C. Pays more than the face amount
D. Provides temporary protection
E. None of these

33. In terms of premium cost, the most expensive type of insurance is: 
A. Term
B. Straight-life
C. 09-payment life
D. 09-year endowment
E. None of these

34. Which one of the following builds up no cash value? 
A. Universal life
B. Straight-life
C. Term
D. 09-payment life
E. None of these

35. Reduced paid-up insurance: 
A. Buys protection with paying new premiums
B. Continues for 20 years
C. Results in a face amount less than the original amount
D. Means original face amount is continued for a certain number of years
E. None of these

36. A premium for fire insurance could be lower than someone else's if: 
A. Building is wood
B. Roof is not fire resistant
C. Building is close to a fire hydrant
D. Goods within store are flammable
E. None of these

37. If the insured cancels a fire insurance policy after seven months, the refund will be:
A. 67%
B. 7/12 of policy
C. 5/12 of policy
D. 33%
E. None of these

38. The insurance required to meet coinsurance is: 
A. 80% × face value
B. 80% × replacement value
C. 80% × actual loss
D. Insurance carried divided by 80%
E. None of these

39. An auto insurance premium may be partially based on: 
A. Attitude of driver
B. Expected life of car
C. Make of car
D. Number of years one expects to drive a car
E. None of these

40. Collision and comprehensive: 
A. Only pay the insurer
B. Only pay the insured
C. Are compulsory insurance
D. Have no deductibles
E. None of these

41. Abby Kaminsky, age 32, has decided to take out a limited payment life policy. She chose this since she expects her income to decline in future years. Abby has decided to take out a 20-year payment life policy with a coverage amount of $200,000. Her annual premium will be: 
A. $1,158
B. $2,316
C. $2,136
D. $1,518
E. None of these

42. Matt Miller, age 28, takes out $50,000 of straight-life insurance. His annual premium is $418.20. At the end of 20 years, the cash value of his policy is: 
A. $13,250
B. $26,000
C. $26,500
D. $30,000
E. None of these

43. Mia's office building with a $300,000 value has a rating of 2 with a building classification of A. The contents in the building are valued at $120,000. The total annual premium is: 
A. $1,046.40
B. $990.00
C. $1,064.40
D. $1,064.04
E. None of these

44. Lee's toy store is worth $400,000 and is insured for $300,000. Assuming an 80% coinsurance clause and a fire that caused $190,000 of damage, the liability of the insurance company is: 
A. $142,500
B. $124,500
C. $187,125
D. $178,125
E. None of these

45. The property of Lance's Garage is worth $90,000. Lance has a fire insurance policy of $40,000 that contains an 80% coinsurance clause. On a fire that causes $60,000 of damage, the insurance company pays: 
A. $27,777.78
B. $27,777.87
C. $33,333.33
D. $33,334. 00
E. None of these

46. Howard Hane had taken out a $130,000 fire insurance policy for his new restaurant at a rate of $.82 per $100. Nine months later, Howard canceled the policy and decided to move his store to a new location. The cost of the premium to Howard is:
A. $1,066
B. $863.46
C. $1,606
D. $836.64
E. None of these

47. Jay Miller insured his pizza shop for $200,000 for fire insurance at an annual rate per $100 of $.49. At the end of 10 months, Jay canceled the policy since his pizza shop went out of business. The refund to Jay is: 
A. $980
B. $852.60
C. $127.40
D. $186.20
E. None of these

48. Bill Blum insured his hardware store with a fire insurance policy for $88,000 at a cost of $.84 per $100. Ten months later his insurance company canceled his policy as a result of failure to correct a fire hazard. The cost of the policy to Bill was: 
A. $739.20
B. $793.20
C. $591.36
D. $616.00
E. None of these

49. Al Smith, who lives in territory 5, carries 10/20/5 compulsory liability insurance along with optional collision that has a $300 deductible. Al, who was at fault in an accident, caused $4,000 damage to the other auto as well as $900 damage to his own car. Also, the courts awarded $15,000 and $7,000, respectively, to the two passengers in the other car for personal injuries. Al is responsible to pay a total of: 
A. $5,000
B. $5,600
C. $600
D. $3,000
E. None of these

50. Given the following information, the total annual premium is:
Sam Montgomery: territory 5
Classified driver 17
Car age 4 Symbol 5
State has compulsory insurance and the following options:
   
A. $791
B. $918
C. $971
D. $298
E. None of these

51. Calculate the annual premium:

Face value: $60,000

Gender: Female

Type: Five-year term

A. $7,920

B. $787.20

C. $675.60

D. $600.00

E. None of these

52. Jim opens a new pizza shop. He insures his store for $90,000 for fire. What is his premium if the rate per $100 is $ .83?

A. $74.70

B. $74,700

C. $ 700

D. $ 747.00

E. None of these

53. Ben’s office building with a $200,000 value has a rating area of 1 with a building class of B. The contents are valued at $90,000. What is the total annual premium for both?

A. $108

B. $486

C. $820

D. $1,306

E. None of these

54. Calculate the optional bodily injury cost for the following:

Class 10; optional bodily injury: 100/300/50

A. $94

B. $144

C. $108

D. $187

E. None of these

55. Maryville University purchased building insurance for a temporary bookstore for a total annual charge of $1,600. It closed the facility after five months. What is the refund?

A. $768

B. $976

C. $624

D. $832

E. None of these

Short Answer Questions

56. 1. Beneficiary
2. Cash value
3. Coinsurance
4. Collision
5. Comprehensive
6. Compulsory
7. Deductible
8. Face amount
9. Indemnity
10. Insured
11. Insurer
12. No-fault
13. Nonforfeiture
14. Premium
15. Paid-up insurance
16. Short rate table
17. Straight-life
18. Term insurance
19. Endowment insurance
A. Amount insured pays
B. Policyholder
C. Result of a nonforfeiture value
D. Continual premium payments
E. One to receive face value of life insurance
F. Builds no cash value
G. The insurance company
H. Amount of insurance stated on the policy
I. Periodic payment
J. Value of policy when terminated
K. Combination of term and whole life
L. Pay for repairs to one’s auto
M. Payment to insured from a loss
N. 80%
O. Blame doesn't matter in payoff
P. Fire, theft
Q. Used when insured cancels
R. Not optional
S. Options when an insurance policy is terminated 

57. Round all answers to nearest cent (as appropriate).
LIFE INSURANCE

Calculate annual premium:
   

58. Complete the cost of the premium for fire insurance:
   

59. Calculate the amount the insurance company will pay:
  
A. ______________ B. ______________ 

60. Calculate cost and refund (use table in text if needed):
   

61. Calculate Joe Wheel's auto premium:
   

62. Melissa Sorez, age 42, takes out a $300,000 five-year term insurance policy. What is her annual premium? At the end of three years, what is the amount of cash value that has built up? 

63. Jim Smith, age 25, buys a straight-life policy for $105,000. What is his annual premium? If after 15 years he no longer wants to pay the premium, what nonforfeiture values are available to him? 

64. Joan's Hardware Shop is worth $40,000 and is insured for $30,000. Assuming an 80% coinsurance clause, what would the insurance company pay if a fire caused $20,000 of damage to the shop? 

65. Jim Rivera bought a new car and carried only compulsory insurance. On a trip to Washington, he hit a car, injuring the couple inside. Jim's car had damage of $1,800, and the car struck had damage of $1,700. After a lengthy court battle, the couple struck by Jim were awarded personal injury judgments of $16,000 and $8,800, respectively. What did the insurance company pay, and what was Jim's responsibility? 

66. Matt Clark, age 27, decided to take out a limited payment life policy. He chose this because he expects his income to decline in future years. Matt decided to take out a 09-year payment life policy with a coverage amount of $90,000. Calculate his annual premium. If he stops paying premiums after 15 years, what will his cash value be? 

67. Melissa Toby, age 36, bought a straight-life insurance policy for $80,000. Calculate her annual premium. If after 20 years she no longer pays premiums, what nonforfeiture options are available to her? 

68. The property of Vin's Garage is worth $400,000. Vin has a fire insurance policy of $160,000 that contains an 80% coinsurance clause. What will the insurance company pay on a fire that causes $180,000 of damage? If Vin met the coinsurance, how much would the insurance company pay? 

69. Ann Rill insured her dress shop for $75,000 of fire insurance at an annual rate per $100 of $.63. At the end of nine months, Ann canceled the policy since her dress shop went out of business. What was the cost of Ann's premium as well as her refund? 

70. Jim Leary insured his bookstore with a fire insurance policy of $90,000 at a cost of $.58 per $100. Eight months later his insurance company canceled the policy because of failure to correct a fire hazard. What did Jim have to pay for the eight months of coverage? 

71. Al Lize, who lives in territory 5, carries 10/20/5 compulsory liability insurance, along with optional collision that has a $100 deductible. Al, who was at fault in an accident, caused $2,200 damage to the other auto and $900 damage to his own car. Also, the courts awarded $18,000 and $9,000, respectively, to the two passengers in the other car for personal injuries. How much does the insurance company pay, and what is Al's share of the responsibility? 

72.    

73.    

74.    

75.    

76.   
What is the cash value of the policy at the end of 20 years? 

77.    

78.    

79.    

80.    

81.   
What is the cash value of the policy at the end of 15 years? 

82. Calculate the cost of the premium:
   

83. Calculate the cost of the premium:
   

84.    

85.    

86.    

87.    

88.    

89.    

90.    

91.    

92. Calculate Joe Brake's auto premium:
   

93. Calculate Joe Wheel's auto premium. 

94. If Joe decides to decrease his deductible to $200 for collision, what additional cost will result? 

95. If Joe Wheel decides to decrease his deductible to $100 for collision, what is the additional cost? 

96. Alice Stone is thinking about taking out $90,000 of five-year term insurance. Alice is 35 years old. What will her annual premium be? 

97. Bill Small, age 28, would like to take out a 09-year endowment policy that has a coverage amount of $30,000. Can you calculate for Bill (A) his annual premium and (B) the cash value at the end of 10 years? 

98. Joe Rossen opened a pizza shop. He insures his shop for $90,000 for fire. What is his insurance premium if the rate per $100 is $.83? 

99. John Davis's store is worth $400,000 and is insured for $240,000. Assuming an 80% coinsurance clause and a fire that caused $100,000 of damage, what is the liability of the insurance company? 

100. Joan Raft had taken out an $80,000 fire insurance policy for her new shop at a rate of $.81 per $100. Seven months later, Joan canceled the policy and decided to move the shop to a new location. What refund did she receive? 

101. Abe Blerf insured his shop with fire insurance for $70,000 at a cost of $.83 per $100. Eight months later, his insurance company canceled his policy because of failure to correct fire hazards. What did Abe pay for the eight months of coverage? 

102. John Jay carries a $500 deductible for collision. An accident resulted in $850 worth of damage to his car. What portion will the insurance company pay? 

103. Calculate the annual total auto premium from the following. There is compulsory insurance.
 

104. Bill's office building with a $200,000 value has a rating of 1 with a building classification of B. The contents in the building are valued at $90,000. What is the total annual premium?

105. Abby Small, age 40, wants to take out a $300,000 term insurance policy. What is her annual premium? At the end of five years, what is the cash value?

106. Jenny Siebert purchased a new Ford Explorer and insured it for compulsory 10/20/5. While traveling to work, Jenny hit another vehicle, injuring both occupants, who were awarded personal injury judgments of $96,000 and $15,000, respectively. What will Jenny have to pay out of pocket for their injuries?

107. Tom Brotherton decided at age 44 to purchase a five-year term policy for $500,000. What is Tom’s annual premium?

108. Calculate the annual insurance premium for the following: Rating Area: 3; class B; building $95,000; contents for $50,000.

109. Janet opened a second bridal shop and paid $1,200 for annually fire insurance. As a result of the Great Recession, she was forced to close her shop after four months. What did the insurance cost her?

110. Stephanie received a $100,000 term life insurance policy as part of her employment compensation. What did her company pay for the five-year term policy if Stephanie was 44 at the time of employment?