Verified Test Bank Ch9 Risk Management The Role Of Insurance - Personal Finance Journey 1e Test Bank by John E. Grable. DOCX document preview.
Introduction to Personal Finance, 1e (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 these answer 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) Premium.
D) Copayment.
Diff: 2
LO: 9.1, Section 9.1
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
5) Which of the following refers to the cost of the insurance?
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
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: A
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: 1
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: 1
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: 1
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: 1
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: 1
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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
17) What percent of young adults visit the emergency room each year?
A) 5%.
B) 10%.
C) 20%.
D) 25%.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
18) What percent of young adults will visit a doctor one to three times a year?
A) 50%.
B) 40%.
C) 30%.
D) 25%.
Diff: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
19) What percent of young adults will have more than 10 visits to a doctor or hospital during the year?
A) 5%.
B) 10%.
C) 20%.
D) 25%.
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: 1
LO: 9.2, Section 9.2
Bloom: K
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: K
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: A
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: 1
LO: 9.2, Section 9.2
Bloom: K
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: 1
LO: 9.2, Section 9.2
Bloom: K
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: 1
LO: 9.2, Section 9.2
Bloom: K
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: 1
LO: 9.2, Section 9.2
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
31) 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 these answer choices are correct.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
32) 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) Unable to work.
D) Modified-own occupation disability.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
33) What percent of Americans could pay their bills or meet expenses if they were to become disabled and not return to work?
A) 50%.
B) 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
34) 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
35) 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
36) 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
37) Which of the following will replace a portion of your salary after you cannot work for 6−12 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
38) 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: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
39) 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) Modified-own occupation disability.
D) Elimination period.
Diff: 1
LO: 9.3, Section 9.3
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
40) 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: 1
41) 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: 1
42) 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: 1
43) 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: 1
44) 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: 1
45) 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: 1
46) 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
47) 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
48) 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
49) Which of the following means that if the insured individual were to die unexpectedly, the policy owner would suffer a financial loss?
A) Policy owner.
B) Capital loss.
C) Insurable interest.
D) Beneficiary.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
50) Which of the following refers to individuals who will receive the death benefit if the primary beneficiary dies before the policy owner?
A) Policy owner.
B) Insured.
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
51) 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
52) 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
53) Which of the following needs to be purchased yearly?
A) Annual renewable term insurance.
B) 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
54) 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
55) Which of the following ensures that your policy premiums will be paid if you were to become disabled?
A) Disability premium waiver.
B) Value 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
56) 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) Value 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
57) Which of the following permits you to extend your policy without having to take a medical exam?
A) Disability premium waiver.
B) Value 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
58) Which of the following is a significant disadvantage of a cash-value policy?
A) Provides the ability to leave a sum of money to a charity or family members on a tax-free basis.
B) Preserves insurability.
C) Provides estate liquidity.
D) Costs more than term policies.
Diff: 1
LO: 9.4, Section 9.4
Bloom: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
59) 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
60) 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
61) 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 these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
62) Which of the following is a factor that increases your premium?
A) Being male.
B) Being younger than age 25.
C) Living in a city.
D) All of these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
63) 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
64) Which of the following is a factor that increases your 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
65) 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 these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
66) 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 these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
67) 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 these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
68) Which of the following is an example of an event that could trigger a comprehensive claim?
A) Hail storm.
B) Broken windshield.
C) Vandalism.
D) All of these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
69) 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 these answer choices are correct.
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
70) Which of the following requires you to pay the policy deductible when you make a claim?
A) 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: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
71) 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: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
72) 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: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
73) 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
74) 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
75) Which of the following is more expensive with higher coverage?
A) Gap coverage.
B) Liability coverage.
C) Comprehensive coverage.
D) All of these answer choices are correct
Diff: 2
LO: 9.5, Section 9.5
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
76) 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
77) 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: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
78) 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
79) 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 these answer choices are correct.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
80) 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
81) 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
82) 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: 1
83) 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: 1
84) 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: 1
85) Which of the following is an example of an event that is high risk and high probability of occurring?
A) Smoking in bed.
B) Hail damage.
C) Loss of lawn as a result of drought.
D) Failure of air conditioning unit.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
86) 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 major drought.
D) Failure of air conditioning unit.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
87) 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 major drought.
D) Accident occurring while texting and driving.
Diff: 2
LO: 9.6, Section 9.6
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
88) 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 left 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
89) 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
90) Which of the following will only 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
91) Which of the following is an activity of daily living?
A) Fixing your own food.
B) Eating food by yourself.
C) Dressing yourself.
D) All of these answer choices are correct.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
92) 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
93) 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
94) Which of the following refers to the waiting phase between the time the insured individual qualifies for benefits and when the insurance carrier begins providing benefits?
A) Time period.
B) Benefit limit.
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
95) Which of the following specifies the length of time benefits will be paid?
A) Time period.
B) Benefit limit.
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
96) Which of the following specifies the maximum 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: K
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
97) 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: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
98) 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 these answer choices are correct.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
99) 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
100) At what age should you consider purchasing a long-term care policy?
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
101) What percent of adult day care center residents are younger than age 65?
A) Less than 35%.
B) Less than 23%.
C) More than 35%.
D) More than 33%.
Diff: 1
LO: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
102) 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: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
103) 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: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
104) 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: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
105) What is the national median cost for an assisted living center per year?
A) $85,200.
B) $97,200.
C) $45,000.
D) $49,200.
Diff: 3
LO: 9.7, Section 9.7
Bloom: E
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
106) What is the national median cost for a home health aide per year?
A) $85,200.
B) $97,200.
C) $45,000.
D) $49,200.
Diff: 3
LO: 9.7, Section 9.7
Bloom: E
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
107) 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
108) 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
109) 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: 2
LO: 9.4, Section 9.4
Bloom: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
110) 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 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: 1
111) 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
112) 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: A
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
113) 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: 9.7, Section 9.7
Bloom: C
AACSB / IMA: none; none
AICPA: FC: none
Min: 1
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