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Questions and Answers
The basic purpose of insurance is to _____.
The basic purpose of insurance is to _____.
protect yourself from economic losses
The purchase of insurance is a common form of ____ by the insured.
The purchase of insurance is a common form of ____ by the insured.
risk transfer
The probability of a loss occurring can be reduced by_____ .
The probability of a loss occurring can be reduced by_____ .
the process used by insurers to decide who can be insured and to determine applicable rates that will be charged for premiums.
Insurance underwriting is best described as:
Insurance underwriting is best described as:
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The primary purpose of life insurance is to provide:
The primary purpose of life insurance is to provide:
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Actuarial data is used to measure:
Actuarial data is used to measure:
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_____ is an activity that reduces the chance that a loss will occur.
_____ is an activity that reduces the chance that a loss will occur.
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The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is:
The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is:
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Identify a true statement about the multiple-of-earnings method.
Identify a true statement about the multiple-of-earnings method.
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Term life insurance is characterized by _____.
Term life insurance is characterized by _____.
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If a term life insurance is convertible, the policy can be:
If a term life insurance is convertible, the policy can be:
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Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.
Henry must make set premium payments on his insurance policy until he dies, and if he cancels the policy, he will receive the cash value. His plan is a _____ policy.
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Employers often provide _____ life insurance as a fringe benefit for their employees.
Employers often provide _____ life insurance as a fringe benefit for their employees.
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A grace period permits the policyholder to retain insurance even though the premium has not been paid for:
A grace period permits the policyholder to retain insurance even though the premium has not been paid for:
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Nonforfeiture rights guarantee that a policy owner will not lose his or her _____.
Nonforfeiture rights guarantee that a policy owner will not lose his or her _____.
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Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.
Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.
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You would have a better chance of choosing your own doctor with a PPO than with an HMO.
You would have a better chance of choosing your own doctor with a PPO than with an HMO.
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A preferred provider organization has characteristics of both Individual practice association (IPA) and an indemnity plan.
A preferred provider organization has characteristics of both Individual practice association (IPA) and an indemnity plan.
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Generally, insurance is more reasonably priced through group plans than as individual policies.
Generally, insurance is more reasonably priced through group plans than as individual policies.
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Living a healthy lifestyle is an example of loss prevention and control.
Living a healthy lifestyle is an example of loss prevention and control.
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During the past few decades, the percentage of our income spent on health care:
During the past few decades, the percentage of our income spent on health care:
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Which of the following is true of the workers' compensation insurance?
Which of the following is true of the workers' compensation insurance?
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Which of the following is true of the health care industry?
Which of the following is true of the health care industry?
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Group health insurance premiums are _____.
Group health insurance premiums are _____.
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One of the key goals of the Affordable Health Care Act of 2010 is _____.
One of the key goals of the Affordable Health Care Act of 2010 is _____.
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Which of the following programs is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare?
Which of the following programs is a public assistance program that provides health insurance benefits only to those who are unable to pay for healthcare?
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Employees should consider risk assumption for certain health risks as:
Employees should consider risk assumption for certain health risks as:
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Long-term care is a term used to describe _____.
Long-term care is a term used to describe _____.
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In order to qualify for disability insurance under social security, a person must be:
In order to qualify for disability insurance under social security, a person must be:
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Dependent children will usually be covered under your health insurance
Dependent children will usually be covered under your health insurance
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Negligence results when someone:
Negligence results when someone:
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The principle of indemnity would prevent:
The principle of indemnity would prevent:
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A liability suit could result against you when:
A liability suit could result against you when:
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Which homeowners' policy is best suited for a renter of an apartment?
Which homeowners' policy is best suited for a renter of an apartment?
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A personal property floater:
A personal property floater:
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Section I of the homeowner's insurance policy covers:
Section I of the homeowner's insurance policy covers:
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Section II of the homeowner's insurance contract covers:
Section II of the homeowner's insurance contract covers:
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A higher home insurance cost may result from:
A higher home insurance cost may result from:
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Replacement cost coverage is the reimbursement of:
Replacement cost coverage is the reimbursement of:
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Donna, who is single and 30-years-old, has received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
Donna, who is single and 30-years-old, has received several speeding tickets recently and was shocked by the effect they had on her auto insurance. Which of the following actions is most likely to help Donna reduce the price of her auto insurance?
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A homeowner's policy does not provide protection for the personal property of:
A homeowner's policy does not provide protection for the personal property of:
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Auto insurance is needed primarily:
Auto insurance is needed primarily:
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Liability coverage provides payment to:
Liability coverage provides payment to:
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Comprehensive automobile coverage refers to:
Comprehensive automobile coverage refers to:
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A personal liability umbrella policy typically includes:
A personal liability umbrella policy typically includes:
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A house with a replacement value of $110,000 is currently insured for $90,000. The house has suffered a $15,000 loss from windstorm damage. The insurance company will pay the full $15,000 less the deductible.
A house with a replacement value of $110,000 is currently insured for $90,000. The house has suffered a $15,000 loss from windstorm damage. The insurance company will pay the full $15,000 less the deductible.
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Funds for Medicare benefits come from _________.
Funds for Medicare benefits come from _________.
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Workers' compensation insurance would make compensation payments to an injured worker only if he or she had been hurt ______.
Workers' compensation insurance would make compensation payments to an injured worker only if he or she had been hurt ______.
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From the standpoint of the person buying insurance, the central purpose of insurance should be:
From the standpoint of the person buying insurance, the central purpose of insurance should be:
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Insurance is a tool that can reduce _____ risk.
Insurance is a tool that can reduce _____ risk.
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Study Notes
Insurance Fundamentals
- The primary function of insurance is to protect against economic losses.
- Purchasing insurance involves the transfer of risk by the insured.
Insurance Underwriting
- Underwriting reduces the probability of loss by evaluating who can be insured and setting premium rates.
- Insurance underwriting is characterized as a form of loss prevention.
Life Insurance
- Life insurance provides financial security for dependents upon the policyholder's death.
- The assessment of a family's total economic needs determines the required amount of life insurance.
- The multiple-of-earnings method suggests coverage should be 5 to 10 times the annual income.
Term and Whole Life Insurance
- Term life insurance features premiums based on the insured's age.
- Convertible term policies can be changed into whole life policies.
- Whole life insurance requires set premium payments until death, with a cash value if canceled.
Group and Employer-Provided Insurance
- Employers typically offer group life insurance as a fringe benefit.
- Group health insurance premiums are generally lower than individual premiums.
Health Care and Insurance Trends
- The percentage of income spent on health care has increased due to an aging population.
- Healthy lifestyles exemplify loss prevention and can mitigate health risks.
Workers' Compensation and Health Insurance
- Workers' compensation insurance covers injuries and illnesses sustained on the job.
- Traditional indemnity plans often have lower premiums if they are high-deductible.
Affordable Health Care Act Goals
- One goal of the Affordable Health Care Act is to decrease the number of uninsured citizens.
- Medicaid provides health insurance benefits solely to those unable to afford healthcare.
Liability and Personal Insurance
- Negligence occurs when an individual fails to act as a reasonable person would.
- The principle of indemnity prevents overcompensation beyond the actual loss.
- Liability coverage in auto insurance covers payments to non-family members involved in accidents.
Homeowners and Auto Insurance
- HO-4 is the homeowner's policy best suited for renters.
- Homeowners insurance does not cover personal property of tenants.
- Premiums may be higher due to low credit scores or other risk factors.
- Replacement cost coverage reimburses repair costs without considering depreciation.
Key Considerations in Insurance Adjustments
- Raising deductibles can help reduce auto insurance premiums significantly.
- Comprehensive auto insurance includes various protections such as liability and medical payments.
Additional Notes
- Dependent children are typically covered under health insurance until age 26.
- Medicare benefits are funded through Social Security taxes from workers and employers.
- Insurance serves as a tool to reduce financial or economic risk, providing peace of mind.
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Description
Test your knowledge on fundamental insurance concepts with these Finance Test 3 flashcards. This quiz covers essential definitions and principles related to insurance and risk management. Ideal for students in finance or related fields.
