Finance Test 3 Flashcards

Questions and Answers

The basic purpose of insurance is to _____.

protect yourself from economic losses

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 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:

loss prevention Signup and view all the answers

The primary purpose of life insurance is to provide:

financial security for dependents in the event of death. Signup and view all the answers

Actuarial data is used to measure:

the risk of loss for a population. Signup and view all the answers

_____ is an activity that reduces the chance that a loss will occur.

Loss prevention Signup and view all the answers

The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is:

assessing the family's total economic needs and subtracting the financial resources available to meet those needs. Signup and view all the answers

Identify a true statement about the multiple-of-earnings method.

The multiple-of-earnings method considers the insurance coverage to be 5 to 10 times the annual income. Signup and view all the answers

Term life insurance is characterized by _____.

premium amounts related to age Signup and view all the answers

If a term life insurance is convertible, the policy can be:

converted to a comparable whole life policy. Signup and view all the answers

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.

whole life Signup and view all the answers

Employers often provide _____ life insurance as a fringe benefit for their employees.

group Signup and view all the answers

A grace period permits the policyholder to retain insurance even though the premium has not been paid for:

31 days. Signup and view all the answers

Nonforfeiture rights guarantee that a policy owner will not lose his or her _____.

cash value Signup and view all the answers

Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.

False Signup and view all the answers

You would have a better chance of choosing your own doctor with a PPO than with an HMO.

True Signup and view all the answers

A preferred provider organization has characteristics of both Individual practice association (IPA) and an indemnity plan.

True Signup and view all the answers

Generally, insurance is more reasonably priced through group plans than as individual policies.

True Signup and view all the answers

Living a healthy lifestyle is an example of loss prevention and control.

True Signup and view all the answers

During the past few decades, the percentage of our income spent on health care:

has increased due to an aging U.S. population. Signup and view all the answers

Which of the following is true of the workers' compensation insurance?

Workers' compensation insurance compensates workers who are injured on the job or become ill through work-related causes. Signup and view all the answers

Which of the following is true of the health care industry?

In a traditional indemnity plan, the premium cost is low if it is a high-deductible plan. Signup and view all the answers

Group health insurance premiums are _____.

lower than individual health insurance premiums Signup and view all the answers

One of the key goals of the Affordable Health Care Act of 2010 is _____.

to reduce the number of uninsured citizens in the country Signup and view all the answers

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?

Medicaid Signup and view all the answers

Employees should consider risk assumption for certain health risks as:

they are required to pay additional insurance premium to cover the lapse of insurance coverage for them. Signup and view all the answers

Long-term care is a term used to describe _____.

the delivery of medical care to persons with chronic medical conditions in a nursing home. Signup and view all the answers

In order to qualify for disability insurance under social security, a person must be:

unable to carry out the duties of any job. Signup and view all the answers

Dependent children will usually be covered under your health insurance

up to age 26. Signup and view all the answers

Negligence results when someone:

fails to act as a reasonable person. Signup and view all the answers

The principle of indemnity would prevent:

an insured from collecting more than he or she lost. Signup and view all the answers

A liability suit could result against you when:

your dog bites the neighbor. Signup and view all the answers

Which homeowners' policy is best suited for a renter of an apartment?

HO-4 Signup and view all the answers

A personal property floater:

provides coverage for items of expensive personal property not adequately covered under the standard homeowner's policy. Signup and view all the answers

Section I of the homeowner's insurance policy covers:

hospitalization cost provided to the insured. Signup and view all the answers

Section II of the homeowner's insurance contract covers:

the cost of defending the insured. Signup and view all the answers

A higher home insurance cost may result from:

low credit scores of the insured. Signup and view all the answers

Replacement cost coverage is the reimbursement of:

the cost of repairing or replacing damaged structures without deducting physical depreciation. Signup and view all the answers

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?

Raising her deductible from $250 to $1,000. Signup and view all the answers

A homeowner's policy does not provide protection for the personal property of:

tenants. Signup and view all the answers

Auto insurance is needed primarily:

as protection against potential liability claims. Signup and view all the answers

Liability coverage provides payment to:

the non-family members involved in the accident. Signup and view all the answers

Comprehensive automobile coverage refers to:

complete coverage including liability, medical payments, and damage to the automobile. Signup and view all the answers

A personal liability umbrella policy typically includes:

coverage for auto related liability losses in excess of the limits purchased in the automobile insurance. Signup and view all the answers

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.

True Signup and view all the answers

Funds for Medicare benefits come from _________.

Social Security taxes paid by covered workers and their employers. Signup and view all the answers

Workers' compensation insurance would make compensation payments to an injured worker only if he or she had been hurt ______.

on the job. Signup and view all the answers

From the standpoint of the person buying insurance, the central purpose of insurance should be:

to transfer risks of serious losses. Signup and view all the answers

Insurance is a tool that can reduce _____ risk.

economic or financial Signup and view all the answers

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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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.

Finance Test 3 Flashcards

Questions and Answers

The basic purpose of insurance is to _____.

The purchase of insurance is a common form of ____ by the insured.

The probability of a loss occurring can be reduced by_____ .

Insurance underwriting is best described as:

The primary purpose of life insurance is to provide:

Actuarial data is used to measure:

_____ is an activity that reduces the chance that a loss will occur.

The single most valuable technique in personal risk management to assist an individual in determining how much life insurance is needed is:

Identify a true statement about the multiple-of-earnings method.

Term life insurance is characterized by _____.

If a term life insurance is convertible, the policy can be:

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.

Employers often provide _____ life insurance as a fringe benefit for their employees.

A grace period permits the policyholder to retain insurance even though the premium has not been paid for:

Nonforfeiture rights guarantee that a policy owner will not lose his or her _____.

Advances in medical technology, drug prescriptions, and treatments have substantially reduced the cost of health care in recent decades.

You would have a better chance of choosing your own doctor with a PPO than with an HMO.

A preferred provider organization has characteristics of both Individual practice association (IPA) and an indemnity plan.

Generally, insurance is more reasonably priced through group plans than as individual policies.

Living a healthy lifestyle is an example of loss prevention and control.

During the past few decades, the percentage of our income spent on health care:

Which of the following is true of the workers' compensation insurance?

Which of the following is true of the health care industry?

Group health insurance premiums are _____.

One of the key goals of the Affordable Health Care Act of 2010 is _____.

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?

Employees should consider risk assumption for certain health risks as:

Long-term care is a term used to describe _____.

In order to qualify for disability insurance under social security, a person must be:

Dependent children will usually be covered under your health insurance

Negligence results when someone:

The principle of indemnity would prevent:

A liability suit could result against you when:

Which homeowners' policy is best suited for a renter of an apartment?

A personal property floater:

Section I of the homeowner's insurance policy covers:

Section II of the homeowner's insurance contract covers:

A higher home insurance cost may result from:

Replacement cost coverage is the reimbursement of:

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?

A homeowner's policy does not provide protection for the personal property of:

Auto insurance is needed primarily:

Liability coverage provides payment to:

Comprehensive automobile coverage refers to:

A personal liability umbrella policy typically includes:

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.

Funds for Medicare benefits come from _________.

Workers' compensation insurance would make compensation payments to an injured worker only if he or she had been hurt ______.

From the standpoint of the person buying insurance, the central purpose of insurance should be:

Insurance is a tool that can reduce _____ risk.

Study Notes

Insurance Fundamentals

Insurance Underwriting

Life Insurance

Term and Whole Life Insurance

Group and Employer-Provided Insurance

Health Care and Insurance Trends

Workers' Compensation and Health Insurance

Affordable Health Care Act Goals

Liability and Personal Insurance

Homeowners and Auto Insurance

Key Considerations in Insurance Adjustments

Additional Notes

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Description

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