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Insurance Basics Quiz
60 Questions
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Insurance Basics Quiz

Created by
@TenaciousFeynman9892

Questions and Answers

Generally, the higher the deductible on an insurance policy, the ___

  • higher the premium
  • increased risk
  • no change to the premium
  • lower the premium (correct)

    • What is the cost of Gwen's auto insurance policy called?

    premium

    The purpose of insurance is NOT to:

  • Help with savings
  • Provide financial protection
  • Diversify an investment portfolio (correct)
  • Aid in risk management

    • What step will not provide protection during Neil's trip?

    <p>take his passport</p> Signup and view all the answers

    What will a person receive if they surrender a $20,000 whole life insurance policy at the time of surrender?

    <p>a calculated amount of money which includes the premiums paid as well as the interest on that money</p> Signup and view all the answers

    Why is term life insurance usually the least expensive type of life insurance?

    <p>the policy only pays a death benefit</p> Signup and view all the answers

    Who is liable for the damage to Richard's car and his personal injuries after the accident?

    <p>Richard</p> Signup and view all the answers

    In the case of a $2,000 loss, what does the $500 the insurance did not pay represent?

    <p>deductible</p> Signup and view all the answers

    What statement would be most appropriate for a woman who has just received a very expensive piece of jewelry?

    <p>I think I need a personal floater</p> Signup and view all the answers

    What is the only type of life insurance that does not develop a cash value?

    <p>term life insurance</p> Signup and view all the answers

    Why would a person want to add a personal property floater to their homeowner's insurance after buying an expensive TV?

    <p>to cover the cost of replacement should the television get damaged or stolen</p> Signup and view all the answers

    When a self-employed person decides to purchase disability insurance, it is generally to:

    <p>protect against the financial effects of not being able to work</p> Signup and view all the answers

    What term describes paying unnecessary premiums for insurance?

    <p>over-insured</p> Signup and view all the answers

    What term describes people who have insurance but are still considered financially vulnerable to high health expenses?

    <p>under-insured</p> Signup and view all the answers

    What type of life insurance provides insurance for a fixed amount at a definite premium for the insured's lifetime?

    <p>whole life insurance</p> Signup and view all the answers

    What type of insurance provides social insurance for the disabled?

    <p>disability insurance</p> Signup and view all the answers

    What is the term for insurance or pension money payable to a beneficiary of a deceased?

    <p>death benefit</p> Signup and view all the answers

    What type of insurance covers the loss of a tenant's personal property as a result of damage or theft?

    <p>renters insurance</p> Signup and view all the answers

    What term describes a venture undertaken without regard to possible loss or injury?

    <p>risk</p> Signup and view all the answers

    What is the term for a person whose interests are protected by an insurance policy?

    <p>insured</p> Signup and view all the answers

    What type of health insurance limits participants to seek health care from a specific list of providers?

    <p>managed care health insurance</p> Signup and view all the answers

    What is the term for payment for insurance?

    <p>premium</p> Signup and view all the answers

    What type of insurance covers loss due to theft or traffic accidents?

    <p>automobile insurance</p> Signup and view all the answers

    What is known as 'pure protection' insurance that is less expensive than 'permanent' life insurance?

    <p>term life insurance</p> Signup and view all the answers

    What can help a person lower personal risk of loss?

    <p>insurance</p> Signup and view all the answers

    What type of car insurance would typically cover damage if a car was damaged in a flood?

    <p>comprehensive</p> Signup and view all the answers

    How should a person decide how much coverage she needs when selecting renters insurance?

    <p>determine the dollar value of personal property to be covered by insurance</p> Signup and view all the answers

    Why is car insurance more expensive for teenage males than teenage females?

    <p>male teenagers have a greater number of accidents than female teenagers</p> Signup and view all the answers

    What benefit allowed a person to buy a new Apple computer after hers was destroyed in a fire?

    <p>replacement value</p> Signup and view all the answers

    If a driver receives several traffic tickets, what is likely to happen to the cost of their car insurance?

    <p>increase</p> Signup and view all the answers

    What is the term for the amount paid to an insurance company for a policy and coverage?

    <p>premium</p> Signup and view all the answers

    Before a person can receive money to cover the damage from a car accident, what must they do?

    <p>file a claim with his insurance company</p> Signup and view all the answers

    What is the key word for insurance companies when establishing the cost for a policy?

    <p>risk</p> Signup and view all the answers

    What are the two types of life insurance policies?

    <p>term life and whole life</p> Signup and view all the answers

    What is the best strategy when shopping for life insurance?

    <p>figure out how much is needed, then get prices from different companies</p> Signup and view all the answers

    What is the purpose of life insurance?

    <p>help meet the financial needs of dependents upon a person's death</p> Signup and view all the answers

    What insurance pays a portion of your salary if you are injured at home and can't work?

    <p>disability</p> Signup and view all the answers

    What is the term for finding ways to lower your chance of loss?

    <p>risk reduction</p> Signup and view all the answers

    What is buying an insurance policy for your home known as?

    <p>risk transfer</p> Signup and view all the answers

    What does liability insurance on your car cover?

    <p>damage to the car you hit</p> Signup and view all the answers

    Who needs life insurance?

    <p>parents of small children</p> Signup and view all the answers

    Homeowner's insurance protects a home from fire damage but does not include liability coverage.

    <p>False</p> Signup and view all the answers

    What type of coverage is needed to repair your car if you hit a tree?

    <p>collision</p> Signup and view all the answers

    What is a person designated to receive money from a life insurance policy known as?

    <p>beneficiary</p> Signup and view all the answers

    What is the amount paid out-of-pocket by the policy holder before the insurance kicks in?

    <p>deductible</p> Signup and view all the answers

    A dependent is someone who relies on someone else financially.

    <p>True</p> Signup and view all the answers

    The higher your deductible, the ___________ your premium will be.

    <p>lower</p> Signup and view all the answers

    The more valuable your property is, the more _____________ your premium will be.

    <p>higher</p> Signup and view all the answers

    Things that can increase your insurance premiums include all except:

    <p>getting higher grades</p> Signup and view all the answers

    What is the money Mr. Acorn receives as the beneficiary on his wife's life insurance?

    <p>death benefit or the face value</p> Signup and view all the answers

    Dental and vision care insurance are generally sold separately from basic insurance coverage.

    <p>True</p> Signup and view all the answers

    What insurance should a store owner concerned about customers being injured in their store get?

    <p>liability insurance</p> Signup and view all the answers

    What protects against financial loss caused by the costs of illness or accident, including preventative care?

    <p>Health Insurance</p> Signup and view all the answers

    What are the four general types of health insurance?

    <p>medical, dental, vision, disability</p> Signup and view all the answers

    What are co-pays?

    <p>The portion of a medical service charge paid by the insured. It is paid first &amp; is a requirement of most health insurance plans.</p> Signup and view all the answers

    What is a written contract detailing what an insurance company will cover, how much it will pay, and how much the insured will pay?

    <p>Insurance Policy</p> Signup and view all the answers

    What is the maximum amount the insurance company will pay if you file a claim?

    <p>Coverage Limit</p> Signup and view all the answers

    What covers damage you cause to other people's property and bodily injuries you cause to people outside of your car?

    <p>General liability</p> Signup and view all the answers

    What covers lost wages and medical expenses if the other vehicle doesn't have coverage?

    <p>uninsured motorists</p> Signup and view all the answers

    What type of insurance covers when the cost of repair from an accident caused by the other driver is greater than their coverage limits?

    <p>under-insured motorist</p> Signup and view all the answers

    Study Notes

    Insurance Basics

    • Higher deductibles result in lower premiums: This means that if you are willing to pay more out-of-pocket in case of a claim, your regular insurance payments will decrease.
    • Premium refers to the cost of an insurance policy: This is the amount paid periodically to keep the insurance coverage active.

    Types of Insurance

    • Insurance does not aim to diversify an investment portfolio: Its main purpose is risk management, not investment diversification.
    • Whole life insurance provides fixed premiums and develops cash value over time, unlike term life insurance which offers death benefits only.
    • Disability insurance protects self-employed individuals against lost income due to inability to work from illness or injury.

    Claim Process and Coverage

    • In claims, policyholders must file a claim with their insurance company to receive compensation for damages.
    • Deductibles are the amount a policyholder must pay before the insurance covers the rest of the claim, leading to partial payments in case of losses.
    • Replacement value ensures that insured individuals can afford to replace lost or damaged property without depreciation affecting the payout.

    Responsibility and Liability

    • If an insurance policy has expired at the time of an accident, the insured individual is liable for any damages incurred.
    • Liability insurance covers damages caused to another party in the event of an accident, including property and bodily injury.

    Risk Management

    • Reducing personal risk of loss can effectively be achieved through obtaining insurance coverage.
    • Risk transfer refers to shifting the financial burden of loss or damage from an individual to an insurance company.

    Health Insurance Insights

    • Health insurance encompasses various types including medical, dental, vision, and disability, and includes coverage for preventative care.
    • Co-pays are an out-of-pocket expense that insured individuals pay at the time of service, usually required for most health plans.

    Additional Details

    • Personal property floaters can provide extra coverage for valuable items, protecting them against loss or theft outside of standard homeowners insurance.
    • The insured is the individual whose interests are protected under the insurance policy.
    • Under-insured individuals have insurance but still maintain vulnerability due to high healthcare costs.

    Policy Terms and Conditions

    • An insurance policy is a written contract detailing coverage, payment responsibilities, and limits.
    • Coverage limits determine the maximum payout an insurance company is willing to provide for a claim.
    • Beneficiaries are designated persons who receive payouts from life insurance policies upon the insured person's death.

    Premium Factors

    • Factors increasing premiums include the value of the insured property and claims history; good grades can lead to discounts, contrary to the other factors.
    • Teen males typically have higher car insurance premiums based on statistics showing a greater number of accidents compared to teen females.

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    Description

    Test your knowledge on the fundamentals of insurance, including types, premiums, and the claims process. This quiz covers essential concepts such as deductibles, whole life vs. term life insurance, and disability insurance. Get ready to enhance your understanding of risk management through insurance.

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