Insurance Concepts Quiz

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Questions and Answers

What primary purpose does insurance serve compared to investments?

It focuses on risk management and protection. (correct)

It is solely for financial growth.

It offers high returns over time.

It guarantees income for retirement.

What type of insurance provides coverage for medical costs?

Life Insurance

Health Insurance (correct)

Auto Insurance

Disability Insurance

How does term life insurance differ from whole life insurance?

Whole life serves as a savings vehicle. (correct)

Term life provides coverage for a longer duration.

There is no difference; they are the same.

Term life is more costly than whole life insurance.

Which of the following is a function of riders in insurance policies?

To add benefits to the basic insurance policy. Signup and view all the answers

What does disability insurance primarily provide?

Income replacement if unable to work. Signup and view all the answers

Which type of insurance is intended for property damage coverage?

Homeowners/Renters Insurance Signup and view all the answers

What aspect of insurance helps in managing financial risks?

Risk management strategies Signup and view all the answers

What is the primary financial risk that health insurance aims to mitigate?

High medical costs Signup and view all the answers

What is a major benefit of purchasing disability insurance?

It replaces a portion of income if unable to work due to illness. Signup and view all the answers

Which term defines the amount the policyholder must pay before the insurer begins to cover costs?

Deductible Signup and view all the answers

How do higher coverage limits typically affect insurance premiums?

They usually increase the premiums. Signup and view all the answers

What is an essential consideration when assessing a home insurance policy for someone in a flood-prone area?

Exclusions and the need for a flood insurance rider. Signup and view all the answers

What aspect of term life insurance makes it cheaper than whole life insurance?

It covers a fixed term but no cash value if the insured survives that term. Signup and view all the answers

What common event is typically excluded from home insurance policies unless added as a rider?

Flood damage Signup and view all the answers

What is a characteristic of copayments in health insurance?

They are usually a flat fee per service rendered. Signup and view all the answers

What happens to claims if they are not covered by the policy?

They might be denied based on policy exclusions. Signup and view all the answers

What is the primary function of PhilHealth?

Offer national health insurance for all Filipinos Signup and view all the answers

Which type of coverage is specifically intended for medical expenses incurred during a hospital stay?

Inpatient or Hospitalization Coverage Signup and view all the answers

What does outpatient coverage typically include?

Doctor’s consultation fees Signup and view all the answers

Which of the following is a typical limitation of basic health insurance plans regarding outpatient services?

They may limit benefits or require add-ons for outpatient care Signup and view all the answers

What type of treatment might critical illness benefits cover?

Life-threatening conditions Signup and view all the answers

Which option would NOT typically be covered under maternity benefits?

complications from childbirth Signup and view all the answers

What type of medical services is associated with mental health coverage?

Sessions with licensed psychologists or psychiatrists Signup and view all the answers

Which of the following services is considered as optional or limited in terms of coverage?

Dental and vision care Signup and view all the answers

What type of insurance protects residential properties against common perils like fire and theft?

Homeowners Insurance Signup and view all the answers

Which type of automobile insurance is mandatory for all vehicles in the Philippines?

Compulsory Third-Party Liability (CTPL) Signup and view all the answers

What does the CTPL insurance NOT cover?

Damage to the insured's own vehicle Signup and view all the answers

What is the monthly premium amount for PhilHealth mentioned?

P500 Signup and view all the answers

What additional coverage options may be included in Homeowners Insurance in the Philippines?

Earthquake and flood damage Signup and view all the answers

What is a key reason individuals are encouraged to review their insurance policies annually?

To reassess their coverage needs based on life changes Signup and view all the answers

Which life event might prompt someone to increase their life insurance coverage?

Getting married Signup and view all the answers

Why is it important to understand policy terms and limitations?

To avoid misunderstandings that lead to lower payouts Signup and view all the answers

What might a significant increase in income lead a person to do regarding their insurance coverage?

Increase coverage limits for additional security Signup and view all the answers

What is a common strategy to reduce insurance costs without sacrificing coverage?

Bundle multiple policies with one insurer Signup and view all the answers

What should couples consider updating after getting married?

Their life insurance policy Signup and view all the answers

What is typically covered by health insurance?

Some or all costs associated with healthcare services Signup and view all the answers

If an individual’s financial situation becomes tight, what might they consider doing to their insurance policies?

Reducing coverage limits to save on premiums Signup and view all the answers

What is the purpose of the maturity date in a bond?

It indicates when the bond issuer pays back the par value. Signup and view all the answers

Which of the following correctly describes a feature of preferred stock?

Preferred stock may be convertible to common stock. Signup and view all the answers

What characterizes mutual funds?

They are professionally managed portfolios of various investments. Signup and view all the answers

What is the average annual dividend rate for the Pag-ibig MP2 Program?

6%-7% Signup and view all the answers

What is the primary benefit of a PERA account for self-employed individuals?

It provides potential annual tax credits of up to P2,000. Signup and view all the answers

Study Notes

Managing Insurance Needs - Life Insurance

Life insurance is about protection, not investment. It aims to reduce financial risks from uncertain events.
Life insurance replaces lost income if premature death occurs. It provides funds for the family to maintain their home, lifestyle, education, and other needs.
Benefits of life insurance include financial protection for dependents, protection against creditors, tax benefits on proceeds, and serves as a vehicle for savings.
Insurance is a financial product to protect individuals from financial loss.
Key types of insurance include property and casualty, health, life, disability, auto etc.
Risks are inherent in all financial matters.
The simplest way to deal with risk is avoidance.
Various types of insurance policies include term life, whole life, health, property and auto, disability and more.

Insurance as a Concept

Insurance is a financial product designed to safeguard against unexpected events, impacting individuals and businesses.

Key Concepts

Premiums are payments to maintain insurance policies, while deductibles are out-of-pocket costs before coverage begins.
Claims processes involves documenting losses, submitting claims, getting reimbursements (minus the deductible), possible claims denial.
Policies have maximum payout limits. Higher limits are advisable for significant financial risk, such as high-value properties or pre-existing medical conditions.
Policies frequently contain exclusions for specific events or conditions (e.g., flood damage). Riders or endorsements, are additional options for coverage. Policies should be reviewed regularly for these exclusions.
Term life insurance is cheaper but has no cash value if you don't pass away during the term. Whole life insurance, while more expensive, has a lifetime investment component.

Types of Insurance

Health Insurance: Covers medical expenses, doctor visits, hospital stays, and preventive care; protects against high medical costs.
Life Insurance: Provides financial support to family members or dependents after death.
Auto Insurance: Covers accidents, theft, and damage.
Homeowners/Renters Insurance: Covers property damage from various perils.
Disability Insurance: Replaces income if an individual cannot work due to illness or injury.
Property and Casualty Insurance: Includes auto, home, and renters' insurance. -Comprehensive Dishonesty Disappearance and Destruction (CDDD) insurance covers losses due to employee dishonesty, loss inside/outside the premises, counterfeit currency, and forgeries.

Types of Coverage (Optional, add-on or limited)

Maternity Benefits: Covers prenatal, delivery, and postnatal care (often limited to childbirth)
Critical Illness: Addresses life-threatening conditions (like cancer, heart disease, and stroke)
Mental Health: Includes consultations with licensed mental health professionals.
Dental and Vision: Covers dental procedures, eye exams, and prescription glasses..

Role of Insurance in Financial Planning

Insurance complements emergency funds. It addresses unexpected large expenses that emergency funds might not cover.
Insurance is a key component within a holistic financial plan. It safeguards assets and future income.
Insurance helps to prevent accumulating debt.

Insurance with Real-Life Scenarios

Health Insurance: Preventing unexpected medical bills that lead to debt, if an unexpected surgery needs to happen.
Auto Insurance: Covering the costs from an accident where you are at fault or not.
Homeowners Insurance: Preventing the loss of a home or significant costs to repair damages, to substantial loss.

Maintaining and Reviewing Insurance Policies

Annual Policy Review: Re-evaluating needs and increasing life insurance for example, and adding policies after having children or buying properties.
Potential Discounts: Bundling or combining insurance policies (home and auto) to lower costs without sacrificing other benefits.

Life Changes and Insurance Update

Significant life events like getting married, having children, or buying a home trigger the need to review and update insurance policies.
Insurance to support a partner, cover a more valuable property, or support children as parents

Understanding Policy Terms & Limitations

Understanding the fine print (policy terms) is crucial for avoiding unpleasant surprises.
Misunderstandings can cause problems during a claim.
Some policies only cover replacement costs, while others cover depreciated value..

Considerations for Financial Planning

Assess needs

How much insurance do I need?
Affordability

Investment Planning

Investment planning identifies financial goals and selects appropriate strategies for achieving them.
Builds wealth while managing risks, and aligns investments with life objectives (like buying a house, funding education, or retirement).
Different goals have varying timeframes (short-term, medium-term, long-term).

Investment Strategies

Growth Investing: Aims for stock appreciation (e.g., Ayala Land, PLDT).
Income Investing: Seeks passive income from dividends or interest-bearing investments (e.g., Meralco, Globe).
Dollar-Cost Averaging: Regularly investing a fixed amount to offset market volatility.
Tax-Efficient Investing: Utilize tax-advantaged accounts (e.g., PERA) to minimize tax liabilities.

Different Ways to Invest

Stocks
Bonds
Preferred stock & convertible bonds
Mutual funds & exchange traded funds (ETFs)
Real estate

Capital Gains

Capital gains are when a stockholder sells a stock for a profit.
Conversely, there is a capital loss when a stock price decreases below the original price, and is sold for less than the original purchase.

What is a Bond?

Bonds are fixed-income instruments where individuals lend money to the government or companies at a fixed interest rate for a set period of time.
The issuing entity repays the principal and interest according to the terms of the bond.

Bond Components

Coupon rate: Interest rate paid by the bond issuer to the bond holder.
Maturity date: The date the bond issuer returns the principal amount of the bond.
Par value: The principal that is repaid to the bondholder at maturity.

Types of Bonds

Government bonds: Debt securities issued by the government.
Corporate bonds : Debt securities issued by a corporation.

Mutual Funds/ Exchange Traded Funds (ETFs), and Notes

Mutual Funds: Professionally managed portfolios of various investments (stocks, bonds) offering diversification
Mutual Funds & ETFs offer diversification.

Real Estate

Real Estate Investing: Can generate steady returns and asset appreciation, acting as a hedge against inflation.
Pre-selling condos, rental income, or resale are options for investors.

Other / Update

Comprehensive Dishonesty Disappearance and Destruction (CDDD) insurance is an optional coverage
Startup or small businesses can protect themselves from employee dishonesty, rivals, thieves, and similar issues.
Insurance options are becoming more diverse.
Basic coverage is a great starting point.

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Description

Test your knowledge on various insurance concepts and types, such as health, disability, and life insurance. This quiz explores the primary purposes of insurance compared to investments, coverage for medical costs, and important policy features. Perfect for anyone looking to enhance their understanding of insurance fundamentals.