Liability and Negligence Quiz

Liability

• A policy coverage that protects you from legal liability for bodily injury and property damage caused by your automobile.
• Includes payment for any judgment awarded, court costs, and legal defense fees.

Elements of Negligence

• Duty: Expectation to use reasonable care regarding others.
• Breach: Wrongful conduct or unlawful act that violates the duty of care.
• Causation: Relationship between breach of care and the damage that occurred.
• Damages: Cost of medical care, lost wages, pain and suffering, property damage.

Title

• A Title Search investigates public land records to determine legal ownership rights to property.

Adjustable-Rate Loans

• Interest rates vary based on the market interest rate.

Res Ipsa Loquitor

• An accident occurrence implies negligence.

Condominium Insurance

• Provides personal property and liability insurance for co-op or condominium owners.

COBRA

• Allows employees from companies with 20 or more employees to continue health insurance coverage for 18 months to 3 years after leaving the company.

Home Warranty

• Covers repairs or replacements of major home systems and appliances.

Mortgage Insurance PMI

• Protects the lender in the event of loan default if the down payment was less than 20%.

Home Equity

• A loan using the borrower's equity in their home as collateral.

Credit Score

• Numerical evaluation of credit applicants based on their credit history.
• Factors impacting credit scores:
  • Payment history (35%): Avoid skipping payments. Pay at least the minimum due.
  • Amount owed (30%): Low debt-to-credit ratio is beneficial.
  • Length of credit history (15%): Longer accounts with the same creditors improve scores.
  • Types of credit used (10%): Diverse credit types are advantageous.
  • New credit (10%): Avoid excessive credit applications in a short period.

Three Methods of Getting Out of Debt

• Math Method: Pay off debt with the highest interest rate first, paying minimums on others.
• Momentum Method: Pay off the lowest balance debt first, then the next lowest, paying minimums on others.
• Shotgun Method: Pay more than the minimum on most or all debt accounts (least effective).

Risks of Adjustable-Rate Loans

• Interest rates tied to the market; rising market rates increase interest payments.

Notable Interest Rates

• Federal Fund Rate: Rates banks charge each other for borrowing. Usually 3% lower than the prime rate.
• Prime Rate: Interest rate banks charge their most creditworthy customers.

4 Requirements of All Legal Contracts

• Legal purpose.
• Legal capacity of parties to contract.
• Valid offer and acceptance.
• Consideration exchange for promises.

Common Loan Clauses

• Insurance Agreement Clause: Requires borrower to purchase credit life insurance to pay off the loan upon death.
• Acceleration Clause: Makes the loan due immediately if a payment is missed.
• Deficiency Payments Clause: Allows lenders to bill borrowers for any difference if the sale of a seized asset doesn't cover the loan amount.
• Recourse Clause: Defines lender actions to collect money from a borrower in case of default.
• Early Payoff Clause: An agreed upon upfront clause allowing early loan repayment.

Costs of Property Repossession

• Occurs when a lender seizes the asset due to loan default.

Considerations for a New, Used, or Leased Vehicle

• New: Negotiate from the dealer's cost, compare financing, be cautious of unnecessary extras, inspect and test-drive, take your time.
• Used: Check consumer reports, negotiate, inspect thoroughly, get the car inspected by a mechanic, ask about ownership history.
• Leased: Consider financial stability, mileage limits, vehicle care, monthly payments, business use, modifications, manufacturer offers.

Term, Whole, and Universal Life Insurance

• Term: Specific period protection, lower initial premium increasing with age, fixed death benefit, no cash value.
• Whole: Permanent protection, fixed premium, fixed death benefit, tax-deferred cash value growth.
• Universal: Permanent protection, flexible premiums and death benefits, cash value varied based on payments and investment results.

HSAS and FSAs

• HSA: Tax-free payment for healthcare expenses, balance can be built up over time.
• FSA: Uses pre-tax dollars for qualified healthcare and childcare expenses, must be used or loaned out.

Parties to a Life Insurance Policy

• Owner: Purchases the policy, has insurable interest, can be the beneficiary or designate others.
• Insured: The person whose life is insured.
• Beneficiary: Receives death benefits, tax-free.
• Conditional Beneficiary: Receives proceeds in case the primary beneficiary predeceases the insured.

Auto Insurance Policy Coverage -

• Part A - Liability Coverage: Provides coverage against lawsuits related to automobile negligence.
• Part B - Medical Expenses Coverage: Covers medical and funeral expenses for the policyholder, family members, and others injured while occupying a covered vehicle.
• Part C - Uninsured Motorist's Protection Coverage: Covers injuries caused by uninsured, insolvent, or hit-and-run drivers.
• Part D - Damage to Your Automobile Coverage: Covers damage or theft of the insured vehicle (collision and comprehensive coverage).

Explain the Use of an Umbrella Policy

• Acts as supplemental liability coverage above homeowner's and auto policies.
• Provides coverage for claims exceeding the liability limits of existing policies.

Prepare to Identify HO 1, 2, 3, 4, 6, & 8 Policies

• Coverages: Dwelling, Other Structures, Unscheduled Personal Property, Loss of Use, Personal Liability, Medical Payments to Others.

HO1 (Basic Form)

• Narrow coverage, not available in most states. Covers specific perils like fire, windstorms, and theft.

HO2 (Broad Form)

• Named perils form, covering specific listed perils.

HO3 (All-Risk Form)

• Comprehensive coverage for all perils, excluding specified exclusions like flood or earthquake.

HO4 (Renter's Form)

• Coverage for personal belongings, does not include liability insurance.

HO6 (Condominium Form)

• Provides personal property and liability insurance for condominium owners.

HO8 (Older Homes Form)

• Covers older homes for repair costs or actual cash value, not replacement cost.

Res Ipsa Loquitor

• The principle that an accident implies negligence.

Peril

• A source of risk or danger. Can be natural, human-caused, or economic.