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Questions and Answers
What does liability insurance protect you from?
What does liability insurance protect you from?
Which element of negligence describes failing to act with reasonable care?
Which element of negligence describes failing to act with reasonable care?
What is the primary purpose of a title search?
What is the primary purpose of a title search?
What does res ipsa loquitor imply in legal contexts?
What does res ipsa loquitor imply in legal contexts?
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COBRA allows employees to continue health insurance coverage for how long after leaving a company?
COBRA allows employees to continue health insurance coverage for how long after leaving a company?
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What is a primary feature of adjustable-rate loans?
What is a primary feature of adjustable-rate loans?
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What is the main risk addressed by Mortgage Insurance PMI?
What is the main risk addressed by Mortgage Insurance PMI?
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Which services are generally offered by a home warranty?
Which services are generally offered by a home warranty?
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What type of coverage does the HO3 policy offer?
What type of coverage does the HO3 policy offer?
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Which of the following is NOT included in the HO1 policy coverage?
Which of the following is NOT included in the HO1 policy coverage?
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The HO4 policy is designed for which type of occupant?
The HO4 policy is designed for which type of occupant?
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What is a distinguishing feature of the HO8 policy?
What is a distinguishing feature of the HO8 policy?
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What does the principle of Res Ipsa Loquitur imply?
What does the principle of Res Ipsa Loquitur imply?
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What has the most significant impact on your credit score?
What has the most significant impact on your credit score?
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Which debt payoff method is considered the most satisfying for individuals?
Which debt payoff method is considered the most satisfying for individuals?
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What happens to the interest you pay if the market interest rate rises for an adjustable-rate loan?
What happens to the interest you pay if the market interest rate rises for an adjustable-rate loan?
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Which of the following is NOT a requirement for a legal contract?
Which of the following is NOT a requirement for a legal contract?
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Which method of debt repayment prioritizes savings in interest payments?
Which method of debt repayment prioritizes savings in interest payments?
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What is the primary purpose of the Federal Fund Rate?
What is the primary purpose of the Federal Fund Rate?
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Which clause requires a borrower to purchase life insurance on the loan?
Which clause requires a borrower to purchase life insurance on the loan?
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If a borrower misses one payment, which clause allows the lender to demand full payment immediately?
If a borrower misses one payment, which clause allows the lender to demand full payment immediately?
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What is the primary purpose of a Flexible Spending Account (FSA)?
What is the primary purpose of a Flexible Spending Account (FSA)?
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Who is responsible for the life insurance policy and can also be the beneficiary?
Who is responsible for the life insurance policy and can also be the beneficiary?
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Which part of an auto insurance policy covers medical expenses for injury while occupying a covered automobile?
Which part of an auto insurance policy covers medical expenses for injury while occupying a covered automobile?
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What does an Umbrella Policy provide?
What does an Umbrella Policy provide?
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What element describes the wrongful conduct related to negligence?
What element describes the wrongful conduct related to negligence?
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Which type of coverage protects against damage to or theft of an automobile?
Which type of coverage protects against damage to or theft of an automobile?
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In the context of negligence, what does 'duty' refer to?
In the context of negligence, what does 'duty' refer to?
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What is 'causation' in the context of negligence?
What is 'causation' in the context of negligence?
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What is the purpose of a deficiency payments clause in a loan agreement?
What is the purpose of a deficiency payments clause in a loan agreement?
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Which statement correctly describes a recourse clause in a loan contract?
Which statement correctly describes a recourse clause in a loan contract?
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What is NOT a recommended consideration when buying a new vehicle?
What is NOT a recommended consideration when buying a new vehicle?
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Which feature characterizes term life insurance?
Which feature characterizes term life insurance?
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When considering a used vehicle purchase, which is an appropriate step to take?
When considering a used vehicle purchase, which is an appropriate step to take?
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What distinguishes universal life insurance from whole life insurance?
What distinguishes universal life insurance from whole life insurance?
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Which of the following is an advantage of Health Savings Accounts (HSAs)?
Which of the following is an advantage of Health Savings Accounts (HSAs)?
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What is a common characteristic of leased vehicles according to the guidelines provided?
What is a common characteristic of leased vehicles according to the guidelines provided?
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Study Notes
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.
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Description
Test your knowledge on legal definitions and principles of liability, negligence, and property insurance. This quiz covers critical concepts such as the elements of negligence, adjustable-rate loans, and more. Perfect for students studying law or insurance principles.
