Test Bank For Personal Finance Building your Future 2nd Edition By Robert Walker

Test Bank For Personal Finance Building your Future 2nd Edition By Robert Walker

Personal Finance, 2e (Walker)
Chapter 10 Insurance: Covering Your Assets

1) Why do you need to purchase insurance?
A) To cover your assets
B) To protect your personal wealth
C) To limit your liability
D) All options are correct

Answer: D
Difficulty: 1 Easy
Topic: Insurance
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

2) How do independent agents differ from company insurance agents?
A) Company insurance agents may represent a single company provider who sells insurance from many companies.
B) Independent insurance agents represent more than one insurance company and can sell insurance from a wide range of insurance companies.
C) There is no difference between an independent and company insurance agent.
D) Independent insurance agents represent one insurance company.

Answer: B
Difficulty: 1 Easy
Topic: Insurance
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

3) Who regulates insurance companies?
A) Fair Trade Board
B) Commissioner of Trade
C) Federal Insurance Commissioner
D) State Insurance Commissioner

Answer: D
Difficulty: 1 Easy
Topic: Insurance
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

4) What is the NAIC?
A) North American Insurance Commissioners
B) North American Investment Council
C) National Association of Insurance Commissioners
D) National Association of Investment Council

Answer: C
Difficulty: 1 Easy
Topic: Insurance
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

5) The insurance declaration page states
A) the cost of insurance.
B) the maximum an insurance company will pay.
C) who is not covered under the policy.
D) All options are correct.

Answer: B
Difficulty: 1 Easy
Topic: Insurance terminology
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

6) What does your medical insurance company pay if you purchase a $100 prescription and have a $25 co-payment plus 20% coinsurance policy?
A) $25
B) $40
C) $45
D) $60

Answer: D
Difficulty: 3 Hard
Topic: Health insurance claims and payments
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

7) What amount does the insurance company pay for a $250 prescription if you have a $30 copayment plus 15% coinsurance policy?
A) $66
B) $56
C) $127
D) $187

Answer: D
Difficulty: 3 Hard
Topic: Health insurance claims and payments
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

8) What is your out-of-pocket cost for a $150 clinic visit if you have a $10 copayment policy?
A) $10
B) $15
C) $25
D) $140

Answer: A
Difficulty: 3 Hard
Topic: Health insurance claims and payments
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

9) What amount does the insurance company pay for a $150 clinic visit if you have a $10 copayment?
A) $10
B) $15
C) $25
D) $140

Answer: D
Difficulty: 3 Hard
Topic: Health insurance claims and payments
Learning Objective: 10-01 Understand the basics of insurance.
Bloom’s: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

10) What is the difference between liability and full coverage auto insurance?
A) Liability insurance only covers the driver’s legal responsibilities if they are at fault in an accident.
B) Full coverage includes liability plus comprehensive coverage but not collision insurance.
C) Liability, in general, costs more than full coverage.
D) You are required by law to have full coverage until you are age 21.

Answer: A
Difficulty: 2 Medium
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

11) When borrowing money for a vehicle, who is typically the lien holder and loss payee on the insurance?
A) The primary driver of the car
B) The owner as noted on the title of the vehicle
C) The lending financial institution
D) The payer of the insurance

Answer: C
Difficulty: 2 Medium
Topic: Auto insurance laws and regulations
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

12) Which of these factors contributes to the calculation of auto insurance premiums?
A) Credit history
B) Driving record
C) Both credit history and driving record
D) Gas mileage over the last month

Answer: C
Difficulty: 1 Easy
Topic: Auto insurance cost factors
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

13) What type of insurance covers you, your passengers, and your vehicle if you are in an accident that is not your fault?
A) The at-fault driver’s insurance
B) Your uninsured/underinsured motorist insurance
C) Your liability insurance
D) Both the at-fault driver’s insurance AND your uninsured/underinsured motorist insurance

Answer: D
Difficulty: 2 Medium
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

14) You are driving on a back country road and hit a deer. What type of auto insurance must you have in order to get your car repaired?
A) Liability
B) Collision
C) Comprehensive
D) Uninsured motorist

Answer: C
Difficulty: 3 Hard
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

15) You back out of your driveway and hit your neighbor’s car. What type of auto insurance must you have in order to get your neighbor’s car repaired?
A) Liability
B) Collision
C) Comprehensive
D) Uninsured motorist

Answer: A
Difficulty: 3 Hard
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

16) You back out of your driveway and hit your neighbor’s car. What type of auto insurance must you have in order to get your car repaired?
A) Liability
B) Collision
C) Comprehensive
D) Uninsured motorist

Answer: B
Difficulty: 3 Hard
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

17) Your car is hit by a motorist who stole a car and then took off. Your car is totalled, and you, luckily, escape with only minor injuries. What type of auto insurance must you have in order to get your car repaired?
A) Liability
B) Collision
C) Comprehensive
D) Uninsured motorist/underinsured motorist

Answer: D
Difficulty: 3 Hard
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

18) If you are at fault in an auto accident and your passenger sustains injuries and is required to go to a hospital for treatment, what type of insurance will cover those expenses?
A) Liability (C2)
B) Collision
C) Comprehensive
D) Health

Answer: A
Difficulty: 3 Hard
Topic: Auto insurance coverage needs
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

19) An independent insurance agent can sell you insurance:
A) from only one company.
B) from any company she represents.
C) only on your automobile.
D) at a cheaper rate than if you were to purchase insurance online.

Answer: B
Difficulty: 2 Medium
Topic: Insurance
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

20) Your insurance deductible is
A) the amount you have to pay if you make an insurance claim.
B) the cost of insurance that is deducted from your paycheck.
C) the maximum the insurance company will pay.
D) a fee the insurance company charges.

Answer: A
Difficulty: 1 Easy
Topic: Insurance terminology
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

21) Minimum automobile liability insurance is
A) not something you need, but is a suggested amount of coverage.
B) Is the same in every state.
C) Is different in every state.
D) Is sufficient to cover your legal responsibilities if you cause an accident.

Answer: C
Difficulty: 2 Medium
Topic: Auto insurance laws and regulations
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

22) SR-22 liability insurance is
A) required by the state if you are classified as a high-risk driver.
B) issued by the state.
C) only required if you are cited for driving under the influence.
D) only required if you own a car.

Answer: A
Difficulty: 2 Medium
Topic: Auto insurance laws and regulations
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

23) What is the coverage of a 20/40/15 policy?
A) $20,000 for personal property liability/$40,000 bodily injury liability for all people injured in an accident/$15,000 for additional auto liability
B) $20,000 for personal property liability/$40,000 bodily injury liability for all people injured in an accident/$15,000 car rental rider
C) $20,000 for bodily injury liability for one person in an accident/$40,000 bodily injury liability for all people injured in an accident/$15,000 personal property liability
D) $20,000 for uninsured coverage/$40,000 bodily injury liability for all people injured in an accident/$15,000 personal property liability

Answer: C
Difficulty: 2 Medium
Topic: Insurance terminology
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

24) What is the maximum amount of coverage of a 20/40/15 policy?
A) $75,000
B) $55,000
C) $40,000
D) $35,000

Answer: A
Difficulty: 2 Medium
Topic: Insurance terminology
Learning Objective: 10-02 Identify the proper insurance coverage for your vehicle.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

25) Which risk does your homeowner’s insurance usually cover?
A) Volcanic eruptions
B) Flood
C) Earthquake
D) All of the options are correct.

Answer: A
Difficulty: 2 Medium
Topic: Home insurance coverage needs
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

26) What type of insurance does not cover your personal property?
A) Homeowner’s
B) Renter’s
C) Comprehensive
D) Health

Answer: D
Difficulty: 2 Medium
Topic: Personal property insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

27) What is the difference between replacement value and actual value for personal property insurance?
A) Actual value is the cost to replace an item.
B) Replacement value is the amount you could get for selling the item at a garage sale.
C) Replacement value is typically the current retail cost to replace the item.
D) Actual value is typically greater than replacement value.

Answer: C
Difficulty: 3 Hard
Topic: Personal property insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

28) What is the primary reason you should maintain a home inventory?
A) It serves as an annual accounting of assets.
B) You can use it to calculate net worth.
C) It can ease the process of filing a report or claim of stolen or damaged property.
D) It can help you budget your insurance needs.

Answer: C
Difficulty: 3 Hard
Topic: Personal property insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

29) What is the purpose of an umbrella insurance policy?
A) To protect your assets in the event of a liability lawsuit and if you reach your liability limits on your other policies
B) To protect your assets in the event of a flood or storm damage
C) To protect your assets in the event of water damage
D) To shield your property from hail damage

Answer: A
Difficulty: 3 Hard
Topic: Umbrella policies
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Evaluate
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

30) The insured value of your home is usually less than the market price because
A) homeowner’s insurance only covers the value of the buildings and structures and not the value of the land.
B) your home depreciates over time and is not worth the market price.
C) of the housing crisis of 2008.
D) of the 2009 recession.

Answer: A
Difficulty: 2 Medium
Topic: Homeowners insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

31) Flood insurance is
A) automatically included in your homeowner’s insurance policy.
B) only required if you live near a river.
C) not important if I live in the 500-year flood plain.
D) purchased from the National Flood Insurance Program.

Answer: D
Difficulty: 1 Easy
Topic: Home insurance coverage needs
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

32) When purchasing homeowner’s or renter’s insurance, replacement value
A) only reimburses you for the amount originally spent to acquire personal property.
B) costs less than purchase price insurance.
C) will reimburse you for the amount required to replace your personal property at today’s values.
D) will give you money to replace the property up to the value insured.

Answer: C
Difficulty: 2 Medium
Topic: Personal property insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

33) Insurance riders
A) cover passengers in your automobile.
B) are additional insurance to protect specific items of value not covered on your primary policy.
C) are extremely expensive and not worth getting.
D) provide protection when dealing with the underinsured.

Answer: B
Difficulty: 2 Medium
Topic: Homeowners insurance policy provisions
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

34) A home inventory
A) helps you recall your personal possessions in case of fire, theft, or destroyed property.
B) should be documented with video or photographs.
C) should be kept in a secure, off-site location.
D) All of the options are correct.

Answer: D
Difficulty: 2 Medium
Topic: Personal property insurance
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation

35) Umbrella liability insurance coverage
A) provides additional liability coverage above your homeowner’s and auto policies.
B) is unaffordable for many people.
C) covers you on a rainy day.
D) is just for the wealthy.

Answer: A
Difficulty: 2 Medium
Topic: Umbrella policies
Learning Objective: 10-03 Determine the proper insurance coverage for your home or apartment.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation