Chapter 10 Home and Automobile Insurance True/False Questions 1)The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks

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Chapter 10 Home and Automobile Insurance

True/False Questions

1)The purpose of insurance is to help protect you and your family against financial hardship due to hazard, accident, death, and similar risks.

2. Personal risks, property risks, and liability risks are types of speculative risks.

3. Risk management is an organized strategy for protecting and conserving assets and people.

4. The most common method of dealing with risk is to shift, or transfer it to an insurance company or some other organization.

5. Self-insurance is the process of establishing a monetary fund that can be used to cover the cost of a loss.

6. Property losses can be categorized into destruction of property, and losses due to robbery, burglary, vandalism, or arson.

7. Vicarious liability refers to the failure to take ordinary or reasonable care in a situation.

8. Homeowner's insurance refers to coverage also available to condominium owners.

9. Personal property refers to building and other structures covered by homeowner's insurance.

10. Personal belongings that have a high value require coverage with a personal property floater.

11. The purpose of a household inventory is to provide evidence of items covered by home insurance.

12. Increased liability insurance is available with an umbrella policy.

13.   Medical payments coverage in a home insurance policy is designed to pay for legal action taken against a homeowner who may be legally responsible for injury or property damage of others.

14. The Comprehensive Form of homeowner's insurance includes coverage for damage due to floods.

15. Replacement cost for settling property insurance claims is less costly than the actual cash value method.

 

16. A home made of wood is more expensive to insure than a comparable brick structure. 

17. The "special form" of a homeowner's policy is less expensive than the "broad form."

18. Financial responsibility laws require that drivers have automobile liability insurance.

19. The 100/300 amounts for bodily injury liability insurance refer to the costs of insurance coverage

 20. Medical payments automobile insurance coverage pays for the costs of injuries to persons in the driver's vehicle.

21. No-fault insurance systems have consistently reduced the time and costs involved in settling claims.

22. Collision coverage pays for damage to your vehicle for such hazards as fire, theft, or wind damage.

23. Property damage liability coverage would pay for damage to another vehicle for which you were at fault.

 

 24. The driver classification category is based on automobile style, model, and value of the vehicle.

25. The purpose of an assigned risk pool is to assist people with poor driving records in obtaining automobile insurance coverage.

Multiple Choice Questions

26. Peril is defined as

A) the refusal by an insurance company to pay for the covered loss.

B) the cause of risk.

C) the cause of a possible loss.

D) an uncertainty as to loss. 

27. Defective house wiring is an example of a

A) hazard.

B) peril.

C) risk.

D) speculation

28. The uncertainties of direct and indirect losses to personal or real property due to fire, wind, accident, theft, etc., are called risks.

A) personal

B) business

C) property

D) liability

E) speculative

 

29. Possible losses due to negligence resulting in bodily harm or property damage to others are called risks.

A) speculative

B) liability

C) property

D) personal

E) commercial

30. Starting a small business that may or may not succeed is an example of 

risk.

A) speculative

B) pure

C) commercial

D) personal

E) liability

31. Using a home security system is an example of risk.

A) shifting

B) accepting

C) reducing

D) sharing

E) transferring

32. Wearing a seat belt in an automobile to protect yourself against injury is an example of

  risk.

A) reducing

B) assuming

C) pooling

D) shifting

E) avoiding

33. Which of the following would be covered by a home insurance policy?

A) hospital expenses for surgery

B) damage to another person's car when driving

C) accidental injury to a coworker on the job

D) wind damage to your roof

E) theft of business supplies from your office 

34. The legal responsibility for the financial cost of another person's losses or injuries is referred to as

A) theft.

B) robbery.

C) liability.

D) assigned risk.

E) collusion.

35. If a homeowner leaves toys on stairs that results in injury to a delivery person, this may be ruled as

A) vicarious liability.

B) negligence.

C) assigned risk.

D) umbrella coverage.

E) coinsurance.

36. Negligence refers to

A) failure to take ordinary and reasonable care.

B) cancellation of insurance.

C) property damage.

D) high risk insurance coverage.

E) common hazards in our society.

 

37. While cleaning your home, a worker damages some furniture. You take action against the worker's employer to cover the cost of the damage. This is an example of a(n)

  liability.

A) umbrella

B) assigned

C) common situation

D) peril

E) vicarious

38. High winds cause damage to trees, shrubs, and other plants. This insurance claim would be covered under the component of homeowner's insurance.

A) additional living expenses

B) personal property

C) building and other structures

D) personal liability

E) property damage

39. The additional living expenses component of a home insurance policy is designed to

A) pay for temporary housing while your home is repaired.

B) cover damage to property while away from home.

C) reimburse a homeowner for damage done by a visitor.

D) pay for medical expenses of people injured on your property.

E) pay for repairs caused by fire or other hazards.

40. Which of the following is considered personal property for home insurance coverage?

A) an automobile

B) a garage

C) furniture

D) a house

E) trees and shrubs

41. Georgette Valentine has expensive photography equipment for use in her hobby. Which of the following coverages would pay for damage or theft of this equipment?

A) an umbrella policy

B) a household inventory

C) additional living expense coverage

D) a personal property floater

E) a coinsurance floater

42. The purpose of a household inventory is to

A) reduce insurance costs.

B) document owned property.

C) obtain personal property floater coverage.

D) increase liability coverage.

E) lower the chance of negligence.

43. The coverage of a home insurance policy would cover accidental damage to another person's property by a member of your family.

A) supplementary

B) personal property

C) medical payments

D) additional living expenses

E) personal liability

44. An umbrella policy is designed to cover

A) expensive personal property.

B) additional buildings on your property.

C) property when traveling away from home.

D) major personal liability suits.

E) flood damage.

45. Most home insurance policies provide coverage for

A) earthquake damage.

B) flood damage.

C) an umbrella liability.

D) personal property floaters.

E) medical payments.

46. Renter's insurance would include coverage for

A) flood damage.

B) personal property.

C) building and other structures.

D) umbrella liability.

E) earthquake damage.

47. Which of the following are not covered by renter's insurance?

A) medical expenses for injuries to visitors

B) fire damage of the building's roof

C) additional living expenses

D) accidental damage to the property of others

E) cost of legal action due to personal liability

48. Which form of homeowner's policy provides coverage for the most risks?

A) special

B) basic

C) broad

D) tenants

E) modified coverage

49. Kelly and Bob Walton recently purchased a new home and desire coverage for all causes of loss or damage except those specially excluded by the policy. They should obtain the

  form of homeowner's policy.

A) basic

B) broad

C) special

D) modified coverage

E) condominium 

50. The form of homeowner's insurance is designed to cover older homes with special designs.

A) basic

B) broad

C) condominium

D) modified coverage

E) special

51. Your home insurance provides for replacement value for personal property losses. A microwave is stolen. It cost $300 two years ago and has an expected life of six years. A comparable microwave costs $400 today. What amount will the insurance company pay?

A) $100

B) $150

C) $200

D) $350

E) $400

52. Which of the following insurance policy provisions requires that the insured must pay for part of the loss of a claim if the property is not insured for the specified percentage of replacement value?

A) personal property floater

B) an endorsement

C) coinsurance clause

D) umbrella coverage

E) assigned risk clause

 

53. The method to settle claims is based on the current replacement cost of a damaged or lost item less depreciation.

A) replacement value

B) actual cash value

C) umbrella

D) endorsement

E) personal property floater

54. Home insurance costs are affected most directly by

A) the profits of the insurance company.

B) insurance agents' commission.

C) government regulations that set premiums.

D) processing costs of claims.

E) the number of claims in an area.

55. Your home insurance policy has a $250 deductible. If a small fire causes $600 damage to your home, what amount of the claim would the insurance company pay?

A) $250

B) $350

C) $450

D) $600

E) not able to determine from this information 

56. The purpose of financial responsibility laws is to

A) reduce auto insurance costs.

B) assist poor drivers in getting insurance coverage.

C) protect the public from financial losses due to auto accidents.

D) require uninsured motorists coverage.

E) pay for high medical costs of auto accident victims.

 

57. provides coverage for the risk of financial loss due to legal expenses, medical expenses, lost wages, and other expenses associated with injuries caused by an automobile accident for which you were responsible.

A) Medical payments

B) Bodily injury liability

C) Uninsured motorists protection

D) No-fault insurance

E) Comprehensive insurance

58. The 100 in 100/300/50 refers to

A) property damage liability coverage.

B) the amount of the deductible.

C) collision coverage.

D) the total coverage for an accident.

E) the limit for bodily injury claims that can be paid to one person.

59. Henry Edwards was injured in an accident caused by another driver who did not have insurance. Henry's medical expenses would be covered by

A) medical payments.

B) collision.

C) bodily injury liability.

D) uninsured motorists protection.

E) no-fault coverage.

60. Which of the following coverages would pay for medical care for people who were injured in your automobile?

A) medical payments

B) bodily injury liability

C) collision

D) comprehensive

E) no-fault insurance

 

61. Which of the following is a system in which drivers involved in an accident collect medical expenses, lost wages, and related injury costs from their own insurance company?

A) assigned risk pool

B) financial responsibility coverage

C) comprehensive system

D) no-fault insurance

E) uninsured motorists protection

62. protects you against financial loss when your car damages the property of others.

A) Collision

B) Comprehensive physical damage

C) Property damage liability

D) No-fault insurance

E) Assigned risk coverage

63. The 25 in 50/100/25 refers to coverage.

A) collision

B) bodily injury liability

C) comprehensive physical damage

D) medical payments

E) property damage liability

64. Which of the following coverages would pay for damage to your automobile in an accident for which you were at fault?

A) property damage liability

B) collision

C) comprehensive physical damage

D) no-fault insurance

E) assigned risk pool coverage

 

65. Comprehensive coverage would cover financial losses due to

A) injuries caused by a driver without insurance.

B) damage to your car in an accident for which you were at fault.

C) damage to your car caused by wind or hail.

D) legal action against you for an accident.

E) damage to a neighbor's tree with your car.

66. coverage would pay for damage to your vehicle in an accident for which another driver with insurance was legally at fault.

A) Property damage liability

B) Collision

C) Comprehensive physical damage

D) Uninsured motorists protection

E) Assigned risk

67. Thad Joslin was judged at fault in an automobile accident. Three others were awarded damages of $150,000, $75,000, and $75,000. Thad has 100/300 bodily injury liability coverage. What amount, if any, would not be covered by his insurance?

A) $150,000

B) $100,000

C) $50,000

D) None. The total amount would be covered by insurance  

68. Your geographic location is a major factor in determining the used to calculate your automobile insurance premiums.

A) driver classification

B) assigned risk pool

C) coverage level

D) legal responsibilities

E) rating territory

 

69. Wind damage occurs to your car costing $800 to repair. If you have a $100 deductible for collision and full coverage for comprehensive, what portion of the claim will the insurance company pay?

A) $100

B) $200

C) $500

D) $700

E) $800 

70. Which of the following refers to a category based on age, sex, marital status, and driving habits that is used to set automobile insurance premiums?

A) rating territory

B) assigned risk pool

C) no-fault system

D) driver classification

71. Which of the following factors is used to determine a person's driver classification?

A) age

B) type and age of vehicle

C) claims in your geographic area

D) insurance company claim processing costs

E) state insurance premium regulations 

72. The purpose of an assigned risk pool is to

A) provide insurance for poor drivers.

B) reduce medical costs associated with auto accidents.

C) take unsafe drivers off the road.

D) reduce auto insurance premiums with state regulation.

E) offer premium discounts to safe drivers.

73. A system that requires each insurance company operating in a state to provide coverage to several individuals with poor driving records is referred to as

A) no-fault insurance.

B) an assigned risk pool.

C) premium discounts.

D) comprehensive coverage.

Essay Questions

74. What coverages are commonly included in a homeowner's insurance policy?

75. What factors affect the cost of home insurance?

76. Which type of automobile insurance is usually considered to be most important?

77. A friend wants to understand what affects the cost of auto insurance. Explain the factors used to determine the automobile insurance premiums a person pays.