Ch8: Home and Car Insurance

Question 1

What is insurance?

Answer 1

protection against possible financial loss

Question 2

What is an isurance company?

Answer 2

risk-sharing firm that assumes financial responsibility for losses from an insured risk

Question 3

When obtaining insurance, you purchase a ____ known as _____

Answer 3

policy, coverage

Question 4

The insured policyholder pays ________ ______

Answer 4

periodic premium

Question 5

What is risk?

Answer 5

chance of loss or injury; uncertainty or lack of predictability

Question 6

What is peril?

Answer 6

anything that may cause loss; usually an event–fire, windstorm, robbery, accidents

Question 7

Hazard

Answer 7

anything that increases likelihood of a loss–driving drunk, defective house wiring

Question 8

What are the most common types of risk?

Answer 8

personal, property, and liability

Question 9

Personal risk

Answer 9

loss of income or life; caused by illness, old age, uemployment

Question 10

Property risk

Answer 10

losses to property; caused by perils such as fire or theft

Question 11

Liability Risks

Answer 11

losses caused by negligence resulting in injury or property damage

Question 12

Pure risks are _______ while speculative risks are ___________

Answer 12

insurable, uninsurable

Question 13

Types of pure risk

Answer 13

property, personal, liability

Question 14

What is negligence?

Answer 14

failure to take ordinary care to prevent accidents

Question 15

Risk Management

Answer 15

organized plan for protecting yourself, your family, and your property; avoidance, reduction, assumption, shifting

Question 16

Things to include in your insurance plan

Answer 16

what you need to insure, how much to insure it for, what kind of insurance should you buy, who should you buy insurance from

Question 17

what is a claim

Answer 17

a request for payment to cover financial loses

Question 18

Potential property losses

Answer 18

home, automobile, furniture, clothing, and personal belongings

Question 19

what is a liability

Answer 19

legal responsibility for the financial cost of another person’s losses or injury

Question 20

Vicarious liability

Answer 20

you are held responsible for actions of another person, such as your child throwing a ball through your neighbor’s window

Question 21

________ insurance is coverage for your place of residence and its financial risks, such as damage to personal ________ and damage to _______

Answer 21

Homeowner’s, property, other

Question 22

A _______ form covers personal property loss or damage specified in the policy; a form of renter’s insurance

Answer 22

broad

Question 23

Homeowner’s insurance covers…

Answer 23

furniture, appliances, clothing

Question 24

_____ _______ is advised in order to replace belongings under homeowner’s insurance

Answer 24

Household inventory

Question 25

Personal Liability covers

Answer 25

injuries to other people on your property

Question 26

an umbrella policy covers…

Answer 26

personal catastrophies; $1-3 million coverage over standard policy

Question 27

Look for policies with ________ coverage. Coinsurance clause requires you pay part of the loss.

Answer 27

full

Question 28

Actual cash value

Answer 28

replacement cost less depreciation

Question 29

Replacement value

Answer 29

full cost to repair or replace the damaged/lost item
some companies limit to 400% ACV
10-20% > ACV coverage

Question 30

Home insurance discounts

Answer 30

fire alarms, smoke detectors, bundling insurance policies

Question 31

All states have compulsory automobile insurance laws.

T or F

Answer 31

true

Question 32

Financial Responsibility Law

Answer 32

state legislation requiring proof of ability to cover cost of damage or injury caused in an automobile accident

Question 33

Bodily Injury Liability

Answer 33

covers loss due to legal expenses, medical expenses, lost wages, and others associated with injuries caused by an accident for which you were responsible

Question 34

100/300/50

Answer 34

expression of bodily injury liability

1: $100,000 max paid to one person
2: $300,000 max paid out for one incident
3: $50,000 max in property damage

Question 35

_______ car, home, and umbrella insurance saves money on _________

Answer 35

bundling, premiums

Question 36

Uninsured Motorist Protection

Answer 36

protects you and family if in accident with uninsured driver

Question 37

Underinsured Motorist’s Coverage

Answer 37

protects you when another driver doesn’t have enough insurance to cover the damages they caused

Question 38

Automobile Property Damage Liability

Answer 38

applies when you damage other’s property, including buildings and street signs

Question 39

Collision (liability?)

Answer 39

pays for damage to your vehicle, regardless of fault; limited by ACV of vehicle at the time of accident

Question 40

Comprehensive Physical Damage

Answer 40

covers damage to vehicle: fire, theft, falling onjects, vandalism, hail, floods, tornadoes, earthquakes, avalanches

Question 41

No-fault Insurance

Answer 41

regardless of fault, each driver collects from their own insurance company; coverage varies by state

Question 42

Benefit of No-Fault insurance

Answer 42

limits state costs of determining fault

Question 43

other auto insurance

Answer 43

wage loss insurance
towing and emergency road service coverage
rental reimbursement coverage

Question 44

Concerns in obtaining coverage

Answer 44

enough coverage to be sued

recommended: 100,000/300,000 bodily injury liability and umbrella policy

Question 45

What effects the insurance premium factors for your car?

Answer 45

year, make, model of car; territory rating (theft, vandalism), driver classification (gender, marital status, age, driving record and habits, credit score)

Question 46

Premium discounts on auto insurance

Answer 46

maintain good driving record, non-smoker, instal security devices, insure multiple vehicles with the same company, larger deductibles, make and model of car, maintain good credit history