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Exam 11: Auto and Homeowners Insurance

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Question 31

Multiple Choice

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Under a cash value policy, the loss of a $600 item with an estimated life of five years that was purchased three years ago and has a replacement cost of $900 would result in a payment from the insurance company of

A) $600.
B) $900.
C) $240.
D) $360.

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Question 32

Multiple Choice

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Additional coverage on your automobile insurance policy can be purchased for

A) the cost of a rental car while your car is being repaired.
B) the protection of valuables you are carrying in your car.
C) the cost of towing, even if the problems are not the result of an accident.
D) Both A and C are correct.

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Question 33

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Medical payments coverage insures against costs of medical care for you and other passengers in your car when you are at fault in an accident.

Which of the following is not correct?

In general, insurance companies generate their revenue from the payments received for policies and from the return earned from investing the payments until the funds are needed to cover claims.

Legal expenses incurred by an insurance company when defending you against a lawsuit are deducted from the limits of your liability coverage.

If an insurance policy carries a $250 deductible for collision and no deductible for comprehensive, and an accident results in the following losses, what will be the reimbursement from the insurance company under your collision and comprehensive coverage? • Replacement of trailer hitch $200 • Replacement of rear bumper $150 • Replacement of computer being carried on the back seat $300 • Replacement of rear windshield $100

Which of the following is not a popular form of insurance for individuals?

Insurance should be considered even when there is a high likelihood than an event will cause a small financial loss.

Use the following two columns of items to answer the matching questions below: -auto insurance A)pays for injuries to you or people in your car in an accident where you (the driver) are at fault B)requires individuals who drive cars to purchase a minimum amount of liability insurance C)a set dollar amount that you are responsible for paying before any coverage is provided by your insurer D)covers damage to your car when you are at fault in an accident E)vehicle insurance to cover various injuries, your property, and the property of others F)covers damage to your car as a result of theft, fire, vandalism, or various other events

Since insurance companies rely mostly on their premiums to cover claims, they price their insurance policies to reflect the probability of a claim and the size of the claim.

Most states have financial responsibility laws that require individuals who drive cars to purchase a minimum amount of liability insurance.

Insurance is not a good option for managing risk when

In general, the cost of comprehensive and collision insurance is the most expensive part of your automobile policy and represents about 60% of the cost.

Auto insurance fraud is not a problem in states that have implemented no-fault insurance programs.

A personal scheduled property floater should be added to your homeowner's insurance policy if

Homeowner's insurance premiums are heavily influenced by all of the following, except

Collision and comprehensive coverage is optional in most states unless you are financing your car in which case you must have this coverage to protect the lender.

Auto insurance discounts might be given for all of the following, except

Which of the following would be considered the most high-risk driver?