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Chapter 11 Study
Terms in this set (31)
What is the purpose of insurance? What is meant by the term liability? How can individuals benefit from insurance?
Insurance allows you to:
maintain your existing level of wealth if there are unexpected events.
the responsibility for damages.
What is risk? What is risk management? How does insurance fit into risk management?
exposure to events that can cause a financial loss.
The first step in risk management is to decide:
whether to protect against risk.
You should consider insurance if:
-you cannot reduce the risk.
-you cannot avoid the risk.
-you do not wish to be exposed to a financial loss as a result of the risk.
What is the responsibility of the insurance company that sells you a policy? What is the relationship between insurance company claims and premiums paid by policyholders?
The responsibility of the insurance company that sells you a policy is to:
cover claims as described in the insurance policy.
The premiums paid by policyholders are priced:
to reflect the probability of a claim and the size of the claim.
What is the role of insurance underwriters? What is the role of insurance agents? Describe two different types of insurance agents.
may represent one insurance company.
___________ agents work for one particular company, whereas ___________ agents (insurance brokers) represent many different insurance companies.
Describe two components of liability coverage in an auto insurance policy.
One of the two components of liability coverage in an auto insurance policy is property damage liability coverage, which protects you:
from losses resulting from damage to another person's property with your car.
Policy limits of 25/50/25 means:
-$25,000 bodily injury for each person injured in accident that you caused
-$50,000 bodily injury for all persons combined
-$25,000 for property damage
(#'s mean that much for the policy limit in 1000s, and always in that order: x/y/z)
Minimum limits of liability are:
not suitable for all drivers since they would not cover the liability in many accidents.
Describe collision and comprehensive coverage. Is this type of coverage required by most states? Who may require this type of coverage?
Collision coverage insures you against:
costs of damage to your car from an accident in which you are at fault.
Comprehensive collision insures you against:
damages to your car that result from floods, theft, explosions, riots, vandalism, or other various events.
Collision and comprehensive coverage are _____ in _____ states.
This type of coverage may be required by:
car loan providers.
Which of the following is a factor that will affect your auto insurance premium?
Factors that can affect an auto insurance premium are:
-Value of the insured vehicle: the higher the value of the car, the higher the premium.
-Repair record of the car: the more easily car damage can be repaired, the lower the premium.
-Your age: younger drivers have less experience and pay higher premiums.
- Your mileage: the more miles you drive, the higher the premium.
-Your driving record: individuals with poor driving records pay more than individuals with good driving records.
-Location: insurance is higher in larger cities.
-Discounts: due to discounts, premiums may be lower on cars with safety devices, for drivers who have had driver training, and students who have a high grade point.
-Your school performance: good students are generally safer drivers and may pay lower premiums.
-Your credit record: Individuals with poor credit records may pay higher premiums.
The intent of no-fault insurance is to:
avoid costly court battles in which each driver attempts to blame the other driver.
No-fault insurance programs provide coverage for:
direct costs incurred due to bodily injury, medical bills, and replacement of lost income if needed.
A disadvantage of no-fault programs is that:
the driver who did not cause the accident subsidizes the driver that caused the accident.
What steps should you take if you are in a car accident?
-Request relevant info from the other driver(s) in the accident
-File a claim with your insurance company
A "replacement cost" homeowner's policy pays you for the:
actual cost of replacing the damaged property.
A standard homeowner's insurance policy covers damage to:
personal assets such as furniture and computers, up to one-half of the coverage of the dwelling.
Standard policies ___________
a deductible that is applied to the personal property.
A home inventory is a listing of:
all your personal assets and estimates of the market value of each of them.
List and briefly describe some of the factors that affect homeowner's insurance premiums.
A homeowner's insurance premium will be higher if:
there are few safety features.
One step you could take to reduce your homeowner's insurance premium is:
How is renter's insurance different from homeowner's insurance? Who should consider purchasing renter's insurance? Briefly describe some of the provisions of a renter's insurance policy.
provides liability coverage for injury to those who might be hurt on your premises, which are also covered by homeowner's insurance.
Who should consider purchasing renter's insurance?
All renters should purchase renter's insurance, if only for the liability protection.
What is the purpose of an umbrella personal liability policy? Who might need one?
An umbrella personal liability policy:
provides additional liability coverage to auto and homeowner's insurance policies.
An umbrella personal liability policy becomes effective when your auto and homeowner's policy limits are:
THIS SET IS OFTEN IN FOLDERS WITH...
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