Insurance Unit 8 - Practice Test

Front

What is an insurance premium?

Back

Your monthly payment to your insurer, regardless of whether you use any services

Answer explanation

An insurance premium is your monthly payment to your insurer, regardless of whether you use any services. It is the cost of maintaining your insurance coverage.

Front

Which term refers to the percentage of covered medical expenses you are responsible for paying after your deductible is met?

Back

Co-insurance

Answer explanation

Co-insurance is the term that refers to the percentage of covered medical expenses you pay after your deductible is met, making it the correct choice. The other options do not describe this concept.

Front

When setting your premium, your car insurance company may consider each of the following EXCEPT... How many miles you drive per year, Your age, Your driving record, Your height

Back

Your height

Answer explanation

When setting your premium, car insurance companies consider factors like mileage, age, and driving record. However, your height is not a relevant factor in determining insurance rates.

Front

Insurance companies make money by...

Back

Collecting more in premiums than they need to pay out each year

Answer explanation

Insurance companies primarily make money by collecting more in premiums than they pay out in claims. This ensures profitability, as they manage risk and expenses effectively.

Front

Which of the following statements is TRUE about auto insurance premiums?
If you have an auto insurance policy and don't get into a car accident or file any claims for a year, you get your premiums back from the insurance company.
If you have an auto insurance policy and get into multiple accidents within one year, your premium amount will decrease.
Auto insurance premiums are a fixed price across all insurance companies.
If you have an auto insurance policy and get into multiple accidents within one year, your premium amount will increase.

Back

If you have an auto insurance policy and get into multiple accidents within one year, your premium amount will increase.

Answer explanation

If you have an auto insurance policy and get into multiple accidents within one year, your premium amount will increase due to the higher risk associated with your driving record.

Front

Your renter's insurance policy costs $20/month and has a $1,000 deductible. A thief breaks into your apartment and steals your $800 TV set. How much would your insurance company pay?

Back

$0

Answer explanation

Your deductible is $1,000, which means you must pay that amount before insurance covers any loss. Since the stolen TV is worth $800, which is less than the deductible, the insurance company pays $0.

Front

Someone broke into Sam’s car by smashing the passenger window. Which type of auto insurance coverage will help cover the cost to get the window replaced?

Back

Comprehensive

Answer explanation

Comprehensive coverage helps pay for damages to your car from incidents like theft or vandalism, including a smashed window. Therefore, it will cover the cost to replace the passenger window.

Front

Why would someone choose to get long term disability insurance even if they already have health insurance?

Back

Health insurance only covers medical bills, while long term disability will help compensate for lost work with a percentage of their income.

Answer explanation

Health insurance primarily covers medical expenses, while long term disability insurance provides income replacement if you cannot work due to a disability, typically covering a percentage of your lost income.

Front

You cause an accident and injure the other driver. The case goes to trial and there is a verdict to compensate the injured person with $58,000. You have a $75,000 coverage limit per person for Bodily Injury. How much will the insurance company pay?

Back

$58,000

Answer explanation

The insurance company will pay the full amount of the verdict, which is $58,000, as it is within the coverage limit of $75,000 for Bodily Injury. Therefore, the correct answer is $58,000.

Front

How much will Frank need to pay out-of-pocket for damages totaling $6,200 with a deductible of $1,000?

Back

$1,000

Answer explanation

Frank's deductible is $1,000, meaning he must pay this amount out-of-pocket before his insurance covers the rest. The total damages are $6,200, but after the deductible, he will receive $5,200 from his insurance.