Foundations in Personal Finance Chapter 9

Which of the following would not be a huge financial risk (and, therefore would not require insurance) if you had a full emergency fund of $500 or more?

• A medical emergency 
• Your identity gets stolen
• A car accident 
• You lose your cell phone

The time between the disabling event and the beginning of payments in your disability coverage is called:

• Elimination period 
• Stop gap
• Deductible 
• Out of pocket

Life insurance policy for a specific period of time is called: 

• Whole life 
• Universal 
• Level 
• Term

Which of the following statements about life insurance is true? 

• There is no difference between term and cash value life insurance.
• You will always need life insurance.
• Term life insurance should be avoided because the policy will expire and it has no savings plan built into it.
• Cash value insurance is normally for life and is more expensive than term life insurance because it funds a savings plan.

Which of the following statements about disability insurance is false? 

• Your coverage should be for 65% of your income.
• After college, short-term disability should be covered by your emergency fund of three to six months' worth of expenses, staying out of debt, and having a money plan.
• A longer elimination period will lower your premium cost.
• Disability insurance is not necessary if you have a good health insurance policy.

A person becomes self-insured when: 

• They have no debt
• They own their own business
• Their kids are grown, they have no debt, and they have fully funded retirement
• Everyone should have term life insurance regardless of age or financial well-being

Which of the following is not a recommended way to save on your health insurance premium?

• See if a Health Savings Account would make sense for your situation.
• Increase your deductible.
• If you are young and healthy, you do not need health insurance.
• Increase your stop-loss or your maximum out-of-pocket expense.

Which of the following types of insurance is not recommended for a young single adult? 

• Auto insurance 
• Health insurance
• Identity theft protection 
• Life insurance

Which of the following is not a recommended way of lowering your car insurance premiums? 

• Increase your deductible
• Shop around
• Get good grades and take a driver education class
• Drop your auto insurance altogether

The purpose of insurance is to: 

• Develop a savings plan 
• Transfer financial risk
• Provide an investment opportunity 
• All of these