FA Unit 10 Test

The purpose of insurance is to...

• Build wealth

• Transfer risk

Why do insurance companies need a large pool of people paying insurance premiums?

• So that insurance company employees will get more bonuses included in their next paycheck

• To cover the costs for the emergencies of the few who need it

What role does math play in the insurance industry?

• They use statistics to find out how likely a client will need to use the insurance

• They use calculus to find out how likely a client will need to use the insurance

What is a premium?

• The amount of money you pay per month to have insurance

• The amount of money you pay out-of-pocket if you have an accident

What is a deductible?

• The amount of money you pay per month to have insurance

• The amount of money you pay out-of-pocket if you have an accident

What is an insurance limit?

• The maximum amount of money the insurance company will pay you to cover an accident

• The amount of money you pay out-of-pocket if you have an accident

What is the benefit of a high deductible?

• You will have a lower monthly insurance payment

• You will have lower out-of-pocket expenses if you get in an accident

What is the benefit of a high premium (monthly payment)?

• You will have a lower monthly insurance payment

• You will have lower out-of-pocket expenses if you get in an accident

How does the make and model of your car affect how much you pay for insurance?

• In general, the more your car is worth the more you will pay to insure it.

• The make and model of your car has no affect on your insurance rate.

How can you benefit from sharing your mileage with your insurance company?

• The fewer miles you drive, the less likely you are to get into an accident, so you will have a lower insurance payment.

• The fewer miles you drive, the more likely you are to get into an accident, so you will have a very high insurance payment.