Unit 7 Insurance & Investing

What is an insurance premium?

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

• A list of the procedures covered by your insurance carrier

• An added cost you pay in order to receive higher-quality services

• The amount you pay out-of-pocket for a specific procedure or service

Answer explanation

An insurance premium is your monthly payment to your insurer, regardless of whether you use any services.

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

• Co-insurance

• Premium

• Out-of-network fees

• Deductible limit

Answer explanation

Co-insurance refers to the percentage of covered medical expenses you are responsible for paying after your deductible is met.

When setting your premium, your car insurance company may consider each of the following EXCEPT...

• Your height

• Your driving record

• Your age

• How many miles you drive per year

Answer explanation

Your height is not a factor that car insurance companies consider when setting your premium. Factors like driving record, age, and miles driven per year are typically taken into account.

Insurance companies make money by...

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

• Refusing to pay out claims to policyholders

• Keeping costs low with minimal advertising

• Collecting money from the government

Answer explanation

Insurance companies make money by collecting more in premiums than they need to pay out each year.

Which of the following statements is TRUE about auto insurance premiums?

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

• 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 decrease

• 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

Answer explanation

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

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?

• $0

• $200

• $800

• $1,100

Answer explanation

Since the stolen TV is below the $1,000 deductible, the insurance company would not pay anything, resulting in $0 payment.

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?

• Comprehensive

• Collision

• Bodily injury liability

• Property liability

Answer explanation

Comprehensive coverage will help cover the cost to get the window replaced in Sam's car after it was smashed by someone breaking in.

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

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

• Health insurance only covers regular check ups, while long term disability insurance also covers emergencies

• Long term disability insurance plans can also extend coverage to family members and pets

• Long term disability only covers medical bills, while health insurance will help compensate for lost work with 40-60% of their income

Answer explanation

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

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?

• $58,000

• $17,000

• $0

• $75,000

Answer explanation

The insurance company will pay $58,000, which is the amount of the verdict since it is within the coverage limit of $75,000 per person for Bodily Injury.

Frank has an auto policy with a coverage limit of $30,000 and a deductible of $1,000. He gets into an accident and the damages to his car total $6,200. Fortunately, he has collision coverage. How much will Frank need to pay out-of-pocket?

• $1,000

• $30,000

• $6,200

Answer explanation

Frank's deductible is $1,000, so he will need to pay $1,000 out-of-pocket for the damages to his car.