Math Reasoning: Understanding Insurance Basics

What is the primary purpose of insurance?

• To increase wealth

• To provide financial protection against losses

• To avoid paying taxes

• To guarantee profits

Which of the following is a type of life insurance policy?

• Liability insurance

• Term insurance

• Property insurance

• Health insurance

In insurance terms, what does the term "premium" refer to?

• The amount paid by the insurer to the insured

• The amount paid by the insured to the insurer

• The total coverage amount

• The deductible amount

Which of the following is NOT typically covered by a standard homeowner's insurance policy?

• Fire damage

• Theft

• Flood damage

• Vandalism

If an insurance policy has a deductible of $500, what does this mean?

• The insurer will pay the first $500 of any claim

• The insured must pay the first $500 of any claim

• The insured pays $500 annually for the policy

• The insurer pays $500 annually to the insured

What is the primary purpose of life insurance?

• To pay back our parents for the money they spent on us if we die

• To help maintain the standard of living of those who depend on our income, such as your spouse and children

• To pay us an income if we are injured and can't work

• To help save money for old age

Which insurance type is intended to provide financial support to a person's beneficiaries after their death?

• Health Savings Account

• Life Insurance

• Renter’s Insurance

• Supplemental Insurance

The value of buying insurance for a cell phone is to

• permit an upgrade to a newer model cell phone.

• be able to replace the cell phone if it is lost or stolen.

• lower the cost of roaming charges on the cell phone.

• be able to change the cell phone service provider.

How is a term life insurance policy different from a whole life insurance policy?

• The cost of a whole life policy increases as the person ages

• The term life policy is only for a limited period of time

• The whole life policy does not have cash value

• The term life policy can only be bought once in a lifetime

Peter has collision insurance with a $1,000 deductible. Peter backs his car into a lamppost and causes $4,300 worth of damage to the car. How much will Peter have to pay?

• $4,300

• $1,000

• $3,300

• $0

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