Insurance Knowledge Assessment

The primary purpose of insurance is to .

• Make a profit for insurance companies.

• Provide financial protection against unforeseen ev
• Increase government revenue.

• Promote risky behavior.

How does renters’ insurance differ from homeowners’ insurance?

• Renters insurance covers personal belongings and personal injury liability, while homeowners’ insurance covers these also along with the physical structure of the property.

• Renters insurance is typically more expensive than homeowners’ insurance.

• Homeowners insurance is only available for properties occupied by the legal owner of the property, while renters’ insurance is available for any rented property.

• Renters insurance is required by law, while homeowners’ insurance is optional.

What is a potential benefit of whole life insurance?

• It provides coverage for a specific number of years.

• It offers the opportunity to build cash value over time.

• It requires no premium payments.

• It is the cheapest policy available for individuals over the age of 70.

Why might a person opt to purchase a term life insurance policy?

• To accumulate cash value over time.

• To provide coverage for a specific period at a lower cost.

• To guarantee coverage for the entire lifetime of the insured.

• To provide coverage for medical expenses.

What is the relationship between the insurance premium and deductible?

• They are unrelated factors.

• As the premium increases, the deductible increases.

• As the premium decreases, the deductible decreases.

• As the premium decreases, the deductible increases.

A person has a ten-year term life insurance policy. The policy will pay

• The death benefit if the insured dies within the ten years.

• The death benefit if the insured dies after the ten years.

• A cash value of $250,000 at the end of ten years.

• A cash value equal to the premiums paid over the ten years.

If a driver hits a deer and incurs damage to the vehicle. What type of auto insurance coverage typically pays for the repair?

• Liability coverage.

• Comprehensive coverage.

• Collision coverage.

• Acts of nature coverage.

Replacement coverage is insurance that

• covers the cost of replacing damaged or stolen property with a new item of similar value.

• provides coverage only for specific types of natural disasters.

• reimburses the policyholder for the full purchase price of an item, regardless of depreciation.

• covers the cost of repairing damaged property.

Which of the following statements best explains an HMO?

• An organization that provides home maintenance services.

• A type of health insurance plan that typically requires members to select a primary care physician and obtain referrals to see a specialist.

• An organization that offers home mortgage options.

• A type of retirement savings account.

Why might a person decide to purchase disability insurance?

• To cover the cost of vacations if they are on sick leave.

• To protect against the loss of income due to illness or injury.

• To finance renovations for an older home.

• To pay for the cost of unexpected medical expenses.