1. Daniel took out property insurance for his vacation home. The property is valued at $500,000, but he paid for coverage of $650,000 "just in case." The house is destroyed through no fault of his own and the type of damage is covered under his insurance contract. How will the insurance company handle his claim?

Select one:

a.

The insurance company will pay him $500,000 because that is what the property is worth.

b.

The insurance company will pay him $500,000 plus reimbursement of that part of Daniel's insurance premium he was paying for the additional $150,000 in coverage that is not being paid out.

c.

The insurance company will not pay Daniel. The contract is void because Daniel misled the insurance company by taking out a $650,000 policy on property that was only worth $500,000.

d.

The insurance company will pay him $650,000. Although the property is only worth $500,000, Daniel has been paying for $650,000 of coverage, so per the contract that is what the insurance company must pay.

2. Traditional health insurance plans are

Select one:

a.

pay for service.

b.

managed care.

c.

value-based care.

d.

health maintenance.

3. Everyone should have disability insurance to replace ________ of their income.

Select one:

a.

25-50%

b.

40-60%

c.

60-75%

d.

90-100%

4. A doctor or engineer's malpractice insurance is an example of ...

Select one:

a.

Term insurance.

b.

Key person life insurance.

c.

Business liability insurance.

d.

None of the above.

5. Under which of the following does the insurer promise to pay the insured a specified amount for the rest of his life, beginning at a later date?

Select one:

a.

straight life policy

b.

whole life policy

c.

universal life policy

d.

deferred annuity contract

6. In which of the following scenarios would an insurance company most likely be found to violate the covenant of good faith and fair dealing?

Select one:

a.

Refusing to pay a valid claim in a timely manner.

b.

Advertising on a big billboard right across the street from a retirement community.

c.

Denying a claim that arguably is not covered by the insurance contract, even though ultimately a jury determines that it is.

d.

All of the above.

7. Adam is single, but has been dating Janet for 3 months. They are planning a great trip to Hawaii, one which Janet could never afford if Adam was not paying for it. Adam's mom does not like airplanes and is concerned about him flying so far. She is elderly and loves her son dearly. She also relies on Adam to manage the family business as she cannot do that herself anymore. Jason, bank president, hears that Adam is planning a trip to Hawaii. He doesn't know Adam very well, has only met him once, but his bank has loaned Adam's family business a large amount of money. Jason is concerned that if anything happened to Adam the business may go under and struggle to pay his loan back. Janet, Adam's mom, and Jason all decide to take out life insurance on Adam. Who has an insurable interest?

Select one:

a.

Adam's mom.

b.

Janet.

c.

Jason.

d.

Both A and C.