______1. Insurance is a method of transferring risk from one party to another.

______2. It is more important to insure large risks with a small probability of occurrence than to insure smaller risks that have a high probability of occurrence.

______3. Insurance is a major expense and plays a significant role in your personal budget.

______4. Insurance is a means of protecting yourself from speculative risk.

______5. You can only insure those items in which you have an insurable interest.

False 6. Peril is the uncertainty of a loss occurring.

True 7. Insurance underwriters are responsible for determining the premium that should be charged for each policy written.

______8. Federal law requires insurance companies to accept all applications which they receive but do permit the companies to individually determine the premium for each policy.

______9. The greater the risk that is being transferred, the higher the insurance premium.

______10. The probability of dying at a particular age is determined by an underwriter.

______11. An exclusion is the amount of each loss that will be paid by the individual.

______12. All insurance policies that offer the same coverage will charge the same premium.

______13. Once you transfer your risk to an insurance company, you can be totally assured of payment by that company if you incur a covered risk.

______14. Liability is usually the largest loss incurred.

______15. If your state has no-fault insurance laws, it is not necessary for you to carry liability auto insurance.

______16. If you carry underinsured auto coverage, your company may pay claims in excess of those paid by the other driver who was at-fault.

______17. If you are injured by a driver who has no auto insurance, you will receive benefits under your personal policy if you carry underinsured coverage.

______18. Collision insurance pays for damage to your car regardless of who is at-fault.

______19. Your insurance costs will be the same regardless of where you live.

______20. An all risk homeowners policy offers more protection than a named perils policy.

______21. An HO-1 policy offers greater insurance protection than an HO-2 policy.

______22. If you are a renter, you can purchase either HO-4 or HO-5 or HO-6 homeowners insurance on your belongings.

______23. HO-# policies cover all risks on the dwelling and contents of a homeowner.

______24. Contents coverage is usually set a s stated percent of the face value of a homeowners policy.

______25. Homeowners insurance normally limits the company liability for jewelry.

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______26. If you want to schedule your jewelry, you will need to add a floater to your homeowners policy.

______27. If you have a significant stamp or trading card collection, you should schedule them on your homeowners policy.

______28. Homeowners insurance automatically provides for the replacement of your home if it is totally

demolished in a storm.

______29. Earthquake damage is automatically included in the basic homeowners policy.

______30. Flood insurance is covered by your homeowners policy.

______31. If your roof is damaged by an ice storm, the insurance company will pay all costs associated with the

repair, if you have actual cash value coverage.

______32. Homeowners can add an insurance endorsement to their policy that will automatically adjust the face value for inflation.

______33. Most homeowner policies carry a coinsurance requirement of eighty (80%) per cent.

______34. The higher the deductible on your homeowners policy, the higher the annual premium.

______35. Insurance policies include the declarations page, definitions, agreement, exclusions and conditions.

MULTIPLE CHOICE Select the best response to each of the following.

___c___1. A person hired to represent the buyer of insurance is called a(n):

a. actuary b. agent c. broker d. underwriter

______2. Losses which are totally exempt from insurance coverage are known as:

a. conditions b. declarations c. deductibles d. exclusions

______3. If you receive an offer for limited insurance, your best course of action would probably be to:

a. purchase the insurance immediately because it is only offered for a very short period of time;

b. purchase the insurance because you will usually receive an excellent benefit for your dollar;

c. ignore the offer because you can get better coverage per insurance dollar with other policies;

d. ignore the offer because the insurance coverage is too broad and thus too expensive;

______4. You can reduce your insurance premiums by:

a. adding a rider; b. increasing your face value;

c. reducing your deductible; d. breaking your smoking habit.

______5. Damage caused by your car to someone elses property is covered by the:

a. property damage liability on your auto insurance; b. property damage liability on your homeowners policy;

c. bodily injury liability on your auto insurance; d. bodily injury liability on your homeowners insurance.

______6. Assume you have 50/100/50 auto liability insurance and that you cause an accident wherein you injure two pedestrians. One pedestrian incurs medical bills of $62,000 while the other only had $4500 in medical expenses. The insurance company would pay (Ignore any deductibles.)

a. $0; b. $50,000; c. $54,500; d. $66,500;

_______7. Auto liability insurance will NOT cover which of the following?

a. pain and suffering to passengers in another car when you hit that car in an auto accident

b. loss of earnings of a pedestrian who accidentally falls on your icy sidewalk.

c. medical costs for a friend who you permitted to drive your car & who was involved in an accident.

d. damage to a utility pole that you slid into during a snowstorm.

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______8. Assume that your car has a market value of $8,500. You are involved in a serious accident. The repair shop estimates that it will cost $9,300 to fix your car. The insurance company will:

a. repair your car and pay $9,300 less your deductible.

b. repair your car and pay the entire $9,300.

c. take your vehicle and give you $8,500.

d. will either repair your car or give you $9,300 whichever you prefer.

______9. Which one of the following will decrease your auto insurance premium?

a. buying a moderately priced sedan instead of the higher priced sports car.

b. decreasing your insurance deductible.

c. selecting single liability coverage instead of split liability coverage.

d. getting a speeding ticket as you drive to work.

______10. As a full-time student, you may NOT be covered by your parents homeowners ins if you:

a. are over age twenty-one and live at home;

b. reside in a college dormitory;

c. reside off campus while attending college.

d. live elsewhere but are injured while visiting your parents.

______11. Which one of the following offers the greatest insurance protection for a homeowner?

a. HO-2 policy; b. HO-3 policy; c. HO-5 policy; d. HO-15 policy;

_____12. You are planning on building a new home. The lot costs $38,000 and the home costs $160,000. The minimum homeowners policy you should purchase is:

a. $128,000; b. $158,400; c. $160,000; d. $198,000;

______13. Umbrella policies pay:

a. all liability costs incurred from an accident or injury sustained either at home or in your car.

b. only liability costs in excess of your auto insurance liability coverage.

c. all liability costs in excess of your auto and homeowners liability coverage.

d. liability costs in excess of your auto and homeowners policy up to the coverage limits.

______14. An umbrella policy will cover which of the following?

a. only liability claims arising from an incident at home or in your car.

b. personal injury and property damage claims only.

c. personal injury and property damage claims as well as all legal costs incurred.

d. personal injury, property damage, libel and false arrest claims.

______15. The comprehensive coverage provided by your auto insurance does NOT cover which of the following?

a. damages to your car when a tree blows onto the roof during a windstorm.

b. losses incurred when someone decides to steal your custom wheels.

c. damages caused when your car is hit broadside at an intersection.

d. losses incurred when your electrical system shorts out causing your car to catch fire.