1)Karen White has a personal auto policy with coverage limits of 20/40/15. Karen has collision coverage with a $250 deductible. She runs a red light and causes an auto accident in which three people are injured. Each of them sues her for $20300 in personal injury and $5000 for vehicle damage (there is no injury to Karen or her car). How much will Karen have to pay out of pocket, and how much will her insurer pay?

Karen pays $5000 and insurer pays $60900

Karen pays $21150 and insurer pays 55650

Karen pays $20900 and insurer pays $55000

Karen pays $0 and insurer pays $65900

2)Elizabeth has a homeowners insurance policy. Her home was broken into, and $8600 worth of possessions were stolen. If her deductible is $2100, how much coverage will her insurance company pay for the loss?

$8600

$6500

$0

$2100

3)If the market value of your home is $264000, but the replacement cost of the structure is $192000, how much homeowners insurance should you have?

$264000

$72000

$456000

$192000

4)As in most financial planning, the last step in developing your insurance plan is to

determine your coverage needs.

identify top insurers.

choose the best package available.

reevaluate your needs regularly.

5)Insurance is the risk management method usually most appropriate for __________________ risks.

high frequency and low severity

low frequency and low severity

high frequency and high severity

low frequency and high severity

6)Liability risk is the risk of being held responsible for

the actions of mother nature.

someone else's losses.

your losses.

the actions of others.

7)To determine the expected loss, multiply the

expected frequency by the expected severity.

probability of frequency by the value of a total loss.

frequency by the loss history.

probability of frequency by the market value of loss.

8)Wearing a helmet when riding a bike is an example of risk

transfer.

retention.

reduction.

avoidance.

9)In order to evaluate your potential losses, you must

avoid the risk or reduce the risk.

estimate the dollar cost of potential losses and transfer the risk.

identify your risk exposures and estimate the dollar cost of potential losses.

estimate the probability the loss will occur and estimate the dollar cost of the loss.