4. Other types of insurance

Property and Casualty Insurance

True or False: Property and casualty insurance companies maintain less liquid asset portfolios than life insurance companies because they may experience unpredictable events that result in a massive amount of claims.

True

False

Susan purchases an older home and wants to obtain homeowners insurance. The home is at an increased risk of water damage because the plumbing has never been updated. In a weak economy, the insurance company charges her a lower premium than usual and agrees to take the risk. This pricing strategy is called

Healthcare Insurance

Becky develops diabetes and needs to schedule an appointment with an endocrinologist. She can only choose a doctor who participates in her healthcare plan. What type of healthcare plan does Susan participate in?

Other Types of Insurance

Determine the type of insurance that is used to cover each risk in the following list.

Risk	Type of Coverage
Loan payments owed to a bank if the borrower dies
Financial loss due to the death of the Chief Financial Officer of a firm
Damages from defective products that cause injury or harm
Damage to a firms building, furniture, and other assets
Losses that exceed the coverage of an existing insurance policy

Bond Insurance

True or False: Bond insurance is a promise by the insurer to guarantee payments to the bond insurer.

True

False

Mortgage Insurance

Which of the following are true regarding mortgage insurance? Check all that apply.

A credit default swap allows a borrower to offset his risk of default with another lender.

Mortgage insurance protects a lender from losses in case the borrower defaults on the loan.

To avoid purchasing mortgage insurance, mortgage lenders typically require borrowers to make a down payment greater than 20 percent of the cost of the home.