AnswersGeneral Financial Literacy - Brinkerhoff - 2000 - 202627Insurance

Insurance — Unit test Answers

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Maria's family has a health insurance plan. Her mother has $350 deducted from her paychecks each month.When Maria visited the doctor, her mother paid a $25 fee. The insurance company covered the rest of the cost of the visit.When Maria's mother went to the hospital, her family was responsible for paying the first $1,000 of the bill. After this payment, the insurance company covered the rest of the costs.

A
payout
B
deductible
C
co-payment
D
premium
2
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How can an insurance company make a profit by taking in premiums and making payouts?

A
The value of the premiums the company takes in is higher than the value of the payouts it makes.
B
The value of the premiums the company takes in is equal to the value of the payouts it makes.
C
The company only makes payouts from a pool of funds, not from individual premiums.
D
The company issues its policies to individuals who are unlikely to require payouts.
3

Which questions about risk should someone ask before making a big purchase? Check all that apply. What problems are most likely to happen?What can be done to avoid liability?What could go wrong?What problems could be most damaging?What option has no risk?

A
What problems are most likely to happen?
B
What can be done to avoid liability?
C
What could go wrong?
D
What problems could be most damaging?
E
What option has no risk?
4

Why does insurance often provide "peace of mind"?

A
People know their insurance coverage will help prevent accidents and damage.
B
People trust that they will make a profit if they pay insurance premiums.
C
People are not concerned about their health if they can pay for doctor's visits.
D
People are less worried when they know they have protection from risk.
5

The basic purpose of insurance is to provide

A
loans.
B
prevention.
C
protection.
D
liability.
6

In what way does a deductible help an insurance company?

A
It adds to the company’s pool of funds.
B
It increases consumers' insurance premiums.
C
It lowers the payout the company has to make.
D
It reduces consumers' co-payments.
7

Which type of insurance policy would someone get to protect others only?

A
health insurance
B
life insurance
C
property insurance
D
disability insurance
8

What must happen in order for an insurance company to make a payout? Check all that apply. The insurance company must verify the claim.The insured party must file a claim.The insured party must purchase property.The insurance policy must be in place.The insured party must experience a covered loss.

A
The insurance company must verify the claim.
B
The insured party must file a claim.
C
The insured party must purchase property.
D
The insurance policy must be in place.
E
The insured party must experience a covered loss.
9

Insurance is a financial service that allows a

A
consumer to transfer all risk to a company.
B
company to control finances for a consumer.
C
consumer to share liability with a company.
D
company to maximize risk for a consumer.
10

What is an insurance premium?

A
the value of something lost or damaged
B
the highest payout available by an insurer
C
the amount paid for an insurance policy
D
the best type of insurance available

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