Pretest

Question 1

The basic purpose of insurance is to provide

Revolt · Accepted Answer

protection.

Question 2

Which is always a cost when buying insurance?

Revolt · Accepted Answer

premium

Question 3

In what circumstance would a property insurance claim be rejected?

Revolt · Accepted Answer

The insurance company finds that a homeowner intentionally caused damage.

Question 4

What is an insurance premium?

Revolt · Accepted Answer

the amount paid for an insurance policy

Question 5

What is one cost of avoiding insurance?

Revolt · Accepted Answer

falling into debt if faced with a serious problem

Question 6

In what way does a deductible help an insurance company?

Revolt · Accepted Answer

It lowers the payout the company has to make.

Question 7

Why does insurance often provide "peace of mind"?

Revolt · Accepted Answer

People are less worried when they know they have protection from risk.

Question 8

Most people prefer to pay health insurance premiums rather than pay out-of-pocket for medical expenses because

Revolt · Accepted Answer

medical costs can be extremely high, and insurance is more affordable than paying out-of-pocket for a hospital stay.

Question 9

How can an insurance company make a profit by taking in premiums and making payouts?

Revolt · Accepted Answer

The value of the premiums the company takes in is higher than the value of the payouts it makes.

Question 10

Which questions about risk should someone ask before making a big purchase? Choose three correct answers.

Revolt · Accepted Answer

What could go wrong?; What problems could be most damaging?; What problems are most likely to happen?

Pretest Answers