Chapter 10—Protecting Your Property
KEYWORDS:
Bloom’s: Applying
74. Your standard HO policy will not include coverage for damage done by
a.
flood.
b.
windstorm.
c.
falling objects.
d.
fire.
e.
theft.
ANSWER:
a
POINTS:
DIFFICULTY:
Easy
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
KEYWORDS:
Bloom’s: Remembering
75. A standard HO policy covers damage from most weather-related perils except
a.
snow and freezing.
b.
windstorms and earthquakes.
c.
earthquakes and floods.
d.
floods and volcanic eruption.
e.
Freezing and volcanic eruption.
POINTS:
DIFFICULTY:
Easy
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
KEYWORDS:
Bloom’s: Remembering
76. A liability suit could result when
a.
b.
c.
d.
e.
ANSWER:
POINTS:
DIFFICULTY:
Moderate
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – AK – DISC: Risk and return
Chapter 10—Protecting Your Property
United States – KS – DISC: Risk and Return
Bloom’s: Applying
77. Which Homeowners’ policy is best suited for a resident of a rented apartment to cover that person’s personal property?
a.
HO-3
b.
HO-4
c.
HO-5
d.
HO-8
e.
A Homeowners’ policy will not apply since the real estate involved is not owned by the insured.
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – AK – DISC: Risk and return
Bloom’s: Applying
78. Negligence results when a person
a.
is not insured.
b.
acts as a “reasonable person.”
c.
fails to act as a “reasonable person.”
d.
admits it.
e.
is more than 18 years old.
c
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – AK – DISC: Risk and return
Bloom’s: Applying
79. The 80 percent co-insurance clause in a homeowner’s policy would cause a reduction in the claim payment for a
covered loss to the dwelling of $30,000 in which of the following cases?
a.
Policy dwelling limit of $75,000, replacement cost of dwelling $90,000, actual cash value of dwelling $85,000
b.
Policy dwelling limit of $75,000, replacement cost of dwelling $100,000, actual cash value of dwelling
$90,000
c.
Policy dwelling limit of $90,000, replacement cost of dwelling $90,000, actual cash value of dwelling $90,000
d.
Policy dwelling limit of $110,000, replacement cost of dwelling $110,000, actual cash value of dwelling
$90,000
e.
Policy dwelling limit of $120,000, replacement cost of dwelling $100,000, actual cash value of dwelling
$90,000
Chapter 10—Protecting Your Property
Challenging
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Analyzing
80. The principle of ____ states that an insured should not be compensated by an insurance company in an amount
exceeding the economic loss.
a.
subrogation
b.
insurable interest
c.
coinsurance
d.
indemnity
e.
none of these
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
81. Donna, who is single and 30 years old, has received several speeding tickets recently and was shocked by the effect on
her auto insurance. Donna drives a 2004 Pontiac Firebird, is currently not covered by health insurance, has an emergency
fund of $25,000, an income of $100,000 per year, and an investment portfolio of $230,000. She is trying to reduce the
price of her auto insurance. Which of the following actions is most likely to be advisable?
a.
Lower her liability limits to the minimum allowed in her state
b.
Drop her medical payments coverage
c.
Raise her deductible from $250 to $1,000
d.
Drop her comprehensive coverage and keep collision only
e.
Drop everything from her policy except the liability insurance
c
Challenging
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
82. Generally, actual cash value is defined as
a.
replacement cost.
b.
original purchase price.
c.
market value.
Chapter 10—Protecting Your Property
d.
purchase cost minus depreciation.
e.
replacement cost minus depreciation.
e
Easy
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
83. The principle of indemnity would prevent:
a.
the act of one person from being imputed to another.
b.
an insured from collecting more than he lost.
c.
a negligent third party from being held liable for damages if the injured party was insured.
d.
a significant amount of loss control activity.
e.
an insurer from ever waiving it’s right to subrogation.
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
84. The right of ____ gives the insurer the right to recover its costs from the at-fault party after the company has paid a
claim to its insured.
a.
subrogation
b.
indemnity
c.
insurance interest
d.
coinsurance
e.
none of these
a
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
85. Tom visits George at his ranch. Although a novice on horseback, Tom decides to join George on a morning ride.
George recommends that Tom ride an unbroken stallion named Satan. While mounting Satan, Tom is thrown headlong
through the windshield of Tom’s car. The damage to the car is $2,000 and Tom’s own insurance pays him $1,500 ($500
Chapter 10—Protecting Your Property
deductible). Under what principle could Tom’s insurance company sue George for his negligence?
a.
adhesion
b.
indemnity
c.
estoppel
d.
subrogation
e.
misrepresentation
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
86. If you have two insurance policies on the same property, the ____ clause explains how the two insurance companies
will share the loss.
a.
principle of indemnity.
b.
co-insurance clause.
c.
other-insurance clause.
d.
companies’ insurable interest.
e.
principle of subrogation.
c
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
87. Co-insurance is a policy provision to discourage the policyholder from being
a.
overinsured.
b.
underinsured.
c.
insured only if specified by lending agency.
d.
insured with more than one company.
e.
insured by government agencies.
Moderate
PFIN.BILL.17.10-1 – LO: 10-1
United States – KS – DISC: Risk and Return
Chapter 10—Protecting Your Property
88. The form of homeowner’s insurance that is incorrectly paired with the insured is
a.
HO–1, renter.
b.
HO–2, homeowner.
c.
HO–4, renter.
d.
HO–8, homeowner.
e.
HO–6, condominium owner.
89. The condominium owner would choose an ____ policy.
a.
HO-2
b.
HO-3
c.
HO-4
d.
HO-6
e.
HO-8
90. You just purchased an older home with a market value of $100,000 and a replacement value of $180,000. What HO
form would meet your needs?
a.
HO-2
b.
HO-3
c.
HO-4
d.
HO-6
e.
HO-8
Chapter 10—Protecting Your Property
United States – KS – DISC: Risk and Return
Bloom’s: Applying
91. Which of the following best describes the personal property floater?
a.
An endorsement providing coverage for items of expensive personal property not adequately covered under
the standard homeowners policy.
b.
An addition to the automobile policy intended to cover items of personal property that are often in or upon a
covered automobile.
c.
A specialized inland marine policy covering boats and trailers used with boats.
d.
A liability policy that covers against liability caused by ownership or use of items of personal property.
e.
None of these
a
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – KS – DISC: Risk and Return
Bloom’s: Applying
92. Section I of the homeowner’s insurance policy covers
a.
the home only.
b.
the house and the garage.
c.
liability of an insured.
d.
the home and its contents.
e.
liability and the house.
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – KS – DISC: Risk and Return
Bloom’s: Remembering
93. Section II of the homeowner’s insurance contract covers
a.
libel.
b.
contractual wrongdoing.
c.
the house and contents.
d.
liability of the insured.
e.
none of these.
Moderate
Chapter 10—Protecting Your Property
94. A homeowner’s policy does not provide protection for the personal property of
a.
family members at home.
b.
family members while in college.
c.
guests.
d.
tenants.
e.
family members traveling.
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
95. The deductible on a standard homeowners’ policy applies to
a.
coverage on the house.
b.
coverage on personal property.
c.
liability coverage.
d.
a and b
e.
a, b, and c
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
96. The policy that pays based on replacement cost for the home is
a.
HO–1.
b.
HO–3.
c.
HO–5.
d.
HO–6.
e.
HO–8.
e
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
Chapter 10—Protecting Your Property
97. The Thomson’s house burned to the ground! They felt they were adequately covered (see coverage below). Their car
(market value $10,000) was in the garage and totally destroyed. How much will they be reimbursed for their auto from
their HO-3 policy?
Replacement value of house
$80,000
ACV coverage on house
60,000
Deductible
300
a.
$0
b.
$9,700
c.
$6,000
d.
$5,700
e.
$8,000
a
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – KS – DISC: Risk and Return
Bloom’s: Analyzing
98. The Thomson’s house burned to the ground! They felt they were adequately covered (see coverage below). Their car
(market value $10,000) was in the garage and totally destroyed. How much will the Thompsons be reimbursed for their
home?
Replacement value of house
$80,000
ACV coverage on house
60,000
Deductible
300
a.
$80,000
b.
$79,700
c.
$63,700
d.
$60,000
e.
$59,700
e
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
Chapter 10—Protecting Your Property
99. Your son left his skateboard at the bottom of the basement stairs. While going downstairs to change a broken light
bulb, you step on the skateboard and break your ankle during the fall. Medical damages total $1,455. How much will your
$140,000 homeowners’ insurance policy pay for this accident? The policy has $100,000 comprehensive liability coverage
and medical payments of $1,000/person.
a.
$0
b.
$250
c.
$500
d.
$1,000
e.
$1,455
a
Challenging
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Analyzing
100. Which of the following would be insured for actual cash value under a standard HO-2 policy?
a.
The house
b.
Unscheduled personal property
c.
Scheduled personal property
d.
a and c
e.
a, b, and c
Challenging
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
101. Which of the following events would probably increase your auto premiums?
a.
Celebrating your 25th birthday
b.
Getting married
c.
Trading in your 2004 Mercedes for a 2005 Ford Escort
d.
Increasing your collision deductible
e.
None of the above
e
Bloom’s: Analyzing
Chapter 10—Protecting Your Property
102. Homeowners’ insurance will cover which of the following?
a.
The meter reader bitten by Cujo, your poodle
b.
Your attached garage destroyed by Hurricane Ivan
c.
Your new Pontiac Transport minivan parked inside the garage
d.
a, b, and c
e.
a and b
e
1
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
103. Carl and Alexandra purchased a $200,000 homeowners policy for their house in 1988. They have renewed the policy
each year since and have replacement coverage. This policy has a $1,000 deductible. Their home now has a replacement
value of $275,000. Last week they came home to find a small fire which caused the following damages:
home
$50,000
personal property
20,000
landscaping
7,000
Assume Carl and Alexandra have a standard HO-3 policy with personal property covered at 50% and landscaping covered
for 10%. How much will the insurance pay for the losses of their personal property and landscaping?
a.
$15,000
b.
$ 9,700
c.
$24,545
d.
$27,000
e.
$30,000
b
1
Challenging
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Evaluating
104. Common types of property that are subject to internal limits on homeowner’s policies include
Challenging
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Analyzing
Chapter 10—Protecting Your Property
a.
musical instruments
b.
furniture
c.
jewelry
d.
clothing
e.
all of the above
c
Moderate
PFIN.BILL.17.10-2 – LO: 10-2
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
105. Which of the following losses is most likely to be covered under your auto liability insurance?
a.
a legal bill incurred by your insurer defending you from a claim related to an accident caused by your
negligence.
b.
a medical bill for your injuries related to an accident that you caused.
c.
a medical bill for injuries to a passenger in your car arising from an accident in which you were not at fault.
d.
an auto shop bill for repairs of a car you own due to an accident caused by your negligence.
e.
an auto repair bill for repairs to the car of a driver who negligently caused an accident with you.
a
Challenging
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
106. Auto insurance is needed primarily because of
a.
potential damage to auto.
b.
potential liability claims.
c.
lender’s requirements.
d.
state law.
e.
federal requirements.
Moderate
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
Chapter 10—Protecting Your Property
107. Liability coverage provides payment to the
a.
insured for damage.
b.
family members of insured.
c.
holder of the auto loan.
d.
lawyer needed to defend criminal offense.
e.
nonfamily members involved in the accident.
e
Moderate
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
108. Your auto liability insurance shows bodily injury limits of $100,000/$300,000. This means
a.
$100,000 would be paid to the people in your automobile and the $300,000 to passengers in the other car.
b.
$100,000 is the limit per individual with $300,000 divided equally between the remaining passengers.
c.
$100,000 is the limit per individual with a $300,000 limit per accident.
d.
$100,000 is the limit per individual with $300,000 being paid to the driver of the other car.
e.
none of the above.
c
Easy
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
109. Kevin, who has liability limits of $20,000/$40,000/$20,000 and a $500 collision deductible, is involved in an
accident. Due to his negligence he runs into a Rolls Royce. Three people sustained bodily injuries in the Rolls Royce. The
driver’s injuries were worth $1,000,000, a passenger received injuries worth $12,500, and another passenger received
injuries of $7,100. How much will the PAP pay for these bodily injuries?
a.
$20,000
b.
$40,000
c.
$39,600
d.
$39,100
e.
Some other amount
c
Challenging
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – AK – DISC: Risk and return
Chapter 10—Protecting Your Property
110. Maximum liability policy limits are determined by
a.
state law.
b.
auto type.
c.
the insured’s choice.
d.
court proceedings.
e.
none of these.
c
Moderate
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
111. Persons insured under Part B medical payments coverage include
a.
the named insured
b.
family members in the car.
c.
any guest occupying the car.
d.
a and b
e.
a, b, and c
e
Easy
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
112. To reduce auto insurance premiums as your car depreciates in value, you should consider self-insuring which of the
following risks?
a.
bodily injury liability
b.
collision
c.
property damage liability
d.
comprehensive (other than collision)
e.
b and d
e
Challenging
PFIN.BILL.17.10-4 – LO: 10-4
United States – KS – DISC: Risk and Return
Bloom’s: Evaluating
Chapter 10—Protecting Your Property
113. Comprehensive automobile coverage refers to
a.
complete coverage including liability, medical payments, and damage to your auto.
b.
coverage for damage to an insured automobile from perils other than collision.
c.
coverage that adds items of property such as CB radios and telephones that are ordinarily excluded
d.
coverage for bodily injuries suffered in an automobile accident.
e.
none of the above.
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Remembering
114. Who is eligible to receive benefits under Part B medical payments coverage of your automobile policy?
a.
Your daughter’s friends riding in your car
b.
The driver of the car you hit
c.
The pedestrian you hit while crossing the street
d.
a and c
e.
All of the above
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
United States – KS – DISC: Risk and Return
Bloom’s: Applying
115. In order to collect under uninsured motorists coverage, three specific conditions must be in effect. They are:
a.
another motorist was at fault; this motorist has no available insurance coverage; and damages were incurred.
b.
another motorist was at fault; this motorist has insurance coverage; and damages were incurred.
c.
you were at fault; the other motorist has insurance coverage; and damages were incurred.
d.
you were at fault; the other motorist has no available insurance coverage; and damages were incurred.
e.
either a or d
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Analyzing
Chapter 10—Protecting Your Property
116. Collision protection pays for damage to
a.
non-auto property of insured.
b.
auto of insured.
c.
all autos in accident.
d.
auto of other party in accident.
e.
non-auto property of others damaged in accident.
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding
117. Your car is damaged by fire while parked in your garage. Protection would be provided by
a.
comprehensive auto coverage.
b.
property damage liability coverage.
c.
homeowner’s personal property coverage.
d.
homeowner’s dwelling unit coverage.
e.
auto collision coverage.
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Applying
118. After packing up to return home for the holidays after the fall semester, Tex stopped at Double T bookstore to sell
back his used textbooks. After collecting $25, he headed back to his pickup truck only to find a broken window, the truck
broken into, and all his suitcases and personal property gone. The loss of his personal property and suitcases would be
covered by
a.
umbrella liability insurance.
b.
comprehensive (other than collision) auto coverage.
c.
property damage liability auto coverage.
d.
property damage to the property of others (homeowners’ coverage).
e.
personal property off premises (homeowners’ coverage).
PFIN.BILL.17.10-4 – LO: 10-4
United States – BUSPROG: Analytic skills – BUSPROG: Analytical skills
Bloom’s: Understanding