Chapter 19 Reading Quiz Answer Key

1. Around the time in the Middle Ages when government bonds were created, there was more financial innovation. What else was invented?

I. Pensions. Pensions are guaranteed monthly amounts of money when you retire, which began as a way to reward knights. II. Banks. Banks were safe institutions to deposit money first used by pilgrims and protected by knights.

A. I only B. II only C. Both I and II D. Neither I nor II

2. What is ?

A. When a customer agrees to pay a regular amount of money over a period of time to be compensated in case of specific emergencies. GENERALLY, you need insurance for things you could not afford if you had an emergency. For example, we have because if we ever need to go to the hospital and get surgery, we would never be able to afford the bill (which could be $50,000+). Instead we pay an insurance company each month or year and then they pay for any hospital stays or emergencies. B. When a customer will receive a regular amount of money over a period of time if he/she pays for the full cost of an emergency. C. When a customer receives principal and interest after giving the government a loan. D. When a person receives a monthly amount of money after retiring.

3. Which of the following is a common example of insurance?

I. Renters insurance – pay a little bit of money every month to be compensated in case of fire or theft to an apartment II. Health insurance – pay a monthly amount of money to be compensated in case of a health emergency III. insurance – pay a monthly amount of money to be compensated in case you ever run out of money in times of

A. I only B. I and II C. I, II, and III – these all exist! If you rent an apartment, you almost always need renter’s before a landlord will let you move in. Health insurance is no longer mandatory by law, but everyone should have it since having an emergency can easily bankrupt a person. Longevity insurance is much less common and not necessary for most people. If you’re wise with your money and investing for retirement, you should not need this. D. None of the above

4. In a normal insurance agreement, what refers to the monthly amount of money you pay to keep the insurance plan in place?

A. Premium – this is the payment you make each month (or once a year) to keep an active. If you miss a payment(s), you may lose your coverage. B. C. Copay D. Contract

5. In a normal insurance agreement, what refers to the extra money you need to pay (in addition to the monthly amount) to activate your insurance? For example, if you are in a car accident and the total repairs are $10,000 and you have to pay your $200 monthly payment and an additional $300 for the insurance company to pay for the rest of the $10,000 repairs, what is the $300 called?

A. Premium B. Deductible – this is what you pay before the insurance company pays. For instance, if you have a $1,000 deductible for your health insurance and you get a hospital bill for $60,000, you pay the first $1,000 (the deductible) and the insurance company pays the rest ($59,000). C. Copay D. Contract

Chapter 19 YouTube Quiz Answer Key

1. Insurance can be described as…

I. The ability to never pay for a thing ever II. Protection III. An extra layer of defense

A. I only B. II only C. I and II D. II and III – we all wish I were true, but sadly it is not.

2. When does someone buy insurance?

A. When they have an exciting opportunity that will change the rest of their life B. Right before college C. When the cost of an emergency is much higher than how much they have in savings. GENERALLY, you need insurance for things you could not afford if you had an emergency. For example, we have health insurance because if we ever need to go to the hospital and get surgery, we would never be able to afford the bill (which could be $50,000+). Instead we pay an insurance company each month or year and then they pay for any hospital stays or emergencies. D. When you have never had a savings account before

3. Why should we always be suspicious about insurance products?

A. There is a “seller” of insurance products and usually that person receives a high commission, which is a bonus an employee receives upon completion of sale. These insurance agents will always try to get you to spend as much money as possible on your insurance policy because the more you spend, the more they make. Know what you need and don’t fall for getting more than is necessary. B. There is a “seller” of insurance products and usually that person receives a low commission, which is a bonus an employee receives upon completion of sale. C. They come in physical packages and are protected by dragons. D. There is NO “seller,” therefore the government requires $0 cost to consumers.

4. Which statement is true about insurance salespeople?

I. They always follow the fiduciary standard. II. They sometimes follow the fiduciary standard. III. They sometimes receive bonuses.

A. I only B. I and II C. II and III – I is false. They do not have to follow the fiduciary standard, which means they do not need to act in your interests. Instead, they can get you to buy products that make them more money even if you do not need them. D. I, II, and III

5. What is ?

A. You pay premiums and your family receives money when you die. This is ideal for people who have children in case they pass away. If this happens, their family will receive a large check to help pay for expenses. B. You are given little payments over months and years of your life and must pay back the government. C. The type of insurance that pays 100% of your hospital bills so you don’t have to. D. The belief that living off your savings is good enough.

6. A premium can be described as…

A. The amount you receive when you activate your policy B. The amount you pay to start and sometimes maintain an existing policy - this is the payment you make each month (or once a year) to keep an insurance policy active. If you miss a payment(s), you may lose your coverage. C. The amount you pay the government, every year, in small portions of all your year’s paychecks D. The name of your tax refund

7. can be described as …

A. The amount you must pay to activate your insurance – this is what you pay before the insurance company pays the rest. For instance, if you have a $1,000 deductible for your health insurance and you get a hospital bill for $60,000, you pay the first $1,000 (the deductible) and the insurance company pays the rest ($59,000). B. Surprise bills the insurance company designed on purpose so you won’t notice paying them C. The amount you receive when your insurance contract pays out D. What happens when insurance companies fail to pay out, which the government refuses to get involved with

8. Car insurance is…

I. Required by law II. Gets more expensive with every traffic ticket a person gets III. Is always highest for those between age 18 and 25

A. I only B. I and II C. II and III D. I, II, and III – Safe drivers who have experience (older than 25 with no accidents or traffic tickets) pay less for their car insurance because the insurance company can trust them more. By law, everyone who owns a car must have car insurance.

9. Life insurance tends to be best for ...

A. Children B. Married individuals C. Families D. B and C – children do not need life insurance because they don’t have bills that they pay. Parents and married people should have life insurance so that if something happens to them, their family can still pay the bills without their income.

10. Health insurance is important because…

I. It tends to be very cheap for all people. II. If someone loses it, health insurance bills become causes of bankruptcy.

A. I only B. II only – health insurance is generally not cheap, but if you don’t have it and you have an emergency, the bills can easily bankrupt most people. C. Both I and II D. Neither I nor II Chapter 19 Summative Quiz Answer Key

1) Asset Z pays a specific amount of interest. More specifically, a person provides principal to the government, bank, or company. Then, the government, bank, or company returns the principal plus interest. Asset Z is what?

A. A credit card B. A debit card C. A bond – this is basically a reverse loan from you to the government. For example, you give them $50 now and in, let’s say 5 years, they’ll give you $75. D. A stock

2) Henry’s Peanut Butter Shoes (HPBS) is a new company taking America by storm. In an attempt to recruit and keep high-quality employees, HPBS decides to offer a retirement plan. This specific retirement plan has become increasingly rare in America. After a certain number of years with the company, a retired employee can receive a monthly check from retirement until death no matter what. What is the name of this retirement plan?

A. 401(k) B. Roth IRA C. Traditional IRA D. Pension – these are not very common anymore because they are expensive for companies to fund. But, if you can get a job with a good pension, that’s great! Once you stop working, you’ll get paid most of your salary until you pass away.

3) Read the scenario below:

Imagine a homeowner purchases X. This requires the homeowner to pay $100 a month to protect the house. The homeowner returns home one night to see the entire house in flames. The homeowner receives a check for the entire worth of a house to rebuild it.

What is X?

A. Security system B. Insurance – again, this is what we buy to protect something we could not afford to pay for in an emergency C. Investing D. Securities 4) Inya starts a business designing tiny, little hats to put on goldfish. To increase profits, her business sells little hats and the goldfish all at once. Consequently, she spends her nights breaking into supermarkets to buy packages of goldfish crackers. After realizing that goldfish crackers are very different than actual goldfish, she begins to break into pet stores at night to obtain actual goldfish. To continue with this (illegal) business model, Inya needs a car! Inya decides to buy a 1990 Toyota Camry for $1,000.

Inya takes out car insurance where she will pay $50 a month. If she is in an accident, the insurance company will reimburse her for damages up to the $1,000 value of her car.

Which of the following statements are true?

I. If Inya never gets into a car accident for a year, all her $50 payments can be returned to her. II. If Inya cancels her insurance policy, she can get all of her $50 payments returned to her.

A. I only B. II only C. Both I and II D. Neither I nor II – sadly, if you never need to use your insurance, you don’t get any of the money back. Likewise if you cancel a policy after not ever using it, you will not get any money back.

5) What statement best describes the purpose of insurance?

A) To protect against very small or minimal payments a person may be charged for during an emergency.

B) To protect against large expenses and emergencies a person would not have enough money for. YOU DO NOT NEED INSURANCE for things you can afford to pay for if something happens to it (i.e. book insurance)

C) To save money in an account that produces a high amount of interest, although not as high as 6%, that a person can touch only in times of major catastrophes.

D) To save money in a way that avoids payment on taxes.

Questions 6 through 8 refer to the scenario below:

Rachell is an old woman who is losing all of her hair. She is unemployed after losing her job at Taco Bell for scaring away all of the customers. The likely cause is a bad diet as she has continued to drink from the Delaware river since she was in high school, even though her 12th grade personal finance teachers have warned her to stop doing this. Rachell is worried that her water-drinking habits will lead to serious health problems, so she purchases health insurance. Rachell must pay $300 a month, $20 whenever she visits a doctor, and $200 when she actually activates her health insurance, such as getting surgery or a procedure done. The insurance will cover all the expenses of the surgery or procedure after the $200.

6) The $300 a month in this scenario is called what?

A) the deductible B) the premium – this is what you pay each month (or sometimes year) to keep your insurance policy active. C) the copay D) the coverage

7) The $20 whenever Rachell visits the doctor is called what?

A) the deductible B) the premium C) the copay – this is the small amount of money you pay each time you use a covered service, no matter the overall cost. This is most common with doctor visits. D) the coverage

8) The $200 to actually undergo a medical procedure is called what?

A) the deductible – this is what you pay before the insurance company pays the rest of the bill B) the premium C) the copay D) the coverage

For Question #9, first look at the list below:

I. Longevity insurance – If you pay your insurance payments, the insurance company will pay your bills if you run out of money when you are old.

II. Car insurance – If you pay your insurance payments, the insurance company will repair or replace your car in case of an accident.

III. Renters insurance – If you pay your insurance payments, the insurance company will replace your belongings if stolen or destroyed in case of a fire or other disaster.

9) All of the types of insurance listed above actually exist EXCEPT . . .

A. I only B. I and III C. II only D. All of the 3 above actually exist. If you rent an apartment, you almost always need renter’s before a landlord will let you move in. Health insurance is no longer mandatory by law, but everyone should have it since having an emergency can easily bankrupt a person. Longevity insurance is much less common and not necessary for most people. If you’re wise with your money and investing for retirement, you should not need this.

10) Which of the two statements below are true?

I. All insurance plans have a copay, deductible, and premium. II. You should purchase the first insurance plan that looks good because almost all insurance plans that are by different insurance companies are identical.

A. I only B. II only C. Both I and II are true D. Neither I nor II is true – Not all plans have a copay, deductible, and premium. Some have only one or two of these. And never purchase the first plan that looks good to you – instead, do research and compare prices and weigh the price against what you’re getting. Some plans are cheap because they don’t cover much, which means they might not be worth it. Other plans are expensive and may cover more than you need. Find an affordable plan that covers exactly what you need.