CHAPTER 19, QUIZ A INSURANCE

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CHAPTER 19, QUIZ A
INSURANCE

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.

____    1. How much would Roberta's semiannual premium be for a 5-year term insurance policy with
           a face value of $350,000, based on Tables 19-1 and 19-2? She turned 26 years old on her
           last birthday. (Round your answer to the nearest cent.)
           a. $450.00
           b. $392.50
           c. $456.82
           d. $549.70

____    2. At age 22, Valencia has decided to purchase a 5-year term insurance policy with face value
           of $165,000. Use the table in the book to calculate her semiannual premium.
           a. $366.30
           b. $190.48
           c. $192.27
           d. $351.90

____    3. At age 29, Wendi purchased a 20-year endowment insurance policy with face value of
           $230,000. She is now 32 and wants to cancel her policy. Determine the amount of reduced
           paid-up insurance to which she is entitled.
           a. $15,070
           b. $19,879
           c. $22,310
           d. $17,338

____    4. At age 40, Janice has decided to purchase a 20-payment life insurance policy with a face
           value of $390,000. Use Tables 19-1 and 19-2 to calculate her quarterly premium. (Round
           your answer to the nearest cent.)
           a. $3,587.16
           b. $10,258.30
           c. $3679.81
           d. $9,524.10

____    5. At age 20, Zia purchased a 20-payment life insurance policy with face value of $415,000.
           She is now 40 and wants to cancel her policy. Use Table 19-3 to calculate the amount of
           reduced paid-up insurance to which she is entitled.
           a. $41,500
           b. $354,665
           c. $382,530
           d. $415,000



                                                                                     Chapter 19, Quiz A
                                                                                                 Page 1
____   6. At age 30, Rolanda purchased a whole life insurance policy with a face value of $115,325.
          She is now 40 and wants to cancel her policy. Use Table 19-3 to calculate the amount of
          reduced paid-up insurance to which she is entitled.
          a. $21,491.58
          b. $21,450.45
          c. $18,340.00
          d. $26,222.22

____   7. If Tanya's husband were to die, she and her children could live on $60,400 per year. Tina
          makes $33,100 annually, and estimates additional income of $21,500 from other sources.
          How much insurance should she purchase on her husband to cover the shortfall, assuming a
          16.7% prevailing interest rate? (Round your answer to the nearest $1000.)
          a. $28,000
          b. $36,000
          c. $35,000
          d. $30,000

____   8. Carlos's wife earns $11,600 per year. If Carlos dies, his family would require $57,900 to
          cover their living expenses. Some of the yearly expenses would be offset by $29,200 from
          stock dividends, but this is still not enough. How much insurance should Carlos have to
          cover the shortfall, given a 13.7% prevailing interest rate?
          a. $298,000
          b. $423,000
          c. $3,000
          d. $125,000

____   9. As the owner of a business, Avery needs fire insurance. His building is worth $427,000 and
          the contents are valued at $325,600. His agent placed the building in structural
          classification A and area rating 4. Use Table 19-4 to calculate his total premium. (Round
          your answer to the nearest cent.)
          a. $4,929.30
          b. $4,534.08
          c. $4,733.38
          d. $4,463.83

____ 10. What would be the total fire insurance premium for Best Seconds if their $837,500 building
         belongs in structural classification D? The contents are worth $421,300 and they received
         an area rating of 2. (The rates per $100 are found in the book)
         a. $7,680.72
         b. $5,126.34
         c. $6,587.14
         d. $7,255.49

____ 11. Michele's property insurance on her home was canceled by the insurance company after a
         period of 315 days. What would be her regular refund if the annual premium were $385.00?
         (Round your answer to the nearest cent.)
         a. $332.62
         b. $332.26
         c. $52.74
         d. $385.00

           Chapter 19, Quiz A
           Page 2
____ 12. The Wings and Things owns a building valued at $2,154,000 but has decided to insure it for
         only $1,542,000. Their insurance policy stipulates coinsurance of 80%. If a fire were to
         cause $685,000 in damage, how much would the insurance company pay on the claim?
         (Round your answer to the nearest cent.)
         a. $612,970.05
         b. $503,000.00
         c. $635,403.86
         d. $667,329.21

____ 13. All Season Gifts owns a building valued at $802,000, but has decided to insure it for only
         $552,000. Their insurance policy stipulates coinsurance of 85%. If a fire were to cause
         $208,000 in damage, how much would the insurance company pay on the claim? (Round
         your answer to the nearest cent.)
         a. $208,000.00
         b. $16,190.05
         c. $168,425.99
         d. $191,800.00

____ 14. Affordable Consulting has insured its building with multiple companies for a total of
         $688,000, of which $275,200 is with USF&G. Assuming that all coinsurance requirements
         have been met, how much would USF&G be responsible for in the event of a $565,000 fire?
         a. $275,200
         b. $412,800
         c. $339,000
         d. $226,000

____ 15. A flood caused $620,000 in damages to a building owned by Super Storage Inc. The
         building, valued at $1,035,000, was insured for $847,000 despite a coinsurance requirement
         of 90% in their policy. How much of the loss will be covered by the insurance company?
         a. $558,000
         b. $620,000
         c. $507,381.64
         d. $563,757.38

____ 16. Tina's Pizza recently incurred $174,000 in damages from an earthquake. Massive Mutual is
         responsible for $240,800 out of a total of $688,000 coverage provided by multiple carriers. If all
         coinsurance requirements have been met, how much of the loss will be paid by Massive Mutual?
         a. $60,900
         b. $125,731
         c. $174,000
         d. $83,419

____ 17. Toby wishes to obtain auto insurance. He wants 50/100/50 liability coverage, $250
         deductible collision and full coverage comprehensive. He lives in territory 2 and has been
         assigned to driver class 3 with a rating factor of 2.95. Based on Tables 19-6 and 19-7, what
         would be his total premium, if his 2-year old car were in model class H? (Round your
         answer to the nearest cent.)
         a. $349.00
         b. $805.35
         c. $680.55
         d. $1,029.55

                                                                                      Chapter 19, Quiz A
                                                                                                  Page 3
____ 18. Jessie is happy with his 7-year old car, but he is thinking of switching auto insurance
         carriers. His agent said the car was in model class A and that he would be assigned to driver
         class 3. For comparison with his current policy, he wants a price quote for 50/100/50
         liability coverage, $500 deductible collision and $100 deductible comprehensive. Based on
         the tables in the book, what would be his total premium if he lives in territory 2 and has a
         rating factor of 1.3?
         a. $309.98
         b. $306.00
         c. $355.24
         d. $397.80

____ 19. Maya was involved in an auto accident in which she was at fault. Her own car sustained
         $1,926 damages and the other vehicle cost $1,126 to repair. Maya was not injured, but the
         driver of the other car required medical treatment $3,448 and a passenger's injuries totaled
         $3,946. Maya's policy includes 10/20/5 liability, $250 deductible collision and full coverage
         comprehensive. How much of the damages must Maya pay?
         a. $385
         b. $250
         c. $260
         d. $955

____ 20. Based on the information in Clarice's auto insurance application, her agent has assigned
         Clarice to driver class 4 and placed her 4-year-old car in model class J. The state where she
         lives requires minimum liability coverage of 50/100/100, and she also wants $500
         deductible collision and full coverage comprehensive. Using Tables 19-6 and 19-7, find her
         total premium, if her state is in territory 1, and she has received a rating factor of 2.6.
         (Round your answer to the nearest cent.)
         a. $981.75
         b. $721.25
         c. $565.50
         d. $860.60

____ 21. Brian was involved in an auto accident in which he was at fault. His own car sustained $3,026
         damages and the other vehicle cost $1,424 to repair. Brian was not injured, but the driver of
         the other car required medical treatment costing $32,375 and a passenger's injuries totaling
         $20,704. Brian's policy includes 50/100/50 liability, $500 deductible collision and $100
         deductible comprehensive. How much of the damages must the insurance company pay?
         a. $57,029
         b. $2,526
         c. $500
         d. $1,424

____ 22. Mary was involved in an auto accident in which she was at fault. Her own car sustained $2,503
         damages and the other vehicle cost $396 to repair. Mary was not injured, but the driver of the
         other car required medical treatment costing $2,298. There was additional property damage in
         the amount of $2,558. Mary's policy includes 10/20/5 liability, $250 deductible collision, and
         $100 deductible comprehensive. How much of the damages must Mary pay?
         a. $250
         b. $396
         c. $7,505
         d. $7,755

            Chapter 19, Quiz A
            Page 4
Problem

     23. Calculate the annual, semiannual, quarterly, and monthly premiums for the following life
         insurance policy, rounding to the nearest cent.

            Face         Sex and
          Value of       Age of          Type of    Annual           Semiannual     Quarterly       Monthly
           Policy        Insured          Policy   Premium            Premium       Premium         Premium
          $80,000      Female-35        20-Payment _____              ________      _______         _______
                                           Life

     24. Calculate the annual, semiannual, quarterly, and monthly premiums for the following life
         insurance policy, rounding to the nearest cent.

            Face         Sex and
          Value of        Age of          Type of       Annual       Semiannual     Quarterly       Monthly
           Policy         Insured         Policy       Premium        Premium       Premium         Premium
          $160,000      Female-29          5-Year       _____         ________      _______         _______
                                           Term

     25. Calculate the value of the nonforfeiture options for the following life insurance policy
         issued to a female at age 20.

             Face Value       Years in       Type of        Cash         Paid-up       Extended          Term
              of Policy        Force         Policy         Value          Ins.          Years           Day
              $20,000            3           Whole        ________      _________      ________        ________
                                              Life

     26. Calculate the value of the nonforfeiture options for the following life insurance policy
         issued to a female at age 20.

             Face Value       Years in      Type of         Cash         Paid-up       Extended          Term
              of Policy        Force         Policy         Value          Ins.          Years           Day
              $50,000           5          20-Year         _______      _________      ________        ________
                                          Endowment

     27. Calculate the building, contents, and total property insurance premium for the following
         policy.

            Area        Structural       Building      Building      Contents     Contents        Total
           Rating         Class           Value        Premium        Value       Premium       Premium
             1              A            $125,000      _______       $50,000      _______       _______

     28. Calculate the short-term premium and refund for the policy canceled by the insured.

               Annual                Canceled           Short-term
              Premium                  After             Premium             Refund
                $550                 4 months           _________           ________




                                                                                  Chapter 19, Quiz A
                                                                                              Page 5
        29. Calculate the short-term premium and refund for the policy canceled by the insured.

                  Annual               Canceled              Short-term
                 Premium                After                 Premium                 Refund
                   $896                 5 days               _________               ________

        30. Calculate the regular refund for the following policy canceled by the insurance company.

                  Annual               Canceled
                 Premium                 After                 Refund
                  $1,280               9 months               _______

        31. Calculate the amount to be paid by the insurance company for the claim.

               Replacement                                                                       Amount of Loss
                Value of             Face Value        Coinsurance             Amount             Insurance Co.
                Building              of Policy          Clause                of Loss              Will Pay
                $100,000              $90,000             90%                  $1,000           ______________

        32. Calculate the amount to be paid by the insurance company for the claim.

               Replacement                                                                       Amount of Loss
                 Value of            Face Value        Coinsurance            Amount              Insurance Co.
                 Building             of Policy          Clause                of Loss              Will Pay
                $2,000,000           $1,600,000           80%                 $800,000          ______________

        33. Calculate the annual premium for the following motor vehicle insurance policy.

                          Driver   Bodily    Prop.   Model     Vehicle     Comp.       Rating     Coll.     Annual
              Territory   Class    Injury   Damage   Class      Age        Deduct.     Factor    Deduct.   Premium
                 4          1      15/30     25       N           2         Full         3        $500     _______
                                                                          Coverage


Essay

        34. Ricky Rose, age 40, wants to purchase a whole life policy with a face value of $50,500.
            What are the annual insurance premiums for this policy? (Use Table 19-1)

        35. Elaine Neumann, 25 years old, is considering purchasing either a 20-payment life or a 20-
            year endowment policy. If Elaine is willing to spend $600 per year on insurance premiums,
            how much more coverage can she purchase with 20-payment life than 20-year endowment?
            (Round to nearest thousand) (Use Table 19-1)

        36. If Janice stops paying premiums on her $350,000 whole life insurance policy at age 23, how
            much longer could she be covered by a $350,000 term policy with no additional premiums?
            She originally purchased the policy 3 years ago.




             Chapter 19, Quiz A
             Page 6
37. As an insurance agent, you are asked by Oceana Industries for a quote on the total annual
    premium for property insurance on a new warehouse in the amount of $975,000. The
    building is structural classification C and area rating 3. In addition, Oceana will require
    contents insurance in the amount of $2,100,000. What is the amount of your quote? (Use
    Table 19-4)

38. Moore Stores has a property insurance policy with an annual premium of $3,750. In recent
    months, Moore Stores failed four fire inspections, and filed three burglary claims against
    the policy. The insurance company has elected to cancel the policy, which has been in
    effect for 173 days. What is the regular refund due Moore Stores? (Round to the nearest
    cent)

39. Medical Arts Center had property valued at $380,000 and insured for $285,000. The fire
    insurance policy contained a 75% coinsurance clause. Medical Arts had water damage of
    $82,000. How much of this damage will be paid by the insurance company?

40. Harriett needs temporary property insurance to cover her home for a period of 20 days.
    Based on the table in the book what would be her short-rate premium if the annual premium
    is $998.00?

41. Fernando's Motorcycles owns a building valued at $1,091,000, but has decided to insure it
    for only $587,000. Their insurance policy stipulates coinsurance of 70%. If a fire were to
    cause $516,000 in damage, how much would the insurance company pay on the claim?

42. Jessie wishes to obtain auto insurance. She wants 100/300/100 liability coverage, $250
    deductible collision and $100 deductible comprehensive. She lives in territory 3 and has
    been assigned to driver class 3 with a rating factor of 1.65. Based on the tables in the book,
    what would be her total premium, if her 8-year old car is in model class P?

43. Don Nickels just purchased a new Toyota Camry. He is in driver classification 4 and lives
    in territory 4. His vehicle is in model class C. Don wants to purchase an automobile policy
    with bodily injury and property damage coverage in the amounts of 100/300/100. The
    insurance company has assigned a 4.0 rating factor to his policy. How much less will Don's
    annual premium be if he chooses collision coverage with $500 deductible rather than $250
    deductible, and comprehensive coverage with $100 deductible rather than full coverage?




                                                                             Chapter 19, Quiz A
                                                                                         Page 7

				
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