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Fin 230 Review Session. Exam 2. Brian Alvin [email protected] Bryan Brooks [email protected] Brett Engel [email protected] Amanda Kastle [email protected] Katie Kimble [email protected] Laura Nemeth [email protected] Overview. Auto and Health Policy Review Reduction of Benefits (HW #7)

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Fin 230 review session

Fin 230 Review Session

Exam 2

Brian Alvin [email protected] Bryan Brooks [email protected]

Brett Engel [email protected] Amanda Kastle [email protected]

Katie Kimble [email protected] Laura Nemeth [email protected]


Overview
Overview

  • Auto and Health Policy Review

  • Reduction of Benefits (HW #7)

  • Life Insurance

    • Types (HW #7)

    • Benefits (HW #8)

    • Cost Comparisons (HW #9)

  • Liability Exposures (HW #9)

  • Homeowners Insurance (HW #10)



Auto review1
Auto Review

Your daughter lives with you and has her own car. Since her insurance premiums have increased substantially, she decides to cancel her car insurance on October 10, 2006, but she doesn’t tell you this. You borrow her car on October 20,2006. While driving her car, you run into a tree, injuring yourself and her car. Your medical bills are $30,000. It costs $10,400 to repair your daughter’s car; the Actual Cash Value of her car before the accident was $9,000.

  • $0

  • $33,900

  • $35,300

  • $38,900

  • None of the above


Auto review2
Auto Review

Your daughter lives with you and has her own car. Since her insurance premiums have increased substantially, she decides to cancel her car insurance on October 10, 2006, but she doesn’t tell you this. You borrow her car on October 20,2006. While driving her car, you run into a tree, injuring yourself and her car. Your medical bills are $30,000. It costs $10,400 to repair your daughter’s car; the Actual Cash Value of her car before the accident was $9,000.

  • $0

  • $33,900

  • $35,300

  • $38,900

  • None of the above


Auto review3
Auto Review

You borrow your neighbor’s car, which is covered under a policy with Fireman’s Fund with the same coverages and limits you have on your car. You lose control of the car and hit a pedestrian. The pedestrian sues you and wins a bodily injury award of $250,000.

  • $0

  • $25,000

  • $100,000

  • $150,000

  • None of the above


Auto review4
Auto Review

You borrow your neighbor’s car, which is covered under a policy with Fireman’s Fund with the same coverages and limits you have on your car. You lose control of the car and hit a pedestrian. The pedestrian sues you and wins a bodily injury award of $250,000.

  • $0

  • $25,000

  • $100,000

  • $150,000

  • None of the above


Auto review5
Auto Review

While on a two week vacation in Los Angeles, you rent a car. You decline the insurance coverage offered by the rental agency. On the last day of your vacation, you run into a low hanging branch, breaking the front windshield and damaging the hood. It costs $600 to replace the windshield and $1,500 to repair the hood. The rental agency holds you responsible for the loss.

  • $0

  • $600

  • $2,000

  • $2,100

  • None of the above

    **Answer in the lectures notes for non-owned cars**


Auto review6
Auto Review

While on a two week vacation in Los Angeles, you rent a car. You decline the insurance coverage offered by the rental agency. On the last day of your vacation, you run into a low hanging branch, breaking the front windshield and damaging the hood. It costs $600 to replace the windshield and $1,500 to repair the hood. The rental agency holds you responsible for the loss.

  • $0

  • $600

  • $2,000

  • $2,100

  • None of the above

    **Answer in the lectures notes for non-owned cars**



Health policy review1
Health Policy Review

While hiking in the mountains of Colorado, you trip and knock yourself unconscious. An air ambulance flies you to the nearest hospital emergency room. The doctor does an X-ray and CT scan on you, and finds out that you are able to go home to recuperate. You are billed $2,000 for air ambulance, $750 for the CT scan, $200 for the x-rays and $300 for the treatment in the emergency room.

  • $0

  • $1,090

  • $1,840

  • $2,000

  • None of the above


Health policy review2
Health Policy Review

While hiking in the mountains of Colorado, you trip and knock yourself unconscious. An air ambulance flies you to the nearest hospital emergency room. The doctor does an X-ray and CT scan on you, and finds out that you are able to go home to recuperate. You are billed $2,000 for air ambulance, $750 for the CT scan, $200 for the x-rays and $300 for the treatment in the emergency room.

  • $0

  • $1,090

  • $1,840

  • $2,000

  • None of the above


Health policy review3
Health Policy Review

You failed your goal-setting project for Fin 230 and realize that everyone else got A’s. You are really depressed and want to snap out of your depression. You see a psychiatrist 2 times each week for a year. Each session with your psychiatrist costs you $90/visit

  • $0

  • $1,575

  • $4,680

  • $7,488

  • None of the above


Health policy review4
Health Policy Review

You failed your goal-setting project for Fin 230 and realize that everyone else got A’s. You are really depressed and want to snap out of your depression. You see a psychiatrist 2 times each week for a year. Each session with your psychiatrist costs you $90/visit

  • $0

  • $1,575

  • $4,680

  • $7,488

  • None of the above


Health policy review5
Health Policy Review

After you have been waiting for 4 years for a new kidney, doctors finally find one. You are charged $500 a day for the hospital room, $30,000 for the operating room, $45,000 in drugs & supplies. The surgeon charges you $100,000 and the assistant surgeon charges you $50,000. You stay in the hospital for 25 days.

  • $0

  • $177,900

  • $185,400

  • $187,500

  • None of the above


Health policy review6
Health Policy Review

After you have been waiting for 4 years for a new kidney, doctors finally find one. You are charged $500 a day for the hospital room, $30,000 for the operating room, $45,000 in drugs & supplies. The surgeon charges you $100,000 and the assistant surgeon charges you $50,000. You stay in the hospital for 25 days.

  • $0

  • $177,900

  • $185,400

  • $187,500

  • None of the above ($205,400)



Use for questions 1 2
Use for questions 1 & 2

You are driving your car along Green Street when a squirrel darts out in front of your car. You swerve to avoid hitting the animal, but you lose control and crash into a light pole. An ambulance races you to Carle Hospital where you are hospitalized for 20 days and undergo extensive surgery. The surgeon charges you $40,000 for the surgery, the assistant surgeon charges $9,000 and the anesthesia costs $20,000. The anesthetist personally administered the anesthesia and remained in constant attendance during the surgery. You are billed $500 per day for the hospital room and board, $5,000 for the operating room expenses and $2,500 for medicine while in the hospital. You are billed $500 for the ambulance ride. It costs $9,000 to repair your car, which had a $15,000 cash value at the time of the loss.


Health insurance
Health Insurance

What is the Initial Benefit Payment under the U of I Undergraduate Student Insurance Plan?

  • $0

  • $35,500

  • $35,825

  • $42,450

  • None of the above


Health insurance1
Health Insurance

What is the Initial Benefit Payment under the U of I Undergraduate Student Insurance Plan?

  • $0

  • $35,500

  • $35,825

  • $42,450

  • None of the above


Health insurance2
Health Insurance

What is the Total Payment the U of I Undergraduate Student Insurance Plan will make on this loss?

  • $0

  • $53,100

  • $62,000

  • $71,000

  • None of the above


Health insurance3
Health Insurance

What is the Total Payment the U of I Undergraduate Student Insurance Plan will make on this loss?

  • $0

  • $53,100

  • $62,000

  • $71,000

  • None of the above


Life insurance
Life Insurance

Based on the Commissioners 1980 Standard Mortality Table (Appendix F in the text), how old would a male be when he lived has lived half his total life expectancy (within 1 year)?

  • 24

  • 37

  • 39

  • 50

  • None of the above


Life insurance1
Life Insurance

Based on the Commissioners 1980 Standard Mortality Table (Appendix F in the text), how old would a male be when he lived has lived half his total life expectancy (within 1 year)?

  • 24

  • 37

  • 39

  • 50

  • None of the above


Life insurance2
Life Insurance

A 30-year-old female purchased a $100,000 whole life policy for $1,500 a year. She receives dividends of $5,000 over time. At age 60, she surrenders that policy for $70,000. If this individual is in the 28% tax bracket at that point, how much does she have to pay in taxes when she surrenders the policy?

  • $0

  • $5,600

  • $8,400

  • $30,000

  • None of the above


Life insurance3
Life Insurance

A 30-year-old female purchased a $100,000 whole life policy for $1,500 a year. She receives dividends of $5,000 over time. At age 60, she surrenders that policy for $70,000. If this individual is in the 28% tax bracket at that point, how much does she have to pay in taxes when she surrenders the policy?

  • $0

  • $5,600

  • $8,400

  • $30,000

  • None of the above


Life insurance4
Life Insurance

Which of the following would be the most appropriate for an individual who is looking for a tax sheltered investment and is willing to accept risk in hopes of a higher return?

  • Re-entry term

  • Endowment life

  • Whole life

  • Yearly renewable term

  • Variable life


Life insurance5
Life Insurance

Which of the following would be the most appropriate for an individual who is looking for a tax sheltered investment and is willing to accept risk in hopes of a higher return?

  • Re-entry term

  • Endowment life

  • Whole life

  • Yearly renewable term

  • Variable life



If an individual wants no uncertainty in an insurance policy, which type of life insurance would he or she be most comfortable with?

  • Variable Life

  • Universal Life

  • Whole Life

  • Variable Universal

  • Re-entry Term


If an individual wants no uncertainty in an insurance policy, which type of life insurance would he or she be most comfortable with?

  • Variable Life

  • Universal Life

  • Whole Life

  • Variable Universal

  • Re-entry Term


John surrenders the policy on August 1, 2003 and selects the paid up insurance option. If he dies in a fire on August 15, 2019, how much will his wife Jane receive from the insurance company?

  • $0

  • $8,528

  • $30,500

  • $100,000

  • None of the above


John surrenders the policy on August 1, 2003 and selects the paid up insurance option. If he dies in a fire on August 15, 2019, how much will his wife Jane receive from the insurance company?

  • $0

  • $8,528

  • $30,500

  • $100,000

  • None of the above


John Doe pays his first five premiums on time, but then he gets amnesia and forgets to pay the rest of the premiums. If John dies on October 31, 2010, how much will his wife Jane receive from the insurance company?

  • $0

  • $4,588

  • $18,700

  • $100,000

  • None of the above


John Doe pays his first five premiums on time, but then he gets amnesia and forgets to pay the rest of the premiums. If John dies on October 31, 2010, how much will his wife Jane receive from the insurance company?

  • $0

  • $4,588

  • $18,700

  • $100,000

  • None of the above


John dies on August 7, 2046 from old age. His wife Jane with an adjusted age of 85 elects to receive joint and survivor life income with her son, Tom, who has an adjusted age of 60. What is the minimum monthly benefit they will receive?

  • $0

  • $4.40

  • $440

  • $480

  • None of the above


John dies on August 7, 2046 from old age. His wife Jane with an adjusted age of 85 elects to receive joint and survivor life income with her son, Tom, who has an adjusted age of 60. What is the minimum monthly benefit they will receive?

  • $0

  • $4.40

  • $440

  • $480

  • None of the above


If John Doe had lied on the policy application about his health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

  • $0

  • $11,411

  • $15,330

  • $100,000

  • None of the above


If John Doe had lied on the policy application about his health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

  • $0

  • $11,411

  • $15,330

  • $100,000

  • None of the above


HW #9 health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?


Life insurance cost comparisons
Life Insurance Cost Comparisons health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

  • Use the following information for the next 5

    questions about a Whole Life policy

    Face amount $275,000

    Annual Premium $3,700

    Dividends

    In year 20 $3,575

    First 20 years total $19,500

    Cash Values

    End of 19th year $74,000

    End of 20th year $81,000

    Accumulated Value of Dividends at

    The end of 20 years at 7.25% $48,250


Traditional net cost
Traditional Net Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year traditional net cost

index per $1,000 of coverage?

  • -7.64

  • -4.82

  • -3.55

  • 1.14

  • None of the above


Traditional net cost1
Traditional Net Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year traditional net cost

index per $1,000 of coverage?

  • -7.64

  • -4.82

  • -3.55

  • 1.14

  • None of the above


Interest adjusted surrender cost
Interest Adjusted Surrender Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year interest adjusted surrender

cost index per $1,000 of coverage based on a

7.25% interest rate?

  • 2.09

  • 3.05

  • 3.61

  • 6.76

  • None of the above


Interest adjusted surrender cost1
Interest Adjusted Surrender Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year interest adjusted surrender

cost index per $1,000 of coverage based on a

7.25% interest rate?

  • 2.09

  • 3.05

  • 3.61

  • 6.76

  • None of the above


Interest adjusted net payment cost
Interest Adjusted Net Payment Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year interest adjusted net payment

cost index per $1,000 of coverage based on a

7.25% interest rate?

  • 6.47

  • 9.57

  • 11.89

  • 12.65

  • None of the above


Interest adjusted net payment cost1
Interest Adjusted Net Payment Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year interest adjusted net payment

cost index per $1,000 of coverage based on a

7.25% interest rate?

  • 6.47

  • 9.57

  • 11.89

  • 12.65

  • None of the above


Interest adjusted net payment cost2
Interest Adjusted Net Payment Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year equivalent annual dividend per

$1,000 of coverage based on a 7.25% interest rate?

  • 1.57

  • 5.88

  • 10.68

  • 13.45

  • None of the above


Interest adjusted net payment cost3
Interest Adjusted Net Payment Cost health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the 20 year equivalent annual dividend per

$1,000 of coverage based on a 7.25% interest rate?

  • 1.57

  • 5.88

  • 10.68

  • 13.45

  • None of the above (3.88)


Yearly rate of return
Yearly Rate of Return health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the yearly rate of return for the 20th policy year

if the annual renewable term rate for this individual is

1.65 per 1,000?

  • 0.2%

  • 4.7%

  • 9.3%

  • 30.2%

  • None of the above


Yearly rate of return1
Yearly Rate of Return health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?

What is the yearly rate of return for the 20th policy year

if the annual renewable term rate for this individual is

1.65 per 1,000?

  • 0.2%

  • 4.7%

  • 9.3%

  • 30.2%

  • None of the above


Hw 10

HW #10 health, but the insurance company did not find out about the lie until John’s death on August 1, 2005, how much would Jane receive as a benefit?


For the following questions, assume that you have both the Homeowners Policy described in Appendix A of your textbook and the State Farm Car Policy, including the Declarations page, handed out in class. For the Homeowners Policy, assume the policy limits exceed 80% of the replacement cost of the house. Also, use the following information as a sample Declarations page for the Homeowners Policy.


Type of Coverage Homeowners Policy described in Appendix A of your textbook and the State Farm Car Policy, including the Declarations page, handed out in class. For the Homeowners Policy, assume the policy limits exceed 80% of the replacement cost of the house. Also, use the following information as a sample Declarations page for the Homeowners Policy.Limits of Liability Cov A – Dwelling $100,000 Cov B – Other Structure 10% of Cov A limit Cov C – Personal Property $50,000 Cov D – Loss of Use Actual Loss Sustained Cov E – Personal Liability $100,000 (per occurrence) Cov F – Medical Payments $1,000 (per person)


While you are away, your teenage son and his friends set up an indoor basketball court in the living room. An errant shot dents the drywall and then lands on your antique clock destroying it. It costs $1500 to replace the clock (ACV $1000) and $300 to repair the wall.

  • 0 D. $1,550

  • $50 E. None of the above

  • $1,050


While you are away, your teenage son and his friends set up an indoor basketball court in the living room. An errant shot dents the drywall and then lands on your antique clock destroying it. It costs $1500 to replace the clock (ACV $1000) and $300 to repair the wall.

  • 0 D. $1,550

  • $50 E. None of the above

  • $1,050


While you are sitting at home an earthquake hits your town. It destroys your house, which had a replacement cost of $100,000, your personal property, which had a replacement cost of $50,000 and an ACV of $40,000, and your car, which had an ACV of $15,000. You are also injured and go to the emergency room for treatment. You are billed $200 for the visit.

  • 0 D. $154,750

  • $15,000 E. None of the above

  • $15,200


While you are sitting at home an earthquake hits your town. It destroys your house, which had a replacement cost of $100,000, your personal property, which had a replacement cost of $50,000 and an ACV of $40,000, and your car, which had an ACV of $15,000. You are also injured and go to the emergency room for treatment. You are billed $200 for the visit.

  • 0 D. $154,750

  • $15,000 E. None of the above

  • $15,200


While you are out of your house, a burglar breaks down a door and steals your television set and your watch. The TV has a replacement value of $800 and an Actual Cash Value of $500. Your watch has a replacement value of $2500 and an Actual Cash Value of $1500. It costs $500 to repair the door.

  • $1,750 D. $2,300

  • $2,000 E. None of the above

  • $2,250


While you are out of your house, a burglar breaks down a door and steals your television set and your watch. The TV has a replacement value of $800 and an Actual Cash Value of $500. Your watch has a replacement value of $2500 and an Actual Cash Value of $1500. It costs $500 to repair the door.

  • $1,750 D. $2,300

  • $2,000 E. None of the above

  • $2,250


Your neighbor was over in your yard enjoying a backyard fire you had started. Your neighbor started running around to get away from a wasp, when he falls into the fire, burning himself. He incurs $15,000 in medical bills. He sues you, but you are not held liable for his injuries.

  • $0 D. $15,000

  • $750 E. None of the above

  • $1,000


Your neighbor was over in your yard enjoying a backyard fire you had started. Your neighbor started running around to get away from a wasp, when he falls into the fire, burning himself. He incurs $15,000 in medical bills. He sues you, but you are not held liable for his injuries.

  • $0 D. $15,000

  • $750 E. None of the above

  • $1,000


You fall asleep while smoking in bed, and wake up on fire. Although you escape, your house burns to the ground. The replacement cost of your house is $120,000, the ACV is $90,000. The replacement cost of your personal property is $60,000, the ACV is $40,000. You incur $30,000 in medical bills for skin grafts.

  • $0 D. $165,000

  • $129,750 E. None of the above

  • $139,750


You fall asleep while smoking in bed, and wake up on fire. Although you escape, your house burns to the ground. The replacement cost of your house is $120,000, the ACV is $90,000. The replacement cost of your personal property is $60,000, the ACV is $40,000. You incur $30,000 in medical bills for skin grafts.

  • $0 D. $165,000

  • $129,750 E.None of the above

  • $139,750


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