Free RIBO Insurance Fundamentals Test 2 — Questions and Answers
Question 1: You accidentally strike the guardrail as you attempt to avoid hitting a squirrel.
- Automobile (Correct answer)
- Life
- Health
- None of the above
Correct answer: Automobile
Striking a guardrail with your vehicle, even to avoid an animal, is an incident involving your automobile. Damage to your car or the guardrail would typically be covered under an automobile insurance policy, specifically the collision or property damage liability components, depending on the circumstances and who is at fault.
Question 2: The deductible is the part of the insurance coverage that the insured will pay. It is usually set to determine the monthly premium amount.
- TRUE (Correct answer)
- FALSE
Correct answer: TRUE
The deductible is the amount of money the insured must pay out-of-pocket before their insurance coverage begins to pay for a claim. Generally, a higher deductible means the insured takes on more initial risk, which results in a lower monthly premium. Conversely, a lower deductible leads to a higher premium because the insurer bears more of the initial claim cost.
Question 3: You hit and injure a pedestrian in a crosswalk.
- Automobile (Correct answer)
- Health
- Life Insurance
- Disability
Correct answer: Automobile
Hitting and injuring a pedestrian in a crosswalk involves your automobile and falls under the liability coverage of an automobile insurance policy. This coverage protects you financially if you are found legally responsible for bodily injury or property damage to others in an accident involving your vehicle.
Question 4: Automobile Insurance is an arrangement between an individual (consumer) and insurer (insurance company) to protect the individual against risk from automobile accidents.
- TRUE (Correct answer)
- FALSE
Correct answer: TRUE
Automobile insurance is indeed a contract between an individual and an insurer designed to protect the individual from financial losses arising from automobile accidents. It provides coverage for damages to the insured's vehicle, injuries to the insured and passengers, and liability for damages or injuries caused to others.
Question 5: You need a cast after breaking an ankle while roller-blading.
- Disability Insurance
- Life Insurance
- Health Insurance (Correct answer)
- Automobile Insurance
Correct answer: Health Insurance
Breaking an ankle and needing a cast is a medical expense directly related to a bodily injury. Health insurance is designed to cover medical costs such as doctor visits, hospital stays, surgeries, and medical devices like casts, making it the appropriate coverage for this scenario.
Question 6: Your apartment is broken into and your computer is stolen. You will need to purchase homeowners insurance.
- TRUE
- FALSE (Correct answer)
Correct answer: FALSE
If your apartment is broken into and your computer is stolen, you would need renter's insurance, not homeowner's insurance. Homeowner's insurance is for individuals who own their homes, while renter's insurance specifically covers personal belongings and liability for those who rent their living space.
Question 7: You are injured in an automobile accident and are at home unable to work for 4 months.
- Life Insurance
- Disability Insurance (Correct answer)
- Health Insurance
- Automobile Insurance
Correct answer: Disability Insurance
Being injured in an automobile accident and unable to work for an extended period means a loss of income. Disability insurance is specifically designed to replace a portion of your income if you become disabled and cannot work due to illness or injury, providing financial stability during recovery.
Question 8: You are advising a client about retirement planning. The client is 38 years old and wants to purchase a retirement annuity to supplement future Social Security benefits and a company pension plan. The client does not currently have any significant savings, but insists that he will be able to set something aside each year for annuity payments. Which of the following plan structures would be most appropriate for this client?
- Periodic payment immediate results
- Single payment deferred annuity
- Periodic payment deferred annuity (Correct answer)
- Single payment immediate annuity
Correct answer: Periodic payment deferred annuity
For a 38-year-old client with no significant savings who plans to set aside money annually for retirement, a periodic payment deferred annuity is most appropriate. 'Periodic payment' allows for regular contributions over time, and 'deferred annuity' means the income payments will begin at a future date, aligning with long-term retirement planning goals.
Question 9: Mary knows that her husband Larry is of sound physical health and is expected to have a long life, but Larry has trouble remembering things, has a terrible track record when it comes to managing money, and cannot be relied upon to make sound financial decisions. Which of the following life insurance settlement options should Mary elect under her won policy to guarantee Larry will have lifetime income if she dies first?
- Fixed amount installments
- Life income option (Correct answer)
- Fixed period installments
- Lump sum settlement
Correct answer: Life income option
To guarantee Larry will have lifetime income despite his inability to manage money, Mary should elect the life income option. This settlement option provides regular payments for the remainder of Larry's life, ensuring a steady stream of income that he cannot outlive, regardless of his financial management skills. It offers the highest degree of income security.
Question 10: When Donna applied for life insurance and paid the initial premium on August 14, her agent issued a conditional receipt. Donna was killed in an automobile accident on August 22, before the policy was issued. The insurance company found nothing negative in her application and has no reason to reject the risk or classify it other than as standard. In this case, the insurance company will:
- Return the premium to Donna's estate ,since it has not obligation to pay the death claim
- Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued
- Issue the policy anyway and pay the face value to Donna's beneficiary (Correct answer)
- Negotiate a reduced settlement with Donna's beneficiary due to the unusual circumstances involved
Correct answer: Issue the policy anyway and pay the face value to Donna's beneficiary
A conditional receipt typically provides temporary coverage from the date of application, provided that the applicant is insurable according to the insurer's underwriting standards. Since the insurance company found nothing negative and would have issued the policy as standard, the coverage was effectively in force at the time of Donna's death, obligating the insurer to pay the death claim.
Question 11: All the following statements pertaining to Medicaid are correct EXCEPT:
- It limits financial assistance to persons age 65 or over who are in need of medical services they cannot afford (Correct answer)
- Its purpose is to help eligible needy persons with medical assistance
- Medicaid benefits may be used to pay the deductible and coinsurance amounts to medicare
- It provides federal matching funds to states for medical public assistance plans
Correct answer: It limits financial assistance to persons age 65 or over who are in need of medical services they cannot afford
Medicaid is a joint federal and state program that provides health coverage to low-income individuals and families, including children, pregnant women, parents, and individuals with disabilities. It does not limit financial assistance solely to persons age 65 or over; that demographic is primarily covered by Medicare. Medicaid's purpose is broader, assisting eligible needy persons of various ages with medical services they cannot afford.
Free RIBO Insurance Fundamentals Test 2
You accidentally strike the guardrail as you attempt to avoid hitting a squirrel.