Homeowners Insurance Answers

Ben just purchased a house in an older neighborhood. After talking to several neighbors across the street, he found that he is paying much more in homeowners insurance than other homeowners in the neighborhood. Ben’s house is about 30 years old. It is made of wood framing and stucco texture. It has all of it’s original plumbing and electrical work. The brick wall at the back of his back yard separates his yard from a drainage wash. Which of the following is not a reasonable argument for the insurance company to use to justify Ben’s higher homeowners insurance premium?

A

The age and outdated structural design of the house implies that remodeling is likely. This warrants a higher premium.

B

Knowing that old plumbing has a tendency to break, there is a real possibility of internal flooding. This warrants a higher premium.

C

Since Ben is right next to a drainage wash, there is a certain danger of flood damage should the wash overflow. This warrants a higher premium.

D

Considering that the house is made of flammable materials and has the original wiring, there is a certain danger of fire. This warrants a higher premium.

2

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Which of the following is a cost homeowners insurance does not protect?

A

The cost of repair or replacement of a home lost in a natural disaster.

B

Additional living expenses required while your home is repaired after a disaster.

C

Replacement costs for all contents in your home, including high cost electronics.

D

The cost of medical expenses incurred by somebody getting injured on your property.

3

Cesar’s annual homeowners insurance premium is $972.80. If his home is valued at $253,000, roughly how much is Cesar paying for homeowners insurance?

A

$0.13 per $100 of value

B

$0.19 per $100 of value

C

$0.26 per $100 of value

D

$0.38 per $100 of value

4

Tara and Levi are trying to decide between homeowners insurance policies offered by two different agencies. AAA Insurance has offered to insure their home for an annual premium of $0.38 per $100 with a $500 deductible. Thompson’s Insurance has offered to insure the same home for an annual premium of $0.26 per $100 with an deductible of $1,000.Insurance CompanyAnnual Premium (per $100)DeductibleAAA Insurance$0.38 $500 Thompson's Insurance$0.26 $1,000 The house Tara and Levi purchased is valued at $425,000. Which of the following statements accurately describes the difference between the two plans?

A

AAA Insurance is cheapest if Tara and Levi experience an incident that results in severe damage or loss to their home.

B

AAA Insurance would be cheapest if Tara and Levi can avoid any incidents that result in severe damage or loss to their home.

C

Thompson’s Insurance is cheaper even if Tara and Levi experience an incident that results in severe damage or loss to their home.

D

Thompson’s will be more expensive whether or not Tara and Levi experience an incident that results in severe damage or loss to their home.

5

Which of the following will not help Robert lower his homeowners insurance premium?

A

Increase the deductible on his policy.

B

Remove replacement cost from his policy.

C

Reduce the number of riders on his policy.

D

Increase the total coverage of his home on his policy.

6

Tara and Levi are trying to decide between homeowners insurance policies offered by two different agencies. AAA Insurance has offered to insure their home for an annual premium of $0.38 per $100 with a $500 deductible. Thompson’s Insurance has offered to insure the same home for an annual premium of $0.26 per $100 with an deductible of $1,000.Insurance CompanyAnnual Premium (per $100)DeductibleAAA Insurance$0.38 $500 Thompson's Insurance$0.26 $1,000 The house Tara and Levi purchased is valued at $425,000. Which of the following statements accurately describes the difference between the two plans?

A

AAA Insurance is cheapest if Tara and Levi experience an incident that results in severe damage or loss to their home.

B

AAA Insurance would be cheapest if Tara and Levi can avoid any incidents that result in severe damage or loss to their home.

C

Thompson’s Insurance is cheaper even if Tara and Levi experience an incident that results in severe damage or loss to their home.

D

Thompson’s will be more expensive whether or not Tara and Levi experience an incident that results in severe damage or loss to their home.

7

Which of the following is a cost homeowners insurance does not protect?

A

The cost of repair or replacement of a home lost in a natural disaster.

B

Additional living expenses required while your home is repaired after a disaster.

C

Replacement costs for all contents in your home, including high cost electronics.

D

The cost of medical expenses incurred by somebody getting injured on your property.

8

Renters insurance is different than homeowners insurance in that _____.

A

unlike homeowner’s insurance, renter’s insurance will not cover items lost in a burglary.

B

homeowner’s insurance protects the building of residence while renter’s insurance does not.

C

renter’s insurance only applies to apartments when homeowner’s insurance only applies to houses.

D

additional living expenses are covered by renter’s insurance but not by homeowner’s insurance.

9

Zach is looking for a homeowners insurance policy for his new house. AAA Insurance company has offered him a plan that insures his home annually for $0.36 per $100 of value in the home. In order to make calculations easier, Thompson’s Insurance lists their annual homeowners insurance premium a bit differently, at $3.63 per $1,000 of value in the home. Zach’s house is worth $289,000. What should Zach be thinking as he chooses between the two insurance companies?

A

$3.63 per $1,000 is approximately the same as $0.36 per $100. The premiums for the two insurance companies will be the same.

B

The annual premium for his house would be cheaper through AAA.

C

The annual premium for his house would be cheaper through Thompson’s.

D

Since the two insurance companies list their premiums differently, the two cannot be compared.

10

In many cases, lenders allow homeowners to include their homeowners insurance premium with their monthly mortgage payment. Tim’s home is worth $279,500. If his homeowners insurance premium is $0.33 per $100, how much is added to his monthly mortgage payment for insurance?

A

$7.69

B

$76.86

C

$92.35

D

$922.35

11

In many cases, lenders allow homeowners to include their homeowners insurance premium with their monthly mortgage payment. Tim’s home is worth $279,500. If his homeowners insurance premium is $0.33 per $100, how much is added to his monthly mortgage payment for insurance?

A

$7.69

B

$76.86

C

$92.35

D

$922.35

12

Liam has purchased a fee-for-service health insurance plan from Leroux Health Insurance. Plan A includes a $248.00 monthly premium and an annual deductible of $5,500.00 (not including co-pays). Liam is a fairly healthy young man. He visits his primary care physician three times a year on scheduled visits. He sees a chiropractic specialist every week to help with lower back pain. He has no current prescriptions that need refilling regularly.Assuming Liam maintains his regular visits with his primary care physician and his chiropractor, and avoids any trips to the emergency room or urgent care, how much will Liam pay in health care related fees this year?Leroux Health InsurancePlan A Cost: Monthly Premium: $248.00 Annual Deductible: $5,500.00 Co-pays: Brand-name Prescriptions $35.00 Generic Prescriptions $15.00 Visits: Primary Care Physician: $40.00 Specialist: $60.00 Urgent Care: $125.00 Emergency Room: $325.00

A

$716.00

B

$3,816.00

C

$5,500.00

D

$6,216.00

13

Allie and Sarah decided that they want to purchase renters insurance for the apartment they share. They made a list of all of the items to be covered by the insurance policy, along with their estimated values. If the items to be covered total more than $3000, the insurance company charges an annual premium of 23% of the total value of the items. If the items to be covered total $3000 or less, the insurance company charges an annual premium of 20% of the total value of the items. Using the list of items Allie and Sarah provided, determine their monthly renters insurance premium. Allie's Stuff Sarah's Stuff TV ($250) Stereo ($75) Stereo ($150) Bicycle ($250) CD's ($225) CD's ($130) DVD's ($385) DVD's ($300) Bicycle ($400) IPOD ($80) Microwave ($30) Computer ($675) Laptop Computer ($950)

A

$65.00

B

$74.75

C

$325.00

D

$780.00

14

Susan is paying $0.30 per $100 on her $483,000 home in homeowners insurance annually. If her annual homeowners insurance premium is divided into twelve equal monthly installments to be included on each of her monthly mortgage payments of $2128.00, what is her total monthly payment?

A

$2,248.75

B

$2,409.75

C

$3,381.00

D

$3,577.00

15

Zach is looking for a homeowners insurance policy for his new house. AAA Insurance company has offered him a plan that insures his home annually for $0.36 per $100 of value in the home. In order to make calculations easier, Thompson’s Insurance lists their annual homeowners insurance premium a bit differently, at $3.63 per $1,000 of value in the home. Zach’s house is worth $289,000. What should Zach be thinking as he chooses between the two insurance companies?

A

$3.63 per $1,000 is approximately the same as $0.36 per $100. The premiums for the two insurance companies will be the same.

B

The annual premium for his house would be cheaper through AAA.

C

The annual premium for his house would be cheaper through Thompson’s.

D

Since the two insurance companies list their premiums differently, the two cannot be compared.

16

Allie and Sarah decided that they want to purchase renters insurance for the apartment they share. They made a list of all of the items to be covered by the insurance policy, along with their estimated values. If the items to be covered total more than $3000, the insurance company charges an annual premium of 23% of the total value of the items. If the items to be covered total $3000 or less, the insurance company charges an annual premium of 20% of the total value of the items. Using the list of items Allie and Sarah provided, determine their monthly renters insurance premium. Allie's Stuff Sarah's Stuff TV ($250) Stereo ($75) Stereo ($150) Bicycle ($250) CD's ($225) CD's ($130) DVD's ($385) DVD's ($300) Bicycle ($400) IPOD ($80) Microwave ($30) Computer ($675) Laptop Computer ($950)

A

$65.00

B

$74.75

C

$325.00

D

$780.00

17

Leroux Health Insurance is considering changing the options in one of their health care plans (Plan A) based on customer feedback that prescriptions and regular visits to the doctor are too expensive for the insured individual. How can Leroux reduce the costs of regular health care without driving up the price of their health care plan?Leroux Health InsurancePlan A Cost: Monthly Premium: $248.00 Annual Deductible: $5,500.00 Co-pays: Brand-name Prescriptions $35.00 Generic Prescriptions $15.00 Visits: Primary Care Physician: $40.00 Specialist: $60.00 Urgent Care: $125.00 Emergency Room: $325.00

A

Reduce the monthly premium but increase the co-pay amounts to compensate for the lower premium.

B

Reduce the annual deductible, but increase the co-pay amounts so that the monthly premium can stay the same.

C

Reduce the co-pay amounts but increase the annual deductible so that the monthly premium can stay the same.

D

Reduce the co-pay amounts but increase the monthly premium to compensate for the lower deductible.

18

Which of the following will not help Robert lower his homeowners insurance premium?

A

Increase the deductible on his policy.

B

Remove replacement cost from his policy.

C

Reduce the number of riders on his policy.

D

Increase the total coverage of his home on his policy.

19

Sammy is a full-time students who does not work. He is too old to stay on his parents health insurance and is looking for his own health care program. The two options he is considering are outlined in the tables below. OPTION 1: Fee-for-service OPTION 2: HMO $225 monthly premium $630 monthly premium$7,500 deductible No annual deductible Co-pays: Co-pays:Name-brand Drugs: $30 Name-brand Drugs:$25 Generic Drugs:$12 Generic Drugs$10 Visits: Visits: Primary Care Physician$30 Primary Care Physician$20 Specialist: $75 Specialist: $62 Urgent Care:$100 Urgent Care:$50 Emergency Room:$250 Emergency Room:$175 The first option is a fee-for-service plan with a $7,500 deductible. Sammy must pay the deductible amount in health-related costs (not including co-pays) before the insurance company will contribute. This plan costs $225.00 per month and requires co-pays for most standard healthcare costs.The second option is an HMO. It is significantly more expensive at $630 per month, but has no annual deductible. The standard co-pays are also less than those in the other option.Sammy is a young man in very good condition. He visits his primary care physician every other month to get physicals for school sports. He fills a prescription for his name-brand asthma inhaler every month. Sammy is an avid sportsman who loves skiing and snowboarding, two potentially dangerous activities.Considering the real possibility of a serious skiing or snowboarding accident that could put Sammy in the hospital for an extended period of time, which of the following statements is true for his situation? (Assume an extended hospital stay costs at least $12,000.)

A

In the event of a serious accident, the $7,500 deductible makes Option 1 the cheaper of the two.

B

The lower monthly premium associated with Option 1 is enough to offset the cost of a serious accident.

C

Even with the higher premium, Option 2 covers more of Sammy’s health care costs in the event of a serious accident.

D

Under Option 2, Sammy will have to pay for more of the health care costs resulting from a serious accident than he would under Option 1.

20

Jordy was living in a third story apartment in his complex. Up there he was paying an annual renters insurance premium of $325.00. When an opportunity to move to the ground floor came up, he jumped on it, but found out that, since burglaries are more common on ground floor apartments, his renters insurance premium would go up by 18%. What is his new annual renter’s insurance premium.

A

$58.50

B

$31.96

C

$268.96

D

$383.50

Homeowners Insurance Answers

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