Transcript FIN 230 Final Exam Review Session Simons, Bill Schneider, and PC Wong

FIN 230 Final Exam Review
Session
Brian Alvin, Kathy Gu, Eric Lam, Neal
Simons, Bill Schneider, and PC Wong
Final Exam Locations
Tuesday, December 11, 2007 – 8-11 AM
VERY IMPORTANT – You must take the
exam in the right room!
Show up on time! Late arrivals may not be
allowed to take the exam.
Last Name Begins
Exam Room
A-O
141 Wohlers Hall
P-Te
2 Education
Th-Z
166 Education
Final Exam
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Exam is open-book, open note
Exam will consist of 40 multiple choice
questions
Bring to the exam:
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#2 Pencils
Calculator
Car and Health Policies
Textbook for Life and Homeowners policies
and the mortality table (Appendices A, E
and F)
Study Tips
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Organize your notes, homework, and
exams
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Redo all of the homework
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Know exactly where things are that you
will need to reference
Go through and rework every question
Go online to see each question explained
Think critically about each question and
how the answer would change if certain
things in the question changed
Write down a summary of all the
exclusions, or where to find them for
each policy
Homework #1 Review
State Farm Car Policy:
Your Use of Your Car
Auto Policy 1
You are backing out of your driveway when
you hit your mailbox and an oncoming car.
Your mailbox incurs $500 of damage, your car
costs $2,100 to repair, and the other car
costs $2,400 to repair. The driver of the
other car incurs $2,000 of medical bills and is
entitled to a $20,000 bodily injury reward.
Your auto policy will pay:
A. $0
B. $6,400
C. $27,400
D. $27,900
E. None of the above
Auto Policy Answer 1
E. None of the above - $24,400
Your mailbox is not covered because
your auto policy does not cover
damages to your property.
2,000 Collision (2,100 – 100
Deductible)
+ 2,400 Property Damage
+ 20,000 Bodily Injury Liability
(includes med bills)
24,400
Auto Policy 2
Your car is stolen, and you immediately
report this to State Farm. You rent a
car for $30 a day. State Farm offers to
pay you for the loss 8 days after it was
stolen. The ACV of your car was
$12,000. Your auto policy will pay:
A. $0
B. $12,000
C. $12,200
D. $12,240
E. None of the above
Auto Policy Answer 2
C. $12,200
If your car is stolen, your policy will
pay up to $25 per day for
transportation costs.
25*8= 200
+ 12,000 Comprehensive
12,200
Homework #2 Review
State Farm Car Policy:
Uninsured/Underinsured
Un(der)insured Basics
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Only covered for un(der)insured in United States and its
territories or Canada
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Un(der)insured covers only bodily injury for you and
people in your car
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If you are not hit by a hit and run driver, your uninsured
coverage will not pay!
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Underinsured will only pay to bring the total coverage of
the other driver to 100,000
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This includes the driver’s existing coverage
Ie. Driver with 15,000 bodily injury liability coverage hits
you. Your underinsured will cover up to 85,000 (100,00015,000)
Un(der)insured Basics (cont.)
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You can get both un(der)insured coverage and
medical payments coverage for the same
accident
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Medical payments pays first
Any remaining bodily injury award will be covered
under your un(der)insured coverage
Example:
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You are hit by an uninsured driver and incur 10,000
in medical bills. You sue the driver and are entitled
to a 200,000 bodily injury award.
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Medical payments coverage will pay 10,000
200,000-10,000 = 190,000 in bodily injury remains
Your insured coverage has a limit of 100,000
So in total, your policy will pay 10,000 (med) +
100,000 (uninsured) = 110,000
Problem #1
While driving your car in California after seeing the Illini
demolish the Trojans, you are hit by a car and severely
injured. You incur $40,000 in medical bills and are
entitled to a $180,000 bodily injury award but the other
driver only has 25/50/100 in coverage. Your car costs
$11,000 to repair.
a) 25,000
b) 100,000
c) 125,000
d) 135,900
e) None of the above
Problem #1 - Answer
Correct answer: B
The other driver will pay the entire cost to
repair your car. He will also pay $25,000
of your bodily injury award.
Medical:
40,000  25,000 (limit)
Underinsured:180,000 - 25,000 – 25,000 = 130,000
 75,000 (limit) (100,000 – 25,000)
Total:
100,000
Problem #2
You are walking to your FIN 230 Final when
one of your classmates, afraid of being late,
comes speeding down the street and hits you.
You incur $40,000 in medical bills and would
be entitled to a $200,000 bodily injury award
but the other student is uninsured.
a) 0
b) 25,000
c) 40,000
d) 125,000
e) None of the above
Problem #2 - Answer
Correct answer: D
Both medical and un(der)insured coverage
apply if you a struck by a motor vehicle as a
pedestrian
Medical:
$25,000 in medical coverage
Uninsured: $200,000 - $25,000 = $175,000,
but $100,000 limit
Total: $25,000 + $100,000 = $125,000
Homework #3 Review
State Farm Car Policy:
- Your Use of Other Cars
- Other People’s Use of Your Car
- Other People’s Use of Other Cars
HW #3 Question 1
Your 17 year old son Allen, who lives with
you, borrows your car one evening.
Unknown to you, he lets his 15 year old
girlfriend drive your car. She obviously needs
practice, since she backs into a gas pump,
damaging the pump and starting a fire that
destroys the gas station and your car.
Fortunately, neither Allen nor his girlfriend is
injured in the accident. It costs $1,275,000
to repair the gas station. Your car has an
ACV of $12,000.
A) 0
B) $12,000
C) $111,900
D) $1,287,000
E) None of the above
HW #3 Answer 1
You are covered because it is your
car. If you were driving your son’s
car it would not be covered. You
driving Allen’s girlfriend’s car would
be covered.
$100,000 Property Liability
$12,000 Comprehensive
$112,000
Comprehensive b/c fire destroys car
not accident.
HW #3 Question 2
Your 18 year old daughter Sarah, who lives with
you, borrows your car one day to go shopping
with her friends. On the way to the mall they are
involved in an accident that is Sarah’s fault. Two
of her friends are seriously injured. One incurs
medical bills of $15,000 and is entitled to a
bodily injury award of $30,000. The other incurs
medical bills of $45,000 and is entitled to a
bodily injury award of $135,000. Your daughter
is not injured in the accident, but she is ticketed
for running a red light and fined $300.
A) 0
B) $40,000
C) $130,000
D) $155,000
E) None of the above
HW #3 Answer 2
Covered b/c it is your car. Fine is not
covered
$30,000 Bodily Injury Liability
$125,000 Bodily Injury Liability (limit
$100,000) and Medical Payments
$155,000 Total
Homework #4 Review
- Introduction to Risk and Insurance
- Fundamental Doctrines of Insurance
- Insurance Contracts
Problem #1
You see a commercial on TV advertising identity theft
protection. The protection will cost you $50 a year.
Your odds each year of being a victim of identity theft
are 1 out of 100. The expected loss from identity theft
is $4,500. Which of the following risk types would
purchase this coverage?
I
Risk averse
II Risk neutral
III Risk seeker
A. I only
D. I, II, and III
B. I and II only
C. II and III only
E. None of the above
Problem #1 - Answer
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Answer: A. I only
Explanation: Expected loss = frequency *
severity
=.01 * $4,500
=$45
The identity theft protection costs $50,
which is greater than the $45 expected
loss. Therefore, a risk averse individual
would purchase this coverage.
Problem #2
You are on vacation in the Bahamas and want to
go scuba diving. Before you are allowed to go on
your first dive, you must take a training course
to avoid drowning. Which method of handling
pure risk does this training course demonstrate?
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A. Avoidance
B. Transfer
C. Loss prevention
D. Morale hazard
E. Societal hazard
Problem #2 - Answer
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Answer: C. Loss prevention
Explanation:
Loss prevention – reduces the
probability/frequency of a loss
Avoidance – usually not practical, means
avoiding the activity
Transfer – Shifting the risk, often from a
financial aspect, to another party
Loss reduction – reduces the severity of a loss
Retention – when the risk is maintained and not
shifted to another party
Problem #3
You, a 21 year old senior are at the Rose Bowl, and you see
your 23 year old co-worker Moe. You ask him if he can cover
your shift at the Law Library next Friday afternoon. In
return, you will pay him $20. He agrees to the deal but you
do not notify your manager. However, Moe fails to show up
to work next Friday afternoon, and you are fired for your
absence. You sue Moe for the loss of your job. Which, if any,
of the requirements for a contract would be missing?
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A. Offer and acceptance
B. Consideration
C. Competent parties
D. Legal purpose
E. None are missing
Problem #3 - Answer
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Answer: E. None are missing
Explanation: Offer and acceptance – You make an offer and your
co-worker accepts
Consideration – You get a day off, and you give your
co-worker $20
Competent parties - You and your co-worker have
reached majority, are of sound
mind, and are not intoxicated
Legal purpose – Having a co-worker fill-in for you is a
legal activity
Legal form - ???
Homework #5 Review
- Introduction to Risk and Insurance
- Buying Insurance
Question 1
Based on the large loss principle, which
of the following is the least important
coverage in your State Farm Car Policy?
A. Collision
B. Comprehensive
C. Liability
D. Emergency Road Service
E. Un(der)insured
Question 1 - Answer
Based on the large loss principle, which
of the following is the least important
coverage in your State Farm Car Policy?
A. Collision
B. Comprehensive
C. Liability
D. Emergency Road Service
E. Un(der)insured
Question 2
Your neighbor, who has his own insurance policy
with Allstate with the same coverages you have
with your State Farm Policy, borrows your car
and runs into a tree, causing $2500 in damage
to your car. Which of the following provisions
keeps you from collecting for this loss under
both your policy and your neighbor’s
A. Lack of an insurable interest
B. Subrogation
C. Other insurance provision
D. Estoppel
E. none of the above
Question 2 - Answer
Your neighbor, who has his own insurance policy
with Allstate with the same coverages you have
with your State Farm Policy, borrows your car
and runs into a tree, causing $2500 in damage
to your car. Which of the following provisions
keeps you from collecting for this loss under
both your policy and your neighbor’s
A. Lack of an insurable interest
B. Subrogation
C. Other insurance provision
D. Estoppel
E. none of the above
Question 3
Which of the following is the best reason
that the State Farm Car Policy excludes
coverage for driving in Europe?
A. To make the policy economically
feasible
B. To standardize the risk
C. To reduce the risk of a catastrophe
D. To avoid losses that are not fortuitous
E. Because this is a contract of adhesion
Question 3 - Answer
Which of the following is the best reason
that the State Farm Car Policy excludes
coverage for driving in Europe?
A. To make the policy economically
feasible
B. To standardize the risk
C. To reduce the risk of a catastrophe
D. To avoid losses that are not fortuitous
E. Because this is a contract of adhesion
Homework #6 Review
U of I Student Health Insurance
Policy
Deductibles
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In-patient
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$100 per injury
No ER deductible
Outpatient
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$150 per policy year
ER deductible: $50 per visit
Exclusions Page 14
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Acupuncture
Learning
disabilities
Cosmetic
Procedures…
Dental
treatment…
Elective surgery
Eye exams…
Foot care…
Immunizations…
Injury cause from
alcohol…
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Organ transplants
Participation in
riots…
Prescription drugs…
Routine physical
exams…
Skeletal
irregularities
Sleep disorders
Suicide or
attempted suicide…
Weight
management…
Limits
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$200,000 for each injury or sickness
$75,000 for intercollegiate, club,
and intramural sports
$20,000 lifetime maximum for
Psychiatric and Drug Abuse
Treatment
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Inpatient – same as other sickness
Outpatient – 50% of charge up to a
max of $35 for 45 days max per policy
year
In-Hospital Expense Benefit
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$100 Deductible, then 80% of the
first $10,000, then 100% of the
balance of room and board and inhospital expenses
In-hospital expenses includes:
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Operating room
Drugs
Blood and blood plasma
X-ray examinations
Radiation treatments
Laboratory tests
Surgical dressings
Medical supplies while Hospital confined
Inpatient - Benefit shall be
80%...
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Surgery
Assistant Surgeon
Anesthesia
Ambulance
Durable Medical Equipment
Diagnostic Procedure Expense
Benefit
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Lower of 80% of usual and
customary or actual charges subject
to limits of:
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CT Scans: $800
MRI: $1,200
Nuclear imaging: $782
Question 1
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You fall and hit your head on your desk.
Your roommate calls an ambulance to
drive you to the emergency room. The
doctor runs a CT scan. The test confirms
that you are okay, just a bad bump. You
are billed $100 for the ambulance, $1200
for the CT, and $400 for the emergency
room visit.
A. $1040
B. $1080
C. $1120
D. $1200
E. None of the above
Question 1 - Answer
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You fall and hit your head on your desk. Your
roommate calls an ambulance to drive you to the
emergency room. The doctor runs a CT scan.
The test confirms that you are okay, just a bad
bump. You are billed $100 for the ambulance,
$1200 for the CT, and $400 for the emergency
room visit.
A. $1040
B. $1080
C. $1120
D. $1200
E. None of the above
CT Scan: Lower of: 1200*0.80 = 960 or 800
Ambulance: 100*0.80 = 80
ER visit: 400-150-50=200*0.80 = 160
800+80+160 = 1040
Question 2
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You badly injure your ankle while
rollerblading. You are hospitalized
for 6 days and have surgery. You
are billed $500 per day for hospital
room and board, $10,000 for x-rays,
$10,000 for the surgeon, $2,500 for
the assistant surgeon and $4,000 for
the anesthesia (which is administered
by a licensed Physician who remained
in constant attendance during your
operation).
A. 0
B.
$12,050 C.
$24,100
D. $24,500 E.
None of the above
Question 2 - Answer
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You badly injure your ankle while
rollerblading. You are hospitalized
for 6 days and have surgery. You
are billed $500 per day for hospital
room and board, $10,000 for x-rays,
$10,000 for the surgeon, $2,500 for
the assistant surgeon and $4,000 for
the anesthesia (which is administered
by a licensed Physician who remained
in constant attendance during your
operation).
A. 0
B.
$12,050 C. $24,100
D. $24,500 E.
None of the above
Question 2 - Explanation
In-Hospital Expense Benefit
Room and Board
X-Rays
$500
x
6
Deductible
80% of first $10,000
Excess of $10,000
Surgeon
Assistant
Anesthesia
10000*0.80 = 8000
$ 10,000 x 0.80
$ 2,500 x 0.80
$ 4,000 x 0.80
13200 + 12900 = 24100
$
$
$
$
$
3,000
10,000
13,000
(100)
12,900
$
$
$
8,000
2,900
10,900
$
$
$
$
8,000
2,000
3,200
13,200
Question 3
You visit a licensed clinical
psychologist once a week for ten
weeks during the semester. You
are charged $80 per visit.
A. 0
B.
D. $400
$160
C. $350
E. None of the above
Question 3 - Answer
You visit a licensed clinical
psychologist once a week for ten
weeks during the semester. You
are charged $80 per visit.
A. 0
B.
D. $400
$160
C. $350
E. None of the above
10 total visits * Lesser of( $35 or
50% of $80) = 10 * $35 = $350
Homework #7 Review
Coordination of Benefits
Introduction to Life Insurance
Question 1
An insurance company with a
complaint ratio of 10.00 means:
A. It is insolvent
B. One complaint has been filed for
every 10 policies issued
C. One out of every ten complaints that
has been filed is a valid complaint
D. Ten complaints have been filed for
every 1 million of premiums written
E. None of the above
Question 1 - Answer
An insurance company with a
complaint ratio of 10.00 means:
A. It is insolvent
B. One complaint has been filed for
every 10 policies issued
C. One out of every ten complaints that
has been filed is a valid complaint
D. Ten complaints have been filed
for every 1 million of premiums
written
E. None of the above
Question 2
Which of the following policies would
have the largest first year premium
for a 50 year old male?
A. 20 year level term life
B. Straight life
C. Whole life paid up at 65
D. Yearly renewable term
E. 10 payment whole life
Question 2 - Answer
Which of the following policies would
have the largest first year premium
for a 50 year old male?
A. 20 year level term life
B. Straight life
C. Whole life paid up at 65
D. Yearly renewable term
E. 10 payment whole life
Question 3
Which of the following types of life
insurance can provide funds for
retirement?
A. Yearly renewable term
B. Re-entry term
C. Endowment life
D. 10 year deferred term life
E. None of the above
Question 3 - Answer
Which of the following types of life
insurance can provide funds for
retirement?
A. Yearly renewable term
B. Re-entry term
C. Endowment life
D. 10 year deferred term life
E. None of the above
Homework #8 Review
Life Insurance
Table of Guaranteed Values
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Cash Value
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Paid-Up Insurance
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Take money and no more insurance
Get that amount when you die
$100,000 Extended Term Insurance
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Get $100k when you die before that date
End of Policy
Year
August 1,
Cash Value
Paid-Up
Insurance
$100,000
Extended
Term
Insurance to
10
2005
11,411
37,400
Oct 13, 2023
11
2006
12,933
40,600
Aug 15, 2025
Whole Life Policy
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Policy becomes Extended Term if
stopped payment of premiums and no
decision
Misstatement of Age and Sex
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Incontestability Issue
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Would adjust benefit accordingly
Caught within 2 years
Suicide
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Return premium if within 1 year
Otherwise treated as normal death
Minimum Payment tables
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Numbers tell you how much per
thousand you will receive monthly
Example:
Upon death your policy pays
$37,400.
Wife has adjusted age of 64 and
want 20 years certain
Chart shows $4.57
There are 37.4 thousands
37.4 * 4.57 = $170.92 = Monthly
benefit
Homework #9 Review
Life Insurance Cost Comparisons
Liability Exposures
Life Insurance Cost Comparisons
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Traditional Net Cost
Interest-Adjusted Net Cost Methods
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Surrender Cost Index
Net Payment Cost Index
Equivalent Level Annual Dividend
Yearly Rate of Return Method
Question 1
You are decorating your house for the
holidays, so you display your favorite reindeer
decoration on your front lawn. Your next door
neighbor wasn’t watching his 5 year old son
closely enough, and he wanders into your yard
and hurts himself on the pointy edges from
the reindeer’s antlers. You could be held liable
based on which of the following?
A. Common law B. Contributory negligence
C. Comparative negligence
D. Attractive nuisance E. None of the above
Question 1 - Answer
You are decorating your house for the
holidays, so you display your favorite reindeer
decoration on your front lawn. Your next door
neighbor wasn’t watching his 5 year old son
closely enough, and he wanders into your yard
and hurts himself on the pointy edges from
the reindeer’s antlers. You could be held liable
based on which of the following?
A. Common law B. Contributory negligence
C. Comparative negligence
D. Attractive nuisance E. None of the above
Question 2
Which of the following costs incurred by a
plaintiff in a bodily injury claim would
represent general damages?
I.
Hedonic losses
II.
Loss of companionship
III.
Pain and suffering
IV.
Hospital bills
V.
Loss of wages
A. I only
B. I and II
C. I, II and III
D.
IV and V E.
None of the above
Question 2 - Answer
Which of the following costs incurred by a
plaintiff in a bodily injury claim would
represent general damages?
I.
Hedonic losses
II.
Loss of companionship
III.
Pain and suffering
IV.
Hospital bills
V.
Loss of wages
A. I only
B. I and II
C. I, II and III
D.
IV and V E.
None of the above
Homework #10 Review
Homeowner’s Policy
Homework #10 Tips
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Read the policy carefully
Remember the basic exclusion and
perils, and you should be good
Make sure you know the Perils
Insured Against on pgs. 672-6754
and the Section I Exclusions on pgs.
674-675 of your textbook
Problem #1
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At your local polling place, you encounter a long
line. Someone tried to cut in front of your causing
a scuffle. During the scuffle, and elderly man
behind you in line was knocked over. This man
sues you and wins a bodily injury award of
$20,000. Back home you realize the line cutter
was part of a pick-pocketing ploy. Your wallet
which contained $600 is missing.
A. $0
B. $350
C. $20,000
D. $20,350
E. None of the above
Problem #1 - Answer
Answer: E. None of the above.
 Explanation:
Homeowners
Personal Property
Personal Liability
$600 → cash
$20,000 → bodily injury award
-250 → deductible
$350
↓
$200 → limit on cash
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Total
$20,000 → personal liability
+ 200 → personal property
$20,200 → Total
Problem #2
Assume you have the auto and homeowners policies
we use in class
An uninsured student pilot on his way back to Willard
airport loses control and crashes into your attached
garage. It costs $30,000 to fix the garage, $10,000
to repair your car (ACV $8,000) and $6,000 to repair
your spouse’s car (ACV $4,000).
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A. $19,750
B. $37,750
C. $38,000
D. $80,000
E. None of the above
Problem #2 - Answer
Answer: B. $37,750
 Explanation:
Homeowners
Auto
Dwelling
Comprehensive
$30,000 → garage
$8,000 → Your car’s ACV
250 → deductible
$29,750
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Total
$29,750 → Homeowners
+ 8,000 → Auto
$37,750 → Total
Problem #3
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Assume you have the auto, health, and homeowners policies
we use in class.
You clean out your fireplace and accidentally drop some
smoldering ashes on your carpet, starting a fire. The fire
destroys your house and all your possessions, including your
car. You suffer minor burns as you battle the blaze before
the fire department from the next town over arrives. It costs
$125,000 to rebuild your house, the ACV of your personal
property was $40,000, and the ACV of your car was
$12,000. You are billed $450 for your visit to the hospital
emergency room, and $900 for the fire department service
charge. You pay $8,000 to live in an apartment for 6 months
while your house is rebuilt.
A. $160,450
B. $160,700
C. $160,950
D. $161,900
E. None of the above
Problem #3 - Answer
Answer: B. $160,700
Explanation:
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Homeowners
Dwelling
$125,000 → rebuilding cost
250 → deductible
$124,750
↓
$100,000 → policy limit
Personal Property
$40,000 → ACV personal property
FD service charge
$900 → service charge
↓
$500 → charge limit
Loss of Use
$8,000 → loss of use
Auto
Comprehensive
$12,000 → ACV car
Health
$450 → visit to hospital ER
-150 → outpatient deductible
- 50 → outpatient ER deductible
$250
X .8 → 80% of usual/actual charge
$200
Total
$148,500 → Homeowners
+ 12,000 → Auto
+
200 → Health
$160,700 → Total
Homework #11 Review
Managing Life and Heath Risks
Social Security
For the following question:
Assume there are no other
allowable deductions, charitable
gifts, adjustable taxable gifts, state
estate tax credits, previously paid
estate and gift taxes or foreign
death taxes. Use the attached
Unified Rate Schedule to determine
the total Federal estate tax owed on
all of the estates.
Question 1
A married man dies in 2007 with a gross
estate of $4,040,000. His funeral
expenses are $30,000. He leaves
$3,000,000 to his wife and $1,010,000
to his son. His wife dies later in 2007
with a gross estate of $3,000,000 (the
amount she inherited from her
husband). Her funeral expenses are
$40,000, and she leaves $2,960,000 to
her son.
A. $0
B. $432,000 C. $477,000
D. $781,900 E. None of the above
Column A
Column B
Column C
Column D
Taxable amount over
Taxable amount not over
Tax on amount in column A
Rate of tax on excess over amount in
column A
(Percent)
0
$10,000
0
18
$10,000
20,000
$1,800
20
20,000
40,000
3,800
22
40,000
60,000
8,200
24
60,000
80,000
13,000
26
80,000
100,000
18,200
28
100,000
150,000
23,800
30
150,000
250,000
38,800
32
250,000
500,000
70,800
34
500,000
750,000
155,800
37
750,000
1,000,000
248,300
39
1,000,000
1,250,000
345,800
41
1,250,000
1,500,000
448,300
43
1,500,000
2,000,000
555,800
45
2,000,000
--------
780,800
45
Question 1 - Answer
B. $432,000
HIS Estate Taxes
4,040,000 Gross Estate
30,000 Funeral Expenses Deduction
-3,000,000 Marital Deduction
1,010,000 Tax Computation Base
345,800 + 0.41*(10,000) = 349,900 Tentative Federal
Estate Tax
- 780,800 Unified Credit
$0 Federal Estate Tax Due
HER Estate Taxes
3,000,000 Gross Estate
40,000 Funeral Expenses Deduction
2,960,000 Tax Computation Base
780,800 + 0.45*(2,960,000-2,000,000) = 1,212,800
Tentative Federal Estate Tax
- 780,800 Unified Credit
$432,000 Federal Estate Tax Due
Question 2
You are single and you earn $165,000
in 2007. What are the total Social
Security taxes paid by both you and
your employer?
A. $0
B. $8,437.50 C. $16,875
D. $25,245 E. None of the above
Question 2 - Answer
C. $16,875
Current (2007) payroll tax is 7.65%
of first $97,500 in earnings plus
1.45% of any additional earnings.
The employer and the employee
both pay this amount.
Employer and employee each pay:
0.0765 * 97500 + 0.0145(165,000 –
97,500) = 8,437.50
2 * 8,437.50 = $16,875
Question 3
Who or what determines the
distribution of an individual’s estate
when he or she dies intestate?
A.
B.
C.
D.
E.
State law
Federal Law
Beneficiary
His/her spouse
None of the above
Question 3 - Answer
State law
Refer to Chapter 22 of text.
Pg 539: If you die intestate, your
estate is distributed in accordance
w/ the laws of the state in which
you were a resident. Your state’s
division may be quite difference
from your wishes.
A.
Question 4
What is the name of a trust that
establishes conditions that must be
met in order for the beneficiaries to
be entitled to receive the proceeds
from your estate?
A. Testamentary trust
B. Inter vivos trust
C. Family incentive trust
D. Living trust
E. None of the above
Question 4 - Answer
C. Family incentive trust
A Family Incentive Trust provides
incentives for the beneficiaries to
work harder and achieve goals.

Question 5





You earn $6,000 during your
summer 2007 internship (May
through August). How many
quarters of coverage under Social
Security would you have earned in
2007?
A. 0
B. 1
C. 4
D. 6
Question 5 - Answer
C.
4
For 2007, you earn one “Quarter”
of coverage for each $1000 of
annual earnings, subject to a
maximum of 4 quarters per year.
$6000/ $1000 = 6
6 >= 4, so 4 quarters
Homework #12 Review
Combining Policies Together
Brian’s Secrets to Using All
Policies

Decide which of the 3 policies apply for the question


Are any excluded for the entire question or do not apply?
Narrow it down.
Look at each number and decide which policy
applies



Anything relating to your car is just the auto policy
(Homeowner’s excludes auto)
Anything relating to your home is just the homeowner’s
policy (Auto excludes personal property)
Anything relating to your health is auto and health policy
(Homeowner’s excludes personal medical payments)


Auto policy pays first $25,000 in medical bills, health pays
additional amount which is calculated by the reduction of
benefits calculations
With it now broken up, it is simply a combination of
questions from previous homework. Write
everything out clearly, and cross off each number
once it is accounted for
Question 1
While you are sitting in your house an
earthquake hits your town. It destroys
your house, which had a replacement
cost of $110,000, your personal property,
which had a replacement cost of $80,000
and an ACV of $60,000, and your car,
which had an ACV of $10,000. You are
also injured and go to the emergency
room for treatment. You are billed $575
for the visit.
A) $10,000
B) $10,300
C) $10,575
D) $160,575 E) None of the above
Question 1 - Answer
Homeowner’s doesn’t cover
earthquakes. Auto policy covers car,
health covers emergency room
treatment.
$10,000 ACV of Car (Comprehensive)
$575 - $200 (deductible) = $375
$375 x .8 (coinsurance) = $300
$10,300 Total
Question 2
Your aunt, who is visiting you from Phoenix,
drives your car on an errand. On her return,
she steps on the gas, rather than the brake,
and runs the car through the back wall of the
garage, which is connected to your house,
and into your living room, hitting your TV. It
costs $15,000 to repair the damage to the
garage/living room wall, $550 to replace the
TV that was destroyed (ACV of $300) and
$2,500 to repair your car. Your aunt incurs
$10,000 in medical bills for the injuries she
sustained in this accident.
A) $15,050
B) $17,450
C) $27,450
D) $27,700
E) None of the above
Question 2 - Answer
Auto and Homeowner’s policies
$15,000 Wall (dwelling)
$300 ACV TV (personal property)
-$250 Homeowner’s deductible
$2,500 Repair car (collision)
-$100 Collision deductible
$10,000 Medical bills
$27,450 Total
Question 3
An alien space ship visiting earth
accidently wrecks your car and attached
garage when their tractor beam
malfunctions. It costs $40,000 to rebuild
your garage. The replacement cost of
your personal property is $25,000; the
ACV was $20,000. The replacement cost
of your car is $20,000, the ACV was
$10,000.
A)0
B) $10,000
C) $49,750
D) $69,750
E) None of the above
Question 3 - Answer
Dwelling – Open Peril (alien space
ship’s tractor beam not excluded)
Personal Property – Named Peril (alien
space ship’s tractor beam not
named)
Auto – Open Peril (alien space ship’s
tractor beam not excluded)
$40,000 Garage (dwelling)
-$250 Homeowner’s deductible
$10,000 ACV Car
$49,750 Total
Additional Office Hours Week of 12/9
Sunday, December 9th
12-2pm Eric Lam
2-4pm
Pan Wong
4-6pm
Neal Simons
6-8pm
Brian Alvin
Monday, December 10th
1-3 pm Bill Schneider
6-8pm
Kathy Gu