D363 Personal Finance - Set 2 - Part 1

Correct Answer: It offers higher interest rates and is offered by mutual fund companies

Money market mutual funds are offered by mutual fund companies, not depository institutions, and tend to provide higher interest rates than standard savings accounts.

Correct Answer: Subtract your age from 110 to determine the percentage to invest in stocks

The "110 Rule" is used to determine the percentage of an investment portfolio that should be allocated to equities based on the investor’s age.

Correct Answer: There is a fixed interest rate regardless of balance

Tiered interest accounts offer different interest rates based on the balance in the account, with higher balances earning higher rates. Fixed interest rates do not apply to this type of account.

Correct Answer: A provision that provides additional benefits at an extra cost

A rider is a provision added to an insurance policy to provide additional benefits beyond the basic policy coverage, typically at an additional cost.

Correct Answer: Health Maintenance Organization

HMOs charge a fixed monthly fee for health services instead of charging separately for each visit or service, promoting preventive care and managing overall costs.

Correct Answer: A provision that mandates all Americans buy health insurance regardless of health status

The individual mandate requires all Americans and legal residents to have health insurance, regardless of pre existing conditions, to ensure that everyone contributes to the healthcare system.

Correct Answer: A marketplace where consumers can purchase health insurance plans

Health insurance exchanges, established by the Affordable Care Act, are state or federal marketplaces where consumers can shop for and buy health insurance plans.

Correct Answer: Contributions are tax deductible, and withdrawals for medical expenses are tax free

HSAs allow individuals to make tax deductible contributions and use the funds tax free for qualified medical expenses, offering both savings and tax benefits.

Correct Answer: 18 months

Under COBRA (Consolidated Omnibus Budget Reconciliation Act), a former employee can continue group health insurance coverage for up to 18 months after leaving employment.

Correct Answer: It covers liability losses that exceed the limits of other policies

Umbrella liability insurance provides additional protection by covering claims that exceed the limits of underlying policies such as homeowner’s or auto insurance.

Correct Answer: The portion of a medical bill you pay after the deductible

Coinsurance is the percentage of the cost of a medical service that a patient must pay after meeting their deductible. For example, if your coinsurance is 20%, you pay 20% of the medical bills after the deductible.

Correct Answer: The amount of credit used to calculate how much a person will pay for a health insurance policy

The benchmark premium is used to calculate how much financial assistance an individual will receive to pay for health insurance under the Affordable Care Act.

Correct Answer: Named perils policy

Named perils policies only cover losses that result from the specific perils listed in the policy, such as fire or theft.

Correct Answer: To reimburse the homeowner for the full cost of replacing a damaged item

Replacement cost insurance covers the full cost of replacing damaged or lost items without factoring in depreciation, unlike actual cash value policies.

Correct Answer: Renter's contents broad form (HO-4)

HO-4, or renter’s insurance, protects renters by covering the loss or damage of personal belongings inside a rented dwelling.

Correct Answer: Supervision and assistance with daily living activities, such as eating and bathing

Custodial care involves helping individuals with basic personal needs, such as eating, bathing, and dressing, typically provided by non medical personnel.

Correct Answer: Partial benefits when the insured cannot fully perform their own job

The residual clause provides partial benefits for individuals who are still able to perform some, but not all, of their previous job duties.

Correct Answer: Provides benefits only if the insured cannot perform any job at all

Any occupation disability policies only provide benefits if the insured is unable to perform any job, not just the job they were trained for.

Correct Answer: It ensures that assets are managed and distributed according to the grantor's wishes, often avoiding probate

A trust allows for the management and distribution of assets according to the grantor's wishes, and it often avoids the probate process, which can be time consuming and costly.

Correct Answer: Revocable living trust

A revocable living trust allows the grantor to make changes or revoke the trust during their lifetime, giving them flexibility in managing their estate.