CFP Exam Free Practice Questions 12

In the first section, Coverage A insures the house and anything attached to it; Coverage B insures any other structures on the property; Coverage C insures the personal property of the owner at actual cash value; Coverage D pays for any loss of use; Coverage E insures against personal liability; and Coverage F insures for any medical payments that need to be paid to other people.

A personal auto policy (PAP) is a package insurance policy that provides both property and liability insurance for the members of a family. A PAP offers four kinds of insurance.

A PAP offers four kinds of insurance: liability coverage, which covers the people named in the policy when they are liable for damages caused by their own auto; medical coverage, in the event that the insured or anyone in the insured’s car needs medical treatment; uninsured motorist coverage, which protects drivers when they are in an accident with another driver who is not insured; and coverage for damage to the insured’s automobile. This last section contains both collision coverage, which insures against accidents with other cars, and comprehensive physical damage, which insures against every other kind of damage.

Crime insurance protects businesses against losses suffered because of burglary, extortion, or employee dishonesty.

An umbrella insurance policy is designed to provide coverage in addition to that provided by a basic liability policy. Umbrella policies can usually only be taken out when the insured has an underlying basic liability policy.

Directors and officers liability insurance is purchased by a corporation on behalf of the officers and directors; it protects these people from lawsuits that may be brought by stockholders, creditors, competitors, and governments.

Hospital-surgical insurance policies provide benefits only when the insured needs surgery or needs to be hospitalized; in other words, they do not cover trips to the doctor’s office. These policies may not be adequate to cover long-term illness.

Traditional indemnity plans provide a comprehensive medical expense plan. This includes medical, hospital, surgical, and diagnostic service. There may be a limit on the amount of reimbursement that can be received, but patients are allowed to choose their own doctor.

A health maintenance organization (HMO) is an organized health care system that provides a range of medical services on a prepaid basis to individual subscribers, all of whom live in a particular geographic region. HMOs emphasize preventative care, though they do offer comprehensive packages of health care services.

A point-of-service plan is a hybrid of the HMO and the PPO: these resemble HMOs for network services and PPOs for non-network services. Point-of-service plans may be either open-ended HMOs, in which is the insured has the option to visit doctors outside the network, or gatekeeper PPOs, in which the customer selects a primary care physician who is responsible for determining whether the customer needs to go outside the network for care.