Question

directions: read each question carefully. choose the answer that best completes the statement or provides the best answer to the question.

1. bruce has just graduated from college and decides that instead of paying for insurance, hell work on building up his emergency fund. this way, if something goes wrong, he can just pay for it using cash. why is this a risky idea?

it is mandatory to have auto, health, life, disability, and renters/home insurance, so hell have to pay 5 penalties per year for not enrolling in these insurance types
an accident or illness can strike at any time and be quite expensive, so its possible hed need a big sum of money well before his emergency fund was large enough
having insurance not only protects you financially, but also physically, so hell be less likely to experience illness or accident if he has insurance
the sooner he starts paying for insurance, the sooner he will reach his maximum lifetime requirement and can stop paying altogether for coverage

1. your parents tell you that on your 22nd birthday, they would like for you to get your own health insurance. you are very healthy, are not taking any prescription medicines, and generally only see your doctor for your annual physical. what type of health insurance is likely to be best for you?

a low deductible plan with a high monthly premium
a high deductible plan with a low monthly premium
your parents must keep you on their plan. they cannot legally remove you.
you do not need health insurance because you are healthy

1. insurance companies operate by charging individuals different prices for coverage depending on their risk levels. then, they collect everyones monthly premiums together and use the money to make payments when people file a claim (for example, someone is in an auto accident or needs to see a doctor). this concept is known as...

Explanation:

1. For question 16: Not all the listed insurance types are mandatory, insurance does not prevent illness/accidents, and there is no maximum lifetime payment requirement for most insurance. The key risk is that a costly unexpected event can happen before the emergency fund is large enough to cover it.
2. For question 17: A low-deductible plan with high premiums is unnecessary for a healthy person with minimal medical needs. Legal rules allow parents to remove adult children from their plan, and even healthy people need insurance for unexpected emergencies. A high-deductible plan with low monthly premiums is cost-effective for someone with low medical usage.
3. For question 18: The described concept, where insurers pool premiums from many people to cover the claims of those who experience losses, is risk pooling.

Answer:

1. An accident or illness can strike at any time and be quite expensive, so it's possible he'd need a big sum of money well before his emergency fund was large enough
2. A high deductible plan with a low monthly premium
3. Risk pooling (this is the standard term for the described insurance operating concept)