UNIT 8 - INSURANCE VOCABULARY EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE
2026
Risk Management - Answers The practice of identifying potential risks in advance, analyzing them and
taking precautionary steps to reduce the risk.
Insurance - Answers A financial product that reimburses you for unexpected losses or damages
caused by a specific set of hazards (such as illness or fire) to a specific thing (such as a car or your life)
for a fee.
Deductible - Answers The out-of-pocket money paid by the policyholder before an insurance company
will cover the remaining costs.
Premium - Answers Money paid by the policyholder each month to purchase the policy.
Insurance Policy - Answers A contract between the insurance company and the insured that states
exactly what is covered.
Claim - Answers A request to your insurance company to pay for something that's insured on your
policy - like damage to your car or a doctor's bill.
Liability Automobile Insurance - Answers Pays for damage or injuries you cause to others in a car
accident. It doesn't cover your own car.
Collision Insurance - Answers Pays to fix or replace your car if it's damaged in a crash, even if it's your
fault.
Comprehensive Insurance - Answers Covers damage to your car from things other than crashes—like
theft, fire, or storms.
Uninsured Motorist Coverage - Answers Helps pay if you're in an accident caused by a driver who
doesn't have insurance.
Personal Injury Protection (PIP) - Answers Pays for medical bills and lost wages if you or your
passengers get hurt in a car accident.
Medicare - Answers A government health insurance program for people age 65 and older or with
certain disabilities.
Medicaid - Answers A government program that provides health care coverage to low-income
individuals and families.
Out-of-Pocket Payments - Answers The portion of medical costs you pay out-of-pocket when receiving
care, while the insurance company covers the rest.
HMO (Health Maintenance Organization) - Answers Health insurance plan that requires members to
use a network of approved doctors and hospitals.
PPO (Preferred Provider Organization) - Answers Health insurance plan that lets members see ANY
doctor or specialist, but offers lower costs when using doctors and hospitals within the plan's
network.
Disability Insurance - Answers Insurance coverage that provides income replacement if you are unable
to work due to illness or injury.
Out-of-Pocket Maximum - Answers The most money you'll have to pay for medical care in a year.
After you reach this amount, your insurance pays 100% of covered costs.
Life Insurance - Answers Insurance paid to beneficiaries who were named by the insured person after
the person dies.
Umbrella Insurance - Answers A liability insurance that provides extra coverage above the limits of a
standard homeowners, auto, or other policy.
2026
Risk Management - Answers The practice of identifying potential risks in advance, analyzing them and
taking precautionary steps to reduce the risk.
Insurance - Answers A financial product that reimburses you for unexpected losses or damages
caused by a specific set of hazards (such as illness or fire) to a specific thing (such as a car or your life)
for a fee.
Deductible - Answers The out-of-pocket money paid by the policyholder before an insurance company
will cover the remaining costs.
Premium - Answers Money paid by the policyholder each month to purchase the policy.
Insurance Policy - Answers A contract between the insurance company and the insured that states
exactly what is covered.
Claim - Answers A request to your insurance company to pay for something that's insured on your
policy - like damage to your car or a doctor's bill.
Liability Automobile Insurance - Answers Pays for damage or injuries you cause to others in a car
accident. It doesn't cover your own car.
Collision Insurance - Answers Pays to fix or replace your car if it's damaged in a crash, even if it's your
fault.
Comprehensive Insurance - Answers Covers damage to your car from things other than crashes—like
theft, fire, or storms.
Uninsured Motorist Coverage - Answers Helps pay if you're in an accident caused by a driver who
doesn't have insurance.
Personal Injury Protection (PIP) - Answers Pays for medical bills and lost wages if you or your
passengers get hurt in a car accident.
Medicare - Answers A government health insurance program for people age 65 and older or with
certain disabilities.
Medicaid - Answers A government program that provides health care coverage to low-income
individuals and families.
Out-of-Pocket Payments - Answers The portion of medical costs you pay out-of-pocket when receiving
care, while the insurance company covers the rest.
HMO (Health Maintenance Organization) - Answers Health insurance plan that requires members to
use a network of approved doctors and hospitals.
PPO (Preferred Provider Organization) - Answers Health insurance plan that lets members see ANY
doctor or specialist, but offers lower costs when using doctors and hospitals within the plan's
network.
Disability Insurance - Answers Insurance coverage that provides income replacement if you are unable
to work due to illness or injury.
Out-of-Pocket Maximum - Answers The most money you'll have to pay for medical care in a year.
After you reach this amount, your insurance pays 100% of covered costs.
Life Insurance - Answers Insurance paid to beneficiaries who were named by the insured person after
the person dies.
Umbrella Insurance - Answers A liability insurance that provides extra coverage above the limits of a
standard homeowners, auto, or other policy.
