Personal Finance Chapters 9-12
Revision Test Questions and All Correct
Answers (2025-2026) Update.
Opportunity costs of buying a house - Answer losing interest on money used as down payment
or security deposit, time and cost of commuting, time and money for repairs, time and effort to
personally build a home
Housing information sources - Answer friends, real estate agents, government agencies
Advantages of renting your residence - Answer mobility, fewer responsibilities, lower initial
costs
Disadvantages of Renting your residence - Answer fewer financial benefits (no tax deductions
on mortgage interest), restricted lifestyle, legal details (conditions of the lease)
Costs of renting - Answer security deposit (usually one month's rent, money held to cover
damages you cause to the property), rent, some utilities
5 Steps of home buying process - Answer determine home ownership needs, find and evaluate
a property to purchase, price the property, obtain financing, close the purchase transaction
(decide what you want, find a house, price the house, pay for the house, close on the house)
Selling your house - Answer prepare home for selling (nice presentation), determine selling
price (appraisal), sale by owner or real estate agent
Types of insurance risk - Answer peril (cause of possible risk), hazard (increases the likelihood
of loss through some peril), property risk, liability risk (losses due to negligence), pure risk
(personal, property, liability), speculative risk (chance of loss or gain)
4 risk management methods - Answer risk avoidance (not driving), risk avoidance (wearing
seat belt), risk assumption (not buying collision insurance on older car), risk shifting (getting
insurance)
4 steps of planning a personal insurance risk - Answer set insurance goals, develop plan to
, Liability Insurance - Answer legal responsibility for financial cost of another person's losses or
injuries- strict (person held responsible for intentional or unintentional actions) or vicarious
(person held responsible for actions of another person-kid throwing ball through window)
umbrella policy - Answer supplementary personal liability coverage, also called personal
catastrophe policy
medical payments coverage - Answer home insurance that pays for minor accidental injuries
on one's proptery
endorsement - Answer an addition of coverage to a standard insurance policy
four components of determining amount of home insurance you need/have - Answer
replacement value of home, value of contents, protection for specific items, liability coverage
desired
coinsurance clause - Answer a policy provision that requires a homeowner to pay for part of
the losses if the property is not insured for the specified percentage of the replacement value
actual cash value (ACV) - Answer receive payment based on current replacement cost of a
damaged or loss item MINUS DEPRECIATION
replacement value - Answer receive full cost of repairing or replacing a damaged or lost item
without considering depreciation
bodily injury liability - Answer coverage for the risk of financial loss due to legal expenses,
medical cost, lost wages, and other expenses associated with injuries caused by an automobile
accident for which the insured was responsible
property damage covereage - Answer coverage for the risk of financial costs due to property
damage for which insured was responsible
100/300/50 - Answer $100,000 limit paid to one person in accident/$300,000 limit paid to all
persons in an accident/ $50,000 limit paid for damage of others' property
Revision Test Questions and All Correct
Answers (2025-2026) Update.
Opportunity costs of buying a house - Answer losing interest on money used as down payment
or security deposit, time and cost of commuting, time and money for repairs, time and effort to
personally build a home
Housing information sources - Answer friends, real estate agents, government agencies
Advantages of renting your residence - Answer mobility, fewer responsibilities, lower initial
costs
Disadvantages of Renting your residence - Answer fewer financial benefits (no tax deductions
on mortgage interest), restricted lifestyle, legal details (conditions of the lease)
Costs of renting - Answer security deposit (usually one month's rent, money held to cover
damages you cause to the property), rent, some utilities
5 Steps of home buying process - Answer determine home ownership needs, find and evaluate
a property to purchase, price the property, obtain financing, close the purchase transaction
(decide what you want, find a house, price the house, pay for the house, close on the house)
Selling your house - Answer prepare home for selling (nice presentation), determine selling
price (appraisal), sale by owner or real estate agent
Types of insurance risk - Answer peril (cause of possible risk), hazard (increases the likelihood
of loss through some peril), property risk, liability risk (losses due to negligence), pure risk
(personal, property, liability), speculative risk (chance of loss or gain)
4 risk management methods - Answer risk avoidance (not driving), risk avoidance (wearing
seat belt), risk assumption (not buying collision insurance on older car), risk shifting (getting
insurance)
4 steps of planning a personal insurance risk - Answer set insurance goals, develop plan to
, Liability Insurance - Answer legal responsibility for financial cost of another person's losses or
injuries- strict (person held responsible for intentional or unintentional actions) or vicarious
(person held responsible for actions of another person-kid throwing ball through window)
umbrella policy - Answer supplementary personal liability coverage, also called personal
catastrophe policy
medical payments coverage - Answer home insurance that pays for minor accidental injuries
on one's proptery
endorsement - Answer an addition of coverage to a standard insurance policy
four components of determining amount of home insurance you need/have - Answer
replacement value of home, value of contents, protection for specific items, liability coverage
desired
coinsurance clause - Answer a policy provision that requires a homeowner to pay for part of
the losses if the property is not insured for the specified percentage of the replacement value
actual cash value (ACV) - Answer receive payment based on current replacement cost of a
damaged or loss item MINUS DEPRECIATION
replacement value - Answer receive full cost of repairing or replacing a damaged or lost item
without considering depreciation
bodily injury liability - Answer coverage for the risk of financial loss due to legal expenses,
medical cost, lost wages, and other expenses associated with injuries caused by an automobile
accident for which the insured was responsible
property damage covereage - Answer coverage for the risk of financial costs due to property
damage for which insured was responsible
100/300/50 - Answer $100,000 limit paid to one person in accident/$300,000 limit paid to all
persons in an accident/ $50,000 limit paid for damage of others' property
