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🛡️ 22 questions · answers and explanations · free

Insurance basics quiz

Free insurance questions with answers and explanations: what insurance is for, deductibles and premiums, liability cover, renters insurance, term vs whole life, disability and umbrella cover, medical bills, wills and beneficiaries.

Tap an answer to check it, or open "Show the answer" under each question. Every question comes from a free 3-minute lesson, linked under its answer. Educational content, not financial advice.

Question 1 of 22

What is the core purpose of insurance?

  1. To transfer the risk of a catastrophe you couldn't afford
  2. To earn back more than you pay in premiums over the long run
  3. To cover every repair and bill so you never pay out of pocket
  4. To grow your savings while also covering small, everyday costs
Show the answer

Answer: A · To transfer the risk of a catastrophe you couldn't afford

Insurance shifts the risk of a financial disaster to the insurer in exchange for a premium.

📚 Learn it: Why Insurance Exists

Question 2 of 22

A very low monthly premium usually comes with...

  1. A higher deductible — you pay more when you need care
  2. A lower out-of-pocket max — your yearly ceiling drops
  3. A lower deductible — you pay less when you need care
  4. Lower copays — each doctor visit costs you less
Show the answer

Answer: A · A higher deductible — you pay more when you need care

Premium and deductible trade off: cheaper monthly cost usually means you pay more when you use care.

📚 Learn it: Health Insurance, Decoded

Question 3 of 22

Which auto coverage protects you from a costly lawsuit?

  1. Comprehensive
  2. Collision
  3. None
  4. Liability
Show the answer

Answer: D · Liability

Liability covers damage and injuries you cause others — the part that can otherwise follow you for years.

📚 Learn it: Auto Insurance: What You Actually Need

Question 4 of 22

Does your landlord's insurance cover your belongings?

  1. Yes, if you're named on the lease
  2. Only big-ticket items like TVs and laptops
  3. No — it covers the building, not your stuff
  4. Yes — everything in your unit is covered
Show the answer

Answer: C · No — it covers the building, not your stuff

The landlord insures the structure; your possessions need your own renters policy.

📚 Learn it: Renters & Homeowners Insurance

Question 5 of 22

Who may not need life insurance at all?

  1. Couples who need both paychecks to cover the mortgage
  2. High earners whose families rely on them
  3. Parents whose kids rely on their paycheck
  4. People with no one depending on their income
Show the answer

Answer: D · People with no one depending on their income

If no one relies on your income, the main reason to carry life insurance disappears.

📚 Learn it: Life Insurance: Term vs Whole

Question 6 of 22

Why are extended warranties on cheap gadgets usually a bad deal?

  1. Renters and homeowners policies already cover gadgets that break down
  2. They only last 90 days, which is the same as the store's return window
  3. They void the manufacturer's warranty the moment you buy one
  4. You could just replace the item — self-insuring is cheaper over time
Show the answer

Answer: D · You could just replace the item — self-insuring is cheaper over time

For low-cost items, paying for repair/replacement yourself beats years of warranty fees.

📚 Learn it: Insurance You're Probably Overpaying For

Question 7 of 22

What does disability insurance protect?

  1. Your ability to earn an income if you cannot work
  2. Your employer from lawsuits after a job injury
  3. Your medical bills if an injury puts you in the hospital
  4. Your family, with a lump sum if you die in an accident
Show the answer

Answer: A · Your ability to earn an income if you cannot work

It replaces part of your paycheck when illness or injury stops you from working.

📚 Learn it: Disability Insurance: Protect the Goose, Not the Eggs

Question 8 of 22

What does umbrella insurance do?

  1. Bundles your home and auto policies into one lower premium
  2. Adds liability coverage above your home and auto limits
  3. Pays for damage to your own home and car above your limits
  4. Covers flood damage your home policy leaves out
Show the answer

Answer: B · Adds liability coverage above your home and auto limits

It is excess liability protection that kicks in when your normal policies are maxed out.

📚 Learn it: Umbrella Insurance: Cheap Backup for Worst-Case Days

Question 9 of 22

Which money move do new parents most often forget?

  1. Switching to a bank with a kids' savings account
  2. Upgrading to a bigger home before the baby arrives
  3. Getting term life insurance to protect dependents
  4. Buying a bigger car to fit the car seat and stroller
Show the answer

Answer: C · Getting term life insurance to protect dependents

If someone depends on your income, term life insurance protects them — and it's the step new parents skip most.

📚 Learn it: The Real Cost of Raising a Kid

Question 10 of 22US

What should you do about health insurance after a layoff?

  1. Wait for the next open enrollment, since you can't buy a marketplace plan sooner
  2. Compare COBRA (keep your plan, full price) vs the cheaper ACA marketplace
  3. Go without it until a new job starts, since short gaps are covered anyway
  4. Keep your old plan for free — your employer must cover it for 18 months
Show the answer

Answer: B · Compare COBRA (keep your plan, full price) vs the cheaper ACA marketplace

COBRA continues your plan but you pay full freight; the marketplace is often cheaper, and job loss lets you enroll.

📚 Learn it: Surviving a Job Loss

Learn it in the app: Insurance Basics lessons, free →

3-minute lessons with a quiz, XP and streaks in the free app. No sign-up needed.

Question 11 of 22

Why file for unemployment immediately?

  1. You lose eligibility for good if you don't file in 48 hours
  2. There's often a waiting period, so delaying delays your money
  3. Your employer can't pay severance until your claim is filed
  4. Benefits are often first-come, first-served, and can run out
Show the answer

Answer: B · There's often a waiting period, so delaying delays your money

Benefits often have a lag before payments start — filing right away starts the clock sooner.

📚 Learn it: Surviving a Job Loss

Question 12 of 22US

What do you need to open an HSA?

  1. Medicare coverage at age 65
  2. An existing 401(k) at work
  3. A low-deductible PPO health plan
  4. A high-deductible health plan
Show the answer

Answer: D · A high-deductible health plan

HSAs are paired with high-deductible health plans (HDHPs).

📚 Learn it: The HSA: The Triple-Tax Secret

Question 13 of 22

What should you do FIRST with a large medical bill?

  1. Ignore it until it's sent to collections
  2. Put it on a credit card to earn the rewards
  3. Request an itemized, line-by-line bill
  4. Pay it in full right away to avoid late fees
Show the answer

Answer: C · Request an itemized, line-by-line bill

An itemized bill lets you catch errors and gives you the detail to negotiate.

📚 Learn it: Fighting a Medical Bill (Yes, You Can)

Question 14 of 22US

Beneficiary designations on a 401(k) or life insurance...

  1. Override what your will says
  2. Apply only without a will
  3. Are overridden by your will
  4. Lapse unless renewed yearly
Show the answer

Answer: A · Override what your will says

Beneficiary forms take precedence over a will — outdated ones can send money to the wrong person.

📚 Learn it: Estate Basics: Wills & Beneficiaries

Question 15 of 22

What happens if you die without a will?

  1. The government takes everything, family or not
  2. The state's default formula decides who gets what
  3. Your partner gets it all if you lived together
  4. Your debts vanish and the family splits the rest
Show the answer

Answer: B · The state's default formula decides who gets what

Dying without a will ('intestate') means state law decides distribution — which may not match your wishes.

📚 Learn it: Why a 25-Year-Old Needs a Will

Question 16 of 22

When should you review your beneficiary designations?

  1. Just once, when you first open the account — then it's set
  2. After marriage, divorce, a new child, or every few years
  3. Only after you retire and start taking withdrawals from it
  4. Only when your balance passes a big milestone, like $100k
Show the answer

Answer: B · After marriage, divorce, a new child, or every few years

Big life changes are exactly when an outdated form sends money to the wrong person.

📚 Learn it: The 5-Minute Form That Overrides a Will

Question 17 of 22

What should you generally insure?

  1. Whatever the seller offers to cover at checkout
  2. Everything you own, so no loss ever comes out of pocket
  3. Only losses you couldn't afford to cover yourself
  4. Mostly small, frequent costs you're likely to run into
Show the answer

Answer: C · Only losses you couldn't afford to cover yourself

Insure against ruinous losses; self-cover anything you could comfortably replace.

📚 Learn it: Why Insurance Exists

Question 18 of 22

When might 'full coverage' not be worth it?

  1. On a new car you're still making loan payments on
  2. When you drive your car more than 15,000 miles a year
  3. On a pricey car you'd struggle to replace yourself
  4. On an old car worth less than the coverage costs
Show the answer

Answer: D · On an old car worth less than the coverage costs

If the car's value is low, paying for collision/comprehensive can cost more than you'd ever recover.

📚 Learn it: Auto Insurance: What You Actually Need

Question 19 of 22

Why is it so commonly overlooked?

  1. It only covers on-the-job injuries, which workers' comp already pays for at no cost
  2. People buy life insurance but forget they are likelier to be disabled than to die young
  3. It can only be bought through an employer, and most jobs don't offer it at all
  4. Social Security disability pays most workers their full salary, so few people need it
Show the answer

Answer: B · People buy life insurance but forget they are likelier to be disabled than to die young

The risk of a working-years disability is higher than dying young, yet this coverage gets skipped.

📚 Learn it: Disability Insurance: Protect the Goose, Not the Eggs

Question 20 of 22

Why is umbrella insurance considered great value?

  1. It builds cash value you can borrow against down the road
  2. Premiums are tax-deductible, so it costs next to nothing
  3. A large amount of coverage costs relatively little per year
  4. It replaces your home and auto policies, so you pay only one bill
Show the answer

Answer: C · A large amount of coverage costs relatively little per year

For a few hundred dollars a year you can get $1 million of asset-protecting liability coverage.

📚 Learn it: Umbrella Insurance: Cheap Backup for Worst-Case Days

Question 21 of 22

Why avoid putting medical debt on a credit card?

  1. Medical charges on a card don't count toward your deductible
  2. Card companies report medical charges to your insurer
  3. It's illegal to charge medical bills to a card in most states
  4. It turns flexible, negotiable debt into high-interest debt
Show the answer

Answer: D · It turns flexible, negotiable debt into high-interest debt

Medical debt is often interest-free and negotiable; a credit card adds high interest and removes that flexibility.

📚 Learn it: Fighting a Medical Bill (Yes, You Can)

Question 22 of 22

Who needs basic estate planning?

  1. Any adult with assets or dependents
  2. Only people worth over $1 million
  3. Nobody until married with kids
  4. Only seniors or the seriously ill
Show the answer

Answer: A · Any adult with assets or dependents

If you have anything or anyone you care about, a basic plan keeps decisions yours, not the state's.

📚 Learn it: Estate Basics: Wills & Beneficiaries

Learn it in the app: Insurance Basics lessons, free →

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