In the EverFi Taxes and Insurance module, the user was taught about the different types and benefits of insurance and the purpose and function of taxes. One of the first points addressed was the purpose of taxes. People often get frustrated about having large amounts of money deducted from their hard-earned paychecks or about paying extra on simple things like clothes and food.
The truth is, tax revenue is a very necessary and important part of our economy. The government uses tax dollars for a wide variety of things and draws nearly all of it’s income from tax sources. Tax dollars are used for social security, (to assist retired Americans financially) for Medicare, food stamps, and interest on the national debt, among other things.
Tax dollars are also used in much smaller percentages for various other government endeavors. About 1% of all tax money goes to foreign aid, and about 3.5% goes to pensions and benefits for government employees.
Everfi Module 7 Insurance Answers
Which of the following typically have the highest auto insurance premiums?
Young, inexperienced drivers
Why might you complete a 1040 instead of a 1040EZ?
You own a home.
In which of the following scenarios will you be entitled to pay the least amount of money out-of-pocket for a medical expense?
You have health insurance with a $500 deductible.
Which is an example of a withholding you might see on your pay stub?
Both A and B (Health Insurance and Retirement Savings)
On a pay stub, what is the difference between “Net Pay” and YTD Net Pay”?
Net Pay is how much you’ve made during a pay period, YTD Net Pay is how you’ve made this year.
When starting a new job, the form you complete to determine how much tax to withhold from your paycheck is called the _______.
W-4
Insurance can help you:
financially protect against unexpected accidents
Jan pays $70 each month for her auto insurance policy. This regular payment is called a:
Jan pays $70 each month for her auto insurance policy. This regular payment is called a:
The amount you owe in state income tax is based on:
Your yearly earnings.
When you purchase an item in a store, you may be charged __________.
Sales tax
Your auto insurance policy has a $200 monthly premium and $700 deductible. What is the maximum amount you will have to pay out-of-pocket for a car accident before your insurance covers your costs?
$700
If you are in a car accident caused by someone else who also has insurance, which type of insurance plan will not require you to pay out of pocket costs?
Either A or B (High deductible plan and Low deductible plan)
Tax that you pay when making a profit from selling a house is an example of:
Capital Gains Tax
Which of the following statements about taxes is FALSE?
Taxes at the local, state and federal level are all equal
If you cause a car accident, which type of insurance will require you to pay the least out of pocket?
Low deductible plan
Which of the following would likely be covered under homeowners insurance but NOT by renter’s insurance?
A tree branch breaks your bedroom window during a storm.
Which of the following are NOT deducted on a typical paystub:
Sales Tax
1040EZ
An end-of-year tax form that is used to determine the amount of income tax owed to the IRS. If your tax situation is simpler, you can fill out a 1040EZ form – which can be submitted by paper or online.
W-4
This form determines how much money will be withheld from your paycheck for taxes.
W-2
Which shows you how much you made and how much you owe in taxes; comes from employer on January 31st
YTD
The amount you have earned in the year so far
Taxes Withheld
Amount taken out of your paycheck to pay for taxes
Social Security
A tax that pays for the retirement benefits for people who are currently retired and for future retired
401k
An optional retirement savings plan sponsored by your employer
Federal Income Tax
Based on how much money you earn each year; the fed. govt. charges income tax to everyone who earns money (is deducted from your paycheck and is paid to the state and federal govt)
State Income Tax
Based on how much you earn annually; the percentage of your income that is taxed varies between states
The income tax paid to the state you live and/or work in. The amount of income tax varies by state, and some states don’t have income tax at all!
Property Tax
Based on the value of owned property, like land, buildings, or houses. The property tax rate depends on your state, local jurisdiction, and the value of your property (is usually collected by local govt and supports local things)
Capital Gains Tax
Charged on any profit you make from selling something at a higher price than you bought it; usually from the sale of stocks, bonds, or property
Sales Tax
A tax on a sale of merchandise or services (only used in some states)
Local, state, and federal taxes
Are required charges from the government that pay for certain government services, like the fire department, public schools or police protection.
Premiums
monthly cost for insurance
Deductible
Amount you must pay before you begin receiving any benefits from your insurance company
Insurance companies consider for cost of premium:
Driving records, tickets, types of cars, grades
The higher your deductible
The less your insurance policy will cost.
Coverage
Refers to how much protection you are eligible to receive under your insurance plan. It is more expensive to have more of this
Claim
The request you make to your insurance company for payment based on the terms of your insurance
Co-pay
Term used in medical insurance. It is a fixed fee that you pay for covered medical services
Auto Insurance
Protects other people and their cars, is required in most states
Homeowners insurance/Renters insurance
Homeowners overs home and possessions, renters only insures items in your home
Health Insurance
insures cost of any medical expense, but the amount of coverage depends on the type of insurance policy
Disability Insurance
helps cover lost income when an illness or injury prevents you from working
Life Insurance
Ensures that another person (your beneficiary) will be financially protected if you pass way
Insurance
Is a way of managing risk. Without insurance, when bad things happen, you have to pay for all costs out-of-pocket.
WHAT IS INSURANCE?
Insurance is a way of managing risk. Without insurance, when bad things happen, you have to pay for all costs out-of-pocket.
auto insurance
Auto insurance is required by law in most states for those who drive, because it protects you and other drivers on the road. If you cause an accident, your insurance will pay for some or all of the damage caused to others and their vehicles.
renter / homeowners insurance
Can protect you from paying for damages in the case of a burglary, fire, or other incident at your home. Homeowners insurance covers your home as well as your possessions inside it, while renters insurance only covers the items in your home.
health insurance
Health insurance helps cover the cost of any medical expenses, including doctor visits, prescriptions, trips to the emergency room or stays in the hospital. The amount of coverage depends on the type of insurance policy you have.
disability insurance
Disability insurance helps cover lost income when an illness or injury prevents you from working.
life insurance
Life insurance ensures that another person (your beneficiary) will be financially protected if you pass away. The beneficiary can be a spouse, child, parent, or another designated person or legal entity.
coverage
Coverage refers to the range of protection you are eligible to receive from your insurance plan.
premium
The premium is the amount you pay the insurance company for coverage. Premium payments may be due all at once or divided and paid on a regular basis, usually monthly.
claim
A claim is the request you make to your insurance company for payment based on the terms of your insurance. If you get into a car accident, you may submit a claim to your auto insurance company to request they pay the repair bill for you.
deductible
The deductible is the amount you are personally required to pay “out-of-pocket” toward each claim before your insurance kicks in. The cost of your deductible is in addition to your premium.
Co-pay
Co-pay is a term used in medical insurance. It is a fixed fee that you pay for covered medical services. For example, your insurance plan may require you to pay a small sum, which is your co-pay, when you visit the doctor’s office.
Joe went to the doctor yesterday and had to pay $20 for his visit. Joe’s $20 office visit payment is called a:
co-pay
Joe pays $100 a month to belong to his employer’s health insurance plan. Joe’s $100 monthly payment is called a:
premium
Maggie must pay for $1,500 worth of medical expenses out-of-pocket before her health insurance policy covers her costs. Maggie’s $1,500 out-of-pocket expenses are called a:
deductible
Maggie pays $50 a month for her health insurance policy. Maggie’s $50 monthly payment is called a:
premium
POLICY TERMS PRACTICE
Coverage refers to how much protection you are eligible to receive under your insurance plan. Generally, it is more expensive to have more coverage.
HOW INSURANCE WORKS
An insurance policy requires that you pay a premium for coverage. The deductible is the amount you must pay in the event of an accident or other claim. In general, the higher your deductible, the less your insurance policy will cost. This is because you are covering more of the cost of a potential claim.
car accidnet
low deductible
car accident that was some else’s fault
low deductible plan and high deductible plan
car maintenance
no insurance, low deductible plan, and high deductible plan
PAYING TAXES
Local, state, and federal taxes are required charges from the government that pay for certain government services, like the fire department, public schools or police protection.
federal income tax
Based on how much money you earn each year. The federal government charges income tax for everyone who earns money.
state income tax
Based on how much money you earn annually. The percentage of your income that is taxed varies between states. Some states don’t charge a state income tax.
sales tax
Charged on items you purchase. Most states charge sales tax every time you buy something. The sales tax percentage varies across states.
property tax
Based on the value of owned property, like land, buildings, or houses. The property tax rate depends on your state, local jurisdiction, and the value of your property.
capital gains tax
Charged on any profit you make from selling something at a higher price than you bought it. Capital gains are usually from the sale of stocks, bonds, or property.
TAX FORMS
When starting a new job, you will fill out the W-4 tax form. This form determines how much money will be withheld from your paycheck for taxes. At the end of the year, your employer will send you a W-2 form. You can use this to complete and submit your taxes to the IRS.
line 1
income
line 2
Unless you make more than $1,500 in interest from bank accounts and other investments this year, this line will be zero.
line 3
Unless you have lived in Alaska for over a year and have received unemployment compensation this year, this line will be zero.
line 4
This is what you get if you add lines 1, 2 and 3.
Line 4 = Line 1 + Line 2 + Line 3
Line 4 = 48,500 + 0 + 0
Line 4 = 48,500
line 5
Until you get married, you should check the “You” box and write the amount for a single person. In this case, $10,000.
line 6
To fill out line 6, subtract line 5 from line 4. Click on the amount you should write on line 6.
line 8
Unless you are over 25, or have a child, you should write down “zero” for this line.
line 10
This number is found by looking up your taxable income in line 6 in a tax table that comes with the 1040EZ form. For your income, the amount is $5,560.
line 9
To fill out line 9, add line 7 and line 8a together. Click on the amount you should write on line 9.
Which of the following are NOT deducted on a typical pay stub:
Sales Tax
In which of the following will you have to pay the least out-of-pocket for a medical expense?
Health insurance with $500 deductible
Insurance policy- $300 premium&$500 deductible how much to pay the insurance each month?
$300
Which of the following statements about taxes is FALSE
Taxes at the local, state, federal levels are all equal
Starting a new job, form you fill out for taxes to withhold from paycheck
W-4
Auto-Insurance-$200 premium&$700 deductible what is the amount you will have to pay before insurance covers your cost?
$700
When you purchase an item in store, you may be charged
Sales Tax
Which of the following has the highest auto insurance premiums?
Young, inexperienced drivers
Insurance can help you financially protect against?
Unexpected accidents
Jan pays $70 for auto insurance. Regular payment is called?
Premium
Insurance policy terms
Coverage premium claim deductible co pay
Coverage
Refers to range of protection you are eligible to receive from your insurance plan
Premium
Amount you pay the insurance company for coverage. Premium payments may be due all at once or divided and paid on a regular basis usually monthly
Claim
Request you make to ur insurance company for payment based on the terms of your insurance
Deductible
Amount you are personally required to pay out of pocket toward each claim before your insurance kicks in
Co pay
A fixed fee that you pay for covered medical services
Which of the following best describes how auto insurance companies manage risk?
The insurance company balances low risk drivers with high risk drivers. The insurance company charges higher rates to higher risk drivers
Types of taxes
Federal income tax state income tax sales tax property tax capital gains tax
Federal income tax
Based on how much money you earn each year the federal gov charges income tax for everyone who earns money
State income tax
Based on how much you earn annually the percentage of your income tax that is taxed varies between states some states don’t charge a state income tax
Sales tax
Charged on items you purchase. Most states charge sales tax every time you buy something. The sales tax percentage varies across states
Property tax
Based on the value of owned property like land buildings or houses the property tax rate depends on your state loan cap jurisdiction and the value of your property
Capital gains tax
Charged on any profit you make from selling something at a higher price than you bought it capital gains are usually from the sale of stocks bonds or property
Which of the following taxes are charged on items at the time of purchase
Sales tax
Social security
Tax that pays for the retirement benefits for people who are currently retired and for the future retired population
State income tax
The income tax paid to the state you live and or work in the amount of income tax varies by state and some states don’t have income tax at all
Deductions
Amounts other than taxes that have been taken out of your paycheck such as health insurance or retirement
Medicare
Tax that pays for health care for people aged 65 and older
401(k)
Optional retirement savings plan sponsored by your employer
Insurance policy terms
Coverage premium claim deductible co pay
Coverage
Refers to range of protection you are eligible to receive from your insurance plan
Premium
Amount you pay the insurance company for coverage. Premium payments may be due all at once or divided and paid on a regular basis usually monthly
Claim
Request you make to ur insurance company for payment based on the terms of your insurance
Deductible
Amount you are personally required to pay out of pocket toward each claim before your insurance kicks in
Co pay
A fixed fee that you pay for covered medical services
Which of the following best describes how auto insurance companies manage risk?
The insurance company balances low risk drivers with high risk drivers. The insurance company charges higher rates to higher risk drivers
Types of taxes
Federal income tax state income tax sales tax property tax capital gains tax
Federal income tax
Based on how much money you earn each year the federal gov charges income tax for everyone who earns money
State income tax
Based on how much you earn annually the percentage of your income tax that is taxed varies between states some states don’t charge a state income tax
Sales tax
Charged on items you purchase. Most states charge sales tax every time you buy something. The sales tax percentage varies across states
Property tax
Based on the value of owned property like land buildings or houses the property tax rate depends on your state loan cap jurisdiction and the value of your property
Capital gains tax
Charged on any profit you make from selling something at a higher price than you bought it capital gains are usually from the sale of stocks bonds or property
Which of the following taxes are charged on items at the time of purchase
Sales tax
Social security
Tax that pays for the retirement benefits for people who are currently retired and for the future retired population
State income tax
The income tax paid to the state you live and or work in the amount of income tax varies by state and some states don’t have income tax at all
Deductions
Amounts other than taxes that have been taken out of your paycheck such as health insurance or retirement
Medicare
Tax that pays for health care for people aged 65 and older
401(k)
Optional retirement savings plan sponsored by your employer
Quiz to Practice
Everfi insurance and taxes
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