Question 1

The ideal insurance system:

Accepted Answer

A) reduces the probability of accidental and fortuitous losses due to increased predictability 
B) requires the transfer of a large number of exposures to loss to a pool, where a fund exists in advance of losses having to be paid 
C) works best when a large proportion of the participants in the pool submits a claim 
D) eliminates all hazards 
A) reduces the probability of accidental and fortuitous losses due to increased predictability 
B) requires the transfer of a large number of exposures to loss to a pool, where a fund exists in advance of losses having to be paid 
C) works best when a large proportion of the participants in the pool submits a claim 
D) eliminates all hazards

Question 2

Nearly all policies of insurance exclude loss caused intentionally by the insured. This is necessary to meet which of the following requisites of an ideally insurable exposure?

Accepted Answer

A) to control the moral hazard 
B) to control the morale hazard 
C) the loss must not be subject to the catastrophic hazard 
D) the loss must be definite and measurable 
A) to control the moral hazard 
B) to control the morale hazard 
C) the loss must not be subject to the catastrophic hazard 
D) the loss must be definite and measurable

Question 3

If you were an underwriter of homeowners insurance coverage,asking which of the following underwriting questions would probably be socially unacceptable to the homeowner applicant?

Accepted Answer

A) What religious beliefs do you have 
B) Does anyone in your family smoke cigarettes in the house 
C) Do you have an alarm system installed and working 
D) Do you have a swimming pool 
A) What religious beliefs do you have 
B) Does anyone in your family smoke cigarettes in the house 
C) Do you have an alarm system installed and working 
D) Do you have a swimming pool

Question 4

Insurance works best when it is sold to those who expect the greatest losses.

Accepted Answer

A) True 
 B)False

Question 5

What are the requirements for a plaintiff to prove negligence against a defendant?

Accepted Answer

The plaintiff must show 1)the defendant

Question 6

FEMA estimates that for every $3 of flood insurance claims paid from the NFIP,it saves about _____ in disaster assistance payments

Accepted Answer

A) $1 
B) $2 
C) $5 
D) $7 
A) $1 
B) $2 
C) $5 
D) $7

Question 7

What are the requirements for an "ideally" insurable group of exposures?

Accepted Answer

There are four requirements,from the poi

Question 8

You are applying for homeowners' insurance,and the application for coverage asks if you have ever been convicted of a crime. Why does the insurer care if you have a criminal record?

Accepted Answer

A) It tarnishes the company's image to sell to former convicts 
B) By law, convicted criminals are not entitled to own property, and thus cannot be issued property insurance policies 
C) A criminal background, especially one involving destruction or theft of property, indicates that you are a potential moral hazard 
D) Underwriters are notorious for asking personal questions 
A) It tarnishes the company's image to sell to former convicts 
B) By law, convicted criminals are not entitled to own property, and thus cannot be issued property insurance policies 
C) A criminal background, especially one involving destruction or theft of property, indicates that you are a potential moral hazard 
D) Underwriters are notorious for asking personal questions

Question 9

List and briefly explain the principles of risk classification.

Accepted Answer

1)separation and class homogeneity the p

Question 10

In which of the following insurance pools would there be no subsidization?

Accepted Answer

A) fire insurance 
B) life insurance 
C) automobile insurance 
D) there would be subsidization in all of these pools 
A) fire insurance 
B) life insurance 
C) automobile insurance 
D) there would be subsidization in all of these pools

Question 11

Which one of the following lists presents the three major categories of "legal liability"?

Accepted Answer

A) breach of contract, res ipsa loquitur, torts 
B) criminal wrongs, product liability, intentional interference 
C) torts, breach of contracts, liability without fault 
D) breach of a contract, tort, criminal wrongs 
A) breach of contract, res ipsa loquitur, torts 
B) criminal wrongs, product liability, intentional interference 
C) torts, breach of contracts, liability without fault 
D) breach of a contract, tort, criminal wrongs

Question 12

The Norris and Manhart cases resulted in which of the following outcomes?

Accepted Answer

A) made insurance intrastate commerce 
B) made it illegal to charge men and women different life insurance premiums 
C) equalization of pension payments between men and women 
D) made it illegal to use gender as an underwriting factor in any type of insurance 
A) made insurance intrastate commerce 
B) made it illegal to charge men and women different life insurance premiums 
C) equalization of pension payments between men and women 
D) made it illegal to use gender as an underwriting factor in any type of insurance

Question 13

Assume Gerald is injured because his landlord,Barbara,fails to replace burned-out light bulbs in the hallway of his apartment building. If Gerald trips and falls and then sues Barbara for his injuries,the basis of his suit most likely will be:

Accepted Answer

A) negligence 
B) intentional interference 
C) res ipsa loquitur 
D) breach of contract (lease) 
A) negligence 
B) intentional interference 
C) res ipsa loquitur 
D) breach of contract (lease)

Question 14

All the following are necessary for an ideally insurable loss exposure except:

Accepted Answer

A) large number of homogeneous exposures 
B) losses must be accidental and unintentional from the point of view of the insured 
C) losses must be measurable 
D) low probability of loss 
A) large number of homogeneous exposures 
B) losses must be accidental and unintentional from the point of view of the insured 
C) losses must be measurable 
D) low probability of loss

Question 15

If you were an underwriter of personal auto insurance,which of the following underwriting criteria would you MOST prefer to use because of its incentive value?

Accepted Answer

A) gender 
B) age 
C) driving record 
D) health 
A) gender 
B) age 
C) driving record 
D) health

Question 16

Damas went to a hair salon to get his hair dyed blonde. He had bad reaction to the dye used on his hair,and all his hair fell out. He further developed a horrible skin infection that almost killed him. Damas sued the salon for his injuries. Damas's attorney was unable to show exactly what the salon did wrong,but the jury ruled in favor of Damas anyway. What legal doctrine would have allowed this verdict?

Accepted Answer

A) Res ipsa loquitur 
B) Workers' compensation laws 
C) Vicarious liability 
D) Attractive Nuisance 
A) Res ipsa loquitur 
B) Workers' compensation laws 
C) Vicarious liability 
D) Attractive Nuisance

Question 17

What is the difference between compensation for personal injuries and punitive damages?

Accepted Answer

Personal injury damages pay for damages

Question 18

Landlord Jones did not replace the broken ladder in the pool of his apartment complex,even though it had been broken for two years and there was a sign posted to indicate that the ladder was broken. Manuel,a tenant of Mr.Jones',is seriously injured by the ladder while trying to exit the pool. Manuel sues Jones. Jones' best legal defense would be:

Accepted Answer

A) res ipsa loquitur 
B) assumption of the risk a reasonable person would get a flashlight or take other precautions 
C) Burton did not intend the injury 
D) the tenant always has the duty to change the light bulbs 
A) res ipsa loquitur 
B) assumption of the risk a reasonable person would get a flashlight or take other precautions 
C) Burton did not intend the injury 
D) the tenant always has the duty to change the light bulbs

Question 19

You can collect for your own injuries under a liability policy.

Accepted Answer

A) True 
 B)False

Question 20

Shanelle travels to Las Vegas,and puts $5,000 on the roulette table,hoping to win big. Which of the following statements is true about this situation?

Accepted Answer

A) Her bet is no different than the one we all make when we buy insurance policies 
B) She created a risk where none existed before, so this transaction is not insurance 
C) If she called her homeowners' insurance agent before she left on her trip, she could have bought a policy against losing money at the roulette table 
D) Her bet represents a pure risk 
A) Her bet is no different than the one we all make when we buy insurance policies 
B) She created a risk where none existed before, so this transaction is not insurance 
C) If she called her homeowners' insurance agent before she left on her trip, she could have bought a policy against losing money at the roulette table 
D) Her bet represents a pure risk

Exam 2: Defining the Insurable Event

The ideal insurance system:

Nearly all policies of insurance exclude loss caused intentionally by the insured. This is necessary to meet which of the following requisites of an ideally insurable exposure?

If you were an underwriter of homeowners insurance coverage,asking which of the following underwriting questions would probably be socially unacceptable to the homeowner applicant?

Insurance works best when it is sold to those who expect the greatest losses.

What are the requirements for a plaintiff to prove negligence against a defendant?

FEMA estimates that for every $3 of flood insurance claims paid from the NFIP,it saves about _____ in disaster assistance payments

What are the requirements for an "ideally" insurable group of exposures?

You are applying for homeowners' insurance,and the application for coverage asks if you have ever been convicted of a crime. Why does the insurer care if you have a criminal record?

List and briefly explain the principles of risk classification.

In which of the following insurance pools would there be no subsidization?

Which one of the following lists presents the three major categories of "legal liability"?

The Norris and Manhart cases resulted in which of the following outcomes?

Assume Gerald is injured because his landlord,Barbara,fails to replace burned-out light bulbs in the hallway of his apartment building. If Gerald trips and falls and then sues Barbara for his injuries,the basis of his suit most likely will be:

All the following are necessary for an ideally insurable loss exposure except:

If you were an underwriter of personal auto insurance,which of the following underwriting criteria would you MOST prefer to use because of its incentive value?

What is the difference between compensation for personal injuries and punitive damages?

You can collect for your own injuries under a liability policy.

Shanelle travels to Las Vegas,and puts $5,000 on the roulette table,hoping to win big. Which of the following statements is true about this situation?

Fundamentals and Terminology

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Advanced Topics in Risk Management

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

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