Question 1

Indemnification clauses should be reviewed by an insurance agent or broker to limit liabilities to a small business.

Accepted Answer

A) True 
 B)False  True

Question 2

A small company can protect itself against the death of important personnel by carrying CGL insurance.

Accepted Answer

A) True 
 B)False  False

Question 3

Match the term with its definition. Some terms may not be used.
-Lessening the frequency, severity, or unpredictability of potential losses

Accepted Answer

A) Actual cash value 
B) Aggregate stop loss limit 
C) Direct loss 
D) Disability buyout insurance 
E) Disability insurance
F)Indirect loss
G)Loss avoidance
H)Loss prevention
I)Loss reduction
J)Replacement value of property
K)Specific stop loss limit 
A) Actual cash value 
B) Aggregate stop loss limit 
C) Direct loss 
D) Disability buyout insurance 
E) Disability insurance
F)Indirect loss
G)Loss avoidance
H)Loss prevention
I)Loss reduction
J)Replacement value of property
K)Specific stop loss limit I

Question 4

Match the term with its definition. Some terms may not be used.
-A firm's per-employee limit on self-funding for medical claims

Accepted Answer

A) Actual cash value 
B) Aggregate stop loss limit 
C) Direct loss 
D) Disability buyout insurance 
E) Disability insurance
F)Indirect loss
G)Loss avoidance
H)Loss prevention
I)Loss reduction
J)Replacement value of property
K)Specific stop loss limit 
A) Actual cash value 
B) Aggregate stop loss limit 
C) Direct loss 
D) Disability buyout insurance 
E) Disability insurance
F)Indirect loss
G)Loss avoidance
H)Loss prevention
I)Loss reduction
J)Replacement value of property
K)Specific stop loss limit

Question 5

Assume that the physical property of a business is valued at $50,000. The company's commercial property policy contains a coinsurance clause with a stated percentage of 80 percent. The company insures the property for $30,000 (75 percent of the specified minimum). The company incurs a fire loss of $20,000. How much of the loss will the insurance company pay for?

Accepted Answer

A)  $0 
B)  $15,000 
C)  $20,000 
D)  $10,000 
A)  $0 
B)  $15,000 
C)  $20,000 
D)  $10,000

Question 6

Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the ___________________ even though this amount is more than Quentin paid for it.

Accepted Answer

A)  replacement value 
B)  actual cash value 
C)  coinsurance value 
D)  minimum value 
A)  replacement value 
B)  actual cash value 
C)  coinsurance value 
D)  minimum value

Question 7

Partially self-funded insurance programs that limit the self-insured portion of an employee's medical coverage to a specific amount is commonly referred to as an aggregate stop loss limit.

Accepted Answer

A) True 
 B)False

Question 8

Loss prevention is defined as lessening the frequency, severity, or unpredictability of losses.

Accepted Answer

A) True 
 B)False

Question 9

Match the term with its definition. Some terms may not be used.
-Minimizing potential losses by preventing, avoiding, and/or reducing risk

Accepted Answer

A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk 
A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk

Question 10

Match the term with its definition. Some terms may not be used.
-A business version of a homeowner's policy designed to meet the property and general liability insurance needs of some small business owners

Accepted Answer

A) Business interruption insurance 
B) Business owner's policy 
C) Commercial general liability insurance 
D) Disability insurance 
E) Indemnification clause
F)Key-person life insurance
G)Package policy
H)Personnel risks
I)Proximate cause
J)Reasonable standard
K)Workers' compensation insurance 
A) Business interruption insurance 
B) Business owner's policy 
C) Commercial general liability insurance 
D) Disability insurance 
E) Indemnification clause
F)Key-person life insurance
G)Package policy
H)Personnel risks
I)Proximate cause
J)Reasonable standard
K)Workers' compensation insurance

Question 11

Self-insurance requires

Accepted Answer

A)  an analysis for stop loss limits. 
B)  implementing risk control methods. 
C)  owning stock in an insurance company. 
D)  saving money to cover possible future losses. 
A)  an analysis for stop loss limits. 
B)  implementing risk control methods. 
C)  owning stock in an insurance company. 
D)  saving money to cover possible future losses.

Question 12

Match the term with its definition. Some terms may not be used.
-Any property other than land and anything physically attached to the land, such as buildings

Accepted Answer

A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk 
A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk

Question 13

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for:

Accepted Answer

A)  exemplary damages. 
B)  non-economic damages. 
C)  compensatory damages. 
D)  punitive damages. 
A)  exemplary damages. 
B)  non-economic damages. 
C)  compensatory damages. 
D)  punitive damages.

Question 14

Since Melissa is starting a day care center in her home, what business risks should be insured? How can an insurance agent assist in the insurance evaluation process?

Accepted Answer

The first step in evaluating an insuranc

Question 15

Pure risk refers to a situation where only loss or no loss can occur-there is no potential gain.

Accepted Answer

A) True 
 B)False

Question 16

Perry's business is not in the safest neighborhood. He is concerned about robbery and vandalism, two types of:

Accepted Answer

A)  business risk. 
B)  market risk. 
C)  pure risk. 
D)  uninsurable risk. 
A)  business risk. 
B)  market risk. 
C)  pure risk. 
D)  uninsurable risk.

Question 17

Barney places his new extension ladder on a slippery surface when he leans it against the wall. He climbs up; the ladder slips out from under him and he falls. Which type of product liability may exist in this situation?

Accepted Answer

A)  Manufacturing since ladder may not have been intended for this use. 
B)  Design since the ladder may not have been made to specifications 
C)  Marketing if the manufacturer did not provide instructions on how to use the ladder. 
D)  There is no liability. The users assumes all risk in using any type of ladder. 
A)  Manufacturing since ladder may not have been intended for this use. 
B)  Design since the ladder may not have been made to specifications 
C)  Marketing if the manufacturer did not provide instructions on how to use the ladder. 
D)  There is no liability. The users assumes all risk in using any type of ladder.

Question 18

Match the term with its definition. Some terms may not be used.
-Land and anything physically attached to the land, such as buildings

Accepted Answer

A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk 
A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk

Question 19

Which term describes land and anything physically attached to the land, such as buildings?

Accepted Answer

A)  Real property 
B)  Personal property 
C)  Replacement value of property 
D)  Actual cash value 
A)  Real property 
B)  Personal property 
C)  Replacement value of property 
D)  Actual cash value

Question 20

A managed-care network providing health insurance that is more expensive than an HMO but offers a broader choice of medical providers is called a

Accepted Answer

A)  key-person organization. 
B)  package policy. 
C)  personal maintenance organization. 
D)  preferred provider organization. 
A)  key-person organization. 
B)  package policy. 
C)  personal maintenance organization. 
D)  preferred provider organization.

Exam 23: Managing Risk in the Small Business

Indemnification clauses should be reviewed by an insurance agent or broker to limit liabilities to a small business.

A small company can protect itself against the death of important personnel by carrying CGL insurance.

Match the term with its definition. Some terms may not be used. -Lessening the frequency, severity, or unpredictability of potential losses

Match the term with its definition. Some terms may not be used. -A firm's per-employee limit on self-funding for medical claims

Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the ___________________ even though this amount is more than Quentin paid for it.

Partially self-funded insurance programs that limit the self-insured portion of an employee's medical coverage to a specific amount is commonly referred to as an aggregate stop loss limit.

Loss prevention is defined as lessening the frequency, severity, or unpredictability of losses.

Match the term with its definition. Some terms may not be used. -Minimizing potential losses by preventing, avoiding, and/or reducing risk

Match the term with its definition. Some terms may not be used. -A business version of a homeowner's policy designed to meet the property and general liability insurance needs of some small business owners

Self-insurance requires

Match the term with its definition. Some terms may not be used. -Any property other than land and anything physically attached to the land, such as buildings

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for:

Since Melissa is starting a day care center in her home, what business risks should be insured? How can an insurance agent assist in the insurance evaluation process?

Pure risk refers to a situation where only loss or no loss can occur-there is no potential gain.

Perry's business is not in the safest neighborhood. He is concerned about robbery and vandalism, two types of:

Barney places his new extension ladder on a slippery surface when he leans it against the wall. He climbs up; the ladder slips out from under him and he falls. Which type of product liability may exist in this situation?

Match the term with its definition. Some terms may not be used. -Land and anything physically attached to the land, such as buildings

Which term describes land and anything physically attached to the land, such as buildings?

A managed-care network providing health insurance that is more expensive than an HMO but offers a broader choice of medical providers is called a

The Entrepreneurial Life

Integrity and Ethics: Foundations for Success in Small Business

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Business

Professional Management and the Small Business

Managing Human Resources

Managing Operations

Managing the Firms Assets

A: Managing Risk in the Small Business

Filters