Question 1

Professional liability insurance is also sometimes known as malpractice insurance.

Accepted Answer

A) True 
 B)False

Question 2

It's good advice for doctors and lawyers to carry malpractice insurance.

Accepted Answer

A) True 
 B)False

Question 3

An insurance company would not be willing to insure a risk if it

Accepted Answer

A)  results from political disruptions. 
B)  has a measurable loss. 
C)  results from an accident. 
D)  has a low probability of occurring. 
A)  results from political disruptions. 
B)  has a measurable loss. 
C)  results from an accident. 
D)  has a low probability of occurring.

Question 4

Molly's neighbor, Steve, is quite careless and is in danger of burning his house down. Molly tried to buy a fire insurance policy on Steve's house, so she could collect the payment when Steve inevitably burned down his own house. The insurance company would not allow Molly to purchase the policy because she did not have an insurable interest in the property.

Accepted Answer

A) True 
 B)False

Question 5

Going bare is a much less risky strategy for self-insurance.

Accepted Answer

A) True 
 B)False

Question 6

An insurance policy is a written contract.

Accepted Answer

A) True 
 B)False

Question 7

Lyla owns a small jewelry business with only four employees. She opened her business recently and makes just enough to pay her bills each week. Yesterday, just before the end of her first quarter in business, she received a notice from the government indicating that she needed to provide evidence of workers' compensation insurance. Lyla

Accepted Answer

A)  realized she was required to provide this insurance so she immediately got a policy. 
B)  is not required to carry workers' compensation because she has less than ten employees. 
C)  doesn't need workers' compensation because her business is in Louisiana. 
D)  doesn't need workers' compensation because she is not in the construction business. 
A)  realized she was required to provide this insurance so she immediately got a policy. 
B)  is not required to carry workers' compensation because she has less than ten employees. 
C)  doesn't need workers' compensation because her business is in Louisiana. 
D)  doesn't need workers' compensation because she is not in the construction business.

Question 8

Donna owns a life insurance policy on her husband Mike through Securitas Mutual Life Insurance Company. As a policyholder, she also owns part of the company.

Accepted Answer

A) True 
 B)False

Question 9

________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.

Accepted Answer

A)  Health 
B)  Professional liability 
C)  Workers' compensation 
D)  Malpractice 
A)  Health 
B)  Professional liability 
C)  Workers' compensation 
D)  Malpractice

Question 10

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

Accepted Answer

A) True 
 B)False

Question 11

Businesses can often reduce the risk to which they are exposed.

Accepted Answer

A) True 
 B)False

Question 12

There are two different kinds of risk: passive and active.

Accepted Answer

A) True 
 B)False

Question 13

A ________ insurance company is owned by stockholders, just like any other investor-owned company. A ________ insurance company is owned by its policyholders.

Accepted Answer

A)  stock; mutual 
B)  corporate; stock 
C)  stock; corporate 
D)  mutual; limited liability 
A)  stock; mutual 
B)  corporate; stock 
C)  stock; corporate 
D)  mutual; limited liability

Question 14

When a firm that is self-insuring against risk decides to cover losses straight out of its budget, it is said to be "going bare."

Accepted Answer

A) True 
 B)False

Question 15

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

Accepted Answer

A)  avoiding the risk 
B)  self-insuring against the risk 
C)  reducing the risk 
D)  loss-prevention program 
A)  avoiding the risk 
B)  self-insuring against the risk 
C)  reducing the risk 
D)  loss-prevention program

Question 16

Some companies are avoiding risk through the use of product recalls.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a goal of enterprise risk management?

Accepted Answer

A)  defining which risks the program will manage 
B)  deciding how to petition the government for financial help 
C)  assigning risk management to a lobbyist in Washington 
D)  refining the business plan for risk management 
A)  defining which risks the program will manage 
B)  deciding how to petition the government for financial help 
C)  assigning risk management to a lobbyist in Washington 
D)  refining the business plan for risk management

Question 18

Organizations spend about ________ percent of gross domestic product on insurance premiums.

Accepted Answer

A)  2 
B)  5 
C)  10 
D)  20 
A)  2 
B)  5 
C)  10 
D)  20

Question 19

Sean is in charge of risk management for First Friends, Inc., a large chain of preschools on the East Coast. He has decided to build enterprise risk management into the organization. The first step Sean should take is to

Accepted Answer

A)  decide on the spyware software the organization should buy. 
B)  send a letter to all of the staff informing them that using e-mail for personal purposes will not be allowed. 
C)  remove the playgrounds from all of the locations. 
D)  decide which risks the organization should manage. 
A)  decide on the spyware software the organization should buy. 
B)  send a letter to all of the staff informing them that using e-mail for personal purposes will not be allowed. 
C)  remove the playgrounds from all of the locations. 
D)  decide which risks the organization should manage.

Question 20

A characteristic of a health savings account that distinguishes it from other types of health care coverage is that it

Accepted Answer

A)  is not tax-deferred. 
B)  allows people to save money for medical expenses in a tax-deferred account. 
C)  covers only emergency procedures. 
D)  provides unlimited access to routine medical services (such as office visits) and minor medical tests and procedures (such as blood tests and X-rays) at no cost. 
A)  is not tax-deferred. 
B)  allows people to save money for medical expenses in a tax-deferred account. 
C)  covers only emergency procedures. 
D)  provides unlimited access to routine medical services (such as office visits) and minor medical tests and procedures (such as blood tests and X-rays) at no cost.

Exam 23: Appendix: Managing Risk

Professional liability insurance is also sometimes known as malpractice insurance.

It's good advice for doctors and lawyers to carry malpractice insurance.

An insurance company would not be willing to insure a risk if it

Going bare is a much less risky strategy for self-insurance.

An insurance policy is a written contract.

Donna owns a life insurance policy on her husband Mike through Securitas Mutual Life Insurance Company. As a policyholder, she also owns part of the company.

________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

Businesses can often reduce the risk to which they are exposed.

There are two different kinds of risk: passive and active.

A ________ insurance company is owned by stockholders, just like any other investor-owned company. A ________ insurance company is owned by its policyholders.

When a firm that is self-insuring against risk decides to cover losses straight out of its budget, it is said to be "going bare."

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

Some companies are avoiding risk through the use of product recalls.

Which of the following is a goal of enterprise risk management?

Organizations spend about ________ percent of gross domestic product on insurance premiums.

Sean is in charge of risk management for First Friends, Inc., a large chain of preschools on the East Coast. He has decided to build enterprise risk management into the organization. The first step Sean should take is to

A characteristic of a health savings account that distinguishes it from other types of health care coverage is that it

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Personal Finances

Filters

A insurance company is owned by stockholders, just like any other investor-owned company. A insurance company is owned by its policyholders.