Question 1

Workers' compensation insurance

Accepted Answer

A)  covers people who are found liable for professional negligence. 
B)  provides coverage against liability arising out of products sold. 
C)  is only required by 48 states. 
D)  guarantees payment of wages and medical costs for employees who are injured on the job. 
A)  covers people who are found liable for professional negligence. 
B)  provides coverage against liability arising out of products sold. 
C)  is only required by 48 states. 
D)  guarantees payment of wages and medical costs for employees who are injured on the job.

Question 2

The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area.

Accepted Answer

A) True 
 B)False

Question 3

Risky Business Insurance Company insures business clients against unexpected disasters such as tornadoes and floods. The company operates in several regions in the U.S., and negotiates contracts following standard insurance industry guidelines. A strategic business guideline that the company would follow is

Accepted Answer

A)  The amount of loss should be equal to or less than a loss covered by a competitor company. 
B)  There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable. 
C)  The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas. 
D)  All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other. 
A)  The amount of loss should be equal to or less than a loss covered by a competitor company. 
B)  There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable. 
C)  The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas. 
D)  All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other.

Question 4

Insurance companies will provide coverage only for losses that are accidental.

Accepted Answer

A) True 
 B)False

Question 5

A mutual insurance company is owned by its policyholders.

Accepted Answer

A) True 
 B)False

Question 6

Product liability insurance covers liability arising out of defective products sold.

Accepted Answer

A) True 
 B)False

Question 7

Insurable interest means that the policyholder is the one at risk to suffer a loss.

Accepted Answer

A) True 
 B)False

Question 8

DeMario was turned down when he attempted to buy a life insurance policy on his former Introduction to Business instructor. The most likely reason the insurance company turned down his attempt to insure the life of his former instructor was that

Accepted Answer

A)  the chance of the loss could not be measured. 
B)  he did not have an insurable interest in the instructor's life. 
C)  the instructor had already taken out a policy. 
D)  the loss would not be accidental. 
A)  the chance of the loss could not be measured. 
B)  he did not have an insurable interest in the instructor's life. 
C)  the instructor had already taken out a policy. 
D)  the loss would not be accidental.

Question 9

Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer.

Accepted Answer

A) True 
 B)False

Question 10

AutoPROs recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. 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)  a loss-prevention program 
A)  avoiding the risk 
B)  self-insuring against the risk 
C)  reducing the risk 
D)  a loss-prevention program

Question 11

Explain what makes the acceptance of risk possible for insurance companies.

Accepted Answer

The law of large numbers states that if

Question 12

Apple has an insurable interest in the lives of its top executives.

Accepted Answer

A) True 
 B)False

Question 13

Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.

Accepted Answer

A) True 
 B)False

Question 14

Risk management involves minimizing the losses from unexpected events.

Accepted Answer

A) True 
 B)False

Question 15

SpeedyTime Delivery requires their drivers to wear seat belts as they operate their trucks. This is an example of self-insuring as a risk management strategy.

Accepted Answer

A) True 
 B)False

Question 16

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Accepted Answer

A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Disability 
A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Disability

Question 17

One afternoon Waata was called to the café. One of Waata's staff had inadvertently spilled hot coffee on a customer's arm and the customer was left with a burn. Waata sent the customer off to the local hospital for treatment knowing that his ________ insurance would cover the claim.

Accepted Answer

A)  extended product liability 
B)  malpractice 
C)  public liability 
D)  major medical 
A)  extended product liability 
B)  malpractice 
C)  public liability 
D)  major medical

Question 18

Enterprise risk management is

Accepted Answer

A)  important to business. 
B)  irrelevant to business. 
C)  only used by nonprofit organizations. 
D)  only used by the Department of Homeland Security. 
A)  important to business. 
B)  irrelevant to business. 
C)  only used by nonprofit organizations. 
D)  only used by the Department of Homeland Security.

Question 19

A fidelity bond covers losses resulting from a second party's failure to fulfill a contract.

Accepted Answer

A) True 
 B)False

Question 20

When one of Waata's employees was stocking a particularly high shelf one morning; he reached a bit too far and fell off the ladder. Luckily he just broke his arm and returned to work later that day. His medical bills due to this accident were covered under

Accepted Answer

A)  workers' compensation. 
B)  disability insurance. 
C)  liability insurance. 
D)  his own health insurance. 
A)  workers' compensation. 
B)  disability insurance. 
C)  liability insurance. 
D)  his own health insurance.

Exam 23: Appendix: Managing Risk

Workers' compensation insurance

The best strategy for a profit-seeking insurance company would be to specialize in providing protection to people in a specific geographical area.

Insurance companies will provide coverage only for losses that are accidental.

A mutual insurance company is owned by its policyholders.

Product liability insurance covers liability arising out of defective products sold.

Insurable interest means that the policyholder is the one at risk to suffer a loss.

DeMario was turned down when he attempted to buy a life insurance policy on his former Introduction to Business instructor. The most likely reason the insurance company turned down his attempt to insure the life of his former instructor was that

Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer.

AutoPROs recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following?

Explain what makes the acceptance of risk possible for insurance companies.

Apple has an insurable interest in the lives of its top executives.

Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.

Risk management involves minimizing the losses from unexpected events.

SpeedyTime Delivery requires their drivers to wear seat belts as they operate their trucks. This is an example of self-insuring as a risk management strategy.

________ insurance replaces part of your income if you become unable to work for an extended period of time.

One afternoon Waata was called to the café. One of Waata's staff had inadvertently spilled hot coffee on a customer's arm and the customer was left with a burn. Waata sent the customer off to the local hospital for treatment knowing that his ________ insurance would cover the claim.

Enterprise risk management is

A fidelity bond covers losses resulting from a second party's failure to fulfill a contract.

When one of Waata's employees was stocking a particularly high shelf one morning; he reached a bit too far and fell off the ladder. Luckily he just broke his arm and returned to work later that day. His medical bills due to this accident were covered under

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

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