Question 1

All risks are insurable.

Accepted Answer

A) True 
 B)False

Question 2

________ risk involves the threat of loss with no chance for profit.

Accepted Answer

A)  Minimum 
B)  Pure 
C)  Speculative 
D)  Managed 
A)  Minimum 
B)  Pure 
C)  Speculative 
D)  Managed

Question 3

Risk management now includes the evaluation of

Accepted Answer

A)  worldwide risks such as global warming. 
B)  worldwide issues such as poverty. 
C)  European issues such as the value of the euro. 
D)  political risks in South America. 
A)  worldwide risks such as global warming. 
B)  worldwide issues such as poverty. 
C)  European issues such as the value of the euro. 
D)  political risks in South America.

Question 4

Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas.

Accepted Answer

A) True 
 B)False

Question 5

Outsourcing helps some companies avoid risk.

Accepted Answer

A) True 
 B)False

Question 6

Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage.

Accepted Answer

A)  deductible unit 
B)  compensation clause 
C)  rider 
D)  tag 
A)  deductible unit 
B)  compensation clause 
C)  rider 
D)  tag

Question 7

According to the rule of indemnity, an insured person cannot collect more than the actual loss from an insurable risk.

Accepted Answer

A) True 
 B)False

Question 8

Disability insurance replaces part of your income if you become disabled and can no longer work, but you usually must be disabled for a specified period of time before benefits are provided.

Accepted Answer

A) True 
 B)False

Question 9

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

Accepted Answer

A)  avoiding the risk 
B)  insuring against the risk 
C)  assuming the risk 
D)  reducing the risk 
A)  avoiding the risk 
B)  insuring against the risk 
C)  assuming the risk 
D)  reducing the risk

Question 10

An insurance company can use the law of large numbers to predict the number of people in your community that will have a car accident in a given month.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements best reflects the concept behind the rule of indemnity?

Accepted Answer

A)  If a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time. 
B)  If a written contract exists between the insured and an insurance company, the insured is entitled to receive the maximum amount stated in the contract in the event of a loss. 
C)  If an insurance company's premiums generate excess funds, these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums. 
D)  An insured person cannot collect more than the actual loss from an insurable risk. 
A)  If a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time. 
B)  If a written contract exists between the insured and an insurance company, the insured is entitled to receive the maximum amount stated in the contract in the event of a loss. 
C)  If an insurance company's premiums generate excess funds, these excess funds must be returned to the policyholders in the form of dividends or reductions in future premiums. 
D)  An insured person cannot collect more than the actual loss from an insurable risk.

Question 12

Risk management for business is critical due in part to

Accepted Answer

A)  natural disasters. 
B)  profitability. 
C)  legal requirements. 
D)  international requirements. 
A)  natural disasters. 
B)  profitability. 
C)  legal requirements. 
D)  international requirements.

Question 13

Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.

Accepted Answer

A) True 
 B)False

Question 14

The risk of environmental harm is ________ in its proportions on issues such as global warming.

Accepted Answer

A)  local 
B)  regional 
C)  national 
D)  international 
A)  local 
B)  regional 
C)  national 
D)  international

Question 15

An endorsement can provide additional coverage to a homeowner's policy for business equipment.

Accepted Answer

A) True 
 B)False

Question 16

One way to lower the need for outside insurance is to self-insure.

Accepted Answer

A) True 
 B)False

Question 17

Any risk is insurable as long as you can pay the premium.

Accepted Answer

A) True 
 B)False

Question 18

Citrus City Groves on Florida's Gulf Coast, harvests an assortment of citrus fruits. The owners of Citrus City are right to think about how the risk of climate change might impact their crops in the future.

Accepted Answer

A) True 
 B)False

Question 19

One of Waata's staff members has been out on sick leave because she had an emergency appendectomy. She brought the hospital bills in to Waata for his opinion. It seems she had been covered by two health insurance policies for some time and now she thinks she may be able to collect from both companies in payment for the operation. Waata assured his employee that

Accepted Answer

A)  she could look forward to a check from both companies once they had paid the medical bills. 
B)  because of the rule of indemnity she would not be able to profit from her operation. 
C)  because of the law of large numbers both insurance companies would pay her directly. 
D)  because her risk was insurable, she would be able to collect from both insurance policies. 
A)  she could look forward to a check from both companies once they had paid the medical bills. 
B)  because of the rule of indemnity she would not be able to profit from her operation. 
C)  because of the law of large numbers both insurance companies would pay her directly. 
D)  because her risk was insurable, she would be able to collect from both insurance policies.

Question 20

A policyholder must have a(n) ________ in what is being insured, meaning that the policyholder must be the one at risk to suffer an economic loss.

Accepted Answer

A)  speculative interest 
B)  uncertain stake 
C)  unsecured holding 
D)  insurable interest 
A)  speculative interest 
B)  uncertain stake 
C)  unsecured holding 
D)  insurable interest

Exam 23: Appendix: Managing Risk

All risks are insurable.

________ risk involves the threat of loss with no chance for profit.

Risk management now includes the evaluation of

Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas.

Outsourcing helps some companies avoid risk.

Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage.

According to the rule of indemnity, an insured person cannot collect more than the actual loss from an insurable risk.

Disability insurance replaces part of your income if you become disabled and can no longer work, but you usually must be disabled for a specified period of time before benefits are provided.

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

An insurance company can use the law of large numbers to predict the number of people in your community that will have a car accident in a given month.

Which of the following statements best reflects the concept behind the rule of indemnity?

Risk management for business is critical due in part to

Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.

The risk of environmental harm is ________ in its proportions on issues such as global warming.

An endorsement can provide additional coverage to a homeowner's policy for business equipment.

One way to lower the need for outside insurance is to self-insure.

Any risk is insurable as long as you can pay the premium.

Citrus City Groves on Florida's Gulf Coast, harvests an assortment of citrus fruits. The owners of Citrus City are right to think about how the risk of climate change might impact their crops in the future.

A policyholder must have a(n) ________ in what is being insured, meaning that the policyholder must be the one at risk to suffer an economic loss.

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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