Deck 7: Principles of Risk and Insurance

Question 1

Collision, fire, hurricane, and theft are examples of:

A) Hazard.
B) Law of large numbers.
C) Peril.
D) Risk.

Answer 1

C

Question 2

A formal program of risk retention for an individual that takes on the insurance company's role in order to cover the individual's risk is:

A) Adverse selection.
B) Formal fund.
C) Risk transfer.
D) Self-insurance.

Answer 2

D

Question 3

The selection of an insurance company includes all of the following except:

A) Cost-benefit analysis.
B) Economic cycle.
C) Industry ratings.
D) Purpose of coverage.

Answer 3

B

Question 4

All of the following are Methods of Settling a Loss except:

A) Actual Cash Value.
B) Fair Market Value.
C) Guaranteed Replacement Cost.
D) Replacement Cost.

Question 5

Which of the following is not an example of a Static risk?

A) Earthquake.
B) Flood.
C) Recession.
D) Sinkhole.

Question 6

Intramural sports are an example of which of the following:

A) Economic risk.
B) Investment risk.
C) Pure risk.
D) Speculative risk.

Question 7

Elements of the Risk Management Process are:
I. Analyze and evaluate potential economic loss exposures.
II. Develop and present recommendations.
III. Implement risk management plan.
IV. Monitor the risk management plan.

A) I, II, IV.
B) II, III, IV.
C) I, II, III.
D) I, II, III, IV.

Question 8

An insurance company's appointment of an agent to act on its behalf is an example of:

A) Apparent Authority.
B) Express Authority.
C) Implied Authority.
D) Legal Authority.