Deck 19: Risk Management and Insurance

Question 1

Which of the following is not an insurable loss?

A) A loss due to a windstorm
B) A loss of a key executive
C) An undeterminable or unpredictable loss
D) A measurable loss of property

Answer 1

C

Question 2

Which of the following businesses is most likely to purchase a fidelity bond?

A) A law office that only receives payments by credit card
B) A doctor's office that only receives payments through insurance companies
C) A bank that receives cash and checks
D) A seller at farmer's markets who operates his or her business alone

Answer 2

C

Question 3

What is the purpose of business liability coverage?

A) Protect the policy holder from losses due to injury to another person or another person's property
B) Protect the business from embezzlement by an employee
C) Protect the business from damage due to fire or flood
D) Protect the business from losses due to negligence by a public employee

Answer 3

A

Question 4

What is the name given to an insurance plan that directly employs or contracts with selected physicians and hospitals to provide health care services in exchange for a fixed,prepaid monthly premium?

A) The Affordable Care Act (ACA)
B) Preferred Provider Organization (PPO)
C) A Health Maintenance Organization (HMO)
D) Major medical insurance

Question 5

What is another name for whole life insurance?

A) Term life insurance
B) Indemnity life insurance
C) Straight life insurance
D) Ordinary life insurance

Question 6

What is the purpose of no-fault insurance?

A) Provide insurance for all vehicles registered in the state
B) Reduce court case loads and premium costs
C) Eliminate finger-pointing for auto accident claims
D) Limit the rights of insured individuals

Question 7

Suppose that early this year you buy a home valued at $180,000 and purchase $200,000 worth of fire insurance on it.According to the principle of indemnity,what amount of money would the insurer pay you if the home were totally destroyed by fire?

A) $90,000
B) $100,000
C) $180,000
D) $200,000

Question 8

Who is responsible for paying the premiums for unemployment insurance coverage that covers eligible unemployed workers?

A) The federal government
B) State governments
C) Employees
D) Employers
E) Both employees and employers

Question 9

Alicia Simmons purchased a standard fire insurance policy with an endorsement for extended coverage.She incurred damage due to nuclear radiation and filed a claim with her insurance company.Why would her insurance company refuse to cover her claim?

A) Normally,insurance companies are skeptical about taking such claims.
B) Losses caused by nuclear radiation usually are excluded from extended-coverage endorsements.
C) Payments to her would bankrupt the company.
D) Insurance companies are slow to respond to policyholders' claims.

Question 10

What is the name given to the clause in an insurance policy that makes it uneconomical to underinsure one's property?

A) Indemnity
B) Endorsement
C) Coinsurance
D) Extended

Question 11

What is the name given to the fee charged by an insurance company to cover a business for possible loss due to fire?

A) Premium
B) Indemnity
C) Policy
D) Dividends

Question 12

What is the purpose of self-insurance?

A) Eliminate the risk
B) Provide a means for covering losses
C) Create high insurance costs
D) Develop a new policy to be purchased by the insured

Question 13

DeToya Blackburn,owner of DeTo Black Music Supplies,Inc.,has had her business up and running for just nine months.A large fire a few blocks away destroyed two small businesses and has made DeToya more concerned about the risk she endures with her own business.DeToya's inventory of musical instruments,sheet music,and repair tools for proper instrument repair could all be destroyed if a similar disaster were to occur in her own business.Due to the DeToya's reliance on the income that the shop generates and the risk associated with potential disaster,she has contacted Tom Sanders,an insurance agent,about insuring DeTo Black Music Supplies from a disaster such as fire.What type of risk would DeToya suffer if her business caught fire?

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

Question 14

Which of the following is not one of the four risk management techniques?

A) Assuming
B) Avoiding
C) Ignoring
D) Shifting

Question 15

A music store owner is considering expanding the offerings of her business (which currently only includes instrument and sheet music sales)to include instrument rental.What type of risk would accompany the possibility of earning a profit from this extension of the business?

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

Question 16

What is the name given to recipients of life insurance proceeds?

A) Beneficiaries
B) Recipients
C) Survivors
D) Actuaries

Question 17

Which of the following is not a type of insurance that is available through either federal or state governments?

A) Disability
B) Retirement
C) Liability
D) Medicare

Question 18

What is the name given to the process of evaluating risks and minimizing the costs associated with those risks?

A) Financial management
B) Risk management
C) Management planning
D) Loss prevention

Question 19

What is the purpose for individuals or businesses purchasing and using safety equipment?

A) Risk avoidance
B) Shifting the risk
C) Risk reduction
D) Risk assumption

Question 20

What type of risk is uninsurable?

A) Speculative
B) Avoidable
C) Pure
D) Financial