Question 1

Which of the following is (are)often consequences of long-term disability?
I.Continuing medical expenses
II.Loss or reduction of employee benefits

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 2

An automobile that is a total loss as a result of a collision is an example of which of the following types of risk?
I.Speculative risk
II.Diversifiable risk

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 3

Rapid inflation,cyclical unemployment,war,hurricanes,and floods are all examples of

Accepted Answer

A) diversifiable risks. 
B) physical hazards. 
C) nondiversifiable risks. 
D) speculative risks. 
A) diversifiable risks. 
B) physical hazards. 
C) nondiversifiable risks. 
D) speculative risks.

Question 4

An earthquake is an example of

Accepted Answer

A) a moral hazard. 
B) a peril. 
C) a physical hazard. 
D) an objective risk. 
A) a moral hazard. 
B) a peril. 
C) a physical hazard. 
D) an objective risk.

Question 5

One of the speculative financial risks considered in an enterprise risk management program is the risk of loss because of adverse changes in commodity prices,interest rates,foreign exchange rates,and the value of money.This risk is called

Accepted Answer

A) property risk. 
B) financial risk. 
C) strategic risk. 
D) operational risk. 
A) property risk. 
B) financial risk. 
C) strategic risk. 
D) operational risk.

Question 6

All of the following statements about risk retention are true EXCEPT

Accepted Answer

A) It may be used intentionally if commercial insurance is unavailable. 
B) It may be used passively because of ignorance. 
C) Its use is most appropriate for low-frequency,high-severity types of risks. 
D) Its use results in cost savings if losses are less than the cost of insurance. 
A) It may be used intentionally if commercial insurance is unavailable. 
B) It may be used passively because of ignorance. 
C) Its use is most appropriate for low-frequency,high-severity types of risks. 
D) Its use results in cost savings if losses are less than the cost of insurance.

Question 7

Carelessness or indifference to a loss is an example of

Accepted Answer

A) physical hazard. 
B) objective probability. 
C) moral hazard. 
D) attitudinal hazard. 
A) physical hazard. 
B) objective probability. 
C) moral hazard. 
D) attitudinal hazard.

Question 8

An insurance company estimates its objective risk for 10,000 exposures to be 10 percent.Assuming the probability of loss remains the same,what would happen to the objective risk if the number of exposures were to increase to 1 million?

Accepted Answer

A) It would decrease to 1 percent. 
B) It would decrease to 5 percent. 
C) It would remain the same. 
D) It would increase to 20 percent. 
A) It would decrease to 1 percent. 
B) It would decrease to 5 percent. 
C) It would remain the same. 
D) It would increase to 20 percent.

Question 9

Following good health habits can be categorized as

Accepted Answer

A) loss prevention. 
B) risk retention. 
C) noninsurance transfer. 
D) personal insurance. 
A) loss prevention. 
B) risk retention. 
C) noninsurance transfer. 
D) personal insurance.

Question 10

Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award.The characteristics of the judicial system that increase the frequency and severity of loss are known as

Accepted Answer

A) moral hazard. 
B) particular risk. 
C) speculative risk. 
D) legal hazard. 
A) moral hazard. 
B) particular risk. 
C) speculative risk. 
D) legal hazard.

Question 11

Katelyn was just named Risk Manager of ABC Company.She has decided to create a risk management program which considers all of the risks faced by ABC-pure,speculative,operational,and strategic-in a single risk management program.Such a program is called a(n)

Accepted Answer

A) financial risk management program. 
B) enterprise risk management program. 
C) fundamental risk management program. 
D) consequential risk management program. 
A) financial risk management program. 
B) enterprise risk management program. 
C) fundamental risk management program. 
D) consequential risk management program.

Question 12

Dense fog that increases the chance of an automobile accident is an example of

Accepted Answer

A) a speculative risk. 
B) a peril. 
C) a physical hazard. 
D) a moral hazard. 
A) a speculative risk. 
B) a peril. 
C) a physical hazard. 
D) a moral hazard.

Question 13

Which of the following is a reason why premature death may result in economic insecurity?
I.Additional expenses associated with death may be incurred.
II.The income of the deceased person's family may be inadequate to meet its basic needs.

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 14

A pure risk is defined as a situation in which there is

Accepted Answer

A) only the possibility of loss or no loss. 
B) only the possibility of profit. 
C) a possibility of neither profit nor loss. 
D) a possibility of either profit or loss. 
A) only the possibility of loss or no loss. 
B) only the possibility of profit. 
C) a possibility of neither profit nor loss. 
D) a possibility of either profit or loss.

Question 15

The extra expense incurred by a business to stay in operation following a fire is an example of a(n)

Accepted Answer

A) fundamental risk. 
B) speculative risk. 
C) direct loss. 
D) indirect loss. 
A) fundamental risk. 
B) speculative risk. 
C) direct loss. 
D) indirect loss.

Question 16

ABC Insurance Company plans to sell homeowners insurance in five Western states.ABC expects that 8 homeowners out of every 100,on average,will report claims each year.The variation between the rate of loss that ABC expects to occur and the rate of loss that actually does occur is called

Accepted Answer

A) objective probability. 
B) subjective probability. 
C) objective risk. 
D) subjective risk. 
A) objective probability. 
B) subjective probability. 
C) objective risk. 
D) subjective risk.

Exam 1: Risk and Its Treatment

Which of the following is (are)often consequences of long-term disability? I.Continuing medical expenses II.Loss or reduction of employee benefits

An automobile that is a total loss as a result of a collision is an example of which of the following types of risk? I.Speculative risk II.Diversifiable risk

Rapid inflation,cyclical unemployment,war,hurricanes,and floods are all examples of

An earthquake is an example of

One of the speculative financial risks considered in an enterprise risk management program is the risk of loss because of adverse changes in commodity prices,interest rates,foreign exchange rates,and the value of money.This risk is called

All of the following statements about risk retention are true EXCEPT

Carelessness or indifference to a loss is an example of

An insurance company estimates its objective risk for 10,000 exposures to be 10 percent.Assuming the probability of loss remains the same,what would happen to the objective risk if the number of exposures were to increase to 1 million?

Following good health habits can be categorized as

Taylor Tobacco Company is concerned that the company may be held liable in a court of law and ordered to pay a large damage award.The characteristics of the judicial system that increase the frequency and severity of loss are known as

Katelyn was just named Risk Manager of ABC Company.She has decided to create a risk management program which considers all of the risks faced by ABC-pure,speculative,operational,and strategic-in a single risk management program.Such a program is called a(n)

Dense fog that increases the chance of an automobile accident is an example of

Which of the following is a reason why premature death may result in economic insecurity? I.Additional expenses associated with death may be incurred. II.The income of the deceased person's family may be inadequate to meet its basic needs.

A pure risk is defined as a situation in which there is

The extra expense incurred by a business to stay in operation following a fire is an example of a(n)

ABC Insurance Company plans to sell homeowners insurance in five Western states.ABC expects that 8 homeowners out of every 100,on average,will report claims each year.The variation between the rate of loss that ABC expects to occur and the rate of loss that actually does occur is called

Insurance and Risk

Introduction to Risk Management

Advanced Topics in Risk Management

Types of Insurers and Marketing Systems

Insurance Company Operations

Financial Operations of Insurers

Government Regulation of Insurance

Fundamental Legal Principles

Analysis of Insurance Contracts

Life Insurance

Life Insurance Contractual Provisions

Buying Life Insurance

Annuities and Individual Retirement Accounts

Health-Care Reform; Individual Health Insurance Coverages

Employee Benefits: Group Life and Health Insurance

Employee Benefits: Retirement Plans

Social Insurance

The Liability Risk

Homeowners Insurance,section I

Homeowners Insurance,section II

Auto Insurance

Auto Insurance and Society

Other Property and Liability Insurance Coverages

Commercial Property Insurance

Commercial Liability Insurance

Crime Insurance and Surety Bonds

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