Question 1

Self-insurance requires

Accepted Answer

A)  purchasing a high-deductible policy. 
B)  implementing risk control methods. 
C)  owning stock in an insurance company. 
D)  earmarking earnings for a contingency fund against possible future losses. 
A)  purchasing a high-deductible policy. 
B)  implementing risk control methods. 
C)  owning stock in an insurance company. 
D)  earmarking earnings for a contingency fund against possible future losses.

Question 2

Property insurance that covers all direct damage to property except damage caused by perils specifically excluded is called commercial general liability (CGL) insurance.

Accepted Answer

A) True 
 B)False

Question 3

A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use is known as a(n) _____ defect

Accepted Answer

A)  marketing 
B)  manufacturing 
C)  design 
D)  engineering 
A)  marketing 
B)  manufacturing 
C)  design 
D)  engineering

Question 4

Match the term with its definition.
-The uncertainty associated with an investment decision

Accepted Answer

A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk 
A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk

Question 5

Because he is afraid of being in a car accident, Harold never drives. Instead, he always takes the bus or subway. Harold is practicing loss

Accepted Answer

A)  avoidance. 
B)  control. 
C)  prevention. 
D)  reduction. 
A)  avoidance. 
B)  control. 
C)  prevention. 
D)  reduction.

Question 6

Brenda expects there will be uncertainty regarding the outcome of her business decisions. The final result of those decisions will not be known until she has identified the investment opportunity, developed strategies, and _____ to her business.

Accepted Answer

A)  secured financing 
B)  purchased inventory 
C)  committed resources 
D)  performed market research 
A)  secured financing 
B)  purchased inventory 
C)  committed resources 
D)  performed market research

Question 7

Match the term with its definition.
-A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property

Accepted Answer

A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages 
A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages

Question 8

Bob and Tom are partners in a business. Discuss the types of insurance the business should carry if something should happen to one of the partners.

Accepted Answer

The business should carry key-person lif

Question 9

Jackie owns a building in a downtown area. Her building is used for office space and is rented to a current business tenant. What kind of risk is associated with this property? Is this type of risk insurable?

Accepted Answer

Jackie has market risk and pure risk wit

Question 10

Match the term with its definition.
-Risks that directly affect individual employees but may have an indirect impact on a business as well

Accepted Answer

A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation 
A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation

Question 11

Assume a contract exists between Mr. Jones, a college professor, and his student, Mr. Smith. Jones provides a syllabus, instruction, tutoring, and assessments of learning, but Smith fails the class. Which of the following elements is absent in this case?

Accepted Answer

A)  Existence of a legal duty between the parties 
B)  Failure to provide the appropriate standard of care 
C)  Presence of injury or damages 
D)  Evidence that the negligent act is the proximate cause of the loss 
A)  Existence of a legal duty between the parties 
B)  Failure to provide the appropriate standard of care 
C)  Presence of injury or damages 
D)  Evidence that the negligent act is the proximate cause of the loss

Question 12

Match the term with its definition.
-The unauthorized transfer of funds from a bank account

Accepted Answer

A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation 
A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation

Question 13

Match the term with its definition.
-An insurance term that refers to the depreciated value of property

Accepted Answer

A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property 
A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property

Question 14

Which of the following actions is part of the second step of a risk management program?

Accepted Answer

A)  Identify and understand risks. 
B)  Evaluate the potential severity of risks. 
C)  Select methods to manage risks. 
D)  Implement the decision. 
A)  Identify and understand risks. 
B)  Evaluate the potential severity of risks. 
C)  Select methods to manage risks. 
D)  Implement the decision.

Question 15

Whether a potential loss is "small" or "large" depends on the

Accepted Answer

A)  size of the insurance deductible. 
B)  strength of a company's financial position. 
C)  dependability of a company's cash flows. 
D)  level of risk retention the company can handle. 
A)  size of the insurance deductible. 
B)  strength of a company's financial position. 
C)  dependability of a company's cash flows. 
D)  level of risk retention the company can handle.

Question 16

Match the term with its definition.
-A cause of loss, either through natural events or through the actions of people

Accepted Answer

A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk 
A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk

Question 17

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for _____ damages.

Accepted Answer

A)  exemplary 
B)  noneconomic 
C)  compensatory 
D)  punitive 
A)  exemplary 
B)  noneconomic 
C)  compensatory 
D)  punitive

Question 18

Match the term with its definition.
-Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically excluded

Accepted Answer

A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk 
A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk

Question 19

Funds transfer fraud provides coverage primarily against employee dishonesty.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is one of the basic principles that should be followed in evaluating an insurance program?

Accepted Answer

A)  Consider the feasibility and affordability of insuring smaller potential losses. 
B)  Secure insurance coverage for all major potential losses. 
C)  Consider the various insurance policies that may be appropriate for your business. 
D)  All of these are correct. 
A)  Consider the feasibility and affordability of insuring smaller potential losses. 
B)  Secure insurance coverage for all major potential losses. 
C)  Consider the various insurance policies that may be appropriate for your business. 
D)  All of these are correct.

Exam 23: Managing Risk

Self-insurance requires

Property insurance that covers all direct damage to property except damage caused by perils specifically excluded is called commercial general liability (CGL) insurance.

A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use is known as a(n) _____ defect

Match the term with its definition. -The uncertainty associated with an investment decision

Because he is afraid of being in a car accident, Harold never drives. Instead, he always takes the bus or subway. Harold is practicing loss

Brenda expects there will be uncertainty regarding the outcome of her business decisions. The final result of those decisions will not be known until she has identified the investment opportunity, developed strategies, and _____ to her business.

Match the term with its definition. -A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property

Bob and Tom are partners in a business. Discuss the types of insurance the business should carry if something should happen to one of the partners.

Jackie owns a building in a downtown area. Her building is used for office space and is rented to a current business tenant. What kind of risk is associated with this property? Is this type of risk insurable?

Match the term with its definition. -Risks that directly affect individual employees but may have an indirect impact on a business as well

Assume a contract exists between Mr. Jones, a college professor, and his student, Mr. Smith. Jones provides a syllabus, instruction, tutoring, and assessments of learning, but Smith fails the class. Which of the following elements is absent in this case?

Match the term with its definition. -The unauthorized transfer of funds from a bank account

Match the term with its definition. -An insurance term that refers to the depreciated value of property

Which of the following actions is part of the second step of a risk management program?

Whether a potential loss is "small" or "large" depends on the

Match the term with its definition. -A cause of loss, either through natural events or through the actions of people

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for _____ damages.

Match the term with its definition. -Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically excluded

Funds transfer fraud provides coverage primarily against employee dishonesty.

Which of the following is one of the basic principles that should be followed in evaluating an insurance program?

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