This action might not be possible to undo. Are you sure you want to continue?
Any situation in which the probability of loss is zero. b. Any situation in which the probability of loss is one. c. Uncertainty concerning the occurrence of loss. d. The probability of a loss occurring. Answer: c 2. Uncertainty based on a person’s mental condition or state of mind is known as a. Objective risk. b. Objective probability. c. Subjective probability. d. Subjective risk. Answer: d 3. A peril is a. The cause of a loss b. A condition that increases the chance of a loss c. The probability that a loss will occur d. A moral hazard Answer: a 4. Dense fog that increases the chance of an automobile accident is an example of a a. Physical hazard b. Moral hazard c. Peril d. Speculative risk Answer: a 5. Indifference to loss because of the existence of insurance is an example of a a. Physical hazard b. Morale hazard c. Objective probability d. Moral hazard Answer: b
Automobile physical damage insurance b. Social Security Answer: a 7. This scenario illustrates the problem of a. The destruction of a firm’s manufacturing plant by an earthquake c. Loss control b. Poor health d. Federally subsidized flood insurance c. All of the following are programs to insure fundamental risks EXCEPT a. The theft of a person’s jewelry d. For the insured. He purchased property insurance on the boat. the use of deductibles in insurance contracts is an example of a. Fundamental risk Answer: b . Risk retention c. The vandalism of a person’s automobile Answer: a 9. Morale hazard d. Risk transfer Answer: b 10. Unemployment compensation d. Adverse selection b. All of the following are examples of direct property losses EXCEPT a. Inflation b. Curt intentionally sunk the boat. and paid off the loan. Curt had difficulty making loan payments because he did not catch many fish. Moral hazard c. Risk avoidance d. and fish prices were low.6. All of the following are examples of personal risks EXCEPT a. collected from his insurer. Curt borrowed money to purchase a fishing boat. The expense to rent a substitute vehicle while a collision-damaged car is repaired b. Premature death Answer: a 8. Unemployment c.
I only II only Both I and II Neither I nor II Answer: b 13. The tendency for unhealthy people to seek life or health insurance at standard rates is an example of a. a. Liability risks b. b. From the standpoint of the insurer. The loss must be unintentional b. Personal risks c. Indemnification c. Risk avoidance b. Fundamental risk Answer: b . II. Adverse selection c. All of the following are characteristics of insurance EXCEPT a. Property risks d. d. Which of the following types of risks is normally uninsurable by private insurers? a. Payment of fortuitous losses Answer: a 12. The loss occurs as a result of chance. Pooling of losses d. Morale hazard b. The loss is certain to occur. Moral hazard d. c. The chance of loss must be calculable Answer: c 14. Characteristics of a fortuitous loss include which of the following? I.11. all of the following are characteristics of an insurable risk EXCEPT a. The loss must be indeterminable d. The loss must be measurable c. Market risks Answer: d 15.
Loss prevention Answer: a 17. the loss would be spread over the entire group. LMN Insurance markets homeowners insurance. Pooling of losses d. Expense loading b. JKL Insurance Company estimates that 14 out of every 100 homeowners it insures will file a claim each year. A group of farmers agreed that if any farmer suffered a property loss. The LMN homeowners policy combines property and casualty insurance in the same contract. Elimination of moral hazard b. The total number of claims filed by JKL policyowners should decrease c. The actual results will more closely approach the expected results d. Manuscript policies b. Mono-line policies d. Which characteristic of insurance is embodied in this agreement? a.16.000 homeowners this year? a. The average size of loss should decline in value b. Underwriting Answer: c 18. Indemnification for loss c. Insurance policies combining property and casualty coverage in the same contract are called a. Multi-year policies Answer: b 19. According to the law of large numbers. Less worry and fear d. JKL insured 200 homeowners. Last year. Risk avoidance c. what should happen if JKL insures 20. In this way. The total dollar value of claims settled should decrease Answer: c . each farmer is responsible for the average loss of the group rather than the actual loss that the farmer sustained. All of the following are benefits to society that result from insurance EXCEPT a. Multiple-line policies c.
We transferred most of that risk to other insurance companies. Which of the following types of loss exposures are best met by the use of avoidance? a. who is self-employed. Low-frequency. I only II only Both I and II Neither I nor II Answer: b 22. “Not a chance. Risk transfer d. low-severity b. Anne. Low-frequency. High-frequency. Passive retention Answer: d . is the main breadwinner for her family.” The shifting of part or all of the insurance originally written by one insurance company to another insurance company is called a. Hedging d. high-severity d. Anne’s treatment of the risk of disability is best described as a. High-frequency. low-severity II. Reinsurance c. Which of the following types of loss exposures may be appropriately handled through the purchase of insurance? I. Anne does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family. High-frequency. high-severity c. Speculating b. Risk avoidance b.20. high-severity a. b. c. Loss avoidance Answer: b 21. Active retention c. she responded. Low-frequency. Apex Insurance Company wrote a large number of property insurance policies in an area where earthquake losses could occur. d. When the president of Apex was asked if she feared that a catastrophic earthquake might put the company out of business. low-severity Answer: b 23.
The circumstantial evidence rule Answer: a . Ryan decided to review his personal risk management program. Replacement cost property insurance b. Under which of the following rules is actual cash value determined by taking into consideration all relevant factors an expert would use to determine the value of the property? a. Actual cash value property insurance c. The broad evidence rule b. Personal risk management Answer: d 26. Ryan decided to drop the physical damage insurance on the car. Brenda listed all the pure-loss exposures her family faces. From a risk management perspective. Answer: b 25. Life insurance Answer: b 27. Personal insurance programming d. All of the following are exceptions to the principle of indemnity EXCEPT a. Increasing the use of retention in the risk management program c. Increasing the use of risk control in the risk management program d. Increasing the use of noninsurance transfer in the risk management program b. His car is ten years old and he would receive little from his insurer if the car were damaged or stolen. Then she analyzed these loss exposures and developed a plan to treat these risks. The property indemnity rule c. Valued policies d. The process Brenda engaged in is called a. dropping physical damage insurance on the car is best described as a. The objective value rule d.24. Personal estate planning b. Personal financial planning c. Increasing the use of avoidance in the risk management program.
Insurable interest c. Subrogation b. In order to obtain physical damage insurance. which was incorporated into the insurance contract.28. Ownership of illegal drugs b. Sue’s office building was damaged by a fire caused by a careless tenant. This agreement. Contract of adhesion c. purchased an expensive car. the insurance company sued the tenant to recover its loss. This suit is based on the principle of a. The contract is voidable at the insurer’s option c. Warranty b. David promised to park the car in a garage that had a 24-hour security guard. What is the legal significance of a material concealment by an insurance applicant? a. Indemnity Answer: a 30. David. is an example of a a. Representation d. A creditor-debtor relationship d. Utmost good faith d. The insurer is immediately entitled to a higher premium Answer: b 31. Potential legal liability Answer: a 29. The contract is automatically voided from its inception d. After paying Sue for her loss. Unilateral contract Answer: a . A contract right c. Loss payments are reduced by the degree of the concealment b. who lives in an apartment in a high-crime area. All of the following will support an insurable interest for purposes of purchasing property and liability insurance EXCEPT a.
200. Conditions are placed on the insurer’s promise to perform Answer: a 34. Contract of adhesion c. and the other party must accept the contract as written b.000 d. $1. Aleatory contract d. Consideration b. Unilateral contract Answer: c 33. Mark lets some of his patrons play these games. the property had depreciated in value by 25 percent. Mark owns a bar. Why are insurance contracts described as “contracts of adhesion”? a. $950 Answer: a 35. Mark wanted to purchase insurance on this equipment in case it was confiscated by the police. One party writes the contract. Only one party makes a legally enforceable promise c. Such an insurance contract would not be enforceable. $1. Competent parties c. At the time of loss. This type of gambling is illegal where Mark lives. and Mark keeps any profits. Two years later the living room set was destroyed by a covered peril. The values exchanged are not equal d.32.200 c. The replacement cost of the furniture at the time of loss was $1. A contract in which the values exchanged are not equal because chance is involved is called a(n) a. $900 b. The bar has a back room in which mark has some slot machines and video poker games. how much will Janice receive from her insurer? a. Which requirement necessary to form an enforceable insurance contract would be missing? a.000 and insured this furniture on an actual cash value basis. Janice purchased a living room set for $1. Conditional contract b. Assuming no deductible. Legal purpose d. Offer and acceptance Answer: c .
The portion of a property and liability insurance contract that contains information about the property to be insured is called the a. and Kate’s plan is excess Answer: b . how will each company respond to a claim filed by Kate? a. Kate is covered under her employer’s group health plan. To reduce premiums c. Her husband’s plan is primary. Exclusions Answer: c 37. and the other plan is excess d. Under the usual coordination-ofbenefits provision. All of the following are purposes of deductibles EXCEPT a. The plan of the person whose birthday is earliest in the year will pay first. She is also covered as a dependent under her husband’s group health plan. Each plan will pay 50 percent of the claim b. To reduce morale hazard b. Automobile insurance d. Deductibles are used in all of the following types of insurance EXCEPT a. Health insurance c.36. Kate’s plan is primary. Insuring agreement b. Property insurance b. Life insurance Answer: d 38. and her husband’s plan is excess c. To exclude uninsurable perils Answer: d 39. Declarations d. Conditions c. To eliminate small claims d.
40. she must pay the first $500 of any physical damage loss to her vehicle before her insurer will pay anything. The 60-day period is called a(n): a. Declaration Answer: c 41. Elimination (waiting) period b. Straight deductible Answer: d 43. d. “I’ll simply add an amendment to your contract that changes the basis of recovery to replacement cost. Definition c. He learned that his personal property was insured on an actual cash value basis. Mark reviewed his homeowners policy. Grace period d. 60 days must pass between the date of injury and when the insurer begins to replace lost earnings. b. Corridor deductible b. Probationary period c. Insuring agreement b. What type of deductible is included in Jenny’s auto insurance policy? a. “although such a loss is usually covered. Under the terms of Jenny’s auto insurance policy. She filed a claim under her disability insurance policy. He contacted his agent who said. Calendar-year deductible c. Coinsurance clause Endorsement Other insurance provision Deductible Answer: b 42. Enrollment period Answer: a . He would like replacement cost coverage on the property. Shauna hurt her back and could not work. Condition d.” The prompt notification requirement is an example of a(n) a. The insurer denied the claim. Aggregate deductible d. Under the policy. you are required to provide prompt notification of loss. stating. She was busy and delayed reporting the damage to her insurer for nine months. c. Janet hit a wall in a parking garage causing a large dent in the fender of her car.” The written provision the agent was referring to is called a(n) a.
What is Brad’s insured status under the program? a.000 loss. c. Brad. a. To help unemployed workers find jobs. but not fully insured. d.44. d. How much will ABC Company receive from its insurer.000 c. b. They are desibned to provide a floor of income with respect to the risks which are covered. $33. $40. As of this year. The method of determining benefits is prescribed by law. With few exceptions. Participants are required to satisfy a means test to receive benefits. These credits were all earned in the last 10 years. $36. He is fully insured. Answer: a 47. He is neither currently insured nor fully insured. All of the following statements about the characteristics of social insurance programs are true EXCEPT: a. Objectives of unemployment insurance include which of the following: I. has 40 credits under the Social Security program. I only II only Both I and II Neither I nor II Answer: c . social insurance programs are compulsory.000 b. The building had a replacement cost of $1 million when it sustained a $40. II. but not currently insured. ABC Company insured its building on a replacement cost basis for $700. b. c. b. c. To encourage employers to stabilize employmenet. He is currently and fully insured.000 under a property insurance policy that included an 80 percent coinsurance clause.000 Answer: a 45. age 50. $35.333 d. d. assuming no deductible applies? a. Answer: c 46. He is currently insured.
The employer liability doctrine d. All of the following benefits are provided under workers compensation EXCEPT a. Survivor benefits c.” The financial advisor was referring to which Social Security benefit? a. “be sure to consider Social Security when examining sources of funds available for family support if you die. Beth was injured at work and is eligible to receive workers compensation benefits. The fellow-servant doctrine c. The assumption-of-risk doctrine Answer: c 49.48. The contributory negligence doctrine b. Prior to the establishment of workers compensation laws. Retirement benefits c. an employer could use all of the following defenses to block an injured worker’s claim for benefits EXCEPT: a. A financial advisor said. Medical care Answer: b . Rehabilitation d. Disability benefits d. Retirement benefits b. Frank is doing some life insurance planning. Disability income b. Health insurance benefits Answer: b 50.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.