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A Practice Test On Insurance! Trivia Quiz

Question 1 of 3

Q1 . Some characteristics of the judicial system and regulatory environment increase the frequency and severity of a loss. This hazard is called

Q2 . All of the following are examples of personal risks EXCEPT

Q3 . Loss control includes which of the following? I. Loss reduction; II. Loss prevention

Q4 . Cathyʹs car hit a patch of ice on the road. The car skidded off the road and hit a tree. The presence of ice on the road is best described as a

Q5 . Ben is concerned that if he injures someone or damages someoneʹs property he could be held legally responsible and required to pay damages. This type of risk is called a

Q6 . 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 losses are known as

Q7 . MLX Drug Company would like to market a new hypertension drug. While the Food and Drug Administration (FDA) was testing the drug, it discovered that the drug produced a harmful side effect. When MLX learned of the FDAʹs test result, MLX abandoned its plan to produce and distribute the drug. MLXʹs reaction illustrates

Q8 . A phrase that encompasses all of the major risks faced by a business firm is

Q9 . ABC Health Insurance Company sells health insurance in one state. Recently, that stateʹs legislature passed a law forbidding health insurers from considering an individualʹs health history when selecting applicants to insure. This change in law will increase the possibility of unprofitable results for ABC. This type of hazard is an example of

Q10 . An earthquake is an example of a

Q11 . The dense fog that increases the chance of an automobile accident is an example of a

Q12 . Jim and Paula Franklin started a dry cleaning business. The business may be successful or it may fail.The type of risk that is present when either a profit or loss could occur is called

Q13 . A peril is

Q14 . A pure risk is defined as a situation in which there is

Q15 . All of the following are examples of direct property losses EXCEPT

Q16 . Faking an accident to collect insurance proceeds is an example of a

Q17 . Katelyn was just named Risk Manager of ABC Company. She has decided to create a risk management program that 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)

Q18 . The premature death of an individual is an example of a

Q19 . An insurance company estimates its objective risk for 10,000 exposures at 10 percent. Assuming the probability of loss remains the same, what would happen to the objective risk if the number of exposures was to increase to 1 million?

Q20 . 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 personʹs family may be inadequate to meet its basic needs

Q21 . Following good health habits can be categorized as

Q22 . Jenna opened a successful restaurant. One night, after the restaurant had closed, a fire started when the electrical system malfunctioned. In addition to the physical damage to the restaurant, Jenna also lost profits that could have been earned while the restaurant was closed for repairs. The lost profits are an example of

Q23 . Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers in its new manufacturing facility. These devices are all examples of

Q24 . The extra expense incurred by a business to stay in operation following a fire is an example of a(n)

Q25 . The use of fire-resistive materials when constructing a building is an example of

Q26 . All of the following are methods of noninsurance transfer EXCEPT

Q27 . Tyndal Products Company produces cereal. The company has entered into contracts to deliver 500,000 boxes of cereal during the next 18 months. The company is concerned that the prices of two ingredients, corn, and wheat, may increase over the next 18 months. The company used grain futures contracts to hedge the price risk associated with these commodities. Tyndalʹs use of hedging illustrates which risk management technique

Q28 . All of the following are programs to insure fundamental risks EXCEPT

Q29 . Which of the following is often consequences of long-term disability? I. Continuing medical expenses II. Loss or reduction of employee benefits

Q30 . Brad started a pest control business. To protect his personal assets against liability arising out of the business, Brad incorporated the business. Bradʹs use of the corporate form of organization to shield against personal liability claims illustrates

Q31 . All of the following are burdens to society because of the presence of risk EXCEPT

Q32 . All of the following statements about risk retention are true EXCEPT

Q33 . From the insuredʹs perspective, the use of deductibles in insurance contracts is an example of

Q34 . Objective risk is defined as

Q35 . 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. Fundamental risk

Q36 . Indifference to loss because of the existence of insurance is an example of a

Q37 . All of the following are considered financial risks EXCEPT

Q38 . Traditionally, risk has been defined as

Q39 . Uncertainty based on a personʹs mental condition or state of mind is known as

Q40 . An individualʹs personal estimate of the chance of loss is

Q41 . Which of the following statements about speculative risks is true?

Q42 . Which of the following statements about a priori probabilities is correct?

Q43 . Which of the following statements about liability risks is (are) true? I. Future income and assets can be attached to pay judgments if inadequate insurance is carried. II. There is an upper limit on the amount of loss.

Q44 . Curt borrowed money from a bank to purchase a fishing boat. He purchased property insurance on the boat. Curt had difficulty making loan payments because he did not catch much fish, and fish prices were low. Curt intentionally sunk the boat, collected from his insurer, and paid off the loan balance. This scenario illustrates the problem of

Q45 . Which of the following statements about the chance of loss and risk is (are) true? I. If the chance of loss is identical for two groups, the objective risk must be the same. II. Two individuals may perceive differently the risk inherent in a given activity.

Q46 . All of the following are characteristics of the liability risk that most people face EXCEPT

Q47 . The long-run relative frequency of an event based on the assumption of an infinite number of observations with no change in the underlying conditions is called

Q48 . Which of the following statements about financial risk is (are) true? I. Enterprise risk does not include financial risk. II. Financial risk is easily addressed through the purchase of insurance.

Q49 . 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