QUESTION What is the difference between avoiding risk and reducing risk? What will be an ideal response? ANSWER Answer: Risk avoidance is the practice of avoiding risk by not participating in risky activity. Risk reduction is the practice of reducing risk by removing hazards or taking preventive measures. Explanation: Two additional ways that businesses […]
QUESTION What are self-insurance and risk transfer? What will be an ideal response? ANSWER Answer: Self-insurance is the practice in which a company sets aside money to cover losses with its own funds. Risk transfer is the practice whereby a company transfers its risk to an insurance company in return for a fee. Explanation: […]
QUESTION What is the difference between stock insurance companies and mutual insurance companies? What will be an ideal response? ANSWER Answer: Stock insurance companies are private insurers providing insurance to policyholders and earning profits for shareholders. Mutual insurance companies are nonprofit private insurers owned by their insurance policyholders, to whom they pay dividends or […]
QUESTION Differentiate among three types of liability insurance. What will be an ideal response? ANSWER Answer: (1) Public liability insurance protects the business against business risks associated with the company’s property or employees. (2) Product liability insurance protects the business when someone claims its product caused damage, injury, or death. (3) Professional liability insurance […]
QUESTION Bryce hired a contractor to fix a leak in the roof of the musical instrument factory where he worked as facilities manager. The contractor came and removed the rotted wood from the roof, covered the hole with a tarp, and promised to be back the next day. The contractor did not show up for […]
QUESTION Who is most likely to pay the most for life insurance? A) teachers B) construction workers C) crab fishermen D) engineers E) doctors ANSWER Answer: C Explanation: C) The fatality rate for commercial fishing workers, who are routinely exposed to stormy seas, dangerous equipment, and slippery decks, is 200 fatalities per 100,000.
QUESTION Copayments are fixed fees that subscribers must pay for the use of specific medical services. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: Copayments must be paid by the subscriber at the time of service.
QUESTION Which type of public insurance are people required to carry? A) crop insurance B) crime insurance C) flood insurance D) social security insurance E) nuclear accident insurance ANSWER Answer: D Explanation: D) Most working Americans (and their employers) are required to pay into Social Security, which is a federal social insurance program that […]
QUESTION Which kind of company would be least likely to purchase the pure-risk coverage of green insurance? A) contractors B) energy auditors C) oil companies D) hotels E) recycling companies ANSWER Answer: C Explanation: C) Green insurance is insurance in which a green contractor who builds a home out of recycled old beams and […]
QUESTION Which of the following is an example of pure risk? A) Clayton purchased $200,000 worth of flood insurance for his fencing club that is located on the banks of a river. B) Rory went to a vanity publisher and paid for 5,000 copies of her novel to be printed. The books are in her […]
