Mark owns a 2006 sedan. The last time Mark renewed his auto insurance, he decided to drop the physical damage insurance on this vehicle. How is Mark dealing with the auto physical damage exposure in his personal risk management program? A) risk transfer B) passive retention C) avoidance D) active retention ANSWER Answer: […]
A restaurant owner leased a meeting room at the restaurant to a second party. The lease specified that the second party, not the restaurant owner, would be responsible for any liability arising out of the use of the meeting room, and that the restaurant owner would be “held harmless” for any damages. The restaurant owner’s […]
Acme Company has three identical manufacturing plants, one on the Texas Gulf Coast, one in southern Alabama, and one in Florida. Each plant is valued at $200 million. Acme’s risk manager is concerned about the damage which could be caused by a single hurricane. The risk manager believes there is an extremely low probability that […]
Which of the following statements about self-insurance is (are) true? I. It is a form of planned retention. II. State law usually prohibits its use for workers compensation. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: A
Laura Evans is risk manager of LMN Company. Laura decided to retain certain property loss exposures. Which of the following is a method that Laura can use to fund the retained property losses? A) current net income B) private insurance C) noninsurance transfer D) high deductibles ANSWER Answer: A
Which of the following statements about the use of a captive insurance company by a parent firm is true? A) The captive may not write outside, non-parent company, business. B) Captives are not permitted to use reinsurance, so any business insured by the captive stays with the captive. C) The captive may be used to […]
Ryan decided to review his personal risk management program. His car is 10 years old, and he would receive little money from his insurer if the car was damaged or destroyed. Ryan decided to drop the physical damage insurance on the car. From a risk management perspective, dropping the physical damage insurance on the car […]
All of the following are disadvantages of noninsurance transfers EXCEPT A) The party to whom the potential loss is transferred may be unable to pay. B) The transfer may fail because the contract language is ambiguous. C) The only potential losses that can be transferred are those that are not commercially insurable. D) The noninsurance […]
An insurance policy specifically written and designed to meet the needs of an insurance purchaser is called a(n) A) manuscript policy. B) bureau policy. C) standard policy. D) excess policy. ANSWER Answer: A
Factors a risk manager must consider in selecting an insurer include which of the following? I. The availability of risk management services II. The financial strength of the insurer A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
