The worst loss that could ever happen to a firm is referred to as the A) maximum possible loss. B) probable maximum loss. C) frequency of loss. D) severity of loss. ANSWER Answer: A
Date: September 19th, 2020
Which of the following is an example of private insurance? A) unemployment insurance B) Social Security C) life insurance D) federal deposit insurance ANSWER Answer: C
Date: September 19th, 2020
Abandoning an existing loss exposure is an example of A) avoidance. B) retention. C) noninsurance transfer. D) insurance transfer. ANSWER Answer: A
Date: September 19th, 2020
If insurers were to provide indemnification for losses that were deliberately caused, which characteristic of ideally insurable risks would not be met? A) The loss must be accidental and unintentional. B) The loss must be determinable and measurable. C) The loss should not be catastrophic. D) There must be a large number of similar exposure […]
Date: September 19th, 2020
Which of the following statements regarding the use of retention is (are) true? I. Retention is best used for loss exposures that have a low frequency and a high severity. II. A financially strong firm can have a higher retention level than a firm whose financial position is weak. A) I only B) II only […]
Date: September 19th, 2020
Which of the following statements regarding insurance and hedging is true? A) Both insurance and hedging deal only with pure risks. B) Insurance reduces objective risk while hedging involves only risk transfer and not risk reduction. C) Hedging reduces objective risk while insurance involves only risk reduction and not risk transfer. D) Both insurance and […]
Date: September 19th, 2020
Which of the following conditions is (are) appropriate for using retention? I. Losses are difficult to predict. II. The worst possible loss is not serious. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Date: September 19th, 2020
The premium that insurance companies charge does not cover the cost of expected losses only. The premium must also cover the cost of compensating agents and other costs of doing business. The amount added to the pure premium to cover these costs is called the A) expense loading. B) deductible. C) dividend. D) loss reserve. […]
Date: September 19th, 2020
All of the following statements about avoidance are true EXCEPT A) Certain loss exposures are never acquired. B) Certain loss exposures may be abandoned. C) The chance of loss for certain loss exposures may be reduced to zero. D) It can be used for any loss exposure facing a firm. ANSWER Answer: D
Date: September 19th, 2020
A discount store chain is concerned that cashiers might steal money from cash registers. To provide protection against theft by the cashiers, the discount store chain can purchase a A) fidelity bond. B) liability insurance policy. C) surety bond. D) business income insurance policy. ANSWER Answer: A
Date: September 19th, 2020
