A student who has skipped many classes and not studied the course material was surprised to learn there was a test when he showed-up for class. The student’s mental uncertainty about whether or not he will pass the test is called A) objective risk. B) objective probability. C) subjective probability. D) subjective risk. […]
Loss control includes which of the following? I. Loss reduction II. Loss prevention A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Following good health habits can be categorized as A) loss prevention. B) risk retention. C) noninsurance transfer. D) personal insurance. ANSWER Answer: A
All of the following are burdens to society because of the presence of risk EXCEPT A) The size of an emergency fund must be increased. B) Risk provides an incentive for people to engage in loss control. C) Society is deprived of certain goods and services. D) Mental fear and worry are present. […]
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. A) I only B) II only C) both I and II D) neither I nor II […]
The extra expense incurred by a business to stay in operation following a fire is an example of a(n) A) fundamental risk. B) speculative risk. C) direct loss. D) indirect loss. ANSWER Answer: D
From the insured’s perspective, the use of deductibles in insurance contracts is an example of A) risk transfer. B) risk control. C) risk avoidance. D) risk retention. ANSWER Answer: D
The use of fire-resistive materials when constructing a building is an example of A) risk transfer. B) risk control. C) risk avoidance. D) risk retention. ANSWER Answer: B
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 many 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 […]
Brad started a pest control business. To protect his personal assets against liability arising out of the business, Brad incorporated the business. Brad’s use of the corporate form of organization to shield against personal liability claims illustrates A) fundamental risk. B) noninsurance transfer. C) risk retention. D) objective risk. ANSWER Answer: B
