All of the following statements about risk retention are true EXCEPT A) It may be used intentionally if commercial insurance is unavailable. B) It may be used passively because of ignorance. C) Its use is most appropriate for low-frequency, high-severity types of risks. D) Its use results in cost savings if losses are less than […]
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 person’s family may be inadequate to meet its basic needs. A) I only B) II only C) both I and II D) neither I nor […]
Which of the following is an example of a noninsurance risk transfer? A) not engaging in dangerous activities B) entering into a hold-harmless agreement C) installing smoke detectors in your home D) using nonflammable building material when constructing a house ANSWER Answer: B
Which of the following is an example of consequential (indirect) loss? A) the theft of a person’s jewelry B) the destruction of a firm’s manufacturing plant by an earthquake C) the cost of renting a substitute vehicle while a collision-damaged car is being repaired D) the vandalism of a person’s automobile ANSWER Answer: […]
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 occurs is called A) objective probability. B) subjective […]
All of the following are examples of personal risks EXCEPT A) poor health. B) unemployment. C) premature death. D) loss of business income. ANSWER Answer: D
Which of the following is (are) often consequences of long-term disability? I. Continuing medical expenses II. Loss or reduction of employee benefits A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
All of the following are programs to insure fundamental risks EXCEPT A) federally subsidized flood insurance. B) auto physical damage insurance. C) Social Security. D) unemployment insurance. ANSWER Answer: B
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
