Insurance And Risk

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Questions Bank

Risk and Its Treatment
Insurance and Risk
Introduction to Risk Management
Enterprise Risk Management and Related Topics
Types of Insurers and Marketing Systems
Insurance Company Operations
Financial Operations of Insurers
Government Regulation of Insurance
Fundamental Legal Principles
Analysis of Insurance Contracts
Life Insurance
Life Insurance Contractual Provisions
Buying Life Insurance
Annuities and Individual Retirement Accounts
Health-Care Reform; Individual Health Insurance Coverages
Employee Benefits: Group Life and Health Insurance
Employee Benefits: Retirement Plans
Social Insurance
The Liability Risk
Auto Insurance
Auto Insurance (continued)
Homeowners Insurance, Section I
Homeowners Insurance, Section II
Other Property and Liability Insurance Coverages
Commercial Property Insurance
Commercial Liability Insurance
Crime Insurance and Surety Bonds

All Questions

Question 1

Free

Multiple Choice

Which of the following is a basic characteristic of insurance?

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pooling of losses

avoidance of risk

payment of intentional losses

certainty about specific losses that will occur

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Question 2

Free

Multiple Choice

Which of the following is implied by the pooling of losses?

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sharing of losses by an entire group

inability to predict losses with any degree of accuracy

substitution of actual loss for average loss

increase of objective risk

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Question 3

Free

Multiple Choice

According to the law of large numbers, what happens as the number of exposure units increases?

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Actual results will increasingly differ from probable results.

Actual results will more closely approach probable results.

Nondiversifiable risk will decrease.

Objective risk will increase.

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Question 4

Free

Multiple Choice

According to the law of large numbers, what should happen as an insurer increases the number of units insured?

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The amount the insurer expects to pay in claims should decrease.

Underwriting expenses should decrease.

Actual results will more closely approach expected results.

The insurer's profitability should become more variable.

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Question 5

Free

Multiple Choice

Characteristics of a fortuitous loss include which of the following?
I)The loss is certain to occur.
II)The loss occurs as a result of chance.

Choose correct answer/s

I only

II only

both I and II

neither I nor II

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Question 6

Multiple Choice

From the viewpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT

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The loss must be accidental.

The loss should be catastrophic.

The premium must be economically feasible.

There must be a large number of exposure units.

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Question 7

Multiple Choice

From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?

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The loss must be intentional.

There must be a small number of unique loss exposures.

The chance of loss must be calculable.

The loss must be indeterminable.

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Question 8

Multiple Choice

Why is a large number of exposure units generally required before a pure risk is insurable?

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It prevents the insurer from losing money.

It eliminates intentional losses.

It minimizes moral hazard.

It enables the insurer to predict losses more accurately.

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Question 9

Multiple Choice

The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?
I)Decrease in moral hazard
II)More accurate prediction of future losses

Choose correct answer/s

I only

II only

both I and II

neither I nor II

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Question 10

Multiple Choice

Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?
I)The loss must be definite as to place.
II)The loss must be definite as to amount.

Choose correct answer/s

I only

II only

both I and II

neither I nor II

To unlock the question

Question 11

Multiple Choice

Methods by which insurers may minimize or avoid catastrophic losses include which of the following?
I)The use of reinsurance
II)Concentrating coverage written in one geographic region

Choose correct answer/s

I only

II only

both I and II

neither I nor II

To unlock the question

Question 12

Multiple Choice

Which of the following types of risks best meets the requirements for being insurable by private insurers?

Choose correct answer/s

most market risks

property risks

financial risks

political risks

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Question 13

Multiple Choice

Reasons why market, financial, and production risks are often uninsurable include which of the following?
I)The potential to produce a catastrophic loss is great.
II)The chance of loss cannot be accurately estimated.

Choose correct answer/s

I only

II only

both I and II

neither I nor II

To unlock the question

Question 14

Multiple Choice

Which of the following types of risks is normally uninsurable by private insurers?

Choose correct answer/s

personal risks

property risks

liability risks

political risks

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Question 15

Multiple Choice

Which of the following is a result of adverse selection?

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The insurer's financial results will be substantially improved.

Persons most likely to have losses are also most likely to seek insurance at standard rates.

It is unnecessary for the insurance company to use underwriting.

Insurance can be written only by the federal government.

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Question 16

Multiple Choice

The tendency for unhealthy people to seek life or health insurance at standard rates is an example of

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moral hazard.

fundamental risk.

attitudinal hazard.

adverse selection.

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Question 17

Multiple Choice

Which of the following statements regarding insurance and gambling is (are) true?
I)Insurance is used to handle existing pure risks, while gambling creates a new speculative risk.
II)Insurance usually involves risk avoidance, while gambling typically involves only risk reduction.

Choose correct answer/s

I only

II only

both I and II

neither I nor II

To unlock the question

Question 18

Multiple Choice

In addition to marketing life insurance, life insurers typically sell which of the following products?
I)Retirement annuities
II)Disability income insurance

Choose correct answer/s

I only

II only

both I and II

neither I nor II

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Question 19

Multiple Choice

Inland marine insurance provides coverage for

Choose correct answer/s

goods being shipped on land.

premature death of members of the armed forces.

goods being shipped on ocean-going vessels.

liability exposures of nonprofit organizations.

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Question 20

Multiple Choice

Which of the following is classified as casualty insurance?

Choose correct answer/s

workers compensation insurance

fire insurance

marine insurance

life insurance

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Insurance And Risk

Which of the following is a basic characteristic of insurance?

Which of the following is implied by the pooling of losses?

According to the law of large numbers, what happens as the number of exposure units increases?

According to the law of large numbers, what should happen as an insurer increases the number of units insured?

Characteristics of a fortuitous loss include which of the following?I)The loss is certain to occur.II)The loss occurs as a result of chance.

From the viewpoint of the insurer, all of the following are characteristics of an ideally insurable risk EXCEPT

From the standpoint of the insurer, which of the following is a characteristic of an ideally insurable risk?

Why is a large number of exposure units generally required before a pure risk is insurable?

The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?I)Decrease in moral hazardII)More accurate prediction of future losses

Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?I)The loss must be definite as to place.II)The loss must be definite as to amount.

Methods by which insurers may minimize or avoid catastrophic losses include which of the following?I)The use of reinsuranceII)Concentrating coverage written in one geographic region

Which of the following types of risks best meets the requirements for being insurable by private insurers?

Reasons why market, financial, and production risks are often uninsurable include which of the following?I)The potential to produce a catastrophic loss is great.II)The chance of loss cannot be accurately estimated.

Which of the following types of risks is normally uninsurable by private insurers?

Which of the following is a result of adverse selection?

The tendency for unhealthy people to seek life or health insurance at standard rates is an example of

Which of the following statements regarding insurance and gambling is (are) true?I)Insurance is used to handle existing pure risks, while gambling creates a new speculative risk.II)Insurance usually involves risk avoidance, while gambling typically involves only risk reduction.

In addition to marketing life insurance, life insurers typically sell which of the following products?I)Retirement annuitiesII)Disability income insurance

Inland marine insurance provides coverage for

Which of the following is classified as casualty insurance?

Characteristics of a fortuitous loss include which of the following?
I)The loss is certain to occur.
II)The loss occurs as a result of chance.

The requirement that losses should be accidental and unintentional in order to be insurable results in which of the following?
I)Decrease in moral hazard
II)More accurate prediction of future losses

Which of the following is implied by the requirement that a loss should be determinable and measurable to be insurable?
I)The loss must be definite as to place.
II)The loss must be definite as to amount.

Methods by which insurers may minimize or avoid catastrophic losses include which of the following?
I)The use of reinsurance
II)Concentrating coverage written in one geographic region

Reasons why market, financial, and production risks are often uninsurable include which of the following?
I)The potential to produce a catastrophic loss is great.
II)The chance of loss cannot be accurately estimated.

Which of the following statements regarding insurance and gambling is (are) true?
I)Insurance is used to handle existing pure risks, while gambling creates a new speculative risk.
II)Insurance usually involves risk avoidance, while gambling typically involves only risk reduction.

In addition to marketing life insurance, life insurers typically sell which of the following products?
I)Retirement annuities
II)Disability income insurance