Question 1

Rebecca received a letter in the mail from her employer's insurance company inquiring if her children had health insurance coverage from another provider.According to the _____________ the insurance provider has the right to this information.

Accepted Answer

A)  rule of 80
B)  rule of indemnity
C)  law of legal compliance
D)  law of large numbersE) A) and B)
F) A) and C)

Question 2

A person is most likely to be pleased with an HMO for health coverage if he or she:

Accepted Answer

A)  is primarily interested in getting coverage at lower cost than traditional health insurance.
B)  wants to be able to choose any doctor in town.
C)  doesn't mind doing extra paperwork if it will guarantee getting the desired treatment.
D)  likes the idea of having a medical spending account that can be used for most routine expenditures without having to get approval from the carrier.E) B) and D)
F) A) and C)

Question 3

UPS requires their delivery people to wear seat belts as they drive their trucks.This is an example of self-insuring as a risk management strategy.

Accepted Answer

A) True 
 B)False

Question 4

Any risk is insurable as long as you can pay the premium.

Accepted Answer

A) True 
 B)False

Question 5

"Insurable interest" means that the policyholder is the one at risk to suffer a loss.

Accepted Answer

A) True 
 B)False

Question 6

Workers' compensation insurance:

Accepted Answer

A)  covers people who are found liable for professional negligence.
B)  provides coverage against liability arising out of products sold.
C)  is only required by 48 states.
D)  guarantees payment of wages and medical costs for employees who are injured on the job.E) B) and D)
F) A) and C)

Question 7

A firm that chooses to self-insure and cover losses out of its budget is said to:

Accepted Answer

A)  fly blind.
B)  roll boxcars.
C)  go bare.
D)  internalize risk.E) A) and D)
F) A) and C)

Question 8

The risk of damaging the global environment is:

Accepted Answer

A)  very real.
B)  only a political issue.
C)  can be ignored by business since there are international laws that protect the environment from harm.
D)  only relevant to China.E) B) and C)
F) C) and D)

Question 9

Hector had been asked to serve on the board of a major pharmaceutical firm.He reluctantly declined,citing the firm's lack of liability coverage for outside members of the board of directors.Hector's decision indicates that he:

Accepted Answer

A)  will self-insure against a loss from legal action taken against the pharmaceutical firm.
B)  feels that the potential loss from legal action against this firm is an uninsurable risk.
C)  insists that the firm follow the rule of indemnity.
D)  will manage his risk by avoiding the potential loss from a liability suit directed at the board of directors.E) None of the above
F) A) and B)

Question 10

Amusement parks often have a minimum height restriction on some of their most thrilling rides.This risk management strategy is done in an effort to:

Accepted Answer

A)  minimize the speculative risk associated with an injury.
B)  reduce the risk associated with a potential accident.
C)  self-insure against a catastrophic accident.
D)  create the perception of a more exciting ride.E) A) and B)
F) All of the above

Question 11

Firms can take out term life-insurance policies on their top executives.

Accepted Answer

A) True 
 B)False

Question 12

Harmon works on a highway construction crew and frequently handles explosives.His friend Willie works as a bookkeeper for a retail store.The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Accepted Answer

A) True 
 B)False

Question 13

Enterprise risk management is:

Accepted Answer

A)  important to business.
B)  irrelevant to business.
C)  only used by nonprofit organizations.
D)  only used by the Department of Homeland Security.E) B) and D)
F) All of the above

Question 14

Risky Business Insurance Company insures business clients against unexpected disasters such as tornadoes and floods.The company operates in several regions in the U.S. ,and negotiates contracts following standard insurance industry guidelines.A strategic business guideline that the company would follow is:

Accepted Answer

A)  The amount of loss should be equal to or less than a loss covered by a competitor company.
B)  There should be documentation that clearly attests to the fact that the loss of buildings,equipment,and even lives is not measurable.
C)  The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas.
D)  All insurance companies that sell similar insurance would equally divide the number of claims,so as not to compete unfairly against each other.E) None of the above
F) A) and B)

Question 15

_________ are tax-deferred accounts that allow people to save money for medical costs such as prescription drugs,office visits,and routine medical procedures.

Accepted Answer

A)  HMOs
B)  Health savings accounts
C)  No-fault medical accounts
D)  Simple fee-for-service health plansE) A) and D)
F) B) and C)

Question 16

When a firm that is self-insuring against risk decides to cover losses straight out of its budget,it is said to be "going bare."

Accepted Answer

A) True 
 B)False

Question 17

Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage.

Accepted Answer

A)  deductible unit
B)  compensation clause
C)  rider
D)  tagE) A) and B)
F) B) and C)

Question 18

All-Star Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases.This is an example of avoiding risk as a risk management strategy.

Accepted Answer

A) True 
 B)False

Question 19

Risk management is concerned only with risks to individuals and businesses.

Accepted Answer

A) True 
 B)False

Question 20

Outsourcing helps some companies avoid risk.

Accepted Answer

A) True 
 B)False

Exam 24: Managing Risk

UPS requires their delivery people to wear seat belts as they drive their trucks.This is an example of self-insuring as a risk management strategy.

Correct Answer
verified

Correct Answer
verified

Workers' compensation insurance:

Correct Answer
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A person is most likely to be pleased with an HMO for health coverage if he or she:

Correct Answer
verified

Rebecca received a letter in the mail from her employer's insurance company inquiring if her children had health insurance coverage from another provider.According to the _____________ the insurance provider has the right to this information.

Correct Answer
verified

Amusement parks often have a minimum height restriction on some of their most thrilling rides.This risk management strategy is done in an effort to:

Correct Answer
verified

Harmon works on a highway construction crew and frequently handles explosives.His friend Willie works as a bookkeeper for a retail store.The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Correct Answer
verified

Outsourcing helps some companies avoid risk.

Correct Answer
verified

Firms can take out term life-insurance policies on their top executives.

Correct Answer
verified

When a firm that is self-insuring against risk decides to cover losses straight out of its budget,it is said to be "going bare."

Correct Answer
verified

Enterprise risk management is:

Correct Answer
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_________ are tax-deferred accounts that allow people to save money for medical costs such as prescription drugs,office visits,and routine medical procedures.

Correct Answer
verified

"Insurable interest" means that the policyholder is the one at risk to suffer a loss.

Correct Answer
verified

Risk management is concerned only with risks to individuals and businesses.

Correct Answer
verified

A firm that chooses to self-insure and cover losses out of its budget is said to:

Correct Answer
verified

All-Star Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases.This is an example of avoiding risk as a risk management strategy.

Correct Answer
verified

Hector had been asked to serve on the board of a major pharmaceutical firm.He reluctantly declined,citing the firm's lack of liability coverage for outside members of the board of directors.Hector's decision indicates that he:

Correct Answer
verified

Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage.

Correct Answer
verified

The risk of damaging the global environment is:

Correct Answer
verified

Any risk is insurable as long as you can pay the premium.

Correct Answer
verified

Exam 24: Managing Risk

UPS requires their delivery people to wear seat belts as they drive their trucks.This is an example of self-insuring as a risk management strategy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Workers' compensation insurance:

Correct AnswerverifiedShow Answer

A person is most likely to be pleased with an HMO for health coverage if he or she:

Correct AnswerverifiedShow Answer

Rebecca received a letter in the mail from her employer's insurance company inquiring if her children had health insurance coverage from another provider.According to the _____________ the insurance provider has the right to this information.

Correct AnswerverifiedShow Answer

Amusement parks often have a minimum height restriction on some of their most thrilling rides.This risk management strategy is done in an effort to:

Correct AnswerverifiedShow Answer

Harmon works on a highway construction crew and frequently handles explosives.His friend Willie works as a bookkeeper for a retail store.The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Correct AnswerverifiedShow Answer

Outsourcing helps some companies avoid risk.

Correct AnswerverifiedShow Answer

Firms can take out term life-insurance policies on their top executives.

Correct AnswerverifiedShow Answer

When a firm that is self-insuring against risk decides to cover losses straight out of its budget,it is said to be "going bare."

Correct AnswerverifiedShow Answer

Enterprise risk management is:

Correct AnswerverifiedShow Answer

_________ are tax-deferred accounts that allow people to save money for medical costs such as prescription drugs,office visits,and routine medical procedures.

Correct AnswerverifiedShow Answer

"Insurable interest" means that the policyholder is the one at risk to suffer a loss.

Correct AnswerverifiedShow Answer

Risk management is concerned only with risks to individuals and businesses.

Correct AnswerverifiedShow Answer

A firm that chooses to self-insure and cover losses out of its budget is said to:

Correct AnswerverifiedShow Answer

All-Star Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases.This is an example of avoiding risk as a risk management strategy.

Correct AnswerverifiedShow Answer

Hector had been asked to serve on the board of a major pharmaceutical firm.He reluctantly declined,citing the firm's lack of liability coverage for outside members of the board of directors.Hector's decision indicates that he:

Correct AnswerverifiedShow Answer

Home-based business owners add a ________ to their homeowner's insurance policy to ensure that they have adequate coverage.

Correct AnswerverifiedShow Answer

The risk of damaging the global environment is:

Correct AnswerverifiedShow Answer

Any risk is insurable as long as you can pay the premium.

Correct AnswerverifiedShow Answer

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