Multiple Choice
Identify
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1.
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The key difference between pure risk and speculative risk is that:
a. | pure risk involves the possibility of both profit and loss | b. | speculative risk
involves the possibility of loss only | c. | pure risk involves the possibility of loss
only | d. | speculative risk involves the possibility of profit
only |
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2.
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According to the Law of Large Numbers, which insurance company would be able to
predict most accurately the number of insureds who will die each year?
a. | Treasure Coast Insurance Company that insures 1,000,000 people of various
ages | b. | First Coast Assurance Company that insures 2,000,000 people of various
ages | c. | Gold Coast Mutual that insures 2,000,000 males ages 40-45 | d. | Emerald Coast
Insurance Corporation that insures 500,000 males ages 40-45 |
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3.
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Only pure risks can:
a. | lead to loss | b. | be insured | c. | be
predicted | d. | result in gain |
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4.
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All of the following are elements of an insurable risk EXCEPT the loss must
be:
a. | measurable | b. | predictable | c. | due to
chance | d. | catastrophic |
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5.
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An attitude of indifference to the possibility of harm or loss is a(n):
a. | physical hazard | b. | moral hazard | c. | morale
hazard | d. | uninsurable peril |
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6.
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Which of the following statements are correct?
a. | insurance is a means of exchanging the uncertainty of a loss with a small, certain
cost | b. | insurance spreads the cost of financial loss among many persons | c. | both a and b are
correct | d. | neither a nor b are correct |
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7.
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Which of the following is a hazard?
a. | fire | b. | disease | c. | death | d. | drug addition |
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8.
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Which of the following is a peril?
a. | cigarette smoking | b. | recklessness | c. | death | d. | pre-existing medical
conditions |
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9.
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An employer decides to self-insure its Workers Compensation obligations.
This is an example of:
a. | risk avoidance | b. | risk transference | c. | risk
retention | d. | risk reduction |
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10.
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Which of the following is a method of transferring risk?
a. | self-insurance of workers' compensation claims | b. | installation of fire
alarms and sprinkler system | c. | purchase of health insurance
policy | d. | avoiding hazards such as skydiving |
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