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Exam 24: Managing Risk

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Question 61

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Sadly,during a war many civilians watch everything they have destroyed.Insurance companies will view this type of loss as:

A) an insurable risk.
B) an uninsurable risk.
C) a demonstration of the law of large numbers.
D) a rule of indemnity.

E) A) and C)
F) B) and C)

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Question 62

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According to the rule of indemnity,an insured person cannot collect more than the actual loss from an insurable risk.

A) True
B) False

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Question 63

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Pure risk involves the chance of either a profit or a loss.

Explain the benefits of workers' compensation.Who is required to carry this type of insurance?

A surety bond protects employers from employee dishonesty.

Worldwide risks need to be prioritized so that international funds can be spent where they can do the most good.

Which of the following is a goal of enterprise risk management?

A policyholder must have an) __________ in what is being insured,meaning that the policyholder must be the one at risk to suffer an economic loss.

Disability insurance replaces part of your income if you become disabled and can no longer work,but you usually must be disabled for a specified period of time before benefits are provided.

The terrorist attack against the World Trade Center in 2001 is an example of pure risk.

Property insurance covers losses from fires,accidents,or theft.

Nancy owns a high-fashion boutique and one source of competitive advantage in the past has been her ability to spot the latest trends,stock the store with those items,and sell out before the next new trend becomes popular.Unfortunately,this year Nancy missed on what would be "hot" and is now stuck with mountains of clothing and accessories that did not sell.All of her cash is invested in this clothing and at the moment she is unable to restock the store with the next season's clothes.Nancy is likely not worried because:

Airlines likely consider risk management to be more important because of:

If a pure risk occurs a company loses money;but if the events do not occur,the company gains nothing.

The car insurance premium charged for young male drivers is higher than the premium for young female drivers.This is due to the rule of indemnity.

Risk management is getting much simpler thanks to the Internet.

Federal Housing Administration FHA)insurance provides insurance to property owners in high-crime areas.

________ risk involves the threat of loss with no chance for profit.

The beginning of an effective risk management strategy is a good loss-prevention program.

Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.