Week 1 Exam Flashcards
Which item, although still insurable, would violate the Law of Large Numbers?
a. Insurance on an original Van Gogh painting
b. Insurance on a tract house
c. Insurance on a 1977 Chevrolet
d. Insurance on a Sony TV
A. Insurance on an original Van Gogh
Which of the following is NOT included in the definition of Insurance?
a. Transfer of risk to a Third party
b. Accumulation of a fund to pay losses
c. Underwriting standards
d. A large number of similar exposure units
C. Underwriting Standards
The chance than an economic loss will occur is a definition of:
a. Peril
b. Risk
c. Hazard
d. Insurance
B. Risk
Which of the following best describes Indemnity?
a. Money paid in exchange for insurance protection
B. Reimbursement to the same financial position as before the loss
c. Damage or destruction of property or person
d. A cause of loss
B. Reimbursement to the same financial condition as before the loss
Which definition best describes a hazard?
a. A condition that increases the chance of loss
b. The chance of loss
c. The uncertainty of whether a loss will or will not occur
d. The cause of loss
A. A condition that increases the chance of loss
A nuclear explosion is generally considered an uninsurable exposure because:
a. The loss would not be accidental
b. There would be no way to assess monetary damages
c. It would be a catastrophic event
d. The loss would not be definite in time and place
C. It would be a catastrophic event
Insurable interest is: a. The subject of an insurance policy b. Ownership of property c. Financial interest in property D. The person insured
C. Financial interest in property
Which of the following is NOT insured by an Ocean Marine policy?
a. A ship’s hull
b. A ship’s cargo
c. A ship’s routes
d. A ship’s freight
C. A ship’s routes
Which of the following is NOT a potential advantage to a company when creating a self-insurance program?
a. The company may incur lower costs than purchasing commercial insurance
b. The premiums are a tax deduction for the company
c. The company maintains more control over its finances
d. The company maintains more control over its operations
B. The premiums are tax deductible for the company
The retail businesses in a small community unite and agree to pay each other’s theft losses. This arrangement is:
a. a risk retention group
b. a reciprocal
c. a mutual insurer
d. a stock insurer
b. a reciprocal
An insurer that is owned by its policyholders is:
a. A stock insurer
b. A reciprocal
c. An inter-insurance exchange
d. A mutual insurer
D. A mutual insurer
An insurer that is publicly traded is called:
a. A mutual
b. A reciprocal
c. An inter-insurance exchange
d. A stock company
D. A stock company
When a company sells off a danger operation, it is using which risk management technique?
a. Control
b. Non-insurance Transfer
c. Avoidance
d. Retention
C. Avoidance
The part of the insurance policy that contains the “who is insured, what is insured and the premium” is called:
a. Declarations
b. Exclusions
c. Conditions
d. Endorsements
A. Declarations
The part of the insurance policy that spells out the insurer’s promise is called:
a. Declarations
b. Exclusions
c. Insuring Agreement
d. Conditions
C. Insuring Agreement