Risk Mgmt Midterm Questions And Answers
100% Correct
Ken owns a hardware store that fills customers' propane tanks. You are Ken's insurance agent and
are attempting to explain insurance terms to Ken. Which of the following statements is
CORRECT?
I. Fire is a peril.
II. Leaving oily rags in a hardware store's repair shop area is a hazard.
III. The handling of propane is a hazard.
IV. A pure risk is one that involves only the chance of loss or no loss; in other words, there is no
chance of gain. C. I, II, III, and IV
Which of the following is a disadvantage of a firm self-insuring?
A. Self-insurance raises the possibility that the business will have to pay higher income taxes.
B. Self-insurance avoids state premium taxes.
C. Self-insurance reduces costs by eliminating or reducing insurance company profit.
D. Self-insurance eliminates selling costs. A. Self-insurance raises the possibility that the
business will have to pay higher income taxes.
,Risk Mgmt Midterm Questions And Answers
100% Correct
All of the following are characteristics of a principal-agent relationship except
A. the agent typically has little or no independent discretion.
B. the agent acts on behalf of the principal in engaging in business transactions.
C. the agent may bind the principal in a contract with a third person.
D. the agent has a duty of loyalty to the principal. A. the agent typically has little or no
independent discretion.
For life insurance to be underwritten, an insurable interest must exist
I. when the policy is first issued.
II. when a loss is claimed. C. I only
Which section of an insurance contract includes information provided by the applicant?
A. The exclusions section
B. The conditions section
,Risk Mgmt Midterm Questions And Answers
100% Correct
C. The insuring agreement
D. The declarations section D. The declarations section
The state insurance department, headed by the state insurance Commissioner:
I. administers compliance.
II. sets regulations implementing legislation. A. Both I and II
Which defense against liability reduces the defendant's proportion of liability based upon the
injured party's contribution to the total negligence that causes injury?
A. Comparative negligence
B. The last clear chance rule
C. Contributory negligence
D. Assumption of risk A. Comparative negligence
, Risk Mgmt Midterm Questions And Answers
100% Correct
Barbara left her car parked on top of a hill while visiting at a friend's house. Unfortunately, she
forgot to apply her emergency brake, and her car rolled down the hill, injuring two children who
were playing.
Which of the following doctrines may influence Barbara's liability in this situation?
A. Negligence
B. Attractive nuisance
C. Strict liability
D. Assumption of risk A. Negligence
Josie has had an exciting year. She passed her CPA exam, joined a small accounting firm as a
public accountant, purchased her first car, and bought a townhome. Which of the following types
of insurance should she have at this point?
I. Automobile insurance
II. Errors and omissions insurance
III. Homeowners insurance
IV. Malpractice insurance A. I, II, and III
100% Correct
Ken owns a hardware store that fills customers' propane tanks. You are Ken's insurance agent and
are attempting to explain insurance terms to Ken. Which of the following statements is
CORRECT?
I. Fire is a peril.
II. Leaving oily rags in a hardware store's repair shop area is a hazard.
III. The handling of propane is a hazard.
IV. A pure risk is one that involves only the chance of loss or no loss; in other words, there is no
chance of gain. C. I, II, III, and IV
Which of the following is a disadvantage of a firm self-insuring?
A. Self-insurance raises the possibility that the business will have to pay higher income taxes.
B. Self-insurance avoids state premium taxes.
C. Self-insurance reduces costs by eliminating or reducing insurance company profit.
D. Self-insurance eliminates selling costs. A. Self-insurance raises the possibility that the
business will have to pay higher income taxes.
,Risk Mgmt Midterm Questions And Answers
100% Correct
All of the following are characteristics of a principal-agent relationship except
A. the agent typically has little or no independent discretion.
B. the agent acts on behalf of the principal in engaging in business transactions.
C. the agent may bind the principal in a contract with a third person.
D. the agent has a duty of loyalty to the principal. A. the agent typically has little or no
independent discretion.
For life insurance to be underwritten, an insurable interest must exist
I. when the policy is first issued.
II. when a loss is claimed. C. I only
Which section of an insurance contract includes information provided by the applicant?
A. The exclusions section
B. The conditions section
,Risk Mgmt Midterm Questions And Answers
100% Correct
C. The insuring agreement
D. The declarations section D. The declarations section
The state insurance department, headed by the state insurance Commissioner:
I. administers compliance.
II. sets regulations implementing legislation. A. Both I and II
Which defense against liability reduces the defendant's proportion of liability based upon the
injured party's contribution to the total negligence that causes injury?
A. Comparative negligence
B. The last clear chance rule
C. Contributory negligence
D. Assumption of risk A. Comparative negligence
, Risk Mgmt Midterm Questions And Answers
100% Correct
Barbara left her car parked on top of a hill while visiting at a friend's house. Unfortunately, she
forgot to apply her emergency brake, and her car rolled down the hill, injuring two children who
were playing.
Which of the following doctrines may influence Barbara's liability in this situation?
A. Negligence
B. Attractive nuisance
C. Strict liability
D. Assumption of risk A. Negligence
Josie has had an exciting year. She passed her CPA exam, joined a small accounting firm as a
public accountant, purchased her first car, and bought a townhome. Which of the following types
of insurance should she have at this point?
I. Automobile insurance
II. Errors and omissions insurance
III. Homeowners insurance
IV. Malpractice insurance A. I, II, and III
