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Exam 24: Managing Risk

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Question 51

True/False

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A mutual insurance company is a nonprofit organization.

A) True
B) False

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Question 52

Multiple Choice

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An insurance company would not be willing to insure a risk if it:

A) results from political disruptions.
B) has a measurable loss.
C) results from an accident.
D) has a low probability of occurring.

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

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Question 53

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Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses.This is an example of which of the following?

Health maintenance organizations put an emphasis on helping members stay healthy instead of on treating illnesses.

________ insurance replaces part of your income if you become unable to work for an extended period of time.

The Ford Motor Company has an insurable interest in the lives of its top executives.

One guideline to determine that a risk is generally insurable is:

An endorsement can provide additional coverage to a homeowner's policy for business equipment.

An insurance policy is a written contract.

Companies adopt risk management procedures to minimize the chance of business failure due to unplanned events such as security breaches,terrorist attacks,and natural disasters.

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

A mutual insurance company is owned by its policyholders.

The federal government provides some insurance protection.

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

Bill has decided to increase the size of his auto repair business,although he realizes that this decision brings added risk.This is an example of ________ risk.

In order to save money,health maintenance organizations HMOs) usually require their members to:

Eduardo was a licensed stock broker in the state of New York.Two years ago,he suggested to his client James that he invest his entire Individual Retirement Rollover account valued at $800,000 into the stock of a high technology company with strong growth potential.After the trade was conducted,James became the owner of several thousand shares.However,the company faltered during a deep recession,and the value of James's holdings decreased to less than ¼ of the purchase value.He decided to sue Eduardo for providing what he considered to be bad advice,and won a hefty sum of money.Eduardo lost his job with a major financial services company,and eventually lost his license to sell investments.Eduardo may have benefited from ___________________.

All risks are insurable.

Jonathon is in charge of risk management for Learnit Corp. ,a large chain of preschools in the mid-west.He has decided to build enterprise risk management into the organization.The first step Jonathon should take is to:

Trevino is a silversmith and works with various metals.At the end of the day,he reclaims and separates each metal by using an inexpensive toxic acid though other methods are available.The risk of fire as well as health dangers to Trevino is unknown.Trevino should: