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1. Which one of the following losses is an indirect loss?
(a) damage to a car when a tree falls on it
(b) loss caused by an arsonist who burns down a building to collect insurance proceeds
(c) monetary losses due to the inability to produce and sell goods when a
machine is destroyed by fire
(d) monetary losses due to a legal liability claim
(e) shoplifting losses caused by employees
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2. Pure risk is characterized by:
(a) a chance of loss and a chance of gain
(b) a chance of loss and no loss only
(c) certainty that a loss will occur
(d) the chance of gain or no loss only
(e) none of the above
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3. A peril is defined as:
(a) the chance that loss will occur
(b) morale hazard
(c) the event which gives rise to loss
(d) the contingency that increases the change of loss
(e) the uncertainty surrounding the cause of loss
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4. Which of the following is a result of adverse selection?
(a) no underwriting is necessary
(b) the applicants for insurance have a higher probability of loss
than the average group of insureds
(c) the federal government must write the insurance
(d) better insureds are attracted to the group
(e) large insurers are able to charge lower premiums
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5. If the chance of loss is high and the severity of loss is high,
generally the most appropriate risk management tool is:
(a) risk transfer
(b) risk reduction
(c) risk assumption
(d) loss prevention
(e) risk avoidance
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6. Which of the following is NOT a hazard?
(a) storing one ton of dynamite in a garage
(b) bad diet (eating lots of junk food)
(c) driving your car on thin ice
(d) living in a tornado prone area
(e) none of these
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7. Taking a $500 deductible on your auto insurance contract is an
example of:
(a) risk avoidance
(b) self-insurance
(c) loss reduction
(d) risk assumption
(e) risk transfer
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8. Proximate cause means:
(a) the event nearest the peril in time
(b) the event nearest the peril
(c) the event nearest the loss in time and space
(d) the first insured peril in a chain of events leading to a loss
(e) the last cause of loss in a chain of events leading to a loss
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9. The most difficult and important step in the risk management process
generally is:
(a) evaluating risk
(b) reviewing the program
(c) selecting the best method(s) to handle risk
(d) identifying the risk
(e) measuring the exposure
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10. All the following are objectives of risk management EXCEPT?
(a) to insure all exposures to loss
(b) to make efficient before-the-loss arrangements for an
after-the-loss balance between resources needed and resources
required to preserve operating effectiveness
(c) eliminate duplicate insurance coverage
(d) develop and maintain plant safety
(e) to keep accurate records of injured and hospitalized employees
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| 11.Which part of the insurance contract
personalizes the coverage to the individual's exposure? (a)
the exclusions (b) the insuring agreements (c) the conditions
section (d) the definitions (e) the declarations page
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| 12. I.M. Crashworthy owns a PAP with
LIABILITY limits of 25/50/5 and a $1,000 Medical Payments coverage
limit. He collided with another car that was leaving the UNI
parking lot outside the business school (i.e. Crashworthy was
at fault in the accident), and the following claims resulted from
the accident: injury to the driver of the other car = $10,000;
injury to the passenger of the other car = $30,000; damage to the
other car = $11,500; medial expenses of insured's wife while a
passenger in Crashworthy's car = $500. Which of the following
amounts would be paid for this accident under Crashworthy's
PAP? (a) $33,000 (b) $35,000 (c) $42,380 (d)
$55,000 (e) $40,500
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| 13 .Susie Koch, the named insured, has a
24 year old son, still residing at home, who goes to school part
time due to the high cost of tuition.The son has an apartment
in the city near school. His stereo having an actual cash value of
$900 and a replacement cost value of $1,400 is stolen from the
apartment one Sunday night. There is a $100 deductible with
Section I of the father's HO-2 policy. Under the
circumstances the HO-2 policy will pay: (a) $800 due to the
deductible (b) $900 (c) the son is not covered and
should have gotten an HO-4 policy (d) because the policy is
replacement cost, the son would receive $1,300 (e) $1,400 is
paid because no deductible applies when there is a robbery under the
HO-2 policy
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| 14.In property insurance, to collect for
a loss, insurable interest must exist: (a) at the inception of the
contract (b) at all times during the contract (c) whenever the
agent comes to check on the policy (d) at the time of the loss
(e) at the time of loss and at the beginning of the contract
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| 15.Which clause or concept in law
provides that when one indemnifies another for a loss, the person
making payment is entitled to recovery from the negligent third
party? (a) mortgagee clause (b) re ipsa loquitur loss
clause (c) appraisal clause (d) subrogation (e)
co-insurance clause
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| 16.Which clause provides that if two
parties cannot agree on a loss settlement each may select a
competent and disinterested party to determine the loss? (a)
proof of loss clause (b) disinterested party rule (c)
subrogation (d) appraisal (e) express authority waiver clause |
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| 17.Which of the following life insurance
policies would have the highest premium for a standard risk male age
35? (a) Level term (b) whole life continuous
premium (c) whole life paid-up at 60 (d) 10-pay whole
life (e) whole life paid-up at 65
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| 18.Compulsory Liability Insurance laws
are designed to: (a) make driver's license testing compulsory after
age 65 (b) reduce auto insurance rates (c) decrease the
number of people who carry auto insurance (d) encourage people
to continue payments on their automobiles (e) force
individuals to purchase auto liability insurance
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| 19.If reinsurer A agrees to reinsure all
autos that meet the underwriting rules specified in the contract
with the primary insurer, this type of insurance arrangement is
called: (a) an automatic treaty (b) a stop-loss carryover
coverage (c) an individually negotiated trail reinsurance
cover (d) a pro-rata reinsurance policy (e) an excessive
loss reinsurance contract
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| 20 If the insurance company cancels a
homeowners policy, the returned premium will be computed on a: (a)
short-rate basis (b) long-rate basis (c) pro-rata basis (d)
contingent fee basis (e) none of these, the homeowners policy
can not be canceled
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