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Question 1 of 10
1. Question
Name the type of risk with which the insurance is concerned.
Correct
A financial risk is the type of risk with which insurance is concerned. A dynamic risk is one that is associated with changes in the economy, whether in price level or consumer tastes. Static risks are those that are more easily covered by insurance, since they pertain to common economic risks. Fundamental risks are those that are not particular to any one individual, and as such are the responsibility of society. Particular risks are felt by individuals and so are more commonly treated by insurance. A pure risk has only two possible results: loss or no loss. A speculative risk, on the other hand, has the potential for both gain and loss. An insurable risk must be definable, measurable, somewhat predictable, and must create losses that are random and not catastrophic.
Incorrect
A financial risk is the type of risk with which insurance is concerned. A dynamic risk is one that is associated with changes in the economy, whether in price level or consumer tastes. Static risks are those that are more easily covered by insurance, since they pertain to common economic risks. Fundamental risks are those that are not particular to any one individual, and as such are the responsibility of society. Particular risks are felt by individuals and so are more commonly treated by insurance. A pure risk has only two possible results: loss or no loss. A speculative risk, on the other hand, has the potential for both gain and loss. An insurable risk must be definable, measurable, somewhat predictable, and must create losses that are random and not catastrophic.
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Question 2 of 10
2. Question
Identify the properties of insurable risk:
I. Insurable risk must be catastrophic
II. Insurable risk must be definable
III. Insurable risk must be predictable
IV. Insurable risk must be measurableCorrect
An insurable risk must be definable, measurable, somewhat predictable, and must create losses that are random and not catastrophic.
Incorrect
An insurable risk must be definable, measurable, somewhat predictable, and must create losses that are random and not catastrophic.
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Question 3 of 10
3. Question
Which type of risk has the potential for both profits and losses?
Correct
A speculative risk, on the other hand, has the potential for both gain and loss.
Incorrect
A speculative risk, on the other hand, has the potential for both gain and loss.
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Question 4 of 10
4. Question
Identify the types of hazards:
I. Economic hazard
II. Physical hazard
III. Morale hazard
IV. Moral hazardCorrect
There are three types of hazards: physical hazards are physical properties (like volatility) that increase hazard; moral hazards are qualities in individuals (like dishonesty) that increase the risk of loss; and morale hazards are the dangers that one faces by being indifferent to risk.
Incorrect
There are three types of hazards: physical hazards are physical properties (like volatility) that increase hazard; moral hazards are qualities in individuals (like dishonesty) that increase the risk of loss; and morale hazards are the dangers that one faces by being indifferent to risk.
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Question 5 of 10
5. Question
Name the process that involves taking steps to minimise the damage caused by risks with high frequency but low loss.
Correct
Risk reduction involves taking active steps to minimize the damage caused by risks with high frequency but low loss. Risk avoidance is the total refusal to perform a risky behavior.
Incorrect
Risk reduction involves taking active steps to minimize the damage caused by risks with high frequency but low loss. Risk avoidance is the total refusal to perform a risky behavior.
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Question 6 of 10
6. Question
The rate at which the population dies is called:
Correct
Mortality is the rate at which a population dies, while morbidity is the likelihood of disability. Insurance companies use the mortality and morbidity rates of certain populations to set insurance rates.
Incorrect
Mortality is the rate at which a population dies, while morbidity is the likelihood of disability. Insurance companies use the mortality and morbidity rates of certain populations to set insurance rates.
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Question 7 of 10
7. Question
Identify the tort which involves printing of defamatory information about another person:
Correct
Libel is the printing of false and defamatory information about another person and is considered an intentional tort.
Incorrect
Libel is the printing of false and defamatory information about another person and is considered an intentional tort.
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Question 8 of 10
8. Question
Which insurance covers the dwelling and other structures on a replacement cost basis?
Correct
Homeowners insurance covers the dwelling and other structures on a replacement cost basis. This means that if the amount of insurance coverage is at least 80%, the loss will be paid without deduction for depreciation, and not on an actual cash basis, in which the payment is the replacement cost minus depreciation. If the amount of insurance is less than 80% of the replacement cost, the company will pay either the actual cash value or the proportion of the replacement cost of the loss that the amount of insurance bears to 80% of the replacement cost value of the building, whichever is larger.
Incorrect
Homeowners insurance covers the dwelling and other structures on a replacement cost basis. This means that if the amount of insurance coverage is at least 80%, the loss will be paid without deduction for depreciation, and not on an actual cash basis, in which the payment is the replacement cost minus depreciation. If the amount of insurance is less than 80% of the replacement cost, the company will pay either the actual cash value or the proportion of the replacement cost of the loss that the amount of insurance bears to 80% of the replacement cost value of the building, whichever is larger.
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Question 9 of 10
9. Question
The portion of the premium that covers expenses, profit, and contingencies is called:
Correct
Loading is the portion of the premium that will cover expenses, profit, and margin for contingencies. Mortality and interest are used to calculate the net premium, which is combined with operating expenses to figure gross expenses.
Incorrect
Loading is the portion of the premium that will cover expenses, profit, and margin for contingencies. Mortality and interest are used to calculate the net premium, which is combined with operating expenses to figure gross expenses.
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Question 10 of 10
10. Question
Identify the elements for the existence of a valid contract:
I. Offer and acceptance
II. Genuine assent
III. Capacity
IV. Inadequate considerationCorrect
In order for a valid contract to exist, there must be five elements: offer and acceptance, genuine assent, adequate consideration, capacity, and legality.
Incorrect
In order for a valid contract to exist, there must be five elements: offer and acceptance, genuine assent, adequate consideration, capacity, and legality.