Module 4 Quiz

Question 1

The process of deciding how much and what kind of insurance to buy is called _____.

Answer 1

Insurance management

Question 2

Liability risk is _____.

Answer 2

One form of pure risk

Question 3

Which of these is NOT a requirement for an insurable risk from the insurance company’s perspective?

Answer 3

The loss must be catastrophic for the insurance company

Question 4

All of the following statements regarding insurable interest are correct except _____.

Answer 4

The beneficiary of a life insurance policy must have an insurable interest in the insured when the insured dies

Question 5

Which of the following is NOT one of the basic, or standard, sections of an insurance policy?

Answer 5

Rider and endorsements

Question 6

Which of the following is NOT one of the primary factors in determining the cost of automobile insurance in any given state?

Answer 6

Gas mileage of vehicle

Question 7

Which of the following statements regarding umbrella insurance coverage is CORRECT?

Answer 7

Umbrella insurance generally comes in $1 million increments

Question 8

Which of the following events would other than collision coverage under a personal auto policy (PAP) cover?

Answer 8

A tree falling on a parked car in a storm

Question 9

Which of the following statements concerning negligence is CORRECT?

Answer 9

An individual can still be sued for negligence even if he behaves responsibly and hasn’t done anything wrong

Question 10

Which of these statements regarding property insurance coverage is CORRECT?

Answer 10

Homeowners and personal auto policies cover personal property and liability, not business property and liability

Question 11

Nicholas and Ashley are buying their first home. Which of the following risks will be facilitated when they purchase homeowners insurance?

Answer 11

Risk transfer

Question 12

The cause of a loss is called _____.

Answer 12

A peril

Question 13

Someone who determines whether an insurance company will cover given risks is _____.

Answer 13

An underwriter

Question 14

Which of the following statements is CORRECT?

Answer 14

In order to avoid a coinsurance penalty, insureds must have coverage for at least 80% of their home’s replacement cost

Question 15

Which of the following is an example of speculative risk?

Answer 15

Stock market investment

Question 16

A risk management plan can _____.

Answer 16

Protect against possible large losses

Question 17

Choosing to live in a well-lit, gated community is an example of _____.

Answer 17

Risk reduction

Question 18

Which of the following statements about insurance agents is CORRECT?

Answer 18

The insurance field has one area that deals with life and health related coverage and another deals with property and casualty coverage, and insurance agents tend to work primarily in one area or the other

Question 19

Which of the following statements best describes the difference between an insurance agent and an insurance broker?

Answer 19

An agent makes the insurance company accountable to information given by the client to the agent, and a broker does not

Question 20

Which of the following perils is NOT covered under a typical homeowners insurance policy?

Answer 20

Flood

Question 21

Which of the following is NOT one of the rules of risk management?

Answer 21

The law of large numbers

Question 22

Which of these would be an example of a peril?

Answer 22

Theft or jewelry

Question 23

Under a personal auto policy (PAP), which of the following is NOT one of the insured’s duties after an accident?

Answer 23

Providing emergency care to injured parties

Question 24

Which of the following statements about auto insurance is CORRECT?

I. Most states require liability insurance, but they do not require collision insurance.
II. The state-mandated liability limits for auto insurance are appropriate for most drivers.

Answer 24

I only

Question 25

Which of these statement regarding agents and brokers is correct?

Answer 25

Most brokers cannot bind coverage with an insurance company

Question 26

Which of these represents the best protection against financial loss due to premature death?

Answer 26

Life insurance

Question 27

Which of the following statements is CORRECT?

Answer 27

Nonparticipating policies are sold by stock companies only

Question 28

Which of the following would NOT be considered an insured as described in a personal automobile policy?

Answer 28

Your estranged son who lives in another state

Question 29

A major issue with standard homeowners and automobile liability insurance is _____.

Answer 29

Inadequate liability coverage limits

Question 30

Comprehensive personal liability insurance (umbrella policies) was designed to _____.

Answer 30

Provide personal catastrophic liability protection