1. Which of the following insurance concepts is based on the ability to predict the approximate number ofdeaths or frequency of disabilities within a certain group during a specific time?
D. Law of large numbers
2. A tornado is an example of a
C. peril
3. All of the following actions are examples of risk avoidance EXCEPT:
C. Pat pays his insurance premium
4. Which of the following statements does NOT describe an element of an insurable risk?
a. The loss must not be due to chance.
b. The loss must be definite and measurable.
c. The loss cannot be catastrophic.
d. The loss exposures to be insured must be large.
a. The loss must not be due to chance.
5. Tom buys his wife Marya $50,000 diamond ring. When she is not wearing the ring, she keeps it in a safedeposit box at a local bank. This is an example of risk
D. reduction
6. Buying insurance is one of the most effective ways of
A. transferring risk
7. In the insurance business, risk can best be defined as:
B. uncertainty regarding financial loss
inventory without paying for them. What kind of hazard is described?
A. Moral hazard
9. Which of the following best describes the function of insurance?
C. It spreads financial risk over a large group to minimize the loss to anyone individual.
10. Which of the following statements is CORRECT?
a. Only speculative risks are insurable.
b. Only pure risks are insurable.
c. Both pure risks and speculative risks are insurable.
d. Neither pure risks nor speculative risks are insurable.