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Exam 23: Appendix: Managing Risk

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Question 21

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It's good advice for doctors and lawyers to carry malpractice insurance.

A) True
B) False

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Question 22

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A ________ insurance company is owned by stockholders, just like any other investor-owned company. A ________ insurance company is owned by its policyholders.

A) stock; mutual
B) corporate; stock
C) stock; corporate
D) mutual; limited liability

E) None of the above
F) B) and C)

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Question 23

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Professional liability insurance is also sometimes known as malpractice insurance.

When a firm that is self-insuring against risk decides to cover losses straight out of its budget, it is said to be "going bare."

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?

Which of the following is a goal of enterprise risk management?

Going bare is a much less risky strategy for self-insurance.

Sean is in charge of risk management for First Friends, Inc., a large chain of preschools on the East Coast. He has decided to build enterprise risk management into the organization. The first step Sean should take is to

Lyla owns a small jewelry business with only four employees. She opened her business recently and makes just enough to pay her bills each week. Yesterday, just before the end of her first quarter in business, she received a notice from the government indicating that she needed to provide evidence of workers' compensation insurance. Lyla

Businesses can often reduce the risk to which they are exposed.

________ insurance provides benefits to the survivors of workers who die as a result of work-related injuries.

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

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

Organizations spend about ________ percent of gross domestic product on insurance premiums.

An insurance policy is a written contract.

Molly's neighbor, Steve, is quite careless and is in danger of burning his house down. Molly tried to buy a fire insurance policy on Steve's house, so she could collect the payment when Steve inevitably burned down his own house. The insurance company would not allow Molly to purchase the policy because she did not have an insurable interest in the property.

There are two different kinds of risk: passive and active.

Some companies are avoiding risk through the use of product recalls.

A characteristic of a health savings account that distinguishes it from other types of health care coverage is that it

Donna owns a life insurance policy on her husband Mike through Securitas Mutual Life Insurance Company. As a policyholder, she also owns part of the company.