Financial Risk Management and Insurance Practice Exam

Financial Risk Management and Insurance Practice Exam

 

Which of the following is a primary goal of financial risk management?
A) To increase shareholder value
B) To maximize the company’s stock price
C) To minimize the company’s risk exposure
D) To reduce company expenses

 

Which type of insurance policy covers the loss of income due to a disability?
A) Life insurance
B) Health insurance
C) Disability income insurance
D) Homeowner’s insurance

 

What does a risk manager primarily aim to achieve in the context of insurance?
A) Avoiding risks altogether
B) Reducing risks to an acceptable level
C) Transferring all risks to others
D) Taking on as much risk as possible

 

Which of the following is an example of pure risk?
A) Investing in stocks
B) Loss of life due to illness
C) Purchase of a new car
D) A business venture

 

What type of insurance provides compensation for medical expenses?
A) Disability insurance
B) Liability insurance
C) Health insurance
D) Property insurance

 

Which of the following best describes “risk pooling” in insurance?
A) Combining risk into one policy
B) Distributing the risk among various entities to spread the cost
C) Removing high-risk individuals from insurance plans
D) Using reserves to cover risk

 

Which of the following is a method of transferring risk in financial risk management?
A) Buying insurance
B) Risk avoidance
C) Risk retention
D) Diversification

 

In the context of insurance, moral hazard refers to:
A) The likelihood that a person will take on excessive risk knowing they are insured
B) The risk of losing money due to inflation
C) The risk of a natural disaster
D) The chance of a policyholder being overinsured

 

Which of the following is considered a financial risk?
A) The risk of a natural disaster affecting the business
B) The risk of bankruptcy or insolvency
C) The risk of illness or injury to employees
D) The risk of product failure in the market

 

What is the primary purpose of reinsurance?
A) To transfer risks from one insurer to another
B) To provide insurance coverage to individuals
C) To help insurance companies avoid bankruptcy
D) To provide financial support during a loss

 

Which of the following types of insurance is often used by businesses to protect against the risk of liability?
A) Health insurance
B) General liability insurance
C) Life insurance
D) Auto insurance

 

The concept of risk retention in risk management means:
A) Accepting the financial consequences of certain risks
B) Transferring risk to another party
C) Reducing the exposure to risk
D) Purchasing insurance coverage for all risks

 

Which of the following is an example of systematic risk?
A) The risk associated with investing in a single company
B) The risk that affects the entire financial market
C) The risk that is specific to a company’s operations
D) The risk associated with international trade

 

Which of the following best describes the concept of “hedging” in financial risk management?
A) Taking on additional risk to increase profits
B) Attempting to offset the risk of an investment by making an opposite investment
C) Insuring against a specific risk event
D) Reducing risk by avoiding all investments

 

In insurance, the principle of indemnity states that an insured party should:
A) Receive more than the actual loss suffered
B) Receive compensation for the amount of loss only up to the limit of the policy
C) Be compensated for emotional distress
D) Be compensated regardless of the cause of loss

 

Which of the following is a common method of measuring risk exposure in insurance?
A) Premium rate analysis
B) Risk-adjusted return
C) Value at Risk (VaR)
D) Loss frequency modeling

 

Which of the following insurance policies is typically used to protect a business’s property?
A) Health insurance
B) Business interruption insurance
C) Property insurance
D) General liability insurance

 

In the context of financial risk management, diversification helps to:
A) Increase overall risk exposure
B) Reduce risk by investing in different assets or markets
C) Eliminate all risks
D) Limit the number of insurance claims

 

What is a key characteristic of adverse selection in the context of insurance?
A) Insurers select the lowest-risk applicants
B) High-risk individuals are more likely to purchase insurance
C) Low-risk individuals purchase insurance more often
D) Insurance companies adjust their premiums based on claim history

 

Which of the following is an example of a non-life insurance policy?
A) Health insurance
B) Homeowners’ insurance
C) Annuities
D) Life insurance

 

What is the purpose of a stop-loss provision in health insurance?
A) To limit the total amount of coverage available
B) To cap the insurer’s liability for high-cost claims
C) To reduce the premiums paid by the policyholder
D) To prevent fraud in claims

 

Which of the following is considered a financial instrument used in risk management?
A) Derivatives
B) Property insurance
C) General liability insurance
D) Life insurance

 

Which of the following is a characteristic of a self-insured retention plan?
A) The insurance company covers all claims above the retention limit
B) The policyholder is responsible for covering all losses below a certain threshold
C) The insurance company handles all claims without any involvement from the policyholder
D) The policyholder pays higher premiums to cover their retention

 

Which of the following best defines “insurable risk”?
A) A risk that is unpredictable and cannot be mitigated
B) A risk that is measurable and predictable, making it eligible for insurance coverage
C) A risk that is not covered under any insurance policy
D) A risk that has no economic impact

 

Which type of insurance is typically required for a business with employees?
A) Worker’s compensation insurance
B) Property insurance
C) Auto insurance
D) Life insurance

 

What is “moral hazard” in the context of financial risk management?
A) The increase in risk caused by a company’s actions
B) The financial risk associated with investing in high-risk assets
C) The tendency to take on more risk when one is protected from the consequences
D) The risk of being over-insured

 

Which of the following is a risk management strategy that involves the use of insurance to cover large, unpredictable risks?
A) Risk avoidance
B) Risk retention
C) Risk transfer
D) Risk reduction

 

Which of the following is typically included in a business’s general liability insurance policy?
A) Coverage for employee injuries on the job
B) Protection against damage to the company’s physical assets
C) Protection against lawsuits for property damage or injury
D) Protection against financial loss from theft

 

In insurance, the concept of “underwriting” refers to:
A) The process of determining the premium rates for policyholders
B) The decision-making process for accepting or rejecting insurance applications
C) The method of calculating risks for insurers
D) The process of paying out insurance claims

 

Which of the following best describes the concept of “risk pooling” in insurance?
A) Combining risks from multiple policyholders to spread the cost of claims
B) Selling individual insurance policies to separate customers
C) Assigning a higher premium to higher-risk individuals
D) Dividing the total amount of risk into smaller units

 

 

What does the term “moral hazard” refer to in the context of financial risk management?
A) The potential for insured individuals to take on excessive risk
B) The risk of financial losses due to mismanagement of a portfolio
C) The likelihood of adverse selection in insurance policies
D) The risk of natural disasters impacting insurance payouts

 

Which of the following is a feature of term life insurance?
A) It covers the policyholder for their entire life
B) It provides coverage for a specified period, such as 10 or 20 years
C) It includes a savings component for future use
D) It is only available to individuals under the age of 30

 

In financial risk management, the term “basis risk” refers to:
A) The risk that an investment will lose value
B) The risk that the hedge does not perfectly offset the underlying exposure
C) The risk of market price fluctuations
D) The risk associated with changes in interest rates

 

Which of the following is an example of operational risk?
A) A lawsuit resulting from product defects
B) A sudden increase in interest rates
C) The risk of system failure or human error in operations
D) A fire destroying a company’s property

 

What does “excess insurance” provide?
A) Coverage for losses beyond the primary insurance policy limits
B) Coverage for employee-related injuries
C) Coverage for the company’s physical assets
D) Coverage for liability claims

 

What is the primary purpose of insurance underwriting?
A) To set the premium rates based on risk evaluation
B) To handle claims processing
C) To determine the insurer’s investment strategies
D) To ensure that all risks are transferred

 

Which of the following best describes a deductible in insurance?
A) The amount the insurance company will pay in the event of a claim
B) The portion of the loss that the policyholder must pay out-of-pocket before the insurance coverage kicks in
C) The premium paid by the policyholder for coverage
D) The maximum amount that the policyholder can claim under the policy

 

What is the role of a “reinsurance” company in the insurance industry?
A) To directly pay out claims to policyholders
B) To insure the policies issued by other insurers
C) To handle all insurance claims processing
D) To manage insurance premiums

 

Which type of insurance policy would be best suited for someone seeking to cover the cost of long-term care due to aging or illness?
A) Life insurance
B) Health insurance
C) Long-term care insurance
D) Disability income insurance

 

Which of the following is an example of a hedging strategy in financial risk management?
A) Taking out a loan to purchase assets
B) Purchasing options to protect against adverse price movements
C) Increasing risk exposure to boost returns
D) Diversifying investments into multiple asset classes

 

Which of the following is a key component of enterprise risk management (ERM)?
A) Focus solely on operational risks
B) Mitigate risks in only one department of the organization
C) Identify, assess, and manage all types of risks across the organization
D) Transfer all risks to a third party

 

Which of the following describes the “fundamental risk” of insurance?
A) The risk of catastrophic loss that could affect the entire industry
B) The risk that a single insured event will cause significant financial loss
C) The risk of a specific insured individual’s loss being greater than anticipated
D) The risk of natural disasters only affecting specific regions

 

Which of the following is a primary goal of risk avoidance in financial management?
A) To eliminate all risk exposures
B) To manage risks through hedging strategies
C) To reduce the likelihood of a risk event occurring
D) To transfer risk to a third party

 

In risk management, “retention” refers to:
A) The decision to avoid risk
B) The practice of holding a reserve to pay for future claims
C) The decision to absorb some or all of the financial consequences of a risk
D) The transfer of risk to a reinsurance company

 

Which of the following best describes a “policyholder surplus”?
A) The total value of insurance premiums collected
B) The total claims paid out by an insurance company
C) The amount by which an insurer’s assets exceed its liabilities
D) The minimum amount of reserves required by regulators

 

What is the main difference between whole life and term life insurance?
A) Whole life insurance provides coverage for a specified period, while term life covers the policyholder for their entire life
B) Term life insurance is usually more affordable and does not build cash value, while whole life insurance is more expensive and accumulates cash value
C) Term life insurance offers no benefits, while whole life insurance includes investment options
D) Whole life insurance only covers accidental death, while term life insurance covers all causes of death

 

Which of the following is a common tool used by companies to manage currency exchange rate risk?
A) Currency futures
B) Property insurance
C) General liability insurance
D) Life insurance

 

What is the primary function of the National Association of Insurance Commissioners (NAIC)?
A) To set the premiums for insurance policies
B) To regulate the insurance industry and promote consumer protection
C) To offer reinsurance to insurance companies
D) To develop new types of insurance products

 

Which of the following would be an example of “financial risk” in a business context?
A) A fire that destroys a company’s warehouse
B) The risk of losing market share due to competition
C) A change in the value of foreign currency affecting an international transaction
D) The risk of an employee being injured on the job

 

What is the primary purpose of catastrophe bonds (CAT bonds)?
A) To provide insurance against potential stock market losses
B) To raise funds for natural disaster response and recovery
C) To hedge against financial risk in foreign investments
D) To provide financing for insurance companies to pay claims

 

Which of the following is an example of “systemic risk” in financial markets?
A) The risk associated with an individual company’s performance
B) The risk that affects the entire financial system or market
C) The risk of a company’s operations being disrupted by a natural disaster
D) The risk of a legal dispute affecting a business’s financial position

 

Which of the following insurance policies provides coverage for damages resulting from a third party’s actions?
A) Life insurance
B) Liability insurance
C) Property insurance
D) Health insurance

 

What is the purpose of a “deductible” in an insurance policy?
A) To decrease the total premium paid by the policyholder
B) To set a limit on the amount of coverage provided
C) To require the policyholder to pay a portion of the loss before the insurer pays
D) To increase the insurance company’s profits

 

Which of the following is a risk management technique involving the reduction of risk by spreading investments across various types of assets?
A) Hedging
B) Risk avoidance
C) Diversification
D) Risk retention

 

Which of the following is true about health insurance plans with a higher deductible?
A) They typically have lower premiums but require higher out-of-pocket expenses
B) They provide more comprehensive coverage for medical expenses
C) They offer a wider range of network providers
D) They are only available to individuals over the age of 50

 

In the context of financial risk management, “operational risk” refers to:
A) The risk of changes in interest rates affecting the company’s financial performance
B) The risk of loss due to failure of internal processes, systems, or human error
C) The risk associated with market fluctuations
D) The risk of losses from foreign exchange movements

 

Which of the following is a key characteristic of a “permanent” life insurance policy?
A) It provides coverage for a specified term
B) It builds cash value over time and provides lifelong coverage
C) It is cheaper than term life insurance
D) It does not include any form of investment component

 

What does “market risk” refer to in financial risk management?
A) The risk of loss due to fluctuations in market prices or interest rates
B) The risk of a company’s products failing in the market
C) The risk of losing customers to competitors
D) The risk of an operational disruption due to technical failures

 

What is the purpose of an “actuarial table” in insurance?
A) To determine the appropriate premium rate for each individual
B) To estimate the likelihood of events occurring based on statistical data
C) To set the insurance policy limits for each type of coverage
D) To outline the procedures for filing insurance claims

 

Which of the following is an example of a “moral hazard” in the context of risk management?
A) A person who takes on excessive risks after purchasing insurance
B) A company increasing its premiums to offset potential losses
C) An individual not purchasing enough coverage due to a lack of understanding
D) A company diversifying its investments to spread risk

 

 

Which of the following best defines “adverse selection” in the context of insurance?
A) The tendency for insurance companies to attract higher-risk individuals
B) The process of selecting investments to maximize returns
C) The risk that insured individuals may take more risks than they would without insurance
D) The practice of underwriting policies based on an individual’s credit score

 

Which of the following is NOT a characteristic of a “whole life” insurance policy?
A) It provides lifetime coverage
B) It accumulates a cash value over time
C) It has lower premiums compared to term life insurance
D) It typically has higher premiums than term life insurance

 

What is the primary benefit of a “stop-loss” insurance policy for a business?
A) It covers medical expenses for employees
B) It limits the amount of financial loss that the business can incur from high claims
C) It provides coverage for legal claims against the business
D) It ensures that the company can recover from natural disasters

 

In financial risk management, “credit risk” refers to:
A) The risk of an investor losing money due to market fluctuations
B) The risk that a borrower will default on a loan or debt obligation
C) The risk that an insurance company will go bankrupt
D) The risk of fraud in financial reporting

 

Which of the following types of insurance would be most appropriate for covering the risk of a business’s property being damaged or destroyed?
A) Liability insurance
B) Life insurance
C) Property insurance
D) Health insurance

 

In the context of insurance, what is “underwriting”?
A) The process of determining the premium rates for insurance policies
B) The process of paying out claims to policyholders
C) The process of marketing insurance products to consumers
D) The process of designing insurance policy documents

 

Which of the following is a key function of an insurance company’s claims department?
A) To determine the premium rates for new policyholders
B) To evaluate and process claims made by policyholders
C) To analyze the risk profiles of prospective customers
D) To develop new types of insurance products

 

Which of the following is true about “coinsurance” in health insurance policies?
A) It requires the insured to pay a fixed amount for each visit
B) It is the percentage of covered expenses the insured pays after the deductible is met
C) It covers all medical expenses without any cost to the policyholder
D) It is the amount an insurer pays towards a claim before the deductible is met

 

Which type of insurance would a company likely purchase to protect against loss from employee theft or dishonesty?
A) Property insurance
B) Worker’s compensation insurance
C) Fidelity bond insurance
D) Life insurance

 

What is the primary purpose of an “actuarial” valuation in insurance?
A) To assess the financial stability of an insurance company
B) To determine the optimal investment strategy for policyholders
C) To estimate future insurance claims based on statistical data
D) To set the interest rates for savings accounts

 

What is “hedging” in the context of financial risk management?
A) The practice of using derivatives to offset potential losses in investments
B) The strategy of diversifying investments to spread risk
C) The process of taking out insurance policies for market volatility
D) The act of selling off risky assets to reduce potential losses

 

What does “reinsurance” primarily help insurance companies achieve?
A) To reduce the premiums paid by policyholders
B) To transfer a portion of the risk to another insurer
C) To increase the number of policyholders
D) To simplify claims processing

 

In an insurance policy, what is typically covered under “liability insurance”?
A) Damage to the policyholder’s own property
B) Medical expenses for the policyholder
C) Injuries or damage to others for which the policyholder is responsible
D) Losses from natural disasters

 

Which of the following types of insurance would cover the costs associated with an individual’s medical care after an accident or illness?
A) Auto insurance
B) Health insurance
C) Homeowners insurance
D) Life insurance

 

Which of the following is a risk management strategy involving the transfer of risk to an external party?
A) Retention
B) Avoidance
C) Hedging
D) Insurance

 

What is the key difference between “term” life insurance and “whole” life insurance?
A) Term life insurance is more expensive
B) Whole life insurance includes a cash value component
C) Term life insurance covers the policyholder for their entire life
D) Whole life insurance does not require underwriting

 

Which of the following is an example of “interest rate risk”?
A) The risk of losing money due to fluctuations in the stock market
B) The risk that rising interest rates will reduce the value of an investment portfolio
C) The risk of a company defaulting on its loan
D) The risk of an insurance claim being rejected

 

What is “self-insurance”?
A) Insurance coverage purchased from an insurance company
B) A policy that covers both health and life risks
C) A risk management strategy where a business sets aside funds to cover its own risks
D) The process of transferring risks to a third party

 

Which of the following is NOT typically covered under a business owner’s insurance policy?
A) Property damage
B) Liability for accidents on business premises
C) Workers’ compensation for employees
D) Business owners’ personal health expenses

 

Which of the following best describes the “cost of risk” in financial management?
A) The premiums paid to transfer risk to an insurer
B) The amount of financial loss a company expects from risk events
C) The cost associated with managing a portfolio of insurance policies
D) The cost of assets lost due to natural disasters

 

What is the purpose of “insurance fraud” prevention measures in the insurance industry?
A) To reduce the number of claims made by policyholders
B) To prevent the payment of false or inflated claims
C) To lower the premiums paid by policyholders
D) To increase the coverage limits offered by insurance policies

 

What is the most common method of risk transfer in insurance?
A) Hedging
B) Reinsurance
C) Insurance policy
D) Diversification

 

What is the primary purpose of the “deductible” in an insurance policy?
A) To set the maximum amount the insurer will pay
B) To reduce the policyholder’s premium payments
C) To require the insured to pay a certain amount before the insurance coverage applies
D) To ensure that the policyholder does not file unnecessary claims

 

Which of the following would be considered a “pure risk”?
A) The possibility of making a profit on a business investment
B) The possibility of suffering a financial loss from a fire or natural disaster
C) The risk associated with speculative investments
D) The risk of fluctuation in stock prices

 

What type of insurance policy is most commonly used to cover an individual’s income in the event of a disability?
A) Life insurance
B) Disability income insurance
C) Auto insurance
D) Health insurance

 

Which of the following is a characteristic of “variable life insurance”?
A) The premiums are fixed for the policyholder’s lifetime
B) The policyholder can allocate premiums to various investment options
C) The death benefit is fixed and guaranteed
D) The policy includes coverage for both life and disability

 

Which of the following is an example of “market risk”?
A) The risk of a business being sued
B) The risk that the value of a financial asset may decrease due to market fluctuations
C) The risk of a business failing due to operational inefficiencies
D) The risk of being held liable for accidents on business premises

 

What is the purpose of an “insurance premium”?
A) To set the insurance policy limit
B) To reimburse the insurer for administrative costs
C) To pay for claims made by policyholders
D) To pay for the insurance coverage provided to the policyholder

 

Which of the following is considered a “natural hazard” that insurance companies might cover?
A) Fire
B) Employee theft
C) Economic downturns
D) Market volatility

 

What is “portfolio diversification” in the context of financial risk management?
A) The process of investing in a single asset to reduce risk
B) The strategy of spreading investments across different types of assets to reduce overall risk
C) The practice of investing only in bonds to avoid stock market risk
D) The strategy of investing in international markets to minimize domestic risk

 

 

Which of the following is an example of a “moral hazard” in insurance?
A) A policyholder taking more risks because they know they are insured
B) A policyholder failing to file a claim after an incident
C) A company offering too many coverage options
D) A policyholder choosing a higher deductible to reduce premiums

 

Which of the following best describes the role of an “actuary” in the insurance industry?
A) To investigate fraudulent claims
B) To calculate the insurance premiums based on risk assessments
C) To manage the marketing of insurance products
D) To develop investment strategies for insurance companies

 

What is the purpose of “property insurance”?
A) To cover losses from lawsuits
B) To protect businesses against theft and damage to physical property
C) To insure against employee injuries at work
D) To offer health coverage for business owners

 

What is typically NOT covered under a general “homeowners insurance” policy?
A) Damage to the home caused by fire
B) Liability for accidents on the property
C) Medical expenses for injuries sustained in the home
D) Flood damage

 

Which of the following best defines “reinsurance”?
A) Insurance purchased by an individual to protect personal assets
B) Insurance coverage purchased by an insurance company to protect against large losses
C) A policyholder’s right to transfer ownership of their policy
D) The premium paid to an insurer for covering a risk

 

Which of the following types of insurance provides coverage for legal defense costs in the event of a lawsuit?
A) Liability insurance
B) Auto insurance
C) Health insurance
D) Workers’ compensation insurance

 

Which of the following is the primary focus of “operational risk” in financial risk management?
A) The risk of financial loss due to market movements
B) The risk of loss due to failures in internal processes, people, or systems
C) The risk that an insurance company may default on its obligations
D) The risk associated with mergers and acquisitions

 

Which type of life insurance policy provides coverage for a specific period of time, such as 10, 20, or 30 years?
A) Term life insurance
B) Whole life insurance
C) Universal life insurance
D) Variable life insurance

 

Which of the following is a feature of “universal life insurance”?
A) Fixed premiums throughout the life of the policy
B) No cash value accumulation
C) Flexible premiums and death benefits
D) Limited to 10-year coverage periods

 

Which of the following does NOT typically affect the premium rates for an insurance policy?
A) The policyholder’s credit history
B) The level of coverage chosen
C) The policyholder’s age and health
D) The marketing expenses of the insurer

 

Which of the following describes “investment risk” in financial risk management?
A) The risk that an investment will decrease in value due to market changes
B) The risk that a company will default on its debt obligations
C) The risk of operational failures within a financial institution
D) The risk of fraud in financial transactions

 

Which of the following is a key characteristic of “short-term disability insurance”?
A) It provides coverage for the entire lifetime of the policyholder
B) It covers injuries or illnesses that prevent the policyholder from working for a short period
C) It provides tax-free death benefits
D) It covers healthcare costs for injuries not related to employment

 

What is the main purpose of “liability insurance” for businesses?
A) To protect businesses against lawsuits for damages caused to others
B) To cover the cost of repairing physical property
C) To provide health benefits to employees
D) To cover lost income from a business interruption

 

What is “market risk” in the context of financial risk management?
A) The risk of a business losing customers due to poor service
B) The risk of a decline in the value of investments due to market factors
C) The risk associated with rising costs of goods and services
D) The risk of a competitor entering the market and lowering prices

 

Which of the following types of insurance is typically required by law for drivers?
A) Auto insurance
B) Health insurance
C) Property insurance
D) Life insurance

 

Which of the following is considered a “pure risk” in insurance?
A) The risk of a business not being profitable
B) The risk of a business being sued
C) The risk of a person dying or becoming disabled
D) The risk of fluctuations in stock prices

 

What is the primary purpose of “workers’ compensation insurance”?
A) To provide healthcare coverage for employees
B) To protect businesses from legal liability for work-related injuries
C) To pay for legal fees in the event of a workplace lawsuit
D) To cover lost income due to illness unrelated to work

 

Which of the following is the primary role of “financial risk management” in a business?
A) To develop investment strategies that maximize profits
B) To identify, analyze, and manage risks that could affect the business’s financial health
C) To reduce tax liabilities through financial planning
D) To select the best employees for financial positions

 

Which of the following is NOT typically a factor in determining the price of an insurance policy?
A) The insured’s age and health
B) The risk profile of the insured
C) The level of service offered by the insurer
D) The location of the insured

 

What is “flood insurance” designed to cover?
A) Damage caused by fire
B) Losses resulting from water damage due to heavy rains or floods
C) Medical expenses related to flood injuries
D) Liability for accidents caused by flooding

 

Which of the following is a major drawback of “self-insurance”?
A) It is generally more expensive than traditional insurance policies
B) It requires the policyholder to handle the administrative and legal aspects of claims
C) It always provides higher coverage limits than regular insurance
D) It is only available for large corporations

 

What is “interest rate risk” in financial risk management?
A) The risk of an investment losing value due to interest rate changes
B) The risk of losing money due to market fluctuations
C) The risk of bankruptcy due to increased interest expenses
D) The risk of low returns on investments

 

What type of insurance would a business likely purchase to protect against the loss of income due to an event that disrupts operations?
A) Property insurance
B) Business interruption insurance
C) Liability insurance
D) Health insurance

 

Which of the following is an example of a “speculative risk”?
A) The risk of theft from a retail store
B) The risk of a stock investment losing value due to market fluctuations
C) The risk of a car accident
D) The risk of a fire destroying a home

 

What is the “claim frequency” in insurance terms?
A) The average size of insurance claims filed by policyholders
B) The total number of claims filed in a given period
C) The speed with which insurance claims are processed
D) The amount of time between a claim and its settlement

 

Which of the following is the main benefit of a “deductible” in an insurance policy?
A) It increases the payout that the insurer will provide
B) It lowers the cost of the insurance premiums
C) It decreases the coverage limits for the insured
D) It reduces the need for insurance claims

 

What type of risk does “moral hazard” describe in insurance?
A) The risk that an insurer will not have enough funds to pay claims
B) The risk that individuals will take more risks when they are insured
C) The risk of market volatility affecting investments
D) The risk of fraud in the claims process

 

Which of the following best describes “risk pooling” in insurance?
A) The process of diversifying insurance products to maximize market share
B) The collection of premiums from a large group of people to pay for claims
C) The strategy of offering low-cost policies to attract customers
D) The process of transferring risk to another insurer

 

What is the main goal of a “risk management” program in an organization?
A) To eliminate all risks associated with the business
B) To maximize the return on investments
C) To identify, assess, and control risks that could affect business objectives
D) To provide health and life insurance for employees

 

Which of the following is the purpose of a “life insurance beneficiary”?
A) To manage the insurance company’s finances
B) To receive the death benefit of the insurance policy upon the policyholder’s death
C) To choose the premiums for the life insurance policy
D) To negotiate insurance terms and coverage

 

 

Which of the following types of insurance covers the costs associated with an employee’s work-related injuries or illnesses?
A) General liability insurance
B) Workers’ compensation insurance
C) Health insurance
D) Disability insurance

 

Which of the following is the primary objective of a “hedging” strategy in financial risk management?
A) To increase investment returns
B) To reduce or eliminate the risk of adverse price movements
C) To diversify the portfolio
D) To guarantee profits from market movements

 

Which of the following best defines “catastrophic risk” in insurance?
A) The risk of high-frequency small claims
B) The risk of large losses caused by events like earthquakes or hurricanes
C) The risk of a policyholder underreporting their claims
D) The risk of fraud in the underwriting process

 

Which type of insurance protects a business from lawsuits for damages caused to others?
A) Professional liability insurance
B) Business interruption insurance
C) General liability insurance
D) Product liability insurance

 

Which of the following is NOT an example of a “financial risk”?
A) Credit risk
B) Market risk
C) Operational risk
D) Reputational risk

 

What does “credit risk” refer to in financial risk management?
A) The risk that an investment will lose value due to market fluctuations
B) The risk that a borrower will default on a loan
C) The risk that an insurer will not be able to meet its obligations
D) The risk of a company failing due to poor management

 

Which of the following is a type of insurance designed to protect against the death of a policyholder?
A) Life insurance
B) Disability insurance
C) Health insurance
D) Property insurance

 

Which of the following insurance policies is most likely to include a “waiting period” before benefits are paid?
A) Auto insurance
B) Disability insurance
C) Health insurance
D) Property insurance

 

What is the primary purpose of “insurance underwriting”?
A) To adjust claims made by policyholders
B) To assess the risk and determine the terms of an insurance policy
C) To sell insurance policies to customers
D) To handle the administrative tasks of an insurance company

 

Which of the following best defines the term “premium” in insurance?
A) The total amount paid by the insurer for claims
B) The upfront payment made by the insured for coverage
C) The amount of coverage provided by an insurance policy
D) The investment income generated by an insurance company

 

Which of the following is considered “moral hazard” in the insurance industry?
A) An insurer increasing premiums based on claims history
B) A policyholder taking more risks because they are insured
C) A person purchasing insurance after an incident has occurred
D) A company rejecting high-risk applicants

 

What is the main function of “life insurance” policies?
A) To cover the policyholder’s funeral expenses only
B) To provide financial support to beneficiaries in the event of the policyholder’s death
C) To cover medical expenses in the event of illness
D) To provide property coverage for an insured’s assets

 

Which of the following best describes “self-insurance”?
A) Purchasing an insurance policy from an external company
B) A business setting aside funds to cover its own potential losses
C) A policyholder opting for higher premiums to reduce deductibles
D) A company paying premiums directly to a government entity

 

Which type of risk involves changes in the value of investments due to market fluctuations?
A) Market risk
B) Credit risk
C) Liquidity risk
D) Operational risk

 

Which of the following types of insurance is required by law for businesses that employ workers?
A) Health insurance
B) Disability insurance
C) Workers’ compensation insurance
D) Auto insurance

 

Which of the following is typically NOT covered under a “homeowners insurance” policy?
A) Damage from vandalism
B) Flood damage
C) Theft of personal property
D) Fire damage

 

Which of the following best describes “moral hazard” in the context of financial risk management?
A) An increase in the likelihood of a loss due to risk reduction strategies
B) A tendency for people to take more risks when they are insured
C) A decrease in the risk of loss when insurance is involved
D) The refusal to pay claims by the insurance company

 

What is a “deductible” in insurance?
A) The amount the insurer will pay to settle a claim
B) The amount the insured must pay before the insurer begins covering claims
C) The cost of the insurance premium
D) The coverage limit for a particular insurance policy

 

Which of the following types of insurance protects against damage to a business’s property caused by natural disasters like hurricanes or earthquakes?
A) General liability insurance
B) Property insurance
C) Workers’ compensation insurance
D) Life insurance

 

Which of the following is an example of “systemic risk”?
A) A large company failing due to mismanagement
B) A market-wide downturn caused by the collapse of key institutions
C) A small business suffering due to a product recall
D) A stock market decline due to corporate fraud

 

Which of the following best defines “operational risk”?
A) The risk of failure due to external events, such as natural disasters
B) The risk arising from internal systems, processes, or people
C) The risk of financial loss due to market fluctuations
D) The risk of legal issues arising from customer disputes

 

Which type of life insurance offers both a death benefit and an investment component?
A) Term life insurance
B) Whole life insurance
C) Universal life insurance
D) Variable life insurance

 

Which of the following is typically NOT considered a type of “liability insurance”?
A) General liability insurance
B) Auto liability insurance
C) Product liability insurance
D) Property insurance

 

Which of the following is the primary focus of “financial risk management”?
A) To increase business profitability through market risks
B) To identify, assess, and manage risks that could impact the financial health of the business
C) To provide a plan for the company’s expansion and growth
D) To avoid legal liabilities at all costs

 

What type of insurance covers the loss of income if a policyholder is unable to work due to injury or illness?
A) Health insurance
B) Disability insurance
C) Life insurance
D) Property insurance

 

Which of the following is an example of “diversification” in financial risk management?
A) Putting all investments into a single stock
B) Holding a variety of different types of investments to reduce risk
C) Focusing on a single industry to maximize returns
D) Buying a large number of the same type of asset

 

Which of the following types of insurance is essential for covering risks related to employee health and injuries at the workplace?
A) Workers’ compensation insurance
B) Disability insurance
C) Life insurance
D) General liability insurance

 

Which of the following best describes “liquidity risk”?
A) The risk of an asset losing value due to market fluctuations
B) The risk that an asset cannot be sold quickly enough to meet financial obligations
C) The risk of a company defaulting on its debt obligations
D) The risk that an investment will not generate a return

 

Which type of insurance provides financial protection in case a person is sued for causing injury or damage to someone else?
A) Life insurance
B) Disability insurance
C) Liability insurance
D) Health insurance

 

Which of the following is a major reason for “reinsurance” in the insurance industry?
A) To reduce the insurer’s risk exposure by spreading the risk with other companies
B) To offer insurance policies at lower premiums
C) To manage employee healthcare costs
D) To limit the claims paid out by the insurer

 

 

Which of the following describes “underwriting risk” in insurance?
A) The risk that an insurance policyholder will file a claim
B) The risk that an insurer will charge insufficient premiums to cover potential claims
C) The risk that an insurance company will not be able to pay claims
D) The risk that an insurance company will invest poorly

 

What is the purpose of an “excess insurance policy”?
A) To cover any amount exceeding the limits of a primary insurance policy
B) To provide coverage for small claims that are below the deductible
C) To offer additional coverage for business liabilities
D) To cover losses due to accidents

 

Which of the following is a characteristic of a “term life insurance” policy?
A) It provides permanent coverage for the policyholder’s life
B) It combines both life insurance and investment components
C) It only covers a specific period of time
D) It has cash value accumulation

 

Which of the following best describes the “principle of indemnity” in insurance?
A) Insurance is meant to profit the insured
B) The insured is compensated only for the actual loss incurred, not to exceed the value of the loss
C) Insurance covers the costs of repairs without any limit
D) Insurance companies are not allowed to cancel a policy

 

Which of the following would be covered by “professional liability insurance”?
A) Injuries caused by a defective product
B) Damage to property caused by employees
C) Negligence or mistakes made during professional services
D) Health expenses for an employee

 

Which of the following risk management strategies involves the complete elimination of a risk?
A) Risk avoidance
B) Risk reduction
C) Risk retention
D) Risk transfer

 

Which of the following is NOT typically a feature of a “commercial property insurance” policy?
A) Coverage for fire damage
B) Coverage for damage from earthquakes
C) Protection against employee theft
D) Coverage for business interruption

 

What is a “rider” in an insurance policy?
A) A discount provided on the policy
B) An additional clause added to the policy to modify coverage
C) The primary term of the insurance agreement
D) A clause that automatically renews the policy

 

Which of the following is an example of a “moral hazard” in the insurance industry?
A) A policyholder taking excessive risks because they know they are insured
B) An insurer increasing premiums based on claims history
C) A policyholder purchasing multiple insurance policies
D) A company declining coverage to high-risk individuals

 

Which of the following best defines “solvency risk” for an insurance company?
A) The risk that the insurance company will not be able to meet its financial obligations
B) The risk that policyholders will not file claims
C) The risk of not earning enough investment returns to cover claims
D) The risk of a loss due to fraudulent claims

 

Which type of insurance is specifically designed to protect against the loss of income if an individual becomes unable to work due to illness or injury?
A) Health insurance
B) Life insurance
C) Disability insurance
D) Auto insurance

 

Which of the following is a characteristic of “variable life insurance”?
A) Premiums are fixed, and coverage is permanent
B) Premiums and death benefits vary based on investment performance
C) The policyholder has no control over the investment choices
D) It is cheaper than term life insurance

 

What is “loss control” in the context of risk management?
A) A method of insuring against all potential losses
B) Actions taken to reduce the frequency or severity of losses
C) The process of compensating for all types of loss
D) A legal strategy to avoid paying claims

 

Which of the following best describes “liability insurance”?
A) Insurance that covers property damage
B) Insurance that covers personal health costs
C) Insurance that protects against legal claims for injuries or damages caused to others
D) Insurance that provides compensation for lost wages

 

Which of the following is an example of a “natural catastrophe” risk that may be insured against?
A) A fire caused by faulty electrical wiring
B) A slip-and-fall accident on business premises
C) A hurricane or earthquake
D) A data breach affecting customer information

 

What is a “mutual insurance company”?
A) A company that sells insurance policies to a small group of individuals
B) An insurance company owned by its policyholders, where profits are shared
C) A company that only offers life insurance policies
D) A company that only deals with high-risk businesses

 

Which of the following best defines “moral hazard” in the context of risk management?
A) A decrease in risk due to risk mitigation efforts
B) A situation where a person’s behavior changes because they are insured
C) A situation where a company ignores risk due to financial security
D) The risk of an individual making mistakes due to negligence

 

Which of the following would be covered by “health insurance”?
A) Accidental damage to personal property
B) Medical expenses for illness or injury
C) Loss of income due to unemployment
D) Damage caused by a natural disaster

 

What does “self-insurance” mean?
A) Purchasing insurance through a third-party provider
B) Setting aside funds within an organization to cover potential risks
C) Only insuring the highest-value assets of a business
D) Purchasing reinsurance for risk management

 

Which of the following is NOT a common feature of “umbrella insurance”?
A) Extra coverage above and beyond standard policies
B) Protection for high-cost liability claims
C) Coverage for personal property
D) Coverage for personal injury or legal defense

 

Which of the following best describes the term “actuarial risk”?
A) The risk that an insurance company cannot meet financial obligations
B) The risk related to the process of calculating insurance premiums
C) The risk that policyholders will not make any claims
D) The risk of underestimating the value of claims

 

Which of the following types of insurance provides protection against the death of a breadwinner in a family?
A) Disability insurance
B) Life insurance
C) Homeowners insurance
D) Auto insurance

 

Which of the following best defines the term “reinsurance”?
A) A policyholder insuring themselves against loss
B) An insurer transferring part of the risk to another insurer
C) An insurance company paying a claim to a policyholder
D) A government program that provides insurance to low-income individuals

 

Which type of risk refers to the possibility of a company’s operational failures leading to financial losses?
A) Systemic risk
B) Operational risk
C) Credit risk
D) Market risk

 

What does the term “claims-made policy” mean in insurance?
A) A policy where claims are only covered if the event occurs within the policy period
B) A policy that covers any claims filed during the term, regardless of when the incident occurred
C) A policy that automatically renews every year
D) A policy that offers a fixed amount of coverage for a specific period

 

 

What is a “co-insurance” clause in an insurance policy?
A) A clause that specifies the amount the insurance company will pay after a deductible
B) A clause requiring the policyholder to cover a percentage of the loss after a certain threshold is met
C) A clause that determines the premium payment schedule
D) A clause that allows for partial refunds on premiums

 

Which of the following is an example of a “moral hazard” in insurance?
A) An insured individual intentionally causing a loss to receive a payout
B) A policyholder taking extra precautions to avoid damage
C) An individual purchasing insurance only after a major incident occurs
D) A company implementing better security measures to prevent theft

 

Which of the following insurance types is most commonly associated with protecting property against fire, theft, or natural disasters?
A) Health insurance
B) Auto insurance
C) Homeowners insurance
D) Life insurance

 

What does “underwriting” in the context of insurance refer to?
A) The process of investigating claims made by policyholders
B) The process of assessing risk and determining policy terms
C) The process of marketing insurance products
D) The process of determining the cost of insurance premiums based on historical data

 

Which of the following would be considered an example of “risk retention”?
A) An individual purchases insurance to cover potential car accidents
B) A business sets aside funds to cover small claims
C) A company buys insurance to transfer all liability to the insurer
D) A person avoids taking certain risks by not engaging in certain activities

 

Which of the following best defines “moral hazard” in the insurance context?
A) A risk caused by physical hazards, such as natural disasters
B) A risk where the insured may take more risks because they are protected by insurance
C) A risk where insurance companies miscalculate premiums
D) A risk related to the use of hazardous materials

 

What is the primary function of “reinsurance”?
A) To ensure that all claims are paid in full
B) To allow an insurer to share risk with other insurers
C) To increase the policyholder’s premium payments
D) To reduce the amount of claims an insurer must process

 

Which of the following best describes a “whole life insurance” policy?
A) It is a policy that provides coverage for a specified period of time
B) It offers coverage with no expiration, as long as premiums are paid
C) It is a policy that pays a death benefit only if the insured dies after the age of 65
D) It accumulates no cash value over time

 

What type of insurance policy is used by businesses to cover potential liability for employees’ injuries at work?
A) Workers’ compensation insurance
B) Property insurance
C) General liability insurance
D) Life insurance

 

What is the meaning of “actuarial science” in the insurance industry?
A) The study of marketing insurance products
B) The study of financial risk and uncertainty through mathematical models
C) The management of claims and disputes
D) The process of determining the premiums based on the insured’s income

 

Which of the following is typically covered by “travel insurance”?
A) Auto damage that occurs during the trip
B) Lost luggage and trip cancellations
C) Long-term medical expenses after the trip
D) Theft of personal property in your home

 

Which of the following insurance types provides coverage for a business against claims of negligence resulting in harm to employees or customers?
A) Professional liability insurance
B) General liability insurance
C) Health insurance
D) Disability insurance

 

Which of the following statements is true regarding “deductibles” in insurance policies?
A) A deductible is the amount an insurance company will pay out to a claimant
B) A deductible is the amount the insured pays before the insurer starts to pay
C) A deductible determines the premium payment frequency
D) A deductible is an automatic reimbursement for all insured costs

 

Which of the following is an example of “transferring risk” in risk management?
A) Buying an insurance policy to cover potential losses
B) Setting aside money to cover the risk internally
C) Changing operations to reduce exposure to risk
D) Training employees to avoid accidents

 

Which of the following insurance types provides coverage for liabilities incurred from the use of a motor vehicle?
A) Auto insurance
B) Life insurance
C) Property insurance
D) Homeowners insurance

 

Which of the following is an example of a “moral hazard” in health insurance?
A) A policyholder seeking medical treatment for minor issues because they know insurance will cover it
B) A policyholder refusing treatment to avoid increasing premiums
C) A policyholder using their health insurance for preventive care
D) A health insurance company denying claims for pre-existing conditions

 

What is a “business interruption insurance” policy designed to cover?
A) The cost of replacing physical property after a loss
B) Lost income due to disruptions in the business operations
C) Medical expenses for business owners and employees
D) General liability for employees’ injuries

 

Which of the following is a key factor in determining an insurance premium?
A) The policyholder’s age and health history
B) The tax rates in the policyholder’s location
C) The number of claims made by the policyholder in the past
D) The insured’s social security number

 

What does “subrogation” mean in the context of insurance?
A) A clause allowing the insurer to refuse payment for certain claims
B) A process where the insurer seeks reimbursement from the responsible party for a paid claim
C) The ability for policyholders to claim additional coverage
D) The redistribution of risk between different insurers

 

Which of the following is typically covered by “life insurance”?
A) Medical expenses for a policyholder’s injury
B) Loss of income due to an accident at work
C) The death benefit paid to beneficiaries upon the policyholder’s death
D) Property damage caused by natural disasters

 

Which type of life insurance allows the policyholder to borrow against the cash value of the policy?
A) Term life insurance
B) Whole life insurance
C) Group life insurance
D) Endowment insurance

 

What is the purpose of “claims-made” insurance policies?
A) To cover claims made during the policy period, regardless of when the incident occurred
B) To cover claims made for incidents that occurred during the policy period, even after it has expired
C) To cover claims for a specific amount only
D) To allow the insurer to decide whether or not to accept claims

 

Which of the following is an example of a “structured settlement” in the insurance industry?
A) A lump sum payment for all claims
B) A series of payments made over time to a claimant, usually in personal injury cases
C) A policy that adjusts the payout based on inflation
D) A type of premium paid in installments

 

Which of the following best describes “liability insurance”?
A) Insurance that covers a business’s employees for workplace injuries
B) Insurance that protects a business from lawsuits resulting from injury or damage caused by the business operations
C) Insurance that provides health benefits to employees
D) Insurance that covers property damage caused by accidents

 

Which of the following best describes “universal life insurance”?
A) A type of insurance that provides lifelong coverage with flexible premiums and death benefits
B) A short-term insurance policy for covering specific medical treatments
C) An insurance policy for specific groups of people only
D) A type of term life insurance with fixed premiums

 

 

What does the “premium” in an insurance policy represent?
A) The amount of money paid by the insurance company for claims
B) The amount of coverage provided by the insurer
C) The amount the policyholder must pay for insurance coverage
D) The deductible amount required by the insurer

 

Which of the following is an example of a “moral hazard” in the insurance industry?
A) A policyholder committing fraud to collect insurance benefits
B) A policyholder who consistently avoids risky behaviors
C) A policyholder reducing coverage to lower premiums
D) A policyholder purchasing multiple insurance policies for the same coverage

 

What type of insurance provides protection for individuals or families in the event of an illness, accident, or injury?
A) Health insurance
B) Property insurance
C) Auto insurance
D) Life insurance

 

Which of the following would be considered a “moral hazard” in a car insurance policy?
A) An insured individual driving recklessly because they know they are covered by insurance
B) A person carefully maintaining their vehicle to avoid accidents
C) A driver choosing not to use their insurance to pay for minor damages
D) A person purchasing additional insurance to protect their car in an accident

 

What is the purpose of “underwriting” in the insurance industry?
A) To assess risks and determine the terms of an insurance policy
B) To settle claims made by policyholders
C) To advertise insurance products
D) To calculate the return on investment for the insurance company

 

Which of the following is the main difference between “term life insurance” and “whole life insurance”?
A) Whole life insurance only provides coverage for a limited time, while term life insurance provides coverage for life
B) Term life insurance has a fixed premium for life, while whole life insurance premiums increase with age
C) Term life insurance provides coverage for a specified period, while whole life insurance offers coverage for life and builds cash value
D) Whole life insurance is cheaper than term life insurance

 

Which of the following best describes a “beneficiary” in life insurance?
A) The individual who purchases the insurance policy
B) The insurance company that provides the policy
C) The person or entity who receives the death benefit from the policy
D) The person responsible for paying the premiums

 

What is “reinsurance” in the insurance industry?
A) Insurance for re-insuring premiums paid by policyholders
B) Insurance that allows insurers to share risk with other insurers
C) Insurance that covers medical costs for the insured
D) Insurance that covers personal liability claims

 

What type of insurance covers the cost of damages or injuries caused by a car accident?
A) Homeowners insurance
B) Auto insurance
C) Life insurance
D) Property insurance

 

Which of the following is a common feature of “disability insurance”?
A) It provides a lump sum payment to the beneficiary upon the policyholder’s death
B) It helps cover medical expenses incurred due to a disability
C) It replaces a portion of the income lost due to a disability
D) It covers property damage caused by a disability

 

Which of the following is an example of “adverse selection” in insurance?
A) A person with high health risks buying a health insurance policy after they are diagnosed with a disease
B) A healthy person purchasing health insurance to prevent illness
C) An insurer using a complex formula to determine premiums
D) A policyholder reducing their coverage to lower premiums

 

What is the “deductible” in an insurance policy?
A) The total amount the insurance company will pay out for a claim
B) The percentage of the loss that the policyholder must pay before the insurance kicks in
C) The amount the policyholder pays to maintain their insurance coverage
D) The maximum amount the policyholder can claim in a given year

 

Which of the following is an example of “self-insurance”?
A) A business setting aside a fund to cover potential losses rather than purchasing insurance
B) A business purchasing a health insurance policy for its employees
C) An individual paying a premium to cover potential medical expenses
D) An individual purchasing home insurance to protect against fire damage

 

What is “insurance fraud”?
A) The practice of intentionally causing damage to claim insurance benefits
B) The process of reviewing and approving claims by insurers
C) The process of investing premiums to generate returns
D) The practice of shopping for the cheapest premiums available

 

Which of the following types of insurance provides protection against the loss of income due to illness or injury?
A) Auto insurance
B) Disability insurance
C) Health insurance
D) Life insurance

 

What does the “insurance policy term” refer to?
A) The number of claims the insured can make in a year
B) The period of time the insurance policy is valid
C) The amount the insurer will pay in premiums
D) The maximum coverage provided under the policy

 

What does “moral hazard” refer to in the insurance industry?
A) A situation where the policyholder intentionally takes on more risk because they are insured
B) A risk that arises from physical hazards such as earthquakes
C) A situation where the insurer refuses to pay claims
D) A situation where the insured takes fewer precautions because they know the insurer will cover the loss

 

Which type of insurance would be most appropriate for protecting a business against financial losses due to lawsuits or negligence?
A) General liability insurance
B) Life insurance
C) Workers’ compensation insurance
D) Health insurance

 

What is the purpose of an “exclusion” in an insurance policy?
A) To increase the coverage amount for a policyholder
B) To list situations or risks that are not covered by the policy
C) To explain how premiums are calculated
D) To detail the insurance company’s obligations to the policyholder

 

What is the purpose of “loss control” in risk management?
A) To transfer risk to another party
B) To reduce the frequency or severity of potential losses
C) To create insurance policies for policyholders
D) To monitor and manage investment returns

 

 

Which of the following is considered an “insurable risk”?
A) A flood caused by a nearby dam failure
B) An act of terrorism
C) A car accident resulting from a policyholder’s negligence
D) A business decision to stop selling a product

 

What is “claims-made” coverage in insurance policies?
A) Coverage that applies only when a claim is made during the policy period, regardless of when the event occurred
B) Coverage that applies only to events that occurred during the policy period, regardless of when the claim is made
C) Coverage that applies for the lifetime of the policyholder
D) Coverage that applies to all claims made during the policy period

 

Which type of insurance covers the costs associated with damage to one’s vehicle?
A) Property insurance
B) Health insurance
C) Auto insurance
D) Homeowners insurance

 

Which of the following best describes the concept of “moral hazard” in risk management?
A) The tendency of insured individuals to take greater risks because they are protected by insurance
B) The principle that insurance companies must have a moral obligation to pay claims
C) The risk of catastrophic losses that are difficult to predict or manage
D) The danger of insuring properties that are highly susceptible to natural disasters

 

In an insurance contract, what does the term “coverage limit” refer to?
A) The amount of money the insurer will pay per policyholder claim
B) The premium that the policyholder must pay annually
C) The maximum amount the insurer will pay for a covered loss
D) The number of claims a policyholder can file in a year

 

Which of the following best describes “actuarial science” in the context of insurance?
A) The study of policies and regulations that govern the insurance industry
B) The use of statistical methods to assess risk and determine insurance premiums
C) The development of new insurance products to meet market demand
D) The legal aspects of enforcing insurance contracts

 

Which of the following insurance policies would best cover the financial losses resulting from a fire in a commercial property?
A) Business interruption insurance
B) Homeowners insurance
C) Fire insurance
D) Auto insurance

 

What is the primary purpose of a “waiver of subrogation” in an insurance policy?
A) To release the insured from paying premiums
B) To prevent the insurer from seeking reimbursement from a third party responsible for the loss
C) To reduce the deductible in the event of a claim
D) To clarify the coverage limits for the policyholder

 

What is the key feature of “whole life insurance” as opposed to “term life insurance”?
A) Whole life insurance provides coverage for a set number of years, while term life insurance covers the policyholder for life
B) Whole life insurance includes an investment component that builds cash value
C) Term life insurance is more expensive than whole life insurance
D) Whole life insurance only pays a death benefit to the beneficiary

 

Which of the following types of insurance typically includes liability coverage for damages caused to others by a vehicle?
A) Health insurance
B) Auto insurance
C) Property insurance
D) Life insurance

 

In the context of insurance, what does the term “subrogation” mean?
A) The policyholder’s right to receive insurance benefits for a claim
B) The process by which an insurer seeks reimbursement from a third party responsible for the loss
C) The insurer’s decision to cancel a policyholder’s insurance coverage
D) The policyholder’s right to sue for additional compensation

 

What is the term for insurance that provides coverage for damage to or loss of property owned by the policyholder?
A) Life insurance
B) Property insurance
C) Health insurance
D) Liability insurance

 

What is “moral hazard” primarily concerned with in the insurance industry?
A) The possibility that the insured will act more cautiously due to having coverage
B) The risk that the insured will take on more dangerous activities because they have insurance
C) The risk of the insurance company miscalculating the premium
D) The risk that the insured will default on premium payments

 

Which type of insurance would cover the costs of medical treatment and hospitalization for an individual injured in an accident?
A) Auto insurance
B) Life insurance
C) Health insurance
D) Disability insurance

 

Which of the following is considered a risk management technique used by insurance companies?
A) Loss prevention
B) Premium overcharging
C) Avoiding underwriting policies
D) Cancelling policies for high-risk individuals

 

What does “underwriting” in insurance generally involve?
A) A process of assessing risk to determine whether to accept or reject insurance applications
B) A method of calculating insurance claims based on losses
C) A process to set a policyholder’s premium after the policy is sold
D) A strategy for distributing claims payments to policyholders

 

What does “catastrophic risk” in insurance refer to?
A) A risk that has a low likelihood of happening but results in significant financial loss if it does
B) A risk that can be easily avoided with proper planning
C) A risk that primarily affects a small group of policyholders
D) A risk that results from minor losses over time

 

In which situation would “business interruption insurance” typically be used?
A) When a business suffers a loss of income due to a fire or natural disaster
B) When a business owner needs to protect against employee theft
C) When a business purchases insurance for employee health benefits
D) When a business wants to cover liability costs for customers

 

What is an example of a “moral hazard” in the context of auto insurance?
A) A person drives more recklessly knowing their car insurance will cover the damage
B) A person carefully drives to avoid an accident
C) A person cancels their insurance after paying for it
D) A person checks their car insurance coverage before purchasing a new car

 

Which of the following best describes “insurance fraud”?
A) When an individual misrepresents information in order to gain insurance coverage at a lower cost
B) When an insurance company fails to pay a claim
C) When a policyholder cancels their insurance policy before it expires
D) When an insurance company uses outdated information to calculate premiums

 

 

Which of the following best describes “moral hazard” in insurance?
A) The risk that insured individuals will avoid taking risks because they are covered
B) The risk that insured individuals may engage in riskier behavior because they have insurance
C) The risk of underwriting losses due to a company’s poor financial management
D) The risk of physical damage to insured property caused by a natural disaster

 

Which type of insurance protects against financial loss from claims of negligence or inadequate work by professionals?
A) Life insurance
B) Auto insurance
C) Professional liability insurance
D) Property insurance

 

What does “reinsurance” refer to in the insurance industry?
A) Insurance that covers the policyholder’s car
B) Insurance that helps to protect the insurance company from significant financial losses
C) Insurance that covers the cost of an employee’s health care
D) Insurance that is purchased by consumers to cover their home and property

 

Which of the following best describes a “self-insured retention” (SIR)?
A) A portion of an insurance policy where the policyholder assumes responsibility for claims before the insurance company pays
B) A deductible that applies to all claims made under an insurance policy
C) The maximum limit a policyholder can receive from an insurance claim
D) The cost associated with acquiring a new insurance policy

 

In the context of risk management, which of the following would be an example of “risk avoidance”?
A) Purchasing insurance to cover potential losses
B) Avoiding activities that could result in high levels of risk
C) Accepting the financial risk of a business operation
D) Implementing safety procedures to reduce the likelihood of accidents

 

Which type of insurance provides compensation to employees who suffer work-related injuries?
A) Health insurance
B) Workers’ compensation insurance
C) Auto insurance
D) Disability insurance

 

What is the main purpose of “flood insurance”?
A) To cover damage from accidents involving large vehicles
B) To protect against property damage caused by floods
C) To cover losses from theft of personal property
D) To compensate for medical expenses related to flood-induced injuries

 

Which of the following is a primary characteristic of “term life insurance”?
A) Provides coverage for the entire life of the insured
B) Offers a cash value component in addition to death benefits
C) Covers the policyholder for a set period, such as 10, 20, or 30 years
D) Provides dividends to the policyholder

 

What does the term “insurance premium” refer to?
A) The amount the policyholder is required to pay for coverage
B) The amount the insurer will pay for claims
C) The deductible the policyholder must cover in the event of a claim
D) The maximum amount of coverage available under the policy

 

Which type of risk management strategy involves the transfer of risk to a third party?
A) Risk retention
B) Risk avoidance
C) Risk transfer
D) Risk control

 

Which of the following is a characteristic of a “deductible” in an insurance policy?
A) The amount the insurer will pay per claim
B) The amount the policyholder must pay out-of-pocket before the insurance company pays
C) The maximum payout by the insurance company in the event of a loss
D) The cost of the insurance policy

 

What does the term “moral hazard” relate to in the context of risk management?
A) Risk posed by a change in interest rates
B) Risk caused by an insurance company’s failure to pay claims
C) Risk resulting from behavior changes due to the presence of insurance coverage
D) Risk that arises from changes in political or economic conditions

 

Which of the following is an example of “retention” as a risk management strategy?
A) Purchasing insurance to cover the risk of property damage
B) Accepting the risk of financial loss without insurance coverage
C) Using safety measures to reduce the likelihood of accidents
D) Selling insurance policies to other companies to share risk

 

Which of the following types of insurance is designed to cover damages caused by lawsuits for libel, slander, or defamation?
A) General liability insurance
B) Professional liability insurance
C) Product liability insurance
D) Employment practices liability insurance

 

In the context of property insurance, what is a “coinsurance clause”?
A) A clause that requires policyholders to maintain a minimum level of insurance coverage
B) A clause that limits the amount of insurance available for property damage
C) A clause that allows the insurer to deny claims based on negligence
D) A clause that sets a specific deductible for the insured party

 

What is a common goal of “enterprise risk management” (ERM)?
A) To reduce all operational costs associated with risk management
B) To manage the risk of individual business units in isolation
C) To identify and manage risks that could impact the entire organization
D) To focus exclusively on compliance with regulatory requirements

 

Which type of insurance provides coverage for employees who are injured and cannot work due to a disability?
A) Life insurance
B) Health insurance
C) Disability insurance
D) Unemployment insurance

 

Which of the following is true regarding “business property insurance”?
A) It only covers damage caused by theft
B) It covers damage or loss of tangible assets used in business operations
C) It covers liability for injuries caused by the business premises
D) It only covers damages to property located in the United States

 

What is “moral hazard” in the context of insurance companies?
A) The moral obligation of the insurer to cover all claims regardless of circumstances
B) The risk of loss caused by fraudulent claims submitted by policyholders
C) The risk that insured individuals will take more risks because they are covered
D) The tendency of insurers to cancel policies to reduce their exposure to risks

 

Which of the following is an example of a “pure risk” in insurance?
A) A risk that results in either a profit or a loss
B) A risk that can be controlled or eliminated by human action
C) A risk that results only in the possibility of a loss, with no potential for gain
D) A risk that involves market fluctuations in stock prices

 

 

Which of the following is a characteristic of “whole life insurance”?
A) Provides coverage for a specific period, such as 10 or 20 years
B) Includes a savings component that accumulates cash value
C) Does not provide any death benefits to beneficiaries
D) Is designed only for people with high-risk professions

 

What is the purpose of an “underwriting” process in insurance?
A) To calculate the premiums for different types of insurance policies
B) To assess and evaluate the risk of insuring an individual or entity
C) To set the maximum payout for a specific claim
D) To determine the financial stability of the insurance company

 

Which of the following is an example of a “pure risk” that is insurable?
A) The risk of stock price fluctuations
B) The risk of a car accident causing bodily injury
C) The risk of an employee receiving a bonus based on company performance
D) The risk of a business expanding internationally

 

Which of the following is a characteristic of “property insurance”?
A) Covers only damage to the property caused by natural disasters
B) Only insures the contents of the property, not the structure
C) Provides protection against loss or damage to physical property
D) Provides coverage for business interruption losses

 

In the context of insurance, what is meant by the term “actuarial risk”?
A) The risk that the insurer will have to pay for claims that exceed premiums collected
B) The risk that a policyholder will file a fraudulent claim
C) The risk associated with mispricing an insurance policy
D) The risk that a natural disaster will affect the insurer’s assets

 

Which of the following is an example of “catastrophic risk”?
A) Risk of losing an investment in the stock market
B) Risk of an earthquake causing widespread property damage
C) Risk of a car accident resulting in minor injuries
D) Risk of theft of personal property

 

Which of the following is the main purpose of “liability insurance”?
A) To provide coverage for damages caused by natural disasters
B) To provide compensation for damages or injuries caused by the insured to others
C) To cover the medical expenses of the insured
D) To protect a business’s assets from theft or vandalism

 

What does “moral hazard” specifically refer to in the insurance industry?
A) The risk that insured individuals will engage in reckless behavior because they know they are covered
B) The risk that an insurance company will go bankrupt due to poor management
C) The risk that a policyholder will be unable to pay the premiums
D) The risk that the insurance policy will be rendered void due to fraud

 

Which of the following is typically covered by “business interruption insurance”?
A) Damage to the business’s physical assets
B) Lost revenue due to events that interrupt business operations, such as a fire or natural disaster
C) Legal expenses incurred from customer lawsuits
D) Injuries to employees while working

 

Which of the following is an example of “retention” in risk management?
A) Purchasing insurance to transfer the risk
B) Avoiding activities that may expose the business to risk
C) Self-insuring by accepting the financial consequences of certain risks
D) Using safety measures to reduce the likelihood of loss

 

Which of the following is an example of a “non-insurable risk”?
A) Risk of property damage from a fire
B) Risk of business failure due to poor management
C) Risk of a natural disaster causing significant financial loss
D) Risk of injury from a car accident

 

Which type of insurance policy allows the policyholder to accumulate savings while providing life insurance protection?
A) Term life insurance
B) Whole life insurance
C) Liability insurance
D) Disability insurance

 

Which of the following best describes “excess insurance”?
A) Insurance that covers losses above a certain limit after the primary insurance has been exhausted
B) Insurance that covers the full cost of a claim from the outset
C) Insurance that covers only specific, high-value items
D) Insurance that is purchased by policyholders to supplement basic life insurance

 

Which type of insurance is typically required by law for drivers of motor vehicles?
A) Health insurance
B) Life insurance
C) Auto liability insurance
D) Property insurance

 

Which of the following is an example of a “moral hazard” in the context of insurance?
A) A policyholder driving recklessly because they know their car insurance will cover the damages
B) An insurance company raising premiums after a policyholder files a claim
C) An insurer offering a lower premium for a non-smoker
D) A policyholder requesting a high deductible to lower their premium

 

Which of the following is a function of an insurance “broker”?
A) Setting insurance rates and underwriting policies
B) Selling insurance policies directly to consumers
C) Helping individuals and businesses find the right insurance coverage by working with multiple insurers
D) Managing claims made by policyholders

 

Which type of insurance provides coverage for damage or theft of a business’s property?
A) General liability insurance
B) Property insurance
C) Workers’ compensation insurance
D) Professional liability insurance

 

What does the term “claims-made policy” refer to in insurance?
A) A policy that covers only claims that occur during the policy period, regardless of when they are reported
B) A policy that covers any claims filed after the policy has expired
C) A policy that covers any claims made within a specified period after the policy expires
D) A policy that automatically renews every year

 

What is the main purpose of “disability insurance”?
A) To cover medical expenses for injuries or illness
B) To provide income replacement for policyholders who are unable to work due to illness or injury
C) To cover funeral expenses for a policyholder’s family
D) To provide coverage for property damage caused by a disability

 

 

Which of the following is a primary purpose of “reinsurance”?
A) To reduce the risk exposure of insurance companies by spreading it across multiple insurers
B) To provide consumers with additional policy options
C) To increase the profit margin for insurance companies
D) To establish premiums for clients based on their claims history

 

Which of the following is a feature of a “term life insurance” policy?
A) It provides coverage for the entire life of the policyholder
B) It includes a cash value accumulation component
C) It provides coverage only for a specified period, such as 10, 20, or 30 years
D) It is typically used for investment purposes

 

What is meant by the term “insurance underwriting”?
A) The process of paying claims to policyholders
B) The process of determining the risk and premium of an insurance policy
C) The process of managing insurance policies after they have been issued
D) The process of investing insurance premiums to generate returns

 

Which of the following is an example of “moral hazard” in the insurance industry?
A) A person engaging in reckless behavior because they know insurance will cover their losses
B) A person deciding not to buy insurance due to low premiums
C) A company raising premiums after paying out a claim
D) A person failing to disclose material information when applying for insurance

 

Which of the following types of insurance typically includes coverage for “business interruption”?
A) Homeowners insurance
B) Life insurance
C) Property insurance
D) Professional liability insurance

 

Which of the following would likely be covered by “flood insurance”?
A) Property damage caused by an earthquake
B) Damage to crops due to drought
C) Property damage caused by rising water levels due to heavy rains
D) Damage caused by a car accident

 

Which of the following is true about “auto liability insurance”?
A) It only covers the repair costs for the policyholder’s car
B) It provides compensation for injuries or damage the policyholder causes to others
C) It covers the repair costs for any car involved in an accident
D) It is required by law in only a few states

 

What is the primary purpose of “workers’ compensation insurance”?
A) To provide life insurance to employees
B) To cover medical expenses and lost wages for employees injured on the job
C) To provide insurance coverage for business property
D) To protect against cyber attacks on business data

 

What does “moral hazard” in the context of insurance typically lead to?
A) An increase in the risk of losses from fraud or dishonest behavior
B) An increase in the premiums paid by policyholders
C) A reduction in the risk faced by the insurance company
D) A decrease in the number of claims filed

 

Which of the following is NOT a form of “risk management”?
A) Risk avoidance
B) Risk transfer
C) Risk retention
D) Risk elimination

 

What is a “premium” in the context of insurance?
A) The amount paid by the policyholder to the insurance company in exchange for coverage
B) The amount the insurance company pays to the policyholder when a claim is made
C) The initial deposit required to activate an insurance policy
D) The amount that is deducted from a claim payout to cover deductibles

 

Which type of life insurance policy typically builds up cash value over time?
A) Term life insurance
B) Universal life insurance
C) Whole life insurance
D) Accidental death insurance

 

What is the key feature of “self-insurance”?
A) The policyholder purchases an insurance policy from an insurer
B) The policyholder sets aside funds to cover potential losses instead of buying traditional insurance
C) The policyholder’s losses are covered by a third party
D) The policyholder is only protected against large losses

 

What does “excess liability insurance” cover?
A) Costs that exceed the limits of a standard liability policy
B) Costs for damages caused by the insured’s employees
C) Costs for theft of property from the business
D) Losses incurred by natural disasters

 

Which of the following is an example of “moral hazard” in risk management?
A) A company increasing its risk exposure after purchasing insurance
B) A company using less stringent security measures because it knows its property is insured
C) A person engaging in risk avoidance behavior due to high insurance premiums
D) A company diversifying its operations to reduce risk exposure

 

Which of the following is true about “health insurance”?
A) It only covers medical expenses resulting from accidents
B) It provides coverage for medical services such as doctor visits, hospital stays, and medications
C) It is not required for individuals under the age of 30
D) It only covers medical expenses for those over 65 years of age

 

Which of the following is a common feature of “disability insurance”?
A) It covers medical expenses for disabilities caused by natural disasters
B) It provides income replacement to individuals who cannot work due to illness or injury
C) It only covers temporary disabilities
D) It covers legal costs related to workplace injuries

 

Which of the following is a purpose of “fidelity bond” insurance?
A) To protect a company from employee theft or fraud
B) To cover losses from natural disasters
C) To protect against financial losses from foreign currency fluctuations
D) To insure business inventory against fire damage

 

Which of the following is true regarding “insurance exclusions”?
A) They specify types of coverage not included in an insurance policy
B) They refer to the total amount an insurance policy will pay out
C) They define the situations in which claims will be accepted
D) They increase the premium rate for policyholders

 

What is the key distinction between “accident insurance” and “health insurance”?
A) Accident insurance only covers injuries sustained in accidents, while health insurance covers a wider range of medical expenses
B) Health insurance only covers medical treatments, while accident insurance covers property damage
C) Accident insurance provides long-term care benefits, while health insurance does not
D) There is no significant difference between the two types of insurance

 

 

Which of the following describes the “principle of indemnity” in insurance?
A) The insurance policyholder is reimbursed for their losses up to the amount of their original investment
B) The insurance policyholder is entitled to a fixed payout regardless of the loss incurred
C) The insurance company sets premiums based on the potential losses of the policyholder
D) The policyholder receives more than the amount of the loss to account for their inconvenience

 

Which type of insurance is primarily intended to cover damage or loss to business property?
A) Workers’ compensation insurance
B) Commercial property insurance
C) Liability insurance
D) Life insurance

 

What does “moral hazard” refer to in the insurance context?
A) A situation where individuals are encouraged to act recklessly due to the existence of insurance coverage
B) The process of reviewing a policyholder’s claims history
C) A form of fraud involving the submission of false claims
D) A pricing model for determining premiums based on individual behavior

 

Which of the following is an example of “property insurance”?
A) A policy that covers medical expenses for an individual
B) A policy that covers damage to a home caused by fire
C) A policy that covers a business’s general liability
D) A policy that provides life coverage to an individual

 

What is the primary difference between “whole life insurance” and “term life insurance”?
A) Whole life insurance provides coverage for a specific period, while term life insurance lasts for the lifetime of the insured
B) Whole life insurance includes a savings component, while term life insurance does not
C) Whole life insurance is only available to individuals over the age of 50, while term life is available to younger individuals
D) Whole life insurance has no cash value, whereas term life insurance accumulates cash value

 

What does “catastrophic insurance” typically cover?
A) Basic healthcare services
B) Only the medical expenses of individuals above the age of 65
C) High-cost medical expenses for serious illnesses or injuries
D) Short-term illnesses and accidents

 

Which of the following types of insurance covers legal costs and damages for which an individual or business is liable?
A) Property insurance
B) Liability insurance
C) Life insurance
D) Disability insurance

 

Which of the following is covered under a “homeowners insurance” policy?
A) Legal fees resulting from a car accident
B) Medical expenses for injuries sustained on someone else’s property
C) Damage to the home caused by fire or theft
D) Business-related losses incurred while working from home

 

What is the purpose of “reinsurance”?
A) To offer higher premiums to policyholders
B) To allow insurance companies to reduce their risk exposure by sharing risk with other companies
C) To cover claims that are too small for standard policies
D) To increase the profitability of individual insurance companies

 

Which of the following is an example of “moral hazard” in the context of health insurance?
A) An individual seeking unnecessary medical treatments because they know the insurance will cover the cost
B) A person avoiding medical treatments to save on insurance premiums
C) An insurer setting low premiums to attract more customers
D) A health insurer limiting the coverage for certain treatments

 

Which of the following is an example of “life insurance”?
A) A policy that covers property damage from a natural disaster
B) A policy that provides income for beneficiaries upon the insured’s death
C) A policy that covers injuries in a car accident
D) A policy that provides coverage for employee illnesses

 

What does the “coinsurance” clause in a health insurance policy refer to?
A) The total amount the policyholder must pay for medical services before the insurer contributes
B) The portion of the cost that the insurance company will pay for covered medical services after the deductible is met
C) The fixed amount the policyholder must pay per medical visit
D) The amount the policyholder must pay as an out-of-pocket expense

 

Which of the following is an example of “loss of income insurance”?
A) A policy that pays for damages to a vehicle after an accident
B) A policy that compensates an individual for lost wages due to illness or injury
C) A policy that covers funeral expenses
D) A policy that covers damages to property from theft

 

What does “excess liability insurance” cover?
A) Additional losses that exceed the limits of the primary insurance policy
B) A fixed amount of compensation for each policyholder’s claim
C) The liability claims of individuals not covered by the policyholder’s insurance
D) Legal fees and fines related to regulatory violations

 

What does the “deductible” refer to in an insurance policy?
A) The amount the insurer agrees to pay per claim
B) The initial amount the policyholder must pay before the insurance company begins to pay for claims
C) The maximum payout the policyholder is entitled to in a policy year
D) The penalty for making a false claim

 

Which of the following is covered under a “general liability insurance” policy?
A) The cost of property damage from a hurricane
B) The medical costs of an employee injured on the job
C) The legal costs for defending against a lawsuit due to bodily injury on business premises
D) The death benefits of a policyholder’s beneficiaries

 

Which of the following best describes the term “self-insured retention” (SIR)?
A) A fixed amount the policyholder must pay out-of-pocket before the insurance kicks in
B) A percentage of claims the policyholder is required to pay before the insurance company becomes liable
C) The total value of all the claims that will be covered by the insurer
D) A portion of a deductible that is deducted from the policyholder’s coverage limit

 

What is “cyber liability insurance” primarily designed to protect businesses against?
A) Property damage caused by fire
B) Losses due to a breach of data security or cyberattacks
C) Medical expenses of employees
D) Losses due to customer dissatisfaction

 

Which of the following is a key feature of “disability income insurance”?
A) It provides lump-sum payments for major life events
B) It covers the medical costs associated with disability
C) It replaces a portion of the policyholder’s income if they cannot work due to injury or illness
D) It pays out benefits only in the case of a terminal illness

 

Which of the following types of insurance typically covers “damage to crops caused by weather events”?
A) Crop insurance
B) Property insurance
C) Automobile insurance
D) Health insurance

 

 

Which of the following is the primary function of the underwriting process in insurance?
A) To assess and manage risk by determining whether to offer coverage
B) To establish the premium amount for policyholders
C) To process claims after an incident occurs
D) To provide legal defense in the event of a lawsuit

 

Which of the following best describes “moral hazard” in the context of insurance?
A) A person may behave riskier when they have insurance coverage
B) A person fraudulently submits false claims to an insurer
C) The failure of an insurance company to maintain adequate reserves
D) The risk of loss that is shared equally by multiple policyholders

 

Which of the following is an example of a “rider” in an insurance policy?
A) A supplementary benefit that adds additional coverage to an existing policy
B) A temporary discount on insurance premiums for new policyholders
C) A clause that limits the insurer’s liability in the event of a claim
D) The process of renewing an insurance policy

 

What does “exclusion” mean in an insurance policy?
A) A part of the policy that covers unexpected events
B) A condition or event that is not covered by the insurance policy
C) A policyholder’s obligation to pay a deductible before coverage kicks in
D) A benefit or payment offered to the insured after a claim is made

 

Which of the following is the main purpose of “umbrella insurance”?
A) To cover only healthcare-related expenses for the policyholder
B) To provide additional coverage above the limits of other insurance policies
C) To cover the cost of home repairs after damage from weather events
D) To cover business-related legal liabilities

 

Which type of insurance would most likely cover losses incurred from damage caused by an earthquake?
A) Standard homeowners insurance
B) Flood insurance
C) Earthquake insurance
D) Disability insurance

 

What does “liability insurance” primarily cover?
A) Property damage caused by natural disasters
B) Medical bills for injuries sustained in an accident
C) Legal and financial costs arising from a policyholder’s responsibility for injuries or damage to others
D) Coverage for lost wages due to illness or injury

 

Which of the following is an example of “health insurance”?
A) A policy that reimburses medical costs for an individual’s hospitalization
B) A policy that covers business-related damages
C) A policy that compensates an individual’s legal costs in a lawsuit
D) A policy that provides death benefits to a policyholder’s family

 

What does “deductible” mean in an insurance policy?
A) The percentage of the claim amount that the insurer pays
B) The total premium amount paid annually
C) The amount the policyholder must pay out-of-pocket before the insurer starts paying claims
D) The maximum payout limit that the insurance company will cover

 

What is the key purpose of “insurance fraud detection” in the claims process?
A) To offer policyholders discounts on premiums
B) To identify and prevent fraudulent claims that could lead to financial loss for the insurer
C) To process claims as quickly as possible
D) To ensure that claims are paid promptly without any errors

 

What is “underinsurance”?
A) Having insurance coverage that exceeds the value of the insured property
B) A situation where the policyholder’s insurance coverage is insufficient to cover the full value of a loss
C) The process of renewing an expired insurance policy
D) The process of buying insurance from multiple companies to reduce risks

 

Which of the following is a benefit of “long-term care insurance”?
A) It covers the cost of medical treatments for terminal illness
B) It provides financial support for the insured’s extended healthcare needs, such as nursing home care
C) It covers the cost of life-saving surgeries
D) It offers financial compensation for lost income due to illness

 

Which of the following insurance policies provides coverage for injuries sustained in a car accident?
A) Automobile liability insurance
B) Workers’ compensation insurance
C) Health insurance
D) Disability insurance

 

What is “reinsurance” used for?
A) To transfer some of the risk from one insurance company to another
B) To offer lower premiums for high-risk policyholders
C) To cover administrative costs for insurers
D) To pay claims for certain types of loss only

 

Which of the following is the most common example of “accident insurance”?
A) A policy that covers loss of life due to a car accident
B) A policy that provides coverage for medical expenses and lost wages resulting from an accident
C) A policy that compensates an individual for damage to their home
D) A policy that offers legal defense costs for accidents

 

What does the term “premium” refer to in insurance?
A) The policyholder’s deductible amount
B) The amount the insurer pays to cover a claim
C) The regular payment made by the policyholder to keep the insurance coverage active
D) The policyholder’s maximum liability in the event of a claim

 

Which of the following best describes the role of “insurance adjusters”?
A) They process insurance premiums and payments
B) They evaluate the validity of claims and determine the amount to be paid to the policyholder
C) They market insurance policies to potential customers
D) They set the terms and conditions of insurance policies

 

Which of the following is typically covered under “flood insurance”?
A) Damage to a home caused by a car accident
B) Water damage from natural flooding events
C) Theft of personal property from a home
D) Property damage caused by a fire

 

What does “actuarial risk assessment” in insurance involve?
A) Calculating the potential costs and risks associated with insuring a policyholder
B) Determining the type of coverage a policyholder needs
C) Deciding whether a claim should be paid or denied
D) Offering financial advice to policyholders regarding investments

 

Which of the following is an example of “insurance policy exclusions”?
A) Benefits for damage caused by fire
B) Claims related to pre-existing medical conditions in health insurance policies
C) Legal defense costs for claims against a policyholder
D) Coverage for theft of personal property

 

 

What is the main purpose of “hazard insurance” in the context of property insurance?
A) To provide coverage for loss or damage due to natural disasters
B) To protect against theft or vandalism
C) To provide coverage for accidents that occur at the insured property
D) To offer a financial safety net in case of illness

 

Which of the following best describes the “insurable interest” requirement in insurance?
A) A policyholder must have a direct financial interest in the property or life being insured
B) The insurer must provide coverage for any loss without any restrictions
C) A policyholder must insure only assets of high value
D) The policyholder must hold an insurance policy for at least five years before claiming

 

Which of the following is an example of “property insurance”?
A) Insurance that covers medical expenses
B) Insurance that compensates for damage to a business’s physical assets
C) Insurance that provides income replacement during illness
D) Insurance that protects against legal liabilities

 

What is the primary function of “loss prevention” strategies in insurance?
A) To prevent the occurrence of a claim by minimizing risk factors
B) To speed up the process of claims processing
C) To help policyholders understand their rights
D) To calculate the cost of damages after an incident

 

Which of the following describes “claims-made” coverage in insurance?
A) Coverage that applies to incidents that occur during the policy period, regardless of when the claim is filed
B) Coverage that applies only if the claim is made within the policy period
C) Coverage for losses that happen after the policy has been canceled
D) Coverage for claims made by the insurer against the policyholder

 

What is the purpose of “coinsurance” in a property insurance policy?
A) To ensure that the insurer pays the full value of a claim
B) To share the financial risk of loss between the insurer and the policyholder
C) To offer a discount on premiums for policyholders
D) To determine the deductible amount the policyholder must pay

 

Which of the following is typically excluded from most homeowners’ insurance policies?
A) Theft of personal property
B) Damage caused by fire or water
C) Damage due to earthquakes or floods
D) Liability for accidents occurring on the property

 

What is the function of a “loss payee” in an insurance policy?
A) A third party who receives payment for a claim, often when they have a financial interest in the insured property
B) A person responsible for paying the insurance premiums
C) A representative of the insurance company who processes claims
D) A government entity that oversees the regulation of insurance companies

 

Which type of insurance would cover the medical expenses of an employee injured while working?
A) Workers’ compensation insurance
B) Health insurance
C) Disability insurance
D) Life insurance

 

What is “self-insurance”?
A) An insurance policy that covers an individual’s health care expenses
B) A practice in which a person or business sets aside money to cover future risks, rather than purchasing traditional insurance
C) A type of government-mandated insurance
D) A form of insurance where the policyholder pays a lower premium and takes on more risk

 

Which of the following best describes “term life insurance”?
A) Insurance that provides coverage for the entire lifetime of the policyholder
B) Insurance that covers specific events like death from accidental injury
C) Insurance that provides coverage for a set period of time, such as 10 or 20 years
D) Insurance that accumulates a cash value over time

 

Which of the following is an example of a “moral hazard” in the context of health insurance?
A) A policyholder misrepresents their medical history to obtain lower premiums
B) A policyholder behaves recklessly, knowing their insurance will cover the costs
C) An insurance company refuses to cover pre-existing conditions
D) A policyholder receives duplicate claims from two different insurers for the same event

 

What is the primary purpose of “disability insurance”?
A) To replace lost income due to illness or injury
B) To provide healthcare coverage for disabilities
C) To pay for long-term care services
D) To cover funeral expenses in case of death

 

Which of the following best describes the term “underwriting loss”?
A) A loss that occurs when an insurer’s claims and expenses exceed the premiums collected
B) A loss due to bad investments made by the insurance company
C) A loss caused by insufficient insurance coverage
D) A loss from fraudulent claims made against the insurer

 

What is “stop-loss insurance”?
A) Insurance that limits the total loss an insurer can incur from a large claim
B) Insurance that provides coverage only for losses above a certain threshold
C) Insurance that covers the financial risk of an insurer’s claims
D) Insurance that covers specific high-risk industries or businesses

 

What is the main purpose of “actuarial science” in insurance?
A) To calculate the potential financial risk and determine appropriate premium rates
B) To process claims and determine the amount of compensation
C) To design the coverage options included in insurance policies
D) To assess the financial health of insurance companies

 

Which type of insurance is designed to protect against financial losses from a lawsuit?
A) Life insurance
B) Liability insurance
C) Health insurance
D) Property insurance

 

Which of the following is a key feature of “health maintenance organization” (HMO) plans?
A) They allow policyholders to choose any healthcare provider without a referral
B) They provide a network of doctors and hospitals with lower out-of-pocket costs for policyholders
C) They offer global health insurance coverage
D) They provide coverage only for outpatient care

 

What does “subrogation” refer to in the insurance claims process?
A) The process of reducing the insurer’s payout to the policyholder
B) The practice of an insurance company seeking reimbursement from a third party responsible for the loss
C) The process of evaluating whether a claim is valid
D) The method used by the insurer to calculate the deductible

 

Which of the following is an example of “life insurance”?
A) Insurance that covers the cost of medical treatment in case of a sudden illness
B) Insurance that provides a financial benefit to beneficiaries upon the death of the insured
C) Insurance that provides financial support for a person’s disability
D) Insurance that covers damage to a person’s property in an accident

 

 

What is the primary focus of the “insurance underwriting” process?
A) To calculate the premium rates for policyholders
B) To assess the risk and determine whether to accept or reject an insurance application
C) To manage the investment portfolio of the insurance company
D) To process claims and determine the payout amount

 

Which of the following is typically covered by “comprehensive automobile insurance”?
A) Damage to a vehicle caused by an accident
B) Damage to a vehicle caused by fire, theft, or vandalism
C) Medical expenses for injuries sustained in an accident
D) Legal costs for a lawsuit related to a car accident

 

Which of the following would be considered a “pure risk” in insurance?
A) The possibility of losing money on an investment
B) The chance of an employee being injured at work
C) The possibility of making a profit from selling insurance policies
D) The risk of a company expanding its market share

 

Which of the following is true about “life insurance” policies with a “cash value” feature?
A) The cash value increases based on the insurer’s investment returns
B) The cash value is not accessible by the policyholder
C) The cash value is paid out to the policyholder at the time of death
D) The cash value is used solely to pay for premiums

 

What does the “insurance premium” refer to?
A) The amount the policyholder must pay for the insurance coverage
B) The amount the insurer pays to the policyholder in the event of a claim
C) The amount of coverage provided by the insurer
D) The value of the policyholder’s insured asset

 

Which of the following is an example of a “moral hazard” in the context of health insurance?
A) A policyholder commits fraud by submitting false claims
B) A policyholder engages in riskier behavior knowing they are covered by insurance
C) A policyholder neglects preventive care, resulting in higher medical expenses
D) A policyholder seeks coverage for a pre-existing condition

 

What is the primary purpose of “reinsurance” in the insurance industry?
A) To allow an insurer to transfer part of its risk to another company
B) To provide coverage for high-risk policyholders
C) To adjust insurance premiums based on market trends
D) To increase the value of an insurance policy

 

Which type of insurance is designed to provide coverage for the income loss due to illness or injury?
A) Health insurance
B) Disability insurance
C) Life insurance
D) Homeowners insurance

 

What does “moral hazard” refer to in the context of financial risk management?
A) A situation where individuals or businesses take on more risk because they know they are covered by insurance
B) The risk of fraud committed by an insurance company
C) The possibility of an economic downturn affecting the insurer’s ability to pay claims
D) The risk of legal action against an insurer for underpayment of claims

 

Which of the following is an example of “commercial property insurance”?
A) Insurance covering damage to a business’s building or equipment
B) Insurance for a company’s employee health benefits
C) Insurance for workers injured during a business trip
D) Insurance protecting against a company’s loss of intellectual property

 

What is the term used to describe the amount the policyholder must pay out-of-pocket before the insurance company begins to pay claims?
A) Premium
B) Deductible
C) Copayment
D) Claim limit

 

Which of the following describes “term life insurance” as compared to “whole life insurance”?
A) Term life insurance has no cash value and provides coverage for a set term
B) Whole life insurance is cheaper than term life insurance and has no cash value
C) Term life insurance offers a cash value component that builds over time
D) Whole life insurance covers the policyholder for a fixed term, like term life insurance

 

What is “underinsurance”?
A) Having too much coverage for a given risk
B) Failing to report claims accurately
C) Not having enough insurance coverage to fully protect against potential risks
D) Having coverage that exceeds the value of the insured assets

 

What is the primary benefit of a “deductible” in an insurance policy?
A) To lower the insurance premium
B) To increase the insurer’s payout to the policyholder
C) To limit the types of claims covered under the policy
D) To encourage the policyholder to reduce risk exposure

 

What type of insurance would be used to cover the legal costs of defending a company against a lawsuit?
A) Liability insurance
B) Property insurance
C) Workers’ compensation insurance
D) Legal expense insurance

 

Which of the following is covered under “homeowners insurance”?
A) Earthquake damage
B) Flood damage
C) Fire damage to the home
D) Intentional damage by the homeowner

 

Which of the following best describes the function of “claims adjusters” in the insurance industry?
A) They determine the premiums for policyholders
B) They assess the extent of damage or loss and determine the payout for a claim
C) They market and sell insurance policies to customers
D) They invest the premiums collected by insurance companies

 

Which of the following is typically excluded from a “standard health insurance” policy?
A) Emergency medical expenses
B) Treatment for chronic illnesses
C) Cosmetic surgery not medically necessary
D) Prescription medications

 

What is the purpose of “business interruption insurance”?
A) To cover lost income if a business is unable to operate due to a covered event
B) To cover employee health benefits during a crisis
C) To provide liability coverage for business operations
D) To protect a business’s intellectual property

 

Which of the following is a characteristic of “whole life insurance”?
A) It provides coverage for a specific period of time
B) It builds cash value over time
C) It has lower premiums compared to term life insurance
D) It offers only death benefit coverage

 

 

Which of the following is a primary purpose of “workers’ compensation insurance”?
A) To provide income for employees during retirement
B) To cover the medical expenses and lost wages for employees injured at work
C) To protect employers against lawsuits filed by employees
D) To insure the health of employees’ families

 

What is the “liability limit” in an insurance policy?
A) The maximum amount the insurer will pay for a claim under the policy
B) The minimum amount a policyholder must pay out-of-pocket for claims
C) The amount of coverage provided for property damage only
D) The maximum premium amount a policyholder can pay annually

 

What is “catastrophic health insurance”?
A) Insurance that covers all medical expenses regardless of the situation
B) Insurance designed to cover only very high-cost health care expenses after a large deductible
C) Insurance that covers routine doctor visits and preventive care
D) Insurance that pays for health care after a specific waiting period

 

Which of the following best defines “moral hazard” in financial risk management?
A) A person or business acting with more caution due to the awareness of being insured
B) A person or business taking on more risk because they have insurance coverage
C) The risk of fraud in financial transactions
D) The risk of economic conditions influencing market prices

 

What is the main goal of “hedging” in financial risk management?
A) To eliminate all risks in an investment portfolio
B) To reduce the volatility of an investment by taking opposing positions
C) To maximize returns from risky investments
D) To insure against unexpected gains in the market

 

Which of the following is NOT typically a covered peril in a “homeowners insurance” policy?
A) Fire damage
B) Theft
C) Flood damage
D) Tornado damage

 

Which of the following is an example of “property insurance”?
A) Insurance that protects an individual’s life
B) Insurance covering the destruction of personal property due to fire or theft
C) Insurance for loss of income due to disability
D) Insurance for a company’s legal expenses

 

What does the “loss ratio” measure in insurance?
A) The ratio of claims paid to the premiums earned by the insurer
B) The ratio of policyholders’ claims to premiums collected
C) The ratio of profit to the total income earned by the insurer
D) The ratio of administrative costs to premiums paid by policyholders

 

What is “disability income insurance” designed to cover?
A) The cost of health care for injuries and illness
B) The medical costs related to a workplace injury
C) Loss of income due to an illness or injury that prevents the policyholder from working
D) Funeral expenses in case of an untimely death

 

What is the purpose of “flood insurance” in property insurance?
A) To cover damage to property caused by natural disasters like earthquakes
B) To provide coverage for losses due to theft or vandalism
C) To cover damage caused by floodwaters and rising water levels
D) To cover the cost of fire damage and smoke inhalation

 

What does the “excess insurance” policy do for the policyholder?
A) It increases the policyholder’s deductible to lower premium costs
B) It provides additional coverage above and beyond the limits of the primary insurance policy
C) It offers coverage for the policyholder’s excess liability
D) It covers all damages beyond a specific threshold

 

What is “term life insurance” often considered a more affordable option for individuals?
A) It has no cash value and is only intended to provide coverage for a limited period
B) It offers coverage for the entire lifetime of the policyholder
C) It guarantees returns on the premiums invested by the policyholder
D) It covers all healthcare expenses for the policyholder

 

Which of the following is typically a characteristic of “insurance fraud”?
A) The accurate reporting of claims
B) The submission of false information to receive benefits
C) The prevention of fraud by insured parties
D) The use of claims data to lower premiums

 

What type of insurance is “malpractice insurance”?
A) Insurance that covers professionals for errors and omissions in their professional services
B) Insurance that covers companies for any damages they cause during business operations
C) Insurance that protects against the risks of homeownership
D) Insurance for automobiles and personal vehicles

 

What is “insurance risk management” primarily concerned with?
A) Reducing the amount of claims submitted by policyholders
B) Estimating and controlling risks to minimize losses for the insurer
C) Ensuring that the insurer’s investments return a high yield
D) Managing the cost of premiums for policyholders

 

Which of the following is an example of “moral hazard” in insurance?
A) A policyholder engages in riskier behavior knowing they are covered
B) A policyholder reports a claim accurately and in full
C) A company sells insurance based on a thorough risk assessment
D) A policyholder opts for a high deductible to save on premiums

 

Which of the following is generally not covered under “automobile liability insurance”?
A) Injuries caused to another driver in an accident
B) Damage to the insured’s own vehicle
C) Injuries caused to passengers in the insured’s vehicle
D) Property damage to another person’s property in an accident

 

What is “coinsurance” in health insurance?
A) The fixed amount the insured pays before the insurer starts covering costs
B) The percentage of the total claim that the insured must pay after the deductible
C) The flat rate that the insurer pays for each visit to a doctor
D) The total cost the insurance company will pay for a healthcare service

 

What is “moral hazard” in financial risk management?
A) A situation where the risk is manageable and predictable
B) The risk that the insured party may act less cautiously because they are protected
C) The analysis of past claims to predict future losses
D) The systematic management of financial losses from insured events

 

Which of the following is true about “umbrella insurance”?
A) It covers the cost of routine medical expenses
B) It provides additional liability coverage above and beyond standard policies
C) It only covers automobile-related accidents
D) It is designed for homeowners only

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