Chapter 16 Risk Management, Insurance, and Crime Prevention
Answer Key
Multiple Choice Questions
1.
Which of the following statements defines risk management?
2.
_____ is the uncertainty that some unpredictable event will result in a loss.
3.
Which of the following statements is a characteristic of a pure risk?
4.
Which of the following statements defines speculative risk?
5.
Which of the following statements defines risk avoidance?
6.
_____ refers to the process of using various methods to reduce the possibility of a loss
occurring.
7.
_____ means shifting the consequences of a risk of a business to persons or organizations
outside that business.
8.
_____ is the best-known form of risk transfer.
9.
_____ refers to the process of setting aside funds to meet losses that are uncertain in size
and frequency.
10.
In businesses, the method of risk assumption usually takes the form of _____.
11.
Most property insurance contracts have a coinsurance provision to:
12.
A(n) _____ provision requires policyholders to buy insurance in an amount equal to a
specified percentage of property value.
13.
Which of the following statements is true of casualty insurance?
14.
_____ protects a business from losses due to suits resulting from mistakes made—or bad
advice given—by someone in an official context.
15.
_____ provides protection for an employee’s estate when he or she dies while still in the
income-producing years.
16.
The _____, established in 2010, is a comprehensive health care reform act that requires
every American to be covered under a health insurance plan, in essence improving access,
affordability, and quality.
17.
Which of the following is covered by business insurance?
18.
_____ are purchased for employees occupying positions that involve the handling of
company funds.
19.
Which of the following statements is true of a Corporate Owned Life Insurance (COLI)
policy?
20.
_____ provide(s) protection against the failure of a contractor to fulfill contractual
obligations.
21.
Retailers sometimes refer to losses from both theft by outsiders and theft by employees as
_____.
22.
Which of the following scenarios constitutes shoplifting?
23.
_____ allows retailers to demand payment of shoplifters or their parents for the items
taken.
24.
Which of the following statements is an effective technique for minimizing theft?
25.
White-collar crimes are primarily committed by _____.
26.
Which of the following constitutes a white-collar crime?
27.
Sale of proprietary information is an example of _____.
28.
Which of the following is an effective way of minimizing white-collar crimes?
29.
_____ helps insure against employee fraud or theft.
30.
Which of the following measures can be used to enhance document security?
True / False Questions
31.
Risk management is the process of increasing productivity by strategically managing the
workflow.
32.
Pure risk always exists when the possibility of a loss is present but the possible extent of
the loss is unknown.
33.
A liability judgment against an individual constitutes a pure risk.
34.
The possibility that a small business will be unprofitable is an insurable risk.
35.
Risk avoidance entails the use of various methods aimed at reducing the probability that a
given event will occur.
36.
The best-known form of risk transfer is insurance.
37.
Self-insurance is usually impractical for very small businesses.
38.
When a business owner buys insurance, he or she is trading a potentially large but
uncertain loss for a small but certain one.
39.
An extended-coverage endorsement multiplies the liability of small businesses.
40.
Coinsurance exempts policyholders from paying the insurance premium.
41.
Indirect losses are frequently more severe in their eventual cost than are direct losses.
42.
Professional liability insurance is also known as malpractice insurance.
43.
Premiums for product liability coverage have been declining steadily over the last several
years.