Which of the following statements about monetary damages awarded by a court is (are)
true?
I. The purpose of general damages is to provide benefits for medical expenses or loss of
earnings.
II. The purpose of punitive damages is to punish the tortfeasor so that others are
deterred from committing the same wrongful act.
A) I only
B) II only
C) both I and II
D) neither I nor II
All of the following are considered floods under the federal flood insurance program
EXCEPT
A) the overflow of tidal waters.
B) the accumulation of surface water after a heavy rain.
C) a mudslide caused by an accumulation of water after a heavy rain.
D) wind-driven rain which enters a dwelling through storm-damaged doors or windows.
ABC Insurance retains the first $1 million of each property damage loss and purchases
insurance for that part of any property loss that exceeds $1 million. The insurance for
property losses above $1 million is called
A) excess insurance.
B) liability insurance.
C) coinsurance.
D) primary insurance.
Which of the following is a provision of the Affordable Care Act?
A) strengthening the use of pre-existing conditions exclusions
B) no cost-sharing for certain preventative services
C) introduction of annual and lifetime limits to control costs
D) elimination of flexible spending accounts
A risk manager is concerned with which of the following?
I. Identifying potential losses
II. Selecting the appropriate techniques for treating loss exposures
A) I only
B) II only
C) both I and II
D) neither I nor II
A factor that can be ignored when deterring the cost of life insurance is
A) time value of money.
B) premiums paid.
C) settlement options.
D) dividends.
Regional Airline (RA) spends millions of dollars each year on jet fuel. The company
also has significant liability exposures. RA can retain a large portion of its liability
exposure if fuel costs are low. The company can pay high fuel costs if retained liability
losses are low. RA cannot, however, absorb both high fuel costs and high retained
liability claims. RA’s insurer designed an insurance program where the insurer pays
only if both contingencies (high fuel costs and high retained liability claims) occur. The
contract the insurer designed is called a(n)
A) double indemnity rider.
B) double trigger option.
C) multiple protection policy.
D) other insurance provision.
The building and personal property coverage form provides several optional coverages.
Under one optional coverage, no deduction is taken for depreciation when settling a
covered loss. This optional coverage is called
A) extra expense.
B) agreed value.
C) replacement cost.
D) inflation guard.
Defects of financial responsibility laws include which of the following?
I. Accident victims may not be fully compensated for their injuries.
II. They apply only to property damage losses, not to bodily injury claims.
A) I only
B) II only
C) both I and II
D) neither I nor II
Taylor Tobacco Company is concerned that the company may be held liable in a court
of law and ordered to pay a large damage award. The characteristics of the judicial
system that increase the frequency and severity of loss are known as
A) moral hazard.
B) particular risk.
C) speculative risk.
D) legal hazard.
HRC Company purchased an unendorsed ISO Commercial General Liability (CGL)
policy. Which of the following claims would be covered under the CGL?
A) workers compensation liability
B) liability arising from intentional acts
C) personal and advertising injury liability
D) professional liability
Which of the following statements about life insurance policy loans is true?
A) Loans are only permitted for specific reasons listed in the policy.
B) They are forgiven if the insured dies before the loans are repaid.
C) The policyholder must pay interest on a life insurance policy loan.
D) They must be repaid on the basis of a schedule determined at the time of the loan.
The purpose of the collision damage waiver when renting an auto is to
A) relieve the renter of financial responsibility if the rented car is damaged or stolen.
B) relieve the renter of legal liability to third parties arising out of operation of the
rented car.
C) relieve the renter’s insurer of legal liability to third parties arising out of operation of
the rented car.
D) waive the insured’s deductible if the rented car is damaged or stolen.
Insurers offering variable annuities charge a number of fees and expenses. One category
of fees and expenses is charged to cover the cost of record keeping, paperwork, and
periodic reports to annuity owners. This expense is the
A) investment management charge.
B) surrender charge.
C) administrative charge.
D) front-end load.
Williams Company installed smoke detectors, a sprinkler system, and fire extinguishers
in its new manufacturing facility. These devices are all examples of
A) risk control.
B) noninsurance transfer.
C) risk avoidance.
D) risk retention.
Which of the following statements about the elements of negligence is (are) true?
I. The negligence of the tortfeasor may arise from a failure to act.
II. The damage that results must be in the form of property damage.
A) I only
B) II only
C) both I and II
D) neither I nor II
Which of the following statements about pension funding agencies and funding
instruments is true?
A) Under a trust-fund plan, individual annuities are purchased each year for employees
participating in the plan.
B) A separate investment account is a group pension account with a life insurance
company.
C) If the funding instrument is a commercial bank, the plan is called an insured plan.
D) Under a guaranteed investment contract, the insurer guarantees the principal of a
lump sum deposit but does not guarantee the interest rate.
Which of the following statements about the Personal Articles Floater is (are) true?
I. It is designed to cover several classes of personal property.
II. Coverage is written on an “open perils” (all-risks) basis.
A) I only
B) II only
C) both I and II
D) neither I nor II
ACME Company is considering starting a retirement plan for its employees. One option
ACME is considering is a profit-sharing plan. All of the following are advantages of
this type of retirement plan EXCEPT
A) The employer’s cost is not affected by the age and the number of employees.
B) Profit sharing plans provide an incentive for employees to work harder and more
efficiently.
C) The 10 percent penalty tax does not apply to distributions prior to age 59.5.
D) ACME enjoys greater flexibility in employer contributions.