Which of the following statements is correct with regard to characteristics of ideally insurable loss exposures?

Which one of the following best defines a hazard?
Select one: A. Anything that shifts the burden of proof to the insurer B. The actual means by which property is damaged or destroyed C. Anything that increases the frequency or the severity of a loss D. An uninterrupted chain of events

C. Anything that increases the frequency or the severity of a loss

For property insurance purposes, wall-to-wall carpeting is typically considered to be part of the building because it
Select one: A. Tends to depreciate in value along with the building. B. Is easy to value. C. Is readily visible. D. Is permanently attached to the building.

D. Is permanently attached to the building.

Ships and their cargoes represent a special category of property insurance. Which one of the following statements is correct with respect to this category?
Select one: A. Even more than other property, ocean cargoes fluctuate in value according to their location. B. If a ship cannot reach its intended destination, the cargo cannot be sold in a different port. C. Ships and their cargoes are exposed only to the perils of windstorm and sinking. D. Because of the high risk of loss, ships and their cargoes are generally considered to be uninsurable.Term

A. Even more than other property, ocean cargoes fluctuate in value according to their location.
Even more than other property, ocean cargoes fluctuate in value according to their location is the correct statement.

Angelina borrows money from the bank to purchase a house. The house serves as security for the loan. In this transaction, Angelina is theTerm A. Mortgagor. B. Secured creditor. C. Bailor. D. Mortgagee.

Angelina borrows money from the bank to purchase a house. The house serves as security for the loan. In this transaction, the bank is the
Select one: A. Mortgagee. B. Bailee. C. Mortgagor. D. Property holder.Term

With regard to negligence, the plaintiff can make no recovery unless he or she
Select one: A. Has a contract. B. Suffers injury or damage. C. Breaks the chain of events. D. Has a witness.Term

B. Suffers injury or damage.

The law that specifies the structure and powers of the three branches of the federal government is
Select one: A. Common law. B. Constitutional law. C. Congressional law. D. Federal law.Term

Colson makes knives and swords as a hobby selling his products on a non-advertised basis. He does not package his products but does provide a warranty against defects. If a parent whose child is injured by one of Colson's ever-sharp knives sues Colson under strict liability, which one of the following statements may be true? Select one: A. Colson is not liable for harm to a third party. B. Colson would be liable because of failure to warn that the knife was sharp and dangerous. C. Colson would be strictly liable only if the knife was unreasonably dangerous in normal use. D. Knives are generally known to be dangerous instrumentalities and Colson could not be held liable.Term

C. Colson would be strictly liable only if the knife was unreasonably dangerous in normal use.

What type of law applies to wrongful acts that society deems so harmful that government takes the responsibility for prosecuting wrongdoers?
Select one: A. Criminal law B. Common law C. Constitutional law D. Civil lawTerm

While Wanda was mowing her lawn, the lawn mower made a popping noise and suddenly exploded. Engine parts flew through the air and struck Wanda's grandfather in the eye. As a result of losing his vision, Wanda's grandfather, Homer, sued the lawnmower manufacturer. Homer's best approach in the lawsuit is to assert
Select one: A. Intentional negligence. B. Breach of warranty. C. Imputed negligence. D. Strict liability.

Anyone who owns or occupies property has a
Select one: A. Products liability loss exposure. B. Premises liability loss exposure. C. Professional liability loss exposure. D. Pollution liability loss exposure.Term

B. Premises liability loss exposure.

When a business suffers loss of income following a liability suit that causes customers to lose confidence in the business' products, what type of loss has the business suffered?
Select one: A. Special damage B. Damage to reputation C. Confidence loss D. Punitive damageTerm

Because attorneys, physicians, architects, and engineers are considered to be experts in their fields and are expected to perform accordingly, what liability exposure do they face if a client is injured when such an expert fails to exercise the appropriate standard of care?
Select one: A. Completed operations B. Products C. Professional liability D. Business operations

C. Professional liability

Telephone Company installs fiber-optic cable using a trenching machine that digs a trench, buries the cable, fills in the trench, and reseeds, all in one pass. The trenching machine can install cable in a fifty-home neighborhood in one day. Soon after the trenching machine passes by, a member of the community steps on the trenched area, sinks in, and breaks his leg. This is an example of a liability loss exposure arising out of
Select one: A. Premises. B. Products. C. Completed operations. D. Mobile equipment.

A licensed electrician completes the job of rewiring a house and returns to his shop. With regard to this job, the electrician has a
Select one: A. Business operations loss exposure. B. Premises liability loss exposure. C. Professional liability loss exposure. D. Completed operations loss exposure.

D. Completed operations loss exposure.

Personnel loss exposures can be comprised of all of the following categories of key personnel, EXCEPT:
Select one: A. Individual employees B. Owners, officers, and managers C. Groups of employees D. Shareholders

SEB Holdings has grown into a multi-billion dollar financial services firm. For 38 years, Big Hal has been its CEO and has ruled the company with an iron first. Big Hal is 78 years old, and financial analysts are concerned about his health and longevity and how closely these factors relate to the company’s success. Which one of the following might help assuage the analysts’ concerns?
Select one: A. A corporate succession plan B. A letter attesting to Big Hal's good health C. Key man retirement plan D. Key man life coverage on Big Hal

A. A corporate succession plan

The cause of loss that occurs more frequently than death, causing personnel losses, is
Select one: A. Kidnap. B. War/terrorism. C. Disability. D. Retirement.Term

While involuntary employee separations may expose an organization to additional liability loss exposures, such as wrongful termination accusations, they generally are not considered a personnel loss exposure because
Select one: A. Employees leave organizations for non-business related reasons and therefore, are not considered a personnel loss. B. The reasons for involuntary employee separations are too numerous and too varied to be measure with high accuracy. C. The organization has determined that it is better off without that employee. D. The organization may not have a risk management person measuring personnel exposures.Term

C. The organization has determined that it is better off without that employee.

The death of a shareholder in a close corporation is often a significant event for the corporation for which one of the following reasons?
Select one: A. Shareholders in a close corporation also serve on the board of directors resulting in a disparity of shareholder votes. B. Ownership in a close corporation is typically concentrated in just the few major shareholders, most of whom are also managers. C. Key shareholders are paid high salaries and are difficult to replace. D. The death or disability of one of the shareholders generally results in payment of dividends to the remaining shareholders.Term

B. Ownership in a close corporation is typically concentrated in just the few major shareholders, most of whom are also managers.Ownership in a close corporation is typically concentrated in just the few major shareholders, most of whom are also managers.

When a newspaper's printing press is damaged, the company may spend extra money to have the newspaper printed on another company's press. The additional cost of printing the newspaper is an example of which one of the following?
Select one: A. Altered condition B. Extra expense C. Lost income D. Reduction in valueTerm

An auto dealer's showroom is destroyed by fire, and the dealer has to temporarily rent an adjacent building to use as a showroom. This is an example of
Select one: A. Lost income. B. An altered condition. C. A reduction in value. D. An extra expense

D. An extra expense.Acquiring substitute property on a temporary basis to replace damaged property is an example of an extra expense.

All for-profit organizations are exposed to net income losses. Net income is defined as
Select one: A. Total revenue minus total expenses. B. Total profit minus total expenses. C. Total assets minus total liabilities. D. Total income minus indirect losses.Term

A. Total revenue minus total expenses.

A net income loss exposure is a condition that presents the possibility of loss caused by a reduction in net income. In a given time period, net income equals revenue minus
Select one: A. Continuing expenses and outstanding liabilities. B. Accounts payable and income taxes. C. Expenses and income taxes. D. Costs of goods sold.Term

C. Expenses and income taxes.in a given time period, net income equals revenue minus expenses and income taxes.

The difference between an organization’s total revenues and its total expenses is
Select one: A. Gross profit. B. Net income. C. Net sales. D. Operating profit.Term

Commercial general liability insurance policies written on an occurrence basis apply to bodily injury and property damage that occurs during the policy period. This provision supports the principle that insurable loss exposures must ideally be
Select one: A. Fortuitous. B. Definite. C. Pure risks. D. Independent.

For insurers to utilize pooling most effectively and present catastrophic losses, the insured exposure units need to be
Select one: A. Different. B. Correlated. C. Independent. D. Adjacent.

C. Independent.For insurers to utilize pooling most effectively and present catastrophic losses, the insured exposure units need to be independent.

Which one of the following is an example of a fortuitous loss?
Select one: A. The value of an insured’s home decreases due to a lack of maintenance. B. Insureds intentionally set a fire and burn their house down. C. An unknown vandal spray-paints graffiti on the insured’s garage. D. An insured demolishes a deck that has been allowed to rot.T

C. An unknown vandal spray-paints graffiti on the insured’s garage.

Which one of the following statements is correct with respect to characteristics of insurable loss exposures?
Select one: A. If losses are not fortuitous, premiums could increase for all policyholders. B. If a loss is fortuitous, the chance of loss could increase as soon as a policy is issued. C. Private insurance is suitable for risks where the probability and timing of loss is known. D. If the insured has control over whether or when a loss will occur, the risk is attractive to insure.Term

A. If losses are not fortuitous, premiums could increase for all policyholders.

Adhering to the characteristics of an ideally insurable loss exposure in selling insurance help assure that
Select one: A. The insurer is able to charge a premium that the insured can afford to pay. B. The losses associated with it typically involve small amounts. C. The insurer is able to predict the amount and timing of each future loss. D. The insurer can charge a high premium for the coverage.

A. The insurer is able to charge a premium that the insured can afford to pay.

Which of the following statements is correct regarding characteristics of ideally insurable loss exposures?

What are some of the ideal characteristics of an insurable exposure?

What are the five characteristics of an ideally insurable risk?

Which of the following is not considered to be an ideally insurable loss exposure?