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FIN 342 Exam 1 Questions And Answers | Guaranteed Pass!!
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FIN 342 Exam 1 Questions And Answers | Guaranteed Pass!!
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FIN 342 Exam 1 Questions And Answers| Guaranteed Pass!!
Direct Loss vs. Indirect Loss Examples? CORRECT ANSWERS Loss of inventory vs.
loss of customers
Which risk management method is recommended for losses that are fairly predictable
and budgetable? CORRECT ANSWERS Retention
What is a pure risk and what is an example? CORRECT ANSWERS A risk in which
there is only downside potential (fire damage)
Insurance contracts are called contracts of _________________ because the insured
cannot negotiate the terms of the contract. CORRECT ANSWERS Adhesion
Consider the risk of wildfire in remote areas of Colorado. Identify two of the
characteristics of ideally insurable risks that are not met by this risk? CORRECT
ANSWERS Contagious/catastrophic & not having a big enough pool (law of large
numbers)
What is the insurer's legal remedy for misrepresentation of a material fact in an
insurance application? CORRECT ANSWERS Option to void the contract
Identify two characteristics of a "hard market" in property and liability insurance?
CORRECT ANSWERS 1) Increasing insurance prices
2) Harder to obtain insurance coverage
If the combined ratio is high, insurance agencies are ________________________
money. CORRECT ANSWERS losing
Which risk management method is being used when sprinklers are installed in
buildings? CORRECT ANSWERS Risk reduction (reduce severity)
Which insurance principle implies that a policy holder should only be able to recover the
"actual cash value" of their loss? CORRECT ANSWERS Indemnity
Give 3 different examples of moral hazard? CORRECT ANSWERS 1) People who don't
lock their house with property insurance
2) Buying life insurance and committing suicide
3) People who drive recklessly because they have auto insurance
Which risk management method is most appropriate for high severity, low frequency
risks? CORRECT ANSWERS Insurance
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