Question 1

Match the term with its definition. Some terms may not be used.
-The uncertainty associated with an investment decision

Accepted Answer

Market risk refers to the uncertainty associated with the market, specifically the potential for fluctuations in the prices of investments.

Answer: B
 Business risk refers to the uncertainty associated with the specific business or industry that an investment is tied to. This includes factors such as competition, regulatory changes, and shifts in consumer demand.

Answer: K
 Pure risk refers to the type of risk that cannot be controlled or avoided, such as natural disasters or accidents. It is different from speculative risk, which involves the possibility of gain or loss.

Answer: A
 All-risk approach refers to an insurance policy that covers a wide range of perils and risks, providing comprehensive protection for the insured. This is in contrast to a named-peril approach, which only covers specific risks that are explicitly listed in the policy.

Answer: D
 Disability insurance is a type of insurance that provides financial protection to individuals who are unable to work due to a disability. It typically pays a portion of the individual's income while they are unable to work.

Answer: J
 A preferred provider organization (PPO) is a type of health insurance plan that allows individuals to receive care from a network of preferred providers. This can help to reduce the cost of care for the insured.

Answer: C
 Compensatory damages refer to a type of monetary compensation that is awarded to a plaintiff in a legal case. This compensation is intended to cover the actual losses or damages that the plaintiff suffered as a result of the defendant's actions.

E and I are not defined.

Question 2

Match the term with its definition. Some terms may not be used.
-A firm's per-employee limit on self-funding for medical claims

Accepted Answer

The answer of Match the term with its definition. Some...

Question 3

Match the term with its definition. Some terms may not be used.
-A managed-care network providing health insurance that is less expensive but more limiting in choices of medical providers

Accepted Answer

Health maintenance organization (HMO) is a managed-care network that provides health insurance. It is less expensive but more limiting in choices of medical providers.

Answer: J
 Preferred provider organization (PPO) is another managed-care network that provides health insurance. It is more flexible as it allows policyholders to go out of network for medical care but at a higher cost.

Answer: D
 Disability insurance provides income protection for individuals who are unable to work due to a disability.

Answer: K
 Pure risk refers to a situation where there is only a chance of loss or no loss at all, but no chance for gain.

Answer: H
 Named-peril approach is a type of insurance policy that covers only the specific risks or perils explicitly listed in the policy.

Answer: E
 Economic damages refer to the monetary losses suffered by an individual or entity as a result of a specific event or incident.

Answer: A
 All-risk approach is a type of insurance policy that covers all possible risks, except those explicitly excluded in the policy.

Answer: G
 Market risk refers to the risk of financial loss due to changes in the market conditions, such as changes in interest rates or exchange rates.

Answer: B and C
 Business risk refers to the risk of financial loss due to various factors such as competition, economic downturns, and technological changes. Compensatory damages refer to the monetary compensation awarded by a court to a victim who has suffered a loss or harm due to the actions of another party.

Question 4

Match the term with its definition. Some terms may not be used.
-The uncertainty associated with a situation where only loss or no loss can occur

Accepted Answer

Pure risk is the uncertainty associated with a situation where only loss or no loss can occur.

Question 5

Match the term with its definition. Some terms may not be used.
-Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically excluded

Accepted Answer

The all-risk approach in property insurance means that the policy covers all forms of direct damage unless they are explicitly excluded in the policy terms. This contrasts with a named-peril approach, where only the risks listed in the policy are covered.

Question 6

Match the term with its definition. Some terms may not be used.
-A loss arising from an inability to carry on normal operations due to a direct loss of property

Accepted Answer

An indirect loss refers to the financial consequences that occur as a result of being unable to continue normal operations due to a direct loss of property, such as lost income or additional expenses incurred.

Question 7

Match the term with its definition. Some terms may not be used.
-Economic or non-economic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action

Accepted Answer

Compensatory damages are intended to compensate the claimant for any injuries or loss arising from the negligent action.

Question 8

Match the term with its definition. Some terms may not be used.
-Compensatory damages that relate to economic loss, such as medical expenses and loss of income

Accepted Answer

Economic damages refer to compensatory damages that relate to economic loss, such as medical expenses and loss of income.

Question 9

Match the term with its definition. Some terms may not be used.
-Identifying the specific perils covered in a property insurance policy

Accepted Answer

The named-peril approach is the method of identifying the specific perils covered in a property insurance policy.

Question 10

Match the term with its definition. Some terms may not be used.
-A loss in which physical damage to property reduces its value to the property owner

Accepted Answer

Direct loss is a loss in which physical damage to property reduces its value to the property owner.

Answer: A 
 Actual cash value (ACV) is the value of property that has been lost or damaged.

Answer: F 
 Indirect loss is a loss that results from a direct loss, such as lost income or extra expenses.

Answer: J 
 Replacement value of property is the cost of replacing property that has been lost or damaged without any deduction for depreciation.

Answer: H 
 Loss prevention refers to measures taken to prevent or reduce the frequency or severity of losses.

Answer: G 
 Loss avoidance refers to measures taken to avoid losses altogether, such as not engaging in risky activities or not taking on certain clients.

Answer: E 
 Disability insurance provides income to an individual who is unable to work due to a disability.

Answer: D 
 Disability buyout insurance is a type of insurance that provides funds to a business owner to buy out a disabled co-owner.

Answer: B
 Commercial general liability (CGL) insurance covers businesses for claims of bodily injury or property damage that occur as a result of their business operations.

Question 11

Match the term with its definition. Some terms may not be used.
-The possibility of losses associated with the assets and earnings potential of a firm

Accepted Answer

Business risk refers to the possibility of losses associated with the assets and earnings potential of a firm.

Answer: E 
 Economic damages are losses experienced as a result of a business dispute, such as loss of income or profits.

Answer: G 
 Market risk refers to the potential losses associated with changes in market conditions, such as a downturn in the economy or changes in consumer preferences.

Answer: K 
 Pure risk refers to the possibility of loss but no possibility of gain. It includes events like accidents, fire, and theft.

Other terms not included in the answer: 
A) All-risk approach: insurance coverage that protects against all types of risks, except those specifically excluded. 
C) Compensatory damages: damages awarded to a plaintiff to compensate for harm or losses suffered. 
D) Disability insurance: insurance coverage that provides income replacement in the event of a disability. 
H) Named-peril approach: insurance coverage that protects against only those risks specifically named in the policy. 
I) Peril: a specific risk or cause of loss. 
J) Preferred provider organization: a type of health insurance plan that allows patients to choose from a network of healthcare providers.

Question 12

Match the term with its definition. Some terms may not be used.
-Choosing not to engage in hazardous activities

Accepted Answer

Loss avoidance is the act of choosing not to engage in hazardous activities or situations in order to prevent potential losses.

Question 13

Match the term with its definition. Some terms may not be used.
-Keeping a loss from happening

Accepted Answer

Loss prevention refers to measures or strategies implemented to prevent or minimize the occurrence of losses, such as accidents, theft, or damages, before they happen.

Question 14

Match the term with its definition. Some terms may not be used.
-Lessening the frequency, severity, or unpredictability of potential losses

Accepted Answer

The answer of Match the term with its definition. Some...

Question 15

Match the term with its definition. Some terms may not be used.
-A cause of loss, either through natural events or through the actions of people

Accepted Answer

Peril is a cause of loss, either through natural events or through the actions of people.

Question 16

Match the term with its definition. Some terms may not be used.
-An insurance term that refers to the depreciated value of property

Accepted Answer

Actual cash value refers to the depreciated value of property.

Question 17

Disability buyout insurance

Accepted Answer

DDisability buyout insurance is specifically designed to provide funds to buy out the ownership interest of a partner or key employee in the event they become disabled, ensuring the continuity of the business. It does not protect against losses due to death; that is the purpose of key person insurance. While it can be used in single-owner operations, its primary function is not common in those settings as there is no partner to buy out.

Question 18

Match the term with its definition. Some terms may not be used.
-Insurance that provides a healthy partner the cash to buy out a partner who becomes ill

Accepted Answer

Disability buyout insurance provides the healthy partner with cash to buy out a partner who becomes disabled.

Question 19

Match the term with its definition. Some terms may not be used.
-A comprehensive limit on annual expenses should a number of employees reach the firm's per-employee limit on self-funding for medical claims

Accepted Answer

The answer of Match the term with its definition. Some...

Question 20

Match the term with its definition. Some terms may not be used.
-The cost of replacing personal property and rebuilding real property at today's prices

Accepted Answer

The term "Replacement value of property" refers to the cost of replacing personal property and rebuilding real property at today's prices.

Quiz 23: Managing Risk in the Small Business

Match the term with its definition. Some terms may not be used. -The uncertainty associated with an investment decision

Match the term with its definition. Some terms may not be used. -A firm's per-employee limit on self-funding for medical claims

Match the term with its definition. Some terms may not be used. -A managed-care network providing health insurance that is less expensive but more limiting in choices of medical providers

Match the term with its definition. Some terms may not be used. -The uncertainty associated with a situation where only loss or no loss can occur

Match the term with its definition. Some terms may not be used. -Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically excluded

Match the term with its definition. Some terms may not be used. -A loss arising from an inability to carry on normal operations due to a direct loss of property

Match the term with its definition. Some terms may not be used. -Economic or non-economic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action

Match the term with its definition. Some terms may not be used. -Compensatory damages that relate to economic loss, such as medical expenses and loss of income

Match the term with its definition. Some terms may not be used. -Identifying the specific perils covered in a property insurance policy

Match the term with its definition. Some terms may not be used. -A loss in which physical damage to property reduces its value to the property owner

Match the term with its definition. Some terms may not be used. -The possibility of losses associated with the assets and earnings potential of a firm

Match the term with its definition. Some terms may not be used. -Choosing not to engage in hazardous activities

Match the term with its definition. Some terms may not be used. -Keeping a loss from happening

Match the term with its definition. Some terms may not be used. -Lessening the frequency, severity, or unpredictability of potential losses

Match the term with its definition. Some terms may not be used. -A cause of loss, either through natural events or through the actions of people

Match the term with its definition. Some terms may not be used. -An insurance term that refers to the depreciated value of property

Disability buyout insurance

Match the term with its definition. Some terms may not be used. -Insurance that provides a healthy partner the cash to buy out a partner who becomes ill

Match the term with its definition. Some terms may not be used. -A comprehensive limit on annual expenses should a number of employees reach the firm's per-employee limit on self-funding for medical claims

Match the term with its definition. Some terms may not be used. -The cost of replacing personal property and rebuilding real property at today's prices