Question 1

Due to the crackdown on fraud by employers,insurers,and states,the cost of worker's compensation insurance has actually gone down.

Accepted Answer

The statement is true as the crackdown on fraud has helped in reducing the number of false claims and ultimately lowering the cost of worker's compensation insurance.

Question 2

Automobile insurance is a form of property insurance.

Accepted Answer

Automobile insurance provides coverage for damage or loss to a vehicle and also offers liability coverage for any injury or damage caused to someone else's property. As it provides coverage for property, it is considered a form of property insurance.

Question 3

Crime insurance covers for loss due to dishonesty,disappearance,and destruction.

Accepted Answer

Crime insurance provides coverage for losses caused by dishonesty, disappearance, and destruction, making the statement true.

Question 4

Insurance coverage is an example of risk transfer.

Accepted Answer

Insurance coverage involves transferring the risk of loss from an individual or organization to an insurance company. The insurance company assumes the financial responsibility of covering the losses or damages that may be incurred, in exchange for payment of premiums by the policyholder.

Question 5

Employment practices liability insurance (EPLI)offer liability coverage that protects against losses resulting from injuries,damage,or theft involving the use of company vehicles.

Accepted Answer

Employment practices liability insurance (EPLI) does not provide coverage for injuries, damage, or theft involving company vehicles. It specifically covers claims related to employment practices such as wrongful termination, discrimination, and harassment.

Question 6

Most BOPs do not include any liability coverage.

Accepted Answer

Business Owner's Policies (BOPs) typically include liability coverage as a standard component, along with property insurance.

Question 7

Every state in the Unites States requires an employer to subscribe to the worker's compensation program of their state.

Accepted Answer

Not every state requires employers to subscribe to a state-run workers' compensation program; some states allow employers to self-insure or use private insurance.

Question 8

Self-insurance is entirely a large business phenomenon.

Accepted Answer

Self-insurance can be practiced by individuals, small businesses, non-profits, municipalities, and other entities in addition to larger businesses.

Question 9

Pensions and annuities are special forms of liability insurance.

Accepted Answer

Pensions and annuities are financial products related to retirement income, not liability insurance, which covers legal responsibilities for damages or injuries.

Question 10

Every risk can be insured.

Accepted Answer

There are certain risks that insurance companies may not cover, such as intentional acts of harm, illegal activities, and events based on decisions made by government policy. Additionally, some risks may be too high for insurance companies to cover at an affordable rate.

Question 11

When buying disability insurance,the primary criterion is the cost of the policy and any exclusionary clauses.

Accepted Answer

While cost is a factor to consider, it is not the primary criterion when buying disability insurance. The key factors to look for include the definition of disability, the benefit amount, the waiting period, and any exclusionary clauses or limitations. It's important to focus on finding a policy that offers comprehensive coverage, even if it comes with a higher premium.

Question 12

The risk behind self-insurance is that if there aren't sufficient funds set aside,the business will suffer losses.

Accepted Answer

Self-insurance means relying on the company's own funds to cover losses instead of purchasing insurance. Therefore, if there are not enough funds set aside, the business may not be able to cover losses, leading to financial difficulties.

Question 13

Risk anticipation strategies promote self-insurance.

Accepted Answer

Risk anticipation strategies are designed to identify potential risks and mitigate them before they occur. By doing so, individuals and organizations can avoid the high costs associated with unexpected events. Self-insurance is one way to mitigate risk, as it involves setting aside funds to cover potential losses rather than relying on an insurance company to pay them. Therefore, risk anticipation strategies do promote self-insurance.

Question 14

The lowest risk assessment rating on the risk management pyramid would be an ADB rating.

Accepted Answer

ADB rating is the lowest risk assessment rating on the risk management pyramid because it indicates that the risk is unlikely to occur and has a low impact if it does occur.

Question 15

Losses incurred by noncompliance with a contract are covered by surety insurance.

Accepted Answer

Surety insurance is designed to cover losses that may arise due to noncompliance with a contract. Therefore, the statement is true.

Question 16

Goods in transit are insured by surety insurance.

Accepted Answer

Goods in transit are typically insured through cargo insurance. Surety insurance is a form of insurance that guarantees the performance of a contract, rather than insuring against loss or damage to goods.

Question 17

A small business establishing a self-insurance fund is following a risk transferring strategy.

Accepted Answer

Self-insurance involves retaining the risk instead of transferring it to an insurance company. Therefore, establishing a self-insurance fund is actually a risk retention strategy, rather than a risk transferring strategy.

Question 18

A company with a CAB risk assessment would pay a higher premium that a company with a BAC risk assessment.

Accepted Answer

The answer of A company with a CAB risk assessment...

Question 19

Installing a sprinkler system to minimize the threat of fire would be a risk reduction strategy.

Accepted Answer

Installing a sprinkler system can reduce the risk of fire by providing early detection and suppression. Therefore, it is a risk reduction strategy.

Question 20

One way to control health insurance costs has been for companies to switch to HMOs or PPOs from their traditional health care plans.

Accepted Answer

HMOs and PPOs are often seen as cost-saving measures for companies as they tend to be more efficient and have lower overall costs compared to traditional health care plans.

Quiz 20: Management Succession and Risk Management Strategies in the Family Business