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4 Cards in this Set
- Front
- Back
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A loss exposure is defined as
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(A) a loss that might occur
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Which of the following statements concerning the findings of behavioral psychologists on the subject of risk tolerance is (are) correct? I. Most people are more risk tolerant than they are risk averse. II. A person who is highly risk tolerant in physical or social activities is also highly risk tolerant in financial matters.
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(D) Neither I nor II
The answer is (D). I is incorrect because most people are more risk averse than they are risk tolerant. II is incorrect because the fact that a person is highly risk tolerant in physical or social activities does not necessarily mean that he or she is also highly risk tolerant in financial matters. |
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In order for a risk to be considered insurable, it must substantially meet all the following requirements EXCEPT:
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The amount of potential losses should be relatively unimportant to insureds.
The answer is (D). Because of the element of expense in carrying on the business of insurance, premiums include a charge to provide for this cost. In the case of risks that are of no great importance to insureds, the cost of handling the business would make the rate prohibitive. To make a risk insurable, the amount of future loss payments must be of such importance as to make them, rather than the insurer's expenses, the principal component in the premium charged. |
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Which of the following statements concerning group insurance is (are) correct? I. The group insurance contract provides coverage to a number of persons. II. Individual members of the group are usually not required to show any evidence of insurability when initially eligible for coverage.
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(C) Both I and II are correct
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