Question 1

Liability insurance protects a business against financial losses to others that the business was responsible for.

Accepted Answer

Liability insurance provides financial protection to a business for damages or injuries caused to others due to negligence or other covered incidents.

Question 2

The alternatives to handle risk include ____.
A) avoid it
B) minimize it
C) handle it or transfer it
D) all of the above

Accepted Answer

All of the above alternatives should be considered to handle risk. Avoiding risk may not always be possible, but minimizing it through preventive measures can be effective. Handling risk can involve implementing strategies to mitigate it, while transferring risk may involve purchasing insurance or outsourcing risk to another party. All of these options can be valuable in managing risk.

Question 3

An insurable interest is required in order to purchase insurance.

Accepted Answer

Insurable interest means that the policyholder must have a financial interest in the insured object or person, so that a financial loss would be suffered if something were to happen to it. Therefore, insurable interest is a requirement for legally valid insurance contracts.

Question 4

Crop insurance normally falls under a public insurance agency.

Accepted Answer

Crop insurance is typically provided by the government through public insurance agencies, such as the Federal Crop Insurance Corporation in the United States.

Question 5

Speculative risk only involves the change of loss.

Accepted Answer

Speculative risk involves both the possibility of loss and the possibility of gain. It is different from pure risk, which only involves the possibility of loss.

Question 6

In order to be insured an applicant needs to show ____.
A) a contract
B) a pure risk
C) an insurable interest
D) a determinable insurance need

Accepted Answer

To be insured, an applicant needs to show an insurable interest, meaning they will suffer a financial loss if the event they are insuring against occurs. A contract (A) is created once the applicant is approved for insurance. A pure risk (B) is a risk that only involves the possibility of loss and no possibility of gain, but it is not something an applicant needs to show in order to be insured. A determinable insurance need (D) may be helpful in determining what type and how much insurance an applicant needs, but it is not a requirement for being insured.

Question 7

Risk is a daily fact of life for both individuals and businesses.

Accepted Answer

Risk is a common occurrence in daily life for both individuals and businesses, whether it be financial, physical, or emotional. It is important to manage and mitigate risks in order to prevent negative consequences.

Question 8

_____ is uncertainty about loss or injury.
A) Insurance
B) Risk
C) Management
D) Accident

Accepted Answer

The definition of risk includes the concept of uncertainty about potential loss or injury. Insurance is a financial tool designed to mitigate the impact of risk, management involves the process of identifying and mitigating risk, and an accident is an event that may result from a risk but does not define the concept itself.

Question 9

Under the rule of indemnity the insured is limited collect only the amount of the loss.

Accepted Answer

The rule of indemnity states that the insured is entitled to be indemnified only to the extent of the actual amount of loss, not more. Therefore, the insured can collect only the amount of the loss and not more than that.

Question 10

___ is the most common way of dealing with risk.
A) Avoiding it
B) Shifting risk to others
C) Minimizing it
D) Self insurance

Accepted Answer

Shifting risk to others, often through insurance, is the most common way of dealing with risk as it allows individuals or businesses to transfer the financial burden of potential losses to another party.

Quiz 20: Personal Financial Planning

Liability insurance protects a business against financial losses to others that the business was responsible for.

The alternatives to handle risk include ____.

An insurable interest is required in order to purchase insurance.

Crop insurance normally falls under a public insurance agency.

Speculative risk only involves the change of loss.

In order to be insured an applicant needs to show ____.

Risk is a daily fact of life for both individuals and businesses.

_____ is uncertainty about loss or injury.

Under the rule of indemnity the insured is limited collect only the amount of the loss.

___ is the most common way of dealing with risk.