Insurance MCQ

Driving too fast and not wearing a seat belt are examples of: A) physical hazard. B) risk. C) moral hazard. D) morale hazard. Answer: D

Which one of the following hazards can be described as a careless attitude or general indifference on the part of the insured toward the occurrence of loss? A) Morale. B) Physical. C) Moral. D) Legal. Answer: A

Dishonesty on the part of an insured is an example of: A) a physical hazard. B) a morale hazard. C) a moral hazard. D) a peril. Answer: C

Which one of the following best defines a hazard? A) Uncertainty of a loss. B) Cause of a loss. C) Unexpected loss. D) Condition that increases the chance of a loss. Answer: D

Which one of the following is considered a hazard? A) Fire. B) Explosion. C) Trash. D) Lightning. Answer: C

Faulty wiring causes a fire that destroys a building. The faulty wiring is considered to be a(n): A) proximate cause. B) hazard. C) peril. D) indirect cause. Answer: B

Fire would be an example of a: A) loss. B) risk. C) peril. D) hazard. Answer: C

Which one of the following is an example of a peril? A) Illness. B) Earthquake. C) Gasoline stored on the premises. D) Indifference. Answer: B

What is the actual cause of a loss? A) Risk. B) Peril. C) Hazard. D) Proximate cause. Answer: B

If John's father transfers ownership of a house to John, which one of the following statements regarding insurance on the house is CORRECT? A) John can buy insurance because he has an insurable interest. B) John must purchase the house from his father to obtain an insurable interest in it. C) John's father must retain his policy on the house. D) John's father must assign his policy to John as well. Answer: A

Which of the following is NOT an example of an insurable interest? A) Person's interest in property she hopes that her uncle will leave to her in his will. B) Person's interest in the improvements he has added to his leased apartment. C) Person's interest in the home she owns. D) Dry cleaner's interest in his customers' clothing in his custody, care, or control. Answer: A

Which one of the following risks is insurable? A) Partial. B) Pure. C) Speculative. D) Whole. Answer: B

Which one of the following statements pertaining to risk is NOT correct? A) Only pure risks are insurable. B) A stock market venture is an example of a pure risk. C) Pure risk involves only the chance of loss; there is never a possibility of gain or profit. D) Uncertainty regarding financial loss is the definition of risk; therefore, it is characteristic of both pure and speculative risks. Answer: B

Which of the following is NOT a source of information important to an underwriter? A) Motor vehicle reports. B) Employer reference. C) Agent or producer comments. D) Consumer reports. Answer: B

The purpose of insurance is to: A) reduce adverse selection. B) transfer risk. C) eliminate risk. D) eliminate hazards. Answer: B

Which of the following is an example of reduction as a method of handling risk? A) Reducing coverage. B) Buying insurance to reduce the risk. C) Installing a burglar alarm. D) Increasing a deductible. Answer: C

Sharing is a method of handling risk. Which of the following phrases best describes the concept of sharing? A) Purchasing insurance. B) Increasing a deductible to share the loss with the insurance company. C) Signing a hold harmless agreement to share the liability. D) Buying a car with a friend to share the risk. Answer: A

Robert and Carolyn live in a busy city and decide that not owning a car is the solution to not experience having a car stolen. Which of the following methods describes this philosophy? A) Loss control. B) Avoidance. C) Retention. D) Transfer. Answer: B

Treating risk by purchasing insurance is an example of what type of risk management? A) Avoidance. B) Reduction. C) Retention. D) Transfer. Answer: D

A chance, possibility, or uncertainty of loss is known as a: A) hazard. B) peril. C) proximate cause. D) risk. Answer: D