Moh - Exam Name MULTIPLE CHOICE Choose the one alternative...

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Exam Name___________________________________ MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) 1) Methods by which insurers may minimize or avoid catastrophic losses include which of the following? I. The use of reinsurance II. Concentrating coverage written in one geographic region A) I only B) II only C) both I and II D) neither I nor II 2) 2) ABC Appliance offers a warranty requiring an annual fee. The warranty may be purchased at the time of sale or any time within the first year after the appliance was purchased. The warranty fee after the date of purchase is twice the time - of - purchase fee. When asked why the fee was higher after the date of purchase, ABC's president said, "Buying a warranty is voluntary. We've noted that those who buy the warranty after the purchase date have a greater need for service." Charging a lower rate after the date of purchase would expose ABC to what problem which also impacts private insurers? A) excessive premiums B) adverse selection C) reduced claims D) bad investments 3) 3) In addition to marketing life insurance, life insurers typically sell which of the following products? I. Retirement plans. II. Disability - income coverage. A) I only B) II only C) both I and II D) neither I nor II 4) 4) Which of the following types of risks is normally uninsurable by private insurers? A) property risks B) liability risks C) personal risks D) market risks 5) 5) Gina would like to buy a house. She will pay 10 percent of the cost of the house as a down payment and borrow the other 90 percent from a mortgage lender. The home will serve as collateral for the loan. The lender requires Gina to purchase property insurance on the home so that the collateral supporting the loan will be protected. This scenario illustrates which of the following benefits of insurance to society? A) enhancement of credit B) incentives for loss prevention C) source of investment funds D) reduction of fear and worry 1
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6) 6) JKL Insurance Company estimates that 14 out of every 100 homeowners it insures will file a claim each year. Last year, JKL insured 200 homeowners. According to the law of large numbers, what should happen if JKL insures 2,000 homeowners this year? A) The average size of loss should decline in value. B) The total dollar value of claims settled should decrease. C) The actual results will more closely approach the expected results. D) The total number of claims filed by JKL policyowners should decrease. 7) 7) Apex Insurance Company wrote a large number of property insurance policies in an area where earthquake losses could occur. When the president of Apex was asked if she feared that a severe earthquake might put the company out of business, she responded, "Not a chance. We transferred most of that risk to other insurance companies." The shifting of part or all of the insurance
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This note was uploaded on 03/21/2011 for the course ECON 400 taught by Professor Shqerat during the Spring '11 term at University of Jordan.

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Moh - Exam Name MULTIPLE CHOICE Choose the one alternative...

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