Personal Finance Chapter 21
Which of the following would not be an insurable risk?
a speculative risk
Which of the following will likely result in lower insurance costs?
buy more than one type of insurance from the same company
Essentially, insurance is a way to enrich policyholders. (t/f)
false
It is not possible to protect yourself from the consequences of pure risks. (t/f)
false
Life insurance typically becomes a higher priority for people as they enter their retirement years and their children marry and start lives of their own. (t/f)
false
Risk transfer is the process of accepting the consequences of risk. (t/f)
false
The amount of money payable to a policyholder upon discontinuation of a life insurance policy is called the face amount. (t/f)
false
The premiums for group plans are usually considerably higher than for individual plans. (t/f)
false
The three major insurable risks are pure, economic, and speculative. (t/f)
false
A condition that creates or increases the likelihood of some loss is called a
hazard
Which of the following is an example of a speculative risk?
placing a bet on a horse race
Under an insurance policy, the insurer agrees to assume an identified risk when the policyholder pays a fee called the
premium
All of the following types of insurance protect against personal risk except
property insurance
Understanding the types of risk you will face and their potential consequences is called
risk assessment
Which of the following techniques is not recommended for a serious risk?
risk assumption
Buying insurance is an example of
risk shifting
In which period of the business cycle has the economy hit the bottom?
trough
Economic risk may result in gain or loss because of changing economic conditions. (t/f)
true
Factories begin laying off workers during the decline period of the business cycle. (t/f)
true
Generally, the higher the deductible, the lower the insurance premium. (t/f)
true
In the business cycle, the trough is followed by recovery. (t/f)
true
Insurers cannot predict which specific individuals will suffer losses. (t/f)
true
Some risks are not serious enough to insure. (t/f)
true
The financial strength of an insurer can be a major factor in keeping down insurance costs. (t/f)
true
You cannot buy insurance on a house you do not own. (t/f)
true