Personal Finance Chapter 8

Examples of risk reduction include:

-installing smoke alarms -wearing a seat belts in a car

Insurance companies or insurers are in the business of diluting risks for the insured.

False

Risk management needs are the same throughout one's life.

False

Insuring one's house against _______ is an example of a peril. Multiple choice question.

Fire

is protection against possible financial loss that allows you to be prepared for the worst.

Insurance

Which of the following is true regarding insurance?

Insurance is not the only way of dealing with risk.

Potential property losses can be caused by which of the following types of risks?

Losses caused by perils and by criminal behavior

Which of the following are risk avoidance actions?

Making sure you do not face product failure by not manufacturing new products

is failure to take ordinary or reasonable care in a situation.

Negligence

Which of the following are covered by a homeowner's policy?

Other structures A house Personal property

is anything that may possibly cause a loss.

Peril

Which types of risks would be classified as pure risks?

Property risks Liability risks Personal risks

Which of the following are general risk management techniques?

Risk avoidance Risk reduction Risk assumption

Which of the following are risk assumption actions?

Self-insuring Deciding not to purchase collision insurance

Physical damage to a property is caused by perils such as fire, wind, water, and smoke.

True

Risk management is a long-range financial planning process that helps reduce financial losses caused by destructive events.

True

The price paid for insuring your home and your car should be thought of as:

an investment for protecting your resources.

The risk of loss or damage due to robbery, burglary, and arson are examples of losses caused by:

criminial behavior

Personal risks are uncertainties surrounding loss of income or life due to:

disability unemployment old age illness

Purchasing insurance is the only way to manage risk.

false

Insurance is a protection against possible _______ loss, and provides protection against many ________. Multiple choice question.

financial, risks

A deductible is a set amount that a policyholder must pay:

for risk shifting. per loss on an insurance policy. for assuming risk.

Defective house wiring is an example of a:

hazard

a ____ is anything that increases the likelihood of loss through some peril.

hazard

Personal risks involve loss of ______ or _____ due to various reasons. Multiple choice question.

income, life

The legal responsibility for the financial cost of another person's losses or injuries is known as:

liability

Risk management is a(n) ________. Multiple choice question.

long-range planning process

Risk management is a _______-range planning process.

longer

Not clearing ice from the front steps of your house is an example of _____, which is failure to take ordinary or reasonable care.

negligence

The contract that is purchased by the insured person when joining a risk-sharing group is known as:

policy.

A risk for which an insurance company pays only if some event that the insurance covers happens is called:

pure risk

The chance of loss or injury is referred to as:

risk

Choosing not to participate at all in any kind of heavy physical activity is one way to protect yourself from injury. This is an example of:

risk avoidance.

When a risk includes a chance of either loss or gain, it is called:

speculative risk

Starting a small business, buying risky stocks, and going to the casinos are all examples of:

speculative risks

Homeowner's coverage includes:

toolshed. plants. garage. trees.

When insurance companies take on the risk of loss or injury, it refers to the fact that no one can predict:

trouble.