Chapter 12 Study Guide

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A business faces risk due to:

An increase in local taxes, poor managements, and a decline in consumer demand.

Human risks:

Are caused by the actions of individuals

Your insurance agent should:

Be someone you trust

Employee Theft:

Can devastate your business financially

An electronic credit authorizer is a machine that:

Checks to see if a credit card is valid

The second step in buying insurance is to:

Determine how much coverage you need

True or False: All risks are insurable.

False

True or False: Although a few employees are hardworking and honest, most will try to take things from your business.

False

True or False: Credit cards are seldom targets of theft.

False

True or False: Electronic devices and security guards are the only steps you can take to prevent or reduce shoplifting.

False

True or False: If you practice risk management you are assuring your business will never face a loss.

False

True or False: It is always a good idea to have extra insurance so every risk is more than covered.

False

True or False: Liability insurance covers fire, robbery, storm damage, and floods.

False

True or False: The most important type of insurance you will need for your business is probably life insurance.

False

True or False: Theft is one of the risks that business owners face, and it is impossible to protect yourself against the different kinds of theft.

False

Which of the following would generally not be considered an uninsurable business risk?

Fire

The location of your business determines whether or not you need:

Flood Insurance

Property insurance usually does not cover losses due to:

Floods

The writer of a bounced check:

Has insufficient funds in the checking account to cover the check

This type of insurance covers your company's legal responsibility for the harm it may cause to others:

Liability

You transfer risk and protect yourself against financial losses from some risks by:

Purchasing insurance

Installing electronic merchandise tags can help to:

Reduce the risk of shoplifting

Looking at all aspects of your business and determining the risks you face is called a:

Risk Assessment

Uninsurable risks are tied to all of the following except:

Robberies

Which type of risk offers you the chance to gain as well as lost from the event or activity?

Speculative

The classifications of risk are based on all of the following except the:

Timing of the risk

To limit losses in the event of a robbery, a business can:

Transfer cash to a safe frequently

True or False: A payment made to an insurance company to cover the cost of insurance is a premium.

True

True or False: A pure risk presents the chance of loss but no opportunity for gain.

True

True or False: A recovery plan is an important part of every risk management plan.

True

True or False: Business interruption insurance covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business.

True

True or False: Business owners buy life insurance so that their heirs have enough money to continue the business.

True

True or False: Risk assessment involves looking at all aspects of a business and determining possible risks.

True

True or False: Robbery is one of the risks of being open for business.

True

True or False: The first step in buying insurance is determining how much coverage you need.

True

True or False: To get the best price for insurance, compare policies from different insurance agents.

True

True or False: To minimize losses from bad checks, you can establish a policy of accepting only check drawn on in-state banks.

True

True or False: You should let your managers and employees know about your plan for handling risks.

True


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