Business Risk and Insurance Concepts Quiz

Questions and Answers

Match the terms with their definitions:

Business risk = The potential for loss in a business venture Disability insurance = Coverage that provides income in the event of a disability Liability insurance (first-party coverage) = Insurance that protects against claims from one's own actions Long-term care insurance = Insurance designed to cover the costs of long-term care services

Match the types of hazards with their descriptions:

Moral hazard = Risk resulting from dishonest behavior Physical hazard = A physical condition that increases risk Morale hazard = Risk increase due to carelessness Frequency = The rate of occurrence of events over time

Match the insurance types with their coverage:

Health insurance = Coverage for medical expenses Liability insurance (third-party coverage) = Protection against claims made by others Umbrella insurance = Excess insurance providing additional coverage Disability insurance = Coverage for loss of income due to disability

Match the property types with their categories:

Personal property = Movable items owned by an individual Real property = Land and anything permanently attached to it Floater = Insurance that covers movable personal property Indemnity = Compensation for loss or damage Signup and view all the answers

Match the terms with their related concepts:

Peril = Event that may cause a loss Insurable interest = Requirement for a valid insurance contract Pure risk = Risk with no possibility of gain Severity = Impact or magnitude of a loss Signup and view all the answers

Match the following types of insurance with their specific purpose:

Disability insurance = Protection against income loss due to inability to work Health insurance = Coverage for medical expenses Long-term care insurance = Assistance with everyday activities due to illness or disability Umbrella insurance = Additional liability coverage over existing policies Signup and view all the answers

Match the following risk concepts with their explanations:

Pure risk = Risk with only the possibility of loss Moral hazard = Risk resulting from a change in behavior after obtaining insurance Frequency = How often a peril occurs Severity = The potential amount of loss from a peril Signup and view all the answers

Match the following property types with their classifications:

Personal property = Movable assets owned by an individual Real property = Fixed assets such as land and buildings Floater = Coverage for property that may move from location to location Liability insurance (third-party coverage) = Protection against claims made by others Signup and view all the answers

Match the following terms with their corresponding definitions:

Insurable interest = The requirement that the insured must have a stake in the insured item Coinsurance = A clause that requires the insured to share in the risk Peril = An event that can cause a financial loss Hazard = A condition that increases the likelihood of a peril occurring Signup and view all the answers

Match the following terms related to liability insurance with their descriptions:

Liability insurance (first-party coverage) = Coverage for an insured’s own losses Liability insurance (third-party coverage) = Protection against claims made by others for damages Own occupation (definition of disability) = A definition that considers whether the insured can perform their specific job Social insurance = Programs that provide protection against economic risks Signup and view all the answers

Match the following insurance types with their specific characteristics:

Disability Insurance = Provides income replacement for the disabled Health Insurance = Covers medical expenses Liability Insurance (Third-party) = Protects against claims made by others Umbrella Insurance = Offers additional coverage beyond other policies Signup and view all the answers

Match the following terms with their associated concepts:

Coinsurance = Sharing of risk between insurer and insured Moral Hazard = Behavior modification due to insurance coverage Pure Risk = A situation with only the possibility of loss Hazard = Condition that increases the likelihood of an accident Signup and view all the answers

Match the following types of property with their definitions:

Personal Property = Movable assets owned by individuals Real Property = Land and buildings owned Floater = Insurance covering property in transit Long-term Care Insurance = Coverage for extended personal care services Signup and view all the answers

Match the following risk factors with their descriptions:

Frequency = How often a risk occurs Severity = The potential impact of a risk when it occurs Peril = An event causing a loss Morale Hazard = Careless behavior due to the existence of insurance Signup and view all the answers

Match the following definitions of disability with their corresponding types:

Own Occupation = Inability to perform duties of one’s specific profession Indemnity = Compensating for a loss to restore to a previous state Insurable Interest = A financial stake in the insured property Social Insurance = Public programs designed to provide financial support Signup and view all the answers

Study Notes

Business Risk

Refers to the potential for loss or failure in a business due to various factors, including financial uncertainty, operational issues, or market fluctuations.

Coinsurance

A clause in insurance policies requiring policyholders to bear a portion of the loss, typically expressed as a percentage of coverage.

Disability Insurance

Provides income replacement to individuals who are unable to work due to a disability, ensuring financial security during recovery.

Floater

A type of insurance policy that covers personal property at different locations or against various risks, often tailored for high-value items.

Frequency

Refers to how often a loss or claim occurs within a specific period; high frequency can indicate greater risk for insurers.

Hazard

Any condition that increases the likelihood of a loss occurring; can be physical, moral, or morale in nature.

Health Insurance

A type of insurance that pays for medical expenses incurred by the insured, can cover hospital visits, medications, and surgeries.

Indemnity

A principle in insurance where the insured is compensated for losses up to the policy limit, restoring them to their financial position before the loss.

Insurable Interest

A legal requirement that ensures the policyholder has a financial stake in the property or life being insured, preventing moral hazard.

Liability Insurance (First-Party Coverage)

Covers losses suffered by the insured directly, such as medical expenses and damages from an accident involving their vehicle.

Liability Insurance (Third-Party Coverage)

Protects the insured against claims made by others for bodily injury or property damage caused by the insured’s actions or negligence.

Long-Term Care Insurance

Provides coverage for services that assist individuals with chronic illnesses or disabilities, often covering nursing homes or in-home care.

Moral Hazard

Refers to the risk that individuals will alter their behavior once insured, often leading to increased claims and losses.

Morale Hazard

Involves a lack of concern for loss because of insurance coverage, potentially leading to negligence or risky behaviors.

Own Occupation (Definition of Disability)

A definition in disability insurance that specifies an individual is considered disabled if they cannot perform their specific job, regardless of their ability to work in other areas.

Peril

Any specific risk or event that can cause a loss, such as fire, theft, or natural disasters.

Personal Property

Refers to movable items owned by an individual, which can include furniture, electronics, and clothing, often covered under homeowners or renters insurance.

Physical Hazard

A tangible condition or situation that increases the likelihood of a loss, such as faulty wiring or unsafe storage practices.

Pure Risk

A type of risk involving scenarios that may only result in loss or no loss, such as natural disasters, with no potential for financial gain.

Real Property

Refers to land and anything permanently attached to it, such as buildings or structures, distinct from personal property.

Severity

The magnitude or seriousness of a loss that occurs, influencing insurance pricing and risk assessment.

Government programs designed to provide financial protection against economic risks, including unemployment, disability, and retirement benefits.

Umbrella Insurance

A type of liability insurance that provides additional coverage beyond the limits of primary policies, protecting against major claims and lawsuits.

Business Risk

Refers to the potential for loss or failure in a business due to various factors, including financial uncertainty, operational issues, or market fluctuations.

Coinsurance

A clause in insurance policies requiring policyholders to bear a portion of the loss, typically expressed as a percentage of coverage.

Disability Insurance

Provides income replacement to individuals who are unable to work due to a disability, ensuring financial security during recovery.

Floater

A type of insurance policy that covers personal property at different locations or against various risks, often tailored for high-value items.

Frequency

Refers to how often a loss or claim occurs within a specific period; high frequency can indicate greater risk for insurers.

Hazard

Any condition that increases the likelihood of a loss occurring; can be physical, moral, or morale in nature.

Health Insurance

A type of insurance that pays for medical expenses incurred by the insured, can cover hospital visits, medications, and surgeries.

Indemnity

A principle in insurance where the insured is compensated for losses up to the policy limit, restoring them to their financial position before the loss.

Insurable Interest

A legal requirement that ensures the policyholder has a financial stake in the property or life being insured, preventing moral hazard.

Liability Insurance (First-Party Coverage)

Covers losses suffered by the insured directly, such as medical expenses and damages from an accident involving their vehicle.

Liability Insurance (Third-Party Coverage)

Protects the insured against claims made by others for bodily injury or property damage caused by the insured’s actions or negligence.

Long-Term Care Insurance

Provides coverage for services that assist individuals with chronic illnesses or disabilities, often covering nursing homes or in-home care.

Moral Hazard

Refers to the risk that individuals will alter their behavior once insured, often leading to increased claims and losses.

Morale Hazard

Involves a lack of concern for loss because of insurance coverage, potentially leading to negligence or risky behaviors.

Own Occupation (Definition of Disability)

A definition in disability insurance that specifies an individual is considered disabled if they cannot perform their specific job, regardless of their ability to work in other areas.

Peril

Any specific risk or event that can cause a loss, such as fire, theft, or natural disasters.

Personal Property

Refers to movable items owned by an individual, which can include furniture, electronics, and clothing, often covered under homeowners or renters insurance.

Physical Hazard

A tangible condition or situation that increases the likelihood of a loss, such as faulty wiring or unsafe storage practices.

Pure Risk

A type of risk involving scenarios that may only result in loss or no loss, such as natural disasters, with no potential for financial gain.

Real Property

Refers to land and anything permanently attached to it, such as buildings or structures, distinct from personal property.

Severity

The magnitude or seriousness of a loss that occurs, influencing insurance pricing and risk assessment.

Government programs designed to provide financial protection against economic risks, including unemployment, disability, and retirement benefits.

Umbrella Insurance

A type of liability insurance that provides additional coverage beyond the limits of primary policies, protecting against major claims and lawsuits.

Business Risk

Refers to the potential for loss or failure in a business due to various factors, including financial uncertainty, operational issues, or market fluctuations.

Coinsurance

A clause in insurance policies requiring policyholders to bear a portion of the loss, typically expressed as a percentage of coverage.

Disability Insurance

Provides income replacement to individuals who are unable to work due to a disability, ensuring financial security during recovery.

Floater

A type of insurance policy that covers personal property at different locations or against various risks, often tailored for high-value items.

Frequency

Refers to how often a loss or claim occurs within a specific period; high frequency can indicate greater risk for insurers.

Hazard

Any condition that increases the likelihood of a loss occurring; can be physical, moral, or morale in nature.

Health Insurance

A type of insurance that pays for medical expenses incurred by the insured, can cover hospital visits, medications, and surgeries.

Indemnity

A principle in insurance where the insured is compensated for losses up to the policy limit, restoring them to their financial position before the loss.

Insurable Interest

A legal requirement that ensures the policyholder has a financial stake in the property or life being insured, preventing moral hazard.

Liability Insurance (First-Party Coverage)

Covers losses suffered by the insured directly, such as medical expenses and damages from an accident involving their vehicle.

Liability Insurance (Third-Party Coverage)

Protects the insured against claims made by others for bodily injury or property damage caused by the insured’s actions or negligence.

Long-Term Care Insurance

Provides coverage for services that assist individuals with chronic illnesses or disabilities, often covering nursing homes or in-home care.

Moral Hazard

Refers to the risk that individuals will alter their behavior once insured, often leading to increased claims and losses.

Morale Hazard

Involves a lack of concern for loss because of insurance coverage, potentially leading to negligence or risky behaviors.

Own Occupation (Definition of Disability)

A definition in disability insurance that specifies an individual is considered disabled if they cannot perform their specific job, regardless of their ability to work in other areas.

Peril

Any specific risk or event that can cause a loss, such as fire, theft, or natural disasters.

Personal Property

Refers to movable items owned by an individual, which can include furniture, electronics, and clothing, often covered under homeowners or renters insurance.

Physical Hazard

A tangible condition or situation that increases the likelihood of a loss, such as faulty wiring or unsafe storage practices.

Pure Risk

A type of risk involving scenarios that may only result in loss or no loss, such as natural disasters, with no potential for financial gain.

Real Property

Refers to land and anything permanently attached to it, such as buildings or structures, distinct from personal property.

Severity

The magnitude or seriousness of a loss that occurs, influencing insurance pricing and risk assessment.

Government programs designed to provide financial protection against economic risks, including unemployment, disability, and retirement benefits.

Umbrella Insurance

A type of liability insurance that provides additional coverage beyond the limits of primary policies, protecting against major claims and lawsuits.

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Description

Test your knowledge on key concepts related to business risk and various insurance types in this Chapter 12 quiz. Covering topics like coinsurance, liability insurance, and moral hazards, it will challenge your understanding of essential insurance principles.