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Lesson 3 Loss Control and Legal Liability EXAMINATION NUMBER 50082300 Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com ,!,,,1 1 1 ,.134 0 krr. \" When you feel confident that you have mastered the material in Lesson 3, go to http://www.takeexamsonline.com and submit your answers online. If you don't have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 1-15: Select the one best answer to each question. 1. Which of the following best defines strategies used to reduce 1 11 ',1 1 11111 11 11110111 1 1 1 1 1 1,1 1 1111 1'1 111 expected losses? A. Loss control B. Loss prevention C. Loss reduction D. Loss avoidance 2. Which of the following is associated with the reduction of the frequency of losses? A. Loss control B. Loss reduction C. Loss prevention D. Loss avoidance 3. Insurance coverage can reduce the incentives to undertake loss control activities if insurers A. help pay for the loss control. B. pay for losses anyway. C. reduce insurance premiums after loss control is implemented. D. don't reduce insurance premiums after loss control is implemented. 111 4. Segregation of exposure units can reduce A. B. C. D. the expected frequency of losses. the expected severity of losses. both the expected frequency and expected severity of losses. only those losses that result from natural disasters. 5. Billy Bob earns $45,000 and faces a .007 probability of dying in a workplace accident. Jim Bob earns $41,000 and faces a .0038 probability of dying in a workplace accident. The two require the same level of skill and training. From this information, what is the implicit value of a person's life? A. $315,000 B. $571,428 C. $1,052,631 D. $1,250,000 6. Which one of the following is not a potential benefit of loss control efforts to improve workplace safety? A. B. C. D. Reduced expected losses Increased worker productivity Improved marginal cost of safety Reduced insurance premiums 7. In business liability cases, courts may apply an economic standard for negligence called cost-justified precautions. This standard is met if the business A. spent at least 10% of its revenue on safety efforts. B. undertook safety costs whenever the marginal benefit of the safety effort was greater than the marginal cost. C. undertook safety costs whenever the marginal benefit of the safety effort was less than the marginal cost. D. has purchased adequate insurance. 8. Which of the following refers to laws passed by legislative bodies? A. Statutory law B. Common law C. Criminal law D. Tort law 9. Which one of the following liability rules frequently applies to products liability cases? A. No liability B. Negligence C. Strict liability D. Absolute liability 10. Under joint and several liability, A. a defendant's spouse is equally liable for the defendant's negligence. B. a defendant has no defenses against the charge of negligence. C. a defendant can't be held fully responsible for losses he or she only partially caused. D. a defendant can be held fully responsible for losses he or she only partially caused. Examination, Lesson 3 11. Which one of the following is not a potential source of limited liability (or being judgment proof)? A. B. C. D. Bankruptcy laws Being elderly Lack of wealth Being incorporated (as a business) 12. Ted was injured in an accident that was caused by Judy's negligence. As a result of the accident, Ted incurred $8,000 in medical bills. He filed and won a lawsuit against Linda, and the medical bills were paid by the judgment. These medical bills are what type of damages? A. B. C. D. Special compensatory damages General compensatory damages Special punitive damages General punitive damages 13. The conditions necessary for a plaintiff to show that a defendant was negligent include all of the following except which one? A. B. C. D. The The The The defendant had a duty to the plaintiff and breached the duty. defendant's breach of duty was the proximate cause of the plaintiff's injury. defendant intended to cause harm to the plaintiff. plaintiff suffered a loss. 14. In which of the following cases is the defendant always liable? A. No liability B. Absolute liability C. Strict liability D. Negligence 15. John was speeding into an intersection when Mary negligently was making a left turn. Their cars collided, and Mary sued John for her injuries. The jury determined that John was negligent and that Mary was 30% responsible for her own injuries. Mary's actual damages were $25,000. If the contributory negligence rule applies in that jurisdiction, how much will Mary get? A. $25,000 B. $17,500 --- M1- C. $7,500 D. Nothing 5,- Examination, Lesson 3 Lesson 4 Personal Insurance Issues EXAMINATION NUMBER 50082400 Whichever method you use in submitting your exam answers to the school, you must use the number above. For the quickest test results, go to http://www.takeexamsonline.com When you feel confident that you have mastered the material in Lesson 4, go to http://www.takeexamsonline.com and submit your answers online. If you don't have access to the Internet, you can phone in or mail in your exam. Submit your answers for this examination as soon as you complete it. Do not wait until another examination is ready. Questions 1-15: Select the one best answer to each question. 1 The market for auto insurance that provides coverage to drivers who would otherwise not be able to buy insurance is called the A. residual B. voluntary market. C. prior approval D. reinsurance 2. Which of the following is not one of the main types of coverage provided under the personal auto policy? A. Liability coverage for injuries caused by the negligence of the insured driver B. Coverage for physical damage to the personal property of the negligent driver C. Coverage for losses caused to the insured by a driver without liability insurance D. Coverage for theft of the insured vehicle 3. Which one of the following is not an argument favoring no-fault personal injury protection (PIP) coverage? A. B. C. D. Loss payments are generally made more quickly. Dispute resolution costs are lower. It provides increased incentives for auto safety. When fault is unclear, more people will still have first-party coverage. 4. Henry is driving Lisa's automobile. He runs a stop sign and causes an accident. Henry and Lisa both have a personal automobile insurance policy. How will the liability coverage between these two policies most likely be coordinated? A. B. C. D. Henry's policy is primary, while Lisa's policy is excess. Lisa's policy is primary, while Henry's policy is excess. Henry's and Lisa's policy pay equal shares. Only Henry's policy is obligated to provide liability coverage, since he is the at-fault driver. 5. Insurance coverage for flood damage is available through the National Flood Insurance Program. How does the program operate? A. Private insurers sell and service the policies, with the federal government bearing the risk. B. Private insurers sell and service the policies while sharing the risk with the federal government. C. Private insurers underwrite the risk, with the federal government acting as a reinsurer only in the event of a bad loss experience. D. All polices are sold and serviced by the federal government, which also bears the risk. 6. Which of the following statements is true of compulsory automobile insurance? A. B. C. D. It's unconstitutional. It enjoys strong enforcement. It's similar to a flat or sales tax in its impact on policyholders. It has a regressive impact on the distribution of income. 7. Driver classes may be based on which of the following factors? A. Age B. Race C. Sexual orientation D. Religion 8. Which of the following losses is most likely to be excluded from coverage in a homeowner's insurance policy? A. B. C. D. Theft of personal property Damage from lightning strike Property loss due to an intentional act Fire loss Examination, Lesson 4 9. What is the main reason that homeowner's insurance policies commonly exclude coverage for earthquake and flood? A. B. C. D. Not many people need this coverage. The losses tend to be correlated across policyholders. Moral hazard The government can provide this coverage more cost effectively. 10. When Kathy buys a single-premium whole life policy, she A. makes the same premium payment each year of the policy period. B. makes the same premium payment each year for a limited number of years and is then covered for her whole life. C. makes the same premium payment each year for her whole life and is covered for her whole life. D. pays the entire premium in a lump sum when the policy is issued and is then covered for her whole life. 11. In the context of life insurance policies, which of the following equations is incorrect? A. B. C. D. Cash value policies = Term insurance + Savings plan Potentially taxable = Receipt - Net cost Death protection = Death benefit - Cash value Death protection = Death benefit 12. Which of the following is not a tax benefit of cash value life insurance? A. B. C. D. Death benefits aren't taxable income. Life insurance premiums paid are tax deductible in the United States. The annual increase in the cash value while the policy is in force isn't taxed. Returns earned on the savings component are tax deferred until surrender. 13. As a rule of thumb, insurance coverage should equal A. B. C. D. 6 to 10 times annual income. 6 to 10 times net worth. 6 to 10 times monthly income. 6% to 10% of expected annual retirement income. 14. An annuity that pays only until the annuitant dies is called a A. straight life B. term annuity. C. whole life D. universal 15. A policy that pays the face amount of the policy if the insured dies and also pays the face amount if the insured survives the policy term is called a/an A. whole life B. universal life Examination, Lesson 4 C. endowment D. term life policy. Examination Number: 50082300 1. 2. 3. 4. 5. 6. 7. A. Loss control C. Loss prevention D. don't reduce insurance premiums after loss control is implemented B. the expected severity of losses. D. $1,250,000 C. Improved marginal cost of safety B. undertook safety costs whenever the marginal benefit of the safety effort was greater than the marginal cost. 8. A. Statutory law 9. C. Strict liability 10. D. a defendant can be held fully responsible for losses he or she only partially caused. 11. B. Being elderly 12. A. Special compensatory damages 13. C. The defendant intended to cause harm to the plaintiff. 14. B. Absolute liability 15. D. Nothing Examination Number: 50082400 1. A. residual. 2. B. Coverage for physical damage to the personal property of the negligent driver 3. C. It provides increased incentives for auto safety. 4. B. Lisa's policy is primary, while Henry's policy is excess. 5. D. All polices are sold and serviced by the federal government, which also bears the risk. 6. B. It enjoys strong enforcement. 7. A. Age 8. C. Property loss due to an intentional act 9. B. The losses tend to be correlated across policyholders. 10. D. pays the entire premium in a lump sum when the policy is issued and is then covered for her whole life. 11. C. Death protection = Death benefit - Cash value 12. B. Life insurance premiums paid are tax deductible in the United States. 13. A. 6 to 10 times annual income. 14. A. straight life 15. C. endowment