1. During your recent meeting with Ron, a new client, you discussed the concept of risk. You defined several terms for Ron. Which of the following terms is defined as: the possibility of loss, but no possibility of gain?

a. Pure Risk.

b. Perils.

c. Risk Transfer.

d. Open-perils.

2. Which of the following would not be considered a personal risk?

a. Becoming disabled due to a car accident.

b. Injuring a passenger in your vehicle during an auto accident that was your fault.

c. Dying at age 42 given a normal life expectancy of age 80.

d. Being diagnosed with a curable form of cancer.

3. You recently met with your client, Don, age 40. Don is widowed and has one dependent child. During your meeting with him you discussed the concept of risk management. Which of the following statements regarding the ways to manage risk is incorrect?

a. The selling of Don’s Jet Ski is an example of risk reduction.

b. Not purchasing life insurance is an example of risk retention.

c. Purchasing a warranty is an example of risk transfer.

d. Insurance is not necessary for every risk of financial loss.

4. If a risk has a high frequency of occurrence and a high severity, you should:

a. Transfer the risk.

b. Retain the risk.

c. Reduce the risk.

d. Avoid the risk.

5. Ginny and Max own a rental home on the Gulf Coast. They insured their property with their local insurance company. The policy provides protection against losses caused by perils that are specifically listed as covered in the policy. What type of policy do they have?

a. All-risk policy.

b. Open-perils policy.

c. Named-perils policy.

d. Identified-perils policy.