a. Identify and analyze new and existing loss exposures.b. Purchase insurance.c.

Rewrite the risk management mission.d. Change insurance companies.ANSWER A( p.

10.16)OBJECTIVE 7QUESTIONWhat is a benefit that a business can receive by applyi
ng sound risk management?a. It will meet state and federal safety regulations.b.
It will have a better opportunity to achieve business goals.c. It will not have
to worry about losses.d. It will be able to attract and retain talented employe
es and managers.ANSWER B( pp. 10.17-10.18)QUESTIONWhat will Jane be able to gain
as a benefit by applying sound risk management to her transportation situation?
a. No future increases in her insurance premium.b. A loss free futurec. Economic
growthd. Greater peace of mindANSWER D( pp. 10.17-10.18)QUESTIONBusinesses, ind
ividuals, and families that practice sound risk management can benefit society b
y doing all of thefollowing, EXCEPT:a. Increasing interest in leisure activities
b. Reducing the overall number of lossesc. Controlling medical expenses through
reduced injuriesd. Stimulating economic growthANSWER A( p. 10.18)QUESTIONOne of
the benefits to a business of retaining a loss exposure instead of insuring it i
sa. A reduction in expenses.b. A greater peace of mind.c. Access to the insurer'
s loss control services.d. Increase in expenses.



ANSWER A( p. 10.17)OBJECTIVE 8QUESTIONWhat is an effective way for Frank and Jan
to begin identifying the liability loss exposures associated with theirnew home
?a. Hire a professional risk managerb. Determine the value of the home and conte
ntsc. Purchase a homeowners insurance policyd. Inspect the home to look for item
s and activities that might cause injury or damageANSWER D( pp. 10.19-10.21)QUES
TIONFrank and Jan researched lead paint hazards and abatement techniques on the
Internet. They discovered that thebest action they can take inside the house is
to remove loose paint chips and dust, replace the windows, and sealthe walls wit
h a paint designed for that purpose.What risk management technique does this act
ivity involve?a. Avoidanceb. Loss controlc. Retentiond. Noninsurance transferANS
WER B( pp. 10.19-10.21)QUESTIONFrank and Jan have discovered that the pollution
that is resulting from the fuel oil leaking into the soil is notcovered by their
homeowners insurance policy. They fear that the oil might seep into the water t
able andcontaminate their neighbors' well water. Illness and damage that might r
esult would be very expensive. Frankand Jan can purchase an endorsement that wil
l provide coverage for this pollution exposure. The endorsementwould cost $50 pe
r year.Is this an effective risk management selection for Frank and Jan until th
ey can replace the tank?a. Yes, they should do this indefinitely and not replace
the tank.b. Yes, they are exchanging a large exposure for a little premium.c. N
o, they are spending a lot of money for little protection.d. No, each neighbor w
ill have insurance to cover any damage to their wells.ANSWER B( pp. 10.19-10.21)
QUESTION Jeff recently started a consulting business. One of his concerns is tha
t he will be sued for giving erroneous adviceto a client. What would be the best
risk management technique for Jeff's use in this situation?



a. Retentionb. Avoidancec. Insuranced. DuplicationANSWER C( pp. 10.19-10.20)OBJ
ECTIVE 9QUESTIONThe process of managing exposures to accidental losses is known
asa. Insurance.b. Risk management.c. Retention.d. Avoidance.ANSWER B( p. 10.3)QU
ESTIONThe risk control technique that seeks to lower the severity of losses isa.
Loss prevention.b. Risk financing.c. Loss reduction.d. Duplication.ANSWER C( p.
10.9)QUESTIONWhen a household or organization decides to keep all or part of a
loss exposure this is known asa. Insurance.b. Retention.c. Reduction.d. Separati
on.ANSWER B( p. 10.10)