1. Bachelor of Commerce (B Com)
  2. Principles of Insurance
  3. Set 1

Principles of Insurance Solved MCQs

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Chapter: Unit 1
1.

Largest Life Insurance Company in India is:

A. The New India Assurance Company Limited
B. Life Insurance Corporation of India (LIC)
C. United India Insurance Company Limited
D. National Insurance Company Limited
Answer» B. Life Insurance Corporation of India (LIC)
2.

The term risk may be defined as:

A. The possibility of adverse results flowing from any occurrence.
B. The possibility of an outcome being different from the expected one.
C. Both a and b
D. None of the above
Answer» C. Both a and b
3.

Risk of premature death is a

A. Financial risk
B. Personal risk
C. Dynamic risk
D. Subjective risk
Answer» B. Personal risk
4.

Insurance is a risk management technique involving:

A. Risk retention
B. Risk avoidance
C. Loss control
D. Risk transfer
Answer» D. Risk transfer
5.

Organisations are mainly concerned with managing

A. Pure risks
B. Speculative risks
C. Personal risks
D. None of the above
Answer» A. Pure risks
6.

The first step in risk management process is

A. Risk avoidance
B. Risk identification
C. Insurance
D. Risk evaluation
Answer» D. Risk evaluation
7.

Main emphasis of risk management is on ___________.

A. Risk retention
B. Reduction of cost of handling risk
C. Risk transfer
D. all
Answer» B. Reduction of cost of handling risk
8.

Cost of loss control is

A. cost of reducing frequency and severity of loss
B. cost of paying workers compensation
C. cost of self-insurance
D. all
Answer» A. cost of reducing frequency and severity of loss
9.

Following are the risk management methods:

A. Insurance
B. Hedging
C. Derivatives
D. All of the above
Answer» D. All of the above
10.

Which of the following types of risks best meets the requirements for being insurable by private insurers?

A. Market risks
B. Property risks
C. Financial risks
D. Political risks
Answer» B. Property risks
11.

All of the following are financial risks which may be faced by business organizations EXCEPT

A. Interest rate risk.
B. Commodity price risk.
C. Product liability risk.
D. Currency exchange rate risk.
Answer» C. Product liability risk.
12.

Risk management follows a systematic process which involves……….steps.

A. Two
B. Three
C. Four
D. Five
Answer» D. Five
13.

Risk management information system is not useful in one of the following

A. Reporting
B. Hedging
C. Claim adjustment process review
D. none
Answer» B. Hedging
14.

Event of high frequency and low severity fall in the self-retention category

A. True
B. False
C. none
D. all
Answer» A. True
15.

When as event is stated to be possible, it has a probability between

A. Zero and one
B. Zero or one
C. None of these
D. Both of the above
Answer» A. Zero and one
16.

If the most impossible event is assigned a value of zero, then most inevitable event is assigned a value

A. Of one
B. Between zero and one
C. Between zero to 10
D. Between 10 to 100
Answer» D. Between 10 to 100
17.

Which of the statement are true? A. Risk retention and risk transfer are some of the techniques to manage risks. B. Implementation is one of the steps in risk management

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» C. Both the statements
18.

Which of the statements are true? A. Loss prevention and loss reduction mean different things. B. Risk maybe transferred by contract.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» B. Statement B.
19.

Which of the statements is correct? A. The simplest way to deal with a risk is to avoid it. B. This technique is always possible and practical.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» D. Neither of the statements
20.

Which of the statements is correct?
A. One of the methods of risk retention is by way of voluntary excess or deductible available under the policy.
B. Another method of retention of risk is to absorb small losses as normal operating expenses of business.

A. Statement A.
B. Statement B.
C. Both the statements
D. Neither of the statements
Answer» C. Both the statements
21.

When should a risk be avoided?

A. When the risk event has a low probability of occurrence and low impact
B. When the risk event is unacceptable -- generally one with a very high probability of Occurrence and high impact
C. When it can be transferred by purchasing insurance
D. A risk event can never be avoided
Answer» B. When the risk event is unacceptable -- generally one with a very high probability of Occurrence and high impact
22.

Risk management can be defined as the art and science of _________ risk factors throughout the life cycle of a project.

A. Researching, reviewing, and acting on
B. Identifying, analyzing, and responding to
C. Reviewing, monitoring, and managing
D. Identifying, reviewing, and avoiding
Answer» A. Researching, reviewing, and acting on
23.

When a firm buys insurance to cover losses caused by riots, the firm is

A. Transferring risk.
B. Avoiding risk.
C. Assuming risk.
D. Reducing risk.
Answer» A. Transferring risk.
24.

Suppose a project has many hazards that could easily injure one or more persons and there is no method of avoiding the potential for damages. The project manager should consider __________ as a means of deflecting the risk.

A. Abandoning the project
B. Buying insurance for personal bodily injury
C. Establishing a contingency fund
D. Establishing a management reserve
Answer» B. Buying insurance for personal bodily injury
25.

The cause of loss or a contigency that may cause a loss is known as--------------

A. Hazard
B. peril
C. Risk
D. Uncertainty
Answer» D. Uncertainty
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