Introduction to Risk and Insurance- Mid-term Exam- Spring 2023 MODEL (4)
Mid-Term Exam (Spring 2023) Academic Year: 2022-2023
Introduction to Risk and Insurance Course Code: 020304202
Department: Statistics Second Level Major: General
From: 10:45 ــــــــ11:45 am English and French Sections Wednesday: 5 /4 /2023
Duration: 60 minutes The Exam consists of (4) pages
First: MCQ (20 questions) MODEL (4)
(1) The principle (or principles) of insurance that prevents the insured from profiting of insurance is
(or are):
A) Utmost Good Faith.
B) Insurable interest.
C) Indemnity.
D) All the above.
(2) If the ACV (actual cash value) is $200,000 and the face amount of insurance is $300,000, if a total
loss occurs, how much does the insurer pay?
A) $100,000.
B) $300,000.
C) $200,000.
D) None of the above.
(3) If the ACV (actual cash value) is $250,000 and the face amount of insurance is $250,000, then the
condition of insurance is:
A) Insufficient.
B) Sufficient.
C) Over sufficient.
D) All the above.
(4) If a plant is insured against fire, the ACV (actual cash value) is one million dollars and the face
amount of insurance $800,000, if a fire occurs and the plant is totally destroyed, the insurer pays:
A) $800,000.
B) One million dollars.
C) $640,000.
D) None of the above.
(5) If a firm is insured against fire and theft, the ACV (actual cash value) is three million dollars and
the face amount of insurance is two million dollars, if a fire occurs and loss is $720,000, the insurer
pays (apply coinsurance clause) ……
A) $720,000.
B) $480,000.
C) Two million dollars.
D) None of the above.
Page 1 of 4
Introduction to Risk and Insurance- Mid-term Exam- Spring 2023 MODEL (4)
(6) All the following is a characterized of social insurance EXCEPT:
A) Coverage is compulsory.
B) The method of determining benefits is prescribed by law.
C) The plan is administrated or supervised by the government.
D) The benefits are directly related to contributions.
(7) Social insurance covers:
A) Personal risks.
B) Property risks.
C) Liability risks.
D) All the above.
(8) Life insurance is available under:
A) Private insurance and social insurance.
B) Fire insurance only.
C) Private insurance only.
D) Social insurance only.
(9) ........ قد يعنى التعويض في التأمين
A) Face amount of insurance.
B) Compensation.
C) Indemnity.
D) All the above.
(10) One of the requirements for insurable risks is that the loss is determined in terms of:
A) Cause.
B) Time.
C) Place.
D) All the above.
(11) The negative technique for handling the risks is:
A) Active retention.
B) Avoidance.
C) Insurance.
D) Passive retention.
(12) Loss control includes which of the following?
I. Loss reduction II. Loss prevention
A) I only.
B) II only.
C) Both I and II.
D) Neither I nor II.
(13) Risks may be unknowingly retained because of ignorance, indifference, or laziness.
A) Passive retention.
B) Loss reduction.
C) Loss prevention.
D) Active retention.
Page 2 of 4
Introduction to Risk and Insurance- Mid-term Exam- Spring 2023 MODEL (4)
(14) From the viewpoint of the insurer, all the following are characteristics of an insurable risk
EXCEPT:
A) The loss must be accidental.
B) There must be a large number of exposure units.
C) The premium must be economically feasible.
D) The loss should be catastrophic.
(15) A situation in which either profit or loss is possible refers to a ….
A) Pure risk.
B) Subjective risk.
C) Speculative risk.
D) Objective risk.
(16) An earthquake is an example of a….
A) Speculative risk.
B) Dynamic risk.
C) Fundamental risk.
D) Subjective risk.
(17) Given that the number of cars insured against collision =25,000, the probability of collision
=0.045, and the actual number of cars damaged by collision = 1170. Therefore, the objective risk is
=……
A) 4%.
B) 5%.
C) 1125.
D) 50.
(18) The term chance of loss means:
A) The size of loss.
B) The probability of loss.
C) The objective risk.
D) All the above.
(19) Objective risk is defined as the ……
A) Actual outcome (or loss).
B) Expected outcome (or loss).
C) Variation between actual outcome (or loss) and expected outcome (or loss).
D) Relative variation between actual outcome (or loss) and expected outcome (or loss).
(20) The extra expense incurred by a business to stay in operation following a fire is an example of a
(an) …….
A) Direct loss.
B) Indirect loss.
C) Nonfinancial loss.
D) Property loss.
Page 3 of 4
Introduction to Risk and Insurance- Mid-term Exam- Spring 2023 MODEL (4)
Second: True or False (20 questions)
(1) There must be a direct loss before there can be an indirect.
(2) Death of a friend and failure in an exam these cases are example of financial risks.
(3) The law of large numbers states that: As the number of exposure units increases, an insurance
company cannot predict its future losses with a high degree of accuracy.
(4) There is no difference between Chance of Loss and Objective Risk.
(5) Chemical material in a plant is a moral hazard that increases the chance of fire.
(6) Subjective risk is defined as the uncertainty based on an individual’s mental condition or state of
mind.
(7) Indemnity in property insurance = Face amount of insurance.
(8) A life insurance contract is a valued policy under which the face amount of insurance paid by the
insurer is determined in advance on the day of buying the insurance.
(9) Assume that a car has an actual cash value (ACV) of $80,000 and that its owner has insured it for
$ 100,000 (Face amount or carried amount) against collision. If the loss is $30,000, the indemnity
is $37,500.
(10) If the Face amount of insurance is more than ACV, therefore, the condition of insurance is
“Under Insurance or Insufficient Insurance”.
(11) Risk management deals with insurable and uninsurable pure risks.
(12) One of the requirements of an insurable risk is that the loss should Not be Catastrophic.
(13) An individual who purchases insurance is called an insurer.
(14) Risk manager is concerned only with the management of pure risks, not speculative risks.
(15) Insurance is recommended for those risks associated with high probability or frequency and high
severity.
(16) Loss control is recommended for those risks associated with high probability or frequency and
high severity.
(17) Subrogation is Substitution of the insurer in place of the insured for the purpose of claiming
indemnity from a third person for loss covered by insurance.
(18) If financial interest is involved, the insurable interest in life insurance can be met. For example:
One business partner can insure the life of his partner.
(19) Concealment is an intentional failure of the applicant for insurance to reveal a material fact to
the insurer such as Nondisclosure.
(20) In life insurance, the principle of indemnity is applied since the loss is always total.
End of Questions
MODEL (4)
GOOD LUCK
Page 4 of 4
