In insurance, all of the following losses areexamples of pure risk EXCEPT:a. injury to a businessperson's customerb. droughtc. decline of stock values on the stock marketd. fire damage to a building

Pure risk is a risk in which there is just the prospect of loss or no loss—there is no chance of…

Answered: In insurance, all of the following lo…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A friend tells you about a plan for the formation of an insurance company that will issue insurance policies to protect a person who buys stock against a decline in the value of that stock. Explain why you believe the scheme will or will not work.
All of the following statements about life insurance company investments are true EXCEPT income from these investments reduces the cost of insurance. funds for these investments are derived primarily from premium income, investment earnings, and maturing investments that must be reinvested. a primary objective in making these investments is safety of principal. the majority of these investments are short-term investments.
Which of the following would be accepted as a proof of liability insurance for automobile liability insurance? An expired insurance card provided by the insurance company A bound insurance application for which the check offered for payment was dishonored due to insufficient funds A liability insurance binder issued by the insurance producer in effect on the date the police requested proof of insurance Insurance declarations page with an expiration date prior to the date of the accident in question
Severity vs. Frequency looks at the loss rate that is more predictable on low severity, high frequency lines of insurance than it is on high severity, low frequency lines. Which of the examples below can best be used to determine the loss rate for a high severity, low frequency line of insurance. a. The COVID 19 pandemic which significantly affected nearly all segments of countries globally. b. A significant tropical storm which does extensive damage to farmlands. c. A catastrophic hurricane that is rated as a category 2 or above. d. A severe forest fire which frequently occurs during the summer months.
If there is a small probability of a risk occurring, a business may choose to assume the risk rather than buy insurance for the risk. true or false
Name a peril that is often excluded from an home or auto insurance policy. Why is the peril included in an insurance policy
2. Which of the following risks are insurable? For risks which are not insurable, explain why they are not insurable.(i) The risk that a $10 Christmas decoration will be broken.(ii) The risk that a borrower will need to pay interest on a debt.(iii) The risk that the interest rate on a debt will increase.(iv) The risk that an insurance company will have to pay too many losses.(v) The risk that an individual is late for an important meeting.(vi) The risk that a pregnancy will result in multiple births (twins, triplets,etc.) incurring unplanned expenses.(vii) The risk of an individual being killed by a malfunctioning self-flyingaeroplane within the next 30 years.(viii) The risk that a dress will not be fashionable in two month’s time.
As an investor, would you rather be in a situation that involves no risk at all? Formulate your response in light of the ongoing pandemic and how it may have affected various type of businesses favorably and unfavorably. How would you classify pandemic risk – systematic or unsystematic. Explain briefly.
Suppose Mylan could write an insurance contract whereby it is insured against all penalties resulting from misclassification. Would this affect their need to disclose? Group of answer choices No, because if they are fully covered, investors would find the loss contingency misleading since there is no receivable for the insurance Yes, because they would offset the loss contingency with a receivable which would net to zero No, because purchasing insurance does not relieve the purchaser of its obligation to make payments related to losses that result from risk. Yes, because it is impossible to insure loss contingencies
Policy reserves for life insurers are the loss reserves equivalent of P&C insurers. True False
33) When a policy matures on the death of the insured , it is called as:
How can moral hazard lead to more costly insurance premiums than one was expected?

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In insurance, all of the following lo examples of pure risk EXCEPT: a. injury to a businessperson's cust b. drought c. decline of stock values on the st d. fire damage to a building