BUSA 308 Book: Principles of Risk Management and Insurance Ch.2, page 36

BUSA 308 Sook Ja Lee

Text Book: Principles of Risk Management
and Insurance
Author: Rejda, George E.
ISBN 978-0-13-299291-6 ISBN 13:
978-0-13-299497-2
Review Question:
Ch.2,
page 36

2. Explain
the law of large numbers.

3.
Pure risks ideally should have certain characteristics to be insurable
by private insurers. List the six
characteristics of an ideally insurable risk.

5.
Why are most market risks, financial risks, production risks, and
political risks considered difficult to insure by private insures?

7.
What are the two major differences between insurance and gambling?

9. a
Identify the major fields of private insurance.

b. Identify several property and
casualty insurance coverages.

10.
a. Explain the basic
characteristics of social insurance programs.

Application Questions:
Ch2. Page 36

1.
Compare3 the risks of(i)fire with(ii)war in
terms of how well they meet the requirements of an ideally insurable risk.

2.
a. Private insurers provide
social and economic benefits to society.
Explain the following benefits of insurance to society.
(1)
Indemnification for loss
(2)
Enhancement of credit
(3)
Source of funds for capital
investment and accumulation

3.
Buildings in flood zones are
difficult to insure by private insurers because the ideal requirements of an
insurable risk are difficult to meet.

a.
Identify the ideal requirements of an
insurable risk.
b.
Which of the requirements of an
insurable risk are not met by the flood peril?

4.
Private insurance provides numerous coverages
that can be used to meet specific loss situations. For each of the following situations,
identify a private insurance coverage that would provide the desired
protection.

a.
Emily, age 28, is a single parent with two
dependent children. She wants s to make certain that funds are available for
her children’s education if she dies before her youngest child finishes
college.

b.
Danielle, age 16, recently
obtained her driver’s license. Her parents want to make certain they are
protected if Danielle negligently injures another motorist while driving a
family car.

c.
Jacob, age 30, is married with
two dependents. He wants his income to continue if he becomes totally disabled
and unable to work.

d.
Tyler, age 35, recently purchases a house for
$200,000 that is located in an area where tornadoes frequently occur. He wants
to make certain that funds are available if the house is damaged or destroyed
by a tornado.

e.
Nathan, age 40, owns an upscale furniture
store. Nathan wants to be protected if a
customer is injured while shopping in the store and sues him for the bodily
injury.