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Test: Risk Management And Insurance - 2 - B Com MCQ


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10 Questions MCQ Test Principles of Insurance - Test: Risk Management And Insurance - 2

Test: Risk Management And Insurance - 2 for B Com 2024 is part of Principles of Insurance preparation. The Test: Risk Management And Insurance - 2 questions and answers have been prepared according to the B Com exam syllabus.The Test: Risk Management And Insurance - 2 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Risk Management And Insurance - 2 below.
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Test: Risk Management And Insurance - 2 - Question 1

What is the law of large numbers in insurance?

Detailed Solution for Test: Risk Management And Insurance - 2 - Question 1
The law of large numbers in insurance states that the average loss per claim decreases as the number of claims increases. This is because insurance companies are able to spread the risk among a larger pool of policyholders, which reduces the variability of individual losses. As a result, the average loss per claim becomes more predictable and stable.
Test: Risk Management And Insurance - 2 - Question 2

What is the primary function of insurance?

Detailed Solution for Test: Risk Management And Insurance - 2 - Question 2
The primary function of insurance is to provide protection against future risks. It allows individuals to transfer their financial risk to an insurance company in exchange for a premium payment. This ensures that if a covered event occurs, the insured party will be compensated for their losses.
Test: Risk Management And Insurance - 2 - Question 3

What is the purpose of insurance pooling?

Detailed Solution for Test: Risk Management And Insurance - 2 - Question 3
Insurance pooling is the practice of a group of small firms joining together to secure better insurance rates and coverage plans. By leveraging their combined buying power, these businesses can negotiate more favorable terms with insurance companies, resulting in lower premiums and improved coverage options.
Test: Risk Management And Insurance - 2 - Question 4
What is the main function of life insurance?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 4
The main function of life insurance is to provide income during retirement. Life insurance policies are designed to ensure that policyholders have financial security in their later years when they are no longer working. By paying regular premiums, individuals can build up a cash value in their policy that can be used to supplement their retirement income.
Test: Risk Management And Insurance - 2 - Question 5
What is the primary function of general insurance?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 5
The primary function of general insurance is to provide coverage for property loss and liability. General insurance policies protect individuals and businesses against financial losses resulting from damage to their property, as well as legal liability for any harm caused to others. This includes insurance for homes, cars, businesses, and other valuable assets.
Test: Risk Management And Insurance - 2 - Question 6
What is the purpose of deductibles in insurance policies?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 6
Deductibles in insurance policies serve the purpose of limiting potential losses for the insurer. When a claim is made, the insured party is responsible for covering a portion of the loss before the insurance company begins to pay. By requiring policyholders to contribute towards the cost of a claim, insurers can reduce the amount they have to pay out and mitigate their financial risk.
Test: Risk Management And Insurance - 2 - Question 7
What is the purpose of insurance in saving and investments?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 7
Insurance can serve as a tool for saving and investments by encouraging individuals to save money. By paying regular premiums towards an insurance policy, individuals are effectively setting aside a portion of their income for future use. This can help individuals build up a financial cushion and provide a source of funds for future expenses or investments.
Test: Risk Management And Insurance - 2 - Question 8
What is the function of insurance in risk-free trade?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 8
Insurance plays a role in risk-free trade by providing coverage for losses in foreign trade. Export insurance, for example, protects businesses against the financial consequences of non-payment or non-delivery by foreign buyers. By mitigating the risks associated with international trade, insurance helps to facilitate secure and stable business operations.
Test: Risk Management And Insurance - 2 - Question 9
What is subrogation in insurance?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 9
Subrogation in insurance refers to the ability of an insurance company to recover expenses from a responsible party. When an insurance company pays out a claim on behalf of an insured individual, it may seek reimbursement from any party that is deemed responsible for the loss. This allows the insurance company to recover some or all of the expenses it incurred in settling the claim.
Test: Risk Management And Insurance - 2 - Question 10
What is the purpose of insurance in risk assessment?
Detailed Solution for Test: Risk Management And Insurance - 2 - Question 10
Insurance plays a role in risk assessment by helping to determine the accuracy of loss estimates. By analyzing historical data and assessing various risk factors, insurance companies can make informed predictions about the likelihood and severity of future losses. This information is used to set premiums, determine coverage limits, and manage the overall risk exposure of the insurer.
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