a. Identify and analyze new and existing loss exposures.b. Purchase insurance.c. Rewrite the risk management mission.d. Change insurance companies.ANSWER A( p. 10.16)OBJECTIVE 7QUESTIONWhat is a benefit that a business can receive by applying sound risk management?a. It will meet state and federal safety regulations.b. It will have a better opportunity to achieve business goals.c. It will not have to worry about losses.d. It will be able to attract and retain talented employees and managers.ANSWER B( pp. 10.17-10.18)QUESTIONWhat will Jane be able to gain as a benefit by applying sound risk management to her transportation situation?a. No future increases in her insurance premium.b. A loss free futurec. Economic growthd. Greater peace of mindANSWER D( pp. 10.17-10.18)QUESTIONBusinesses, individuals, and families that practice sound risk management can benefit society by doing all of thefollowing, EXCEPT:a. Increasing interest in leisure activitiesb. Reducing the overall number of lossesc. Controlling medical expenses through reduced injuriesd. Stimulating economic growthANSWER A( p. 10.18)QUESTIONOne of the benefits to a business of retaining a loss exposure instead of insuring it isa. A reduction in expenses.b. A greater peace of mind.c. Access to the insurer's loss control services.d. Increase in expenses.

ANSWER A( p. 10.17)OBJECTIVE 8QUESTIONWhat is an effective way for Frank and Jan to begin identifying the liability loss exposures associated with theirnew home?a. Hire a professional risk managerb. Determine the value of the home and contentsc. Purchase a homeowners insurance policyd. Inspect the home to look for items and activities that might cause injury or damageANSWER D( pp. 10.19-10.21)QUESTIONFrank and Jan researched lead paint hazards and abatement techniques on the Internet. They discovered that thebest action they can take inside the house is to remove loose paint chips and dust, replace the windows, and sealthe walls with a paint designed for that purpose.What risk management technique does this activity involve?a. Avoidanceb. Loss controlc. Retentiond. Noninsurance transferANSWER B( pp. 10.19-10.21)QUESTIONFrank and Jan have discovered that the pollution that is resulting from the fuel oil leaking into the soil is notcovered by their homeowners insurance policy. They fear that the oil might seep into the water table andcontaminate their neighbors' well water. Illness and damage that might result would be very expensive. Frankand Jan can purchase an endorsement that will provide coverage for this pollution exposure. The endorsementwould cost $50 per year.Is this an effective risk management selection for Frank and Jan until they can replace the tank?a. Yes, they should do this indefinitely and not replace the tank.b. Yes, they are exchanging a large exposure for a little premium.c. No, they are spending a lot of money for little protection.d. No, each neighbor will have insurance to cover any damage to their wells.ANSWER B( pp. 10.19-10.21)QUESTION Jeff recently started a consulting business. One of his concerns is that he will be sued for giving erroneous adviceto a client. What would be the best risk management technique for Jeff's use in this situation?

a. Retentionb. Avoidancec. Insuranced. DuplicationANSWER C( pp. 10.19-10.20)OBJECTIVE 9QUESTIONThe process of managing exposures to accidental losses is known asa. Insurance.b. Risk management.c. Retention.d. Avoidance.ANSWER B( p. 10.3)QUESTIONThe risk control technique that seeks to lower the severity of losses isa. Loss prevention.b. Risk financing.c. Loss reduction.d. Duplication.ANSWER C( p. 10.9)QUESTIONWhen a household or organization decides to keep all or part of a loss exposure this is known asa. Insurance.b. Retention.c. Reduction.d. Separation.ANSWER B( p. 10.10)