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Financial Planning Courses: Insurance and Risk Management

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1.
Which of the following is true?
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Neither is true. In managing risk, you should buy only the amount of insurance necessary to cover a risk you cannot afford. The premium reflects the benefits, so a low-cost policy may not have the same benefits of a higher-premium policy.
2.
Life insurance places a value on a person's _______.
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Earning ability. The purpose of life insurance is to pay benefits that replace one's lost earnings ability if one dies.
3.
Insurance protects a person from risks.
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False. Insurance cannot protect a person from risk; instead, it protects a person from financial losses caused by risks.
4.
It is possible to eliminate all risk in personal finance.
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False. Though it is possible to minimize it, no one has yet succeeded in eliminating risk entirely.
5.
Which of the following is a way to manage risk?
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All of the above. Risk is all around us, and we manage it by assuming it, avoiding it, sharing it, or transferring it to someone else.