PSI - Exams Insurance and Risk Management Questions and Answers

Question 1

A client trips over a painter's toolbox left in a hallway and breaks their arm. Which type of insurance policy is designed to cover the client's medical expenses and related damages?

Accepted Answer

General Liability Insurance

Answer

Workers' Compensation Insurance

Answer

Errors and Omissions Insurance

Answer

Builder's Risk Insurance

Question 2

A general contractor for a new home construction project hires a licensed and insured electrical subcontractor to perform all wiring work. This decision is an example of which risk management strategy?

Accepted Answer

Risk Transference

Answer

Risk Avoidance

Answer

Risk Mitigation

Answer

Risk Acceptance

Question 3

Which of the following situations would typically be covered under a mandatory workers' compensation insurance policy?

Accepted Answer

An employee develops carpal tunnel syndrome from repetitive data entry tasks.

Answer

An employee's personal vehicle is stolen from the company parking lot.

Answer

A client sues the company for a faulty product installation.

Answer

A salaried manager is laid off due to company downsizing.

Question 4

A real estate agent mistakenly informs a buyer that a property is zoned for commercial use, but it is actually zoned residential. After the sale, the buyer discovers the error and sues the agent for financial losses. Which type of insurance is specifically designed to protect the agent in this situation?

Accepted Answer

Errors and Omissions (E&O) Insurance

Answer

Fidelity Bond

Answer

General Liability Insurance

Answer

Commercial Property Insurance

Question 5

What is the primary purpose of a Certificate of Insurance (COI) when requested by a client before a contractor begins work?

Accepted Answer

To provide verifiable proof that the contractor has active insurance coverage with specific limits.

Answer

To serve as the complete insurance policy contract between the contractor and insurer.

Answer

To bill the client for a portion of the contractor's insurance premium.

Answer

To transfer all legal liability for the project from the contractor to the client.

Question 6

Which statement BEST describes the fundamental difference between a surety bond and a typical insurance policy?

Accepted Answer

A surety bond guarantees performance or compliance, while an insurance policy protects against financial loss.

Answer

A surety bond is a two-party agreement, while an insurance policy involves three parties.

Answer

Insurance policies require the policyholder to repay any claims paid out by the insurer.

Answer

Surety bonds are designed to protect the policyholder, while insurance protects a third party.