Chapter 1

Question 1

Any condition or situation that presents a possibility of loss, whether or not an actual loss occurs

Answer 1

Loss Exposure

Question 2

The process of making and implementing decisions that will minimize the adverse effects of accidental losses on an organization

Answer 2

Risk Management

Question 3

A risk control technique that reduces the frequency of a particular loss

Answer 3

Loss Prevention

Question 4

A risk control technique that reduces the severity of a particular loss

Answer 4

Loss Reduction

Question 5

A fundamental measure of the loss exposure assumed by an insurer

Answer 5

Exposure Unit

Question 6

One of the two main sectors of the insurance industry, encompassing numerous types of insurance, most of which cover the financial consequences of damage to one’s own property or legal liability to others

Answer 6

Property-Casualty Insurance

Question 7

One of the two main sectors of the insurance industry, encompassing numerous types of insurance that cover the financial consequences of death, injury, or sickness.

Answer 7

Life-Health Insurance

Question 8

An obligation to actin complete honesty and to disclose all relevant facts

Answer 8

Utmost Good Faith

Question 9

Any contract in which one party must either accept the agreement as written by the other party or reject it.

Answer 9

Contract of Adhesion

Question 10

A contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss

Answer 10

Contract of Indemnity

Question 11

A single document that contains all the agreements between the insured and the insurer and that forms a complete insurance policy

Answer 11

Self-Contained Policy

Question 12

An insurance policy that consists of several different documents, none of whch by itself forms a complete policy

Answer 12

Modular Policy

Question 13

Any type of insurance that indmenifies an insured who suffers a financial loss because property has been lost, stolen, damaged, or destroyed

Answer 13

Property Insurance

Question 14

Insurance that covers losses resulting from the isnured’s liability to others

Answer 14

Liability Insurance

Question 15

Policy that covers most of the property and liability loss exposures that arise out of residential property ownership and ocupancy, as well as property and liablity loss exposures that individuals and families may have while they are away from their residences.

Answer 15

Homeowners Policy

Question 16

A package policy that combines most of the property and liability coverages needed by small and medium-size businesses.

Answer 16

Businessowners Policy (BOP)

Question 17

Insurance that covers a business or not-for-profit organization against loss exposures airsing out of the ownership, maintenance, or use of automobiles

Answer 17

Commerical Auto Insurance

Question 18

Policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts

Answer 18

Commerical Package Policy (CPP)

Question 19

Insurance that covers commerical buildings and their contents against various types of property loss.

Answer 19

Commercial Proeprty Insurance

Question 20

Insurance that covers many of the common liability loss exposures faced by an organization, incuding its premises, operations, and products

Answer 20

Commerical General Liability (CGL) Insurance

Question 21

Loss occurring by chance

Answer 21

Fortuitous Loss

Question 22

Chance of loss or no loss, but no chance of gain

Answer 22

Pure Risk

Question 23

1. Pure Risk
2. Fortuitous losses
3. Definite and Measurable
4. Large number of similar exposure units
5. Independent and not catastrophic
6. Affordable

Answer 23

6 Characteristics of an Ideally Insurable Loss Exposure