Module 1-D - Hazards and Risks

Question 1

Declined Coverage

Answer 1

Takes place when an insurance company rejects an application for coverage.

Question 2

Exposure

Answer 2

The extent to which an item is open to damage or loss. More exposure means a loss is
more likely, so this is a determining factor in an insurer’s underwriting decisions.

Question 3

Named Peril Policy

Answer 3

A policy that names all perils that will be covered.

Question 4

Open Peril

Answer 4

An open perils policy covers all causes of loss except for those explicitly excluded. Also
known as “All Peril.”

Question 5

Peril

Answer 5

The actual cause of loss or damage, such as lightning, fire, or theft.

Question 6

Risk

Answer 6

In the insurance industry, risk can have two meanings: 1) the potential for financial loss;
being exposed or open to damage, and 2) an insured item.

Question 7

Risk - Pure

Answer 7

Risk that does not entail the possibility of gain; the only possible outcomes are a loss or
no loss. Insurable (as opposed to speculative risk which is uninsurable).

Question 8

Risk - Speculative

Answer 8

Risk that might result in gain, loss, or no change in circumstance (as opposed to pure
risk, which does not include the possibility of gain). Uninsurable.

Question 9

Uninsurable

Answer 9

Risks are said to be uninsurable when they do not meet certain qualifications. For
example, an insurable risk cannot involve a loss that the insured deliberately causes.
Certain perils are too catastrophic to be insurable (like war or nuclear events).