Nature Of Insurance

Question 1

Selections against company. Includes the tendency of people of higher risks to seek or continue insurance to a greater extent than those with little risk or less risk.

Answer 1

Adverse Selection

Question 2

Any factor, condition, or situation that creates an increase possibility that a peril will actually occur

Answer 2

Hazard

Question 3

Similar objects or insurance that are exposed to the group of perils

Answer 3

Homogeneous Exposure Units

Question 4

Attempt to return the insured to their original financial position

Answer 4

Indemnity Contract

Question 5

Fundamental principle of insurance that the larger the number of individual risks combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period

Answer 5

Law of Large Numbers

Question 6

Unintentional decrease in the value of an assent due to a peril

Answer 6

Loss

Question 7

Risk of a possible loss

Answer 7

Loss Exposure

Question 8

Hazard brought on by the effect of personal reputation, character, associates, personal living habits, financial responsibility, and environment, as distinguished from physical health, upon an individuals general insurability

Answer 8

Moral Hazard

Question 9

Hazard arising from indifference to loss because of the existence of insurance. Having a careless attitude

Answer 9

Morale Hazard

Question 10

Immediate, specific event causing loss and giving rise to risk

Answer 10

Peril

Question 11

Physical and tangible conditions existing in a manner that make a loss more likely to occur

Answer 11

Physical Hazard

Question 12

Type of risk that involves the chance of loss only; there is no opportunity for gain; it is insurable

Answer 12

Pure Risk

Question 13

Uncertainty regarding loss, the possibility of a loss occurring for an insured or prospect

Potential for loss

Answer 13

Risk

Question 14

When individuals evade risk entirely. Act of not doing something that could possibly cause a loss or the inactivity of participation in an event that may potentially cause a loss situation

Answer 14

Risk Avoidance

Question 15

Process of analyzing exposures that create risk and designing programs to handle them

Answer 15

Risk Management

Question 16

Spreads the risk by sharing the possibility of loss over a large number of people. Transfers the risk from an individual to a group

Answer 16

Risk Pooling/Loss Sharing

Question 17

When the chance of a loss are lessened, or the severity of a potential loss is minimized

Answer 17

Risk Reduction

Question 18

Act of analyzing the loss exposure presented by a risk and determine that the potential loss is acceptable. Often associated with self-insurance.

Not buying the extra product insurance because buying the product again in a given amount of time is worth the risk.

Answer 18

Risk Retention

Question 19

Act of shifting the responsibility of risk to another in the form of an insurance contract

Answer 19

Risk Transfer

Question 20

Type of risk that involves the chance of both loss and gain; it is not insurable

Answer 20

Speculative Risk