Principles Of Insurance

Question 0

What is exposure?

Answer 0

An exposure is a condition or situation that presents a possibility of loss

Question 1

What is risk?

Answer 1

Risk is the chance or uncertainty of loss

Question 2

What are the methods of managing risk?

Answer 2

1. Avoiding risk
2. Controlling risk
3. Retaining a risk

Question 3

What is loss prevention?

Answer 3

A risk control technique that curtails loss frequency

Question 4

What is risk reduction?

Answer 4

A risk control technique that limits the loss severity

Question 5

What does it mean to retain a risk?

Answer 5

If any loss occurs the person retaining the risk will pay for it themselves

Question 6

What does it mean to transfer a risk?

Answer 6

Transferring risk includes but is not limited to, insurance. A hold harmless agreement may. Shift liability from an owner or contractor to a tenant or subcontractor.

Question 7

What is a hold harmless agreement?

Answer 7

A hold harmless agreement is a contractual arrangement where one party assumes the liability of a situation and relieves the other party of responsibility.

Question 8

What is the purpose of insurance?

Answer 8

To transfer risk

Question 9

Formal definition of insurance?

Answer 9

A contract or device for transferring risk from a person, business, or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums.

Question 10

What is the Law of Large Numbers?

Answer 10

The Law of Large Numbers says that the more examples used to develop any statistic, the more reliable the statistic will be.

Question 11

What type of risk is insurance not used to handle?

Answer 11

Speculative risks

Question 12

What are speculative risks?

Answer 12

Speculative risks are risks in which there exists both the possibility of gain and the possibility of loss.

Question 13

Insurance is only used to handle what kind of risk?

Answer 13

Pure risk

Question 14

What is pure risk?

Answer 14

Risks that involve only the possibility of loss.

Question 15

What is insurable interest?

Answer 15

Before you can benefit from insurance, you must have a chance of financial loss or a financial interest in the property.

Question 16

Risk of loss must be ____ as to ___ and ___ and difficult to ______ or falsify.

Answer 16

Risk of loss must be definite as to time and place and difficult to counterfeit or falsify.

Question 17

Risk must be (expected/unexpected)?

Answer 17

Risk must be unexpected.

Question 18

The risk must be (large/small) enough to create a financial _______ for the individual involved.

Answer 18

The risk must be large enough to create a financial hardship for the individual involved.

Question 19

The loss must be (calculable/indefinite)?

Answer 19

The loss must be calculable

Question 20

The _____ of insurance must be _________ to the insured.

Answer 20

The cost of insurance must be affordable to the insured.

Question 21

There must be a (large/small) number of persons with a similar _______ loss available for the insurance so that overall, losses become _________.

Answer 21

There must be a large number of persons with a similar potential loss available for the insurance so that overall loss become predictable.

Question 22

The loss must not happen to a (large/small) number of insureds at the same time.

Answer 22

The loss must not happen to a large number of insureds at the same time.

Question 23

What is spread of risk?

Answer 23

The insurance company insured multiple people from multiple locations to avoid a catastrophic loss for the company.

Question 24

What is a peril?

Answer 24

The cause of loss

Question 25

What is a hazard?

Answer 25

Anything that increases the chance of loss.

Question 26

What is a physical hazard?

Answer 26

A hazard that arises from the condition, occupancy, or use of the property itself.

Question 27

What is a morale hazard?

Answer 27

A moral hazard is when an individual through carelessness or by irresponsible action can increase the possibly for a loss.

Question 28

What is a moral hazard?

Answer 28

A moral hazard is when a person might create a loss situation on purpose just to collect from the insurance company.