Property Terms & Concepts Flashcards
All of the following are true about speculative risk except:
A. Speculative Risk involves an uncertainty of loss
B. Speculative risk involves a possibility of gain
C. Speculative risk is a feature of gambling
D. Speculative risk is a feature of insurance
Answer: D -Only pure risk is insurable.
In property, casualty and medical-expense insurance, the principle of making someone whole again after a loss by paying only for actual losses is called: A. Estoppel B. Warranty C. Indemnity D. Subrogation
Answer: Indemnity
The law of large numbers states that:
The predictions become more accurate as the number of units being considered increases.
A property and casualty insurance agent frequently has the authority to provide temporary insurance coverage known as: A. Certificate B. Quotation C. Binder D. Policy
Answer: Binder
All of the following are true about insurance EXCEPT:
A. It transfers risk from one party to a group
B. It is a form of gambling because it may or may not pay off
C. It is a social device for spreading loss over large numbers of people
D. It involves the pooling of large numbers of individual risks
Answer: B
Something that may increase the seriousness of a loss if loss occurs, or that increases the likelihood that a loss will occur, is called a: A. Peril B. Catastrophe C. Hazard D. Risk
Answer: Hazard
Insurable risks must involve: A. Certain and uncertain losses B. Certain losses only C. Gambling D. The possibility of loss only
Answer: The possibility of loss only
Insurable interest exists only when a number of conditions are met. Which one of the following is NOT one of the requirements for insurable interest?
A. The applicant must not share the interest with anyone else
B. The applicant must have an interest in protecting what is insured
C. The applicant must face a risk of loss
D. The applicant must not have a potential for gain
Answer: A
A moral hazard:
A. Arises from the condition, occupancy, or use of the property itself
B. Is the tendency to create a loss on purpose, to collect from the insurance company
C. Is not a consideration in insurable risk
D. Arises through an individual’s carelessness or irresponsible action.
Answer: B
A binder:
A. may be oral or written
B. Is always a written agreement
C. Guarantees that a policy will be issued
D. May only be issued by the insurance company
Answer: A
A client can provide insurable interest via: A. Lie detector test B. Checking account statements C. Police report D. Physical inspection
Answer: B
In the property and casualty insurance field, insurable interest must exist:
A. At the time of application or at the time of loss
B. At the time of loss
C. For at least 5 years
D. At the time the application is made for insurance
Answer: B
In which of the following would a person have insurable interest?
A. The car on which she is still paying
B. The house she owned but has rented out to a tenant
C. Both of the above
D. Neither of the above
Answer: C
Which of the following is an insurable risk?
A. Wear and tear on a valuable oriental rug
B. Theft of a paperback book
C. Hail damage to the roof of a car
D. All answer options are an insurable risk
Answer: C
The uncertainty about loss that exists whenever more than one outcome is possible is called:
Risk
