Section Review 1-5

Question 1

Risk is the:

Answer 1

Select one:
a. cause of the loss
b. uncertainty or chance of loss
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Chapter 1: Introduction to Insurance

The correct answer is: uncertainty or chance of loss

Question 2

Insurable interest and actual cash value are both related to:

Answer 2

Select one:
a. Peril
b. Indemnity
c. Speculative risk
d. Law of Large Numbers
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Both serve to make the Insured whole but to not allow the Insured to come out ahead. By requiring an insurable interest, we prevent the Insured from insuring property owned by others. By only paying ACV, we keep the Insured from coming out ahead by getting "new for old."

Chapter 4: Typical Property Policy
The correct answer is: Indemnity