quiz 1

a contract which one party undertakes to indemnity another against loss is called

Insurance

a set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered an

Legal Hazard

all of the following are examples of risk retention EXCEPT

Premiums

events in which a person has both the chance if winning or losing are classified as

Speculative Risk

a tornado that destroys property would be an example of which of the following

a peril

events or conditions that increase the chances of an insured loss occurring are referred to as

hazards

units with the same or similar exposure to loss are referred to as

homogeneous

which insurance principle states that if a policy allows for greater compensation than the financial loss incurred the insured may only receive benefit for the amount lost

indemnity

which statement regarding insurable risk is not correct

insureds cannot be randomly selected

all of the following actions by a person could be described as risk avoidance EXCEPT

investing in a stock market

the insurer may suspect that a moral hazard exist if the policyholder

is not honest about his health on an apply for insurance

Insurance is a contact by which one seeks to protect another from

loss

an individual tendency to be dishonest would be indicative of a

moral hazard

according to the California code which if the following can be classified as an insurable event

pure risk

adverse is a concept described as

risk with higher probably of loss seeking insurance more often than other risks

hazard is best defined as

something that increases the risk of loss

if an applicant for a life insurance policy and person to be insured by the policy are two different people the underwriter would be concerned about

whether an insurable interest exists between the individuals

what do individuals use to transfer their risk of loss to a larger group?

Insurance

which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated

law of large numbers

which is the following factors is not considered by an underwriter the premium rates for an individual seeking insurance

Race

installing deadbolt locks on the doors of a home is an example of which method of handling risk?

Reduction

which of the following statements is not true concerning insurable interest as it applies to Life Insurance

a debtor has an insurable interest in the life of a lender

the protection of the insurer from adverse selection is provided in part by

a profitable distribution of exposures

the growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damage is known as

legal hazard

which of the following individuals must have insurable interest in the insured?

policy owner

what describes a situation when poor risk are balanced with preferred Risk and average risk or in the middle

profitable distribution of exposures

peril

the cause of the loss insured against

not all losses are insurable and there are certain requirements that must be met before arrest is a proper subject for insurance these requirements include all of the following except

the loss may be intentional

which of the following is not a characteristic of pure risk?

the loss must be catastrophic

for the purpose of insurance risk is defined as

the uncertainty or chance of loss

when an individual purchases insurance what risk management techniques is he or she practicing

transfer

when an individual purchases life insurance what risk management techniques is he or she participating

transfer