Chapter 1 Quiz

What type of insurance policy insures against all risks of loss that are not specifically excluded by the policy?

Open Peril Policy

What hazard would you be concerned about if you lived next to an explosive contractor?

Physical

The risk of loss may be classified as

Pure risk and speculative risk

Which of the following is NOT an element of insurability?

Risk of loss is speculative

Which of the following is NOT a characteristic of an insurable risk?

The loss must be catastrophic

Faulty wiring in a home is an example of a

hazard

A moral hazard

owner of a small business applies for fire insurance, has huge unsolved inventories & large gambling debt

Insurance is the transfer of

risk

Which of the following would be considered a risk-sharing arrangement?

Reciprocal

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

Reduction

Insured changed careers & is no longer required to perform many physical activities, so he walks/jogs for 45 minutes every morning. Also eliminated fatty foods. Which method of dealing with risk?

Reduction

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

loss

Illegal use of narcotics would be an example of a

moral hazard

All the following are examples of risk retention except

premiums

Events in which a person has both the chance of winning or losing are classified as

speculative risk