Chapter exam: Nature of insurance, Risk, Perils, Hazards

Which of the following refers to a condition that may increase the chance of a loss?

Hazard

Which of the following best describes the statement "The more times an event is repeated, the more predictable the outcome becomes"?

Law of large numbers

Which of the following is considered to be any situation that had potential for loss?

Law of large numbers

Which of the following element of an insurable risk?

Loss must be catastrophic

Restoring an insured to the same condition as before a loss is known as

Principle of indemnity

All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT

Probability of loss is unknown

Which of the following is NOT considered to be a definition of the term "loss"?

Probability that event will occur

A situation in which there is ONLY a chance of loss or no is a

Pure risk

Which of these statements correctly describes risk?

Pure risk is the only insurable risk

Which of the following would NOT be accomplished with the purchase of an insurance policy?

Risk is eliminated

Which of the following is a situation where there is a possibility of either a loss or a gain?

Speculative risk

Which type of risk is gambling?

Speculative risk

Which of the following is NOT considered a definition of risk?

The cause of a loss

A hazard can be best described as

a condition that may increase the likelihood of a loss occuring

An insurer having a large number of similar exposure units is considered important because

the greater the number insured, the more accurately the insurer can predict losses and set appropriate premiums