Basic Insurance Concepts and Principles
An individual was involved in a head to head on collision while driving home one day. His injuries were not serious, and he recovered. However, he decided that in order to never be involved in another accident, he would not drive or ride in a car ever again. Which method of risk management does this describe?
Avoidance
In what type of plan would the employer pay all of the claims?
Self-funded
All of the following are examples of risk retention EXCEPT
Premiums
Peril is most easily defined as
The cause of loss insured against
Which type of insurance guarantees or indemnifies owners of real or personal property or the holders of liens or other interested parties against loss or damage suffered to said property
Title insurance
A tornado that destroys property would be an example of which of the following?
A peril
With respect to the business of insurance, a hazard is
Any condition or exposure that increases the possibility of loss.
In property and casualty insurance, insurable interest must exist
At the time of loss
Which of the following is the correct formula for computing a loss ratio?
Incurred losses + loss adjusting expense/earned premium
What do individuals use to transfer their risk of loss to a larger group?
Insurance
All of the following actions by a person could be described as risk avoidance EXCEPT
Investing in the stock market
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 a(n):
Legal hazard
The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damages is known as
Legal hazard
The risk of loss may be classified as
Pure risk and speculative risk
According to California Insurance Code, which of the following can be classified as an insurable event?
Pure risks
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards
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 a(n)
Legal hazard
Insurance is a contract by which one seeks to protect another from
Loss
Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
Reduction
Which of the following is an insurable risk?
Hail damage to the roof of a car
