Life Ch. 2 Nature of Insurance

An insurable risk requires that the chance for both a loss or gain exists the loss must be catastrophic that the chance of loss be measurable that the loss must be incalculable

An insurable risk requires the loss to be calculable or predictable.

How can an insurance company minimize exposure to loss? Risk Avoidance Reinsurance Reissuance Risk Assumption

Many insurers are able to minimize exposure to loss by re-insuring risks.

Which of the following is a requirement for a risk to be considered insurable? Catastrophic Speculative Chance of both a loss and gain Predictability of loss

One of the requirements for an insurable risk is the predictability of loss.

The probability of loss becoming more predictable is attributed to Law of Large Numbers speculative risk insurable interest Law of Frequent Risks

The Law of Large Numbers allows the probability of loss to become more predictable.

What type of risk involves the potential for loss with no possibility for gain? Speculative Pure Adversev cAdverse

Pure risk involves the potential for loss with no possibility for gain.

Insurance addresses what type of risk? Pure Speculative None of these All risks are insurable

Pure risk is the only type of risk that is insurable because there is only the chance of loss.

For insurance purposes, similar objects which are exposed to the same perils are referred to as Homogenous perils Similar exposure units Homogeneous exposure units Common hazards

Similar objects of insurance that are exposed to the same group of perils are called homogeneous exposure units.