quiz 2

Which of the following can be defined as a cause of a loss?

peril

A business becoming incorporated is an example of risk

transfer

Which of these statements regarding insurance is false?

As the number of insured units increases, the number of losses decreases.

A condition that increases the possibility of financial loss is called a

Hazard

For insurance purposes, similar objects which are exposed to the same group of perils are referred to as

Homogeneous exposure units.

Which of the following is NOT an example of risk retention?

Not doing a business deal after deciding it would be too risky

According to the law of large numbers, how would losses be affected if the number of similar insured units increase?

Predictability of losses will be improved

Which of these statements is NOT a characteristic of the law of large numbers

Rates can be calculated to compensate for losses

How can an insurance company minimize exposure to loss?

Reinsuring risks

Which of the following describes the act of insuring a risk against possible loss?

Risk Transfer

What type of risk involves the potential for loss AND the possibility for gain?

Speculative Risk

Which of the following involves sharing an uncertain risk with another similar group?

Transfer

ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk:

reduction

Which of the following can be defined as "the potential for loss"

risk

Which of these is NOT considered to be an element of an insurable risk?

speculative risk

An insurable risk requires

that the chance of loss be calculable

A hold-harmless clause is an example of risk

transfer

Purchasing insurance is an example of risk

transference