Unit 2: Nature of Insurance, Risk, Perils and Hazards
A business becoming incorporated is an example of risk _____
transfer
A business becoming incorporated is an example of risk___
transfer
A hold-harmless clause is an example of risk
transfer
Which of the following involves sharing an uncertain risk with another similar group?
transfer
Purchasing insurance is an example of risk...
transference
Which of the following can be defined as "the potential for loss"?
Risk
What type of risk involves the potential for loss with no possibility for gain?
Pure risk
Which of these statements regarding insurance is false?
As the number of insured increases, the number of losses decreases
which of the following is NOT an example of risk retention?
Not doing a business deal after deciding it would be to risky
Which of the following can be defined as a cause of loss?
Peril
Which of the following types of risk is insurable?
Pure
ABC Company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk...
reduction
Which of these statements is NOT a characteristic of the law of large numbers?
Rates can be calculated to compensate for losses.
An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this?
Reinsurance contract
How can an insurance company minimize exposure to loss?
Reinsuring risks
Which term describes the elimination of a hazard?
Risk avoidance
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
A condition that increases the possibility of financial loss is called a(n)
hazard
For insurance purposes, similar objects which are exposed to the same group of perils are referred to as
homogenous exposure units
Risk _____ is the process of analyzing exposures that create risk and designing programs to handle them.
management
The law of large numbers enables an insurer to...
predict losses
An insurable risk requires
that the chance of loss be calcuable or predictable
