Arkansas Property & Casualty Exam Prep question n answer graded A+

Arkansas Property & Casualty Exam PrepInsurance - correct answer 1. Sharing, spreading or transferring risk through the accumulation of funds of large numbers of individuals. 2. Giving up a known certain loss (the client's premium) in order to avoid a larger potential loss. 3. A contract where one party agrees to indemnify another for certain stated contingencies. Risk - correct answer the chance of a loss. 4 Methods of risk management: - correct answer 1. Avoidance: Not doing the thing that puts the client at risk. 2. Reduction: Reducing the things that make a loss more likely. 3. Retention: Keeping the risk and not trying to transfer it. 4. Transfer: Risk can be transferred to someone else (the insurance company) through contracts. Peril - correct answer The direct cause of a loss. Hazard - correct answer Something that increases the chance of a loss 4 Types of Hazards - correct answer 1. Physical Hazards (Environmental) - Conditions in property that increase the chance of a peril. 2. Morale Hazards - An attitude of "not caring" about the property. 3. Moral Hazards - A situation in which someone might illegally try to destroy their own property for financial gain. 4. Legal Hazards - A court ruling that causes an unexpected liability and the general increased tendency of people to sue.