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MS - Property & Casualty Insurance – 86 questions with Solutions
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MS - Property & Casualty Insurance – 86 questionswith Solutions
Risk - -possibility that a loss will occur.
-Insurance - -is a contract that transfers the risk of financial loss from an
individual or business to an insurance company
-Speculative risks - -have a possibility of a loss and also a possibility of a
gain
-Pure risks - -only involve the possibility of experiencing a loss, not a gain.
-Exposure - -the potential for accidents and other losses
-Peril - -the cause of a loss
-Loss - -the unintended, unforeseen damage to property; injury; or amount
paid
-Direct Loss - -a physical loss to property with no intervening cause
-Indirect Loss - -a consequential loss as the result from a direct loss.
-Hazard - -anything that increases the chance that a loss will incur
-Physical Hazard - -physically identifiable factors that increase the chance
of loss
-Moral Hazard - -Arise from an individual's character
-Morale Hazard - -state of mind or careless attitude
-Risk Sharing - -two or more individuals or businesses agree to pay a
portion of any loss incurred by any member of the group
-Risk Transfer - -what happens with insurance - insurer agrees to pay if an
insured has a loss, the insured no longer bears that risk
-Risk Avoidance - -eliminating a particular risk by not engaging in a certain
activity
-Risk Retention - -the individual or business will pay for the loss if it occurs,
or a portion of the loss via a deductible.
, -Risk Reduction - -Lessening the chance that a loss will occur, or lessening
the extent of a loss if it occurs
-STARR - -sharing, transfer, avoidance, retention, reduction
-Insurance used the risk management method of ______________ to spread a
risk of loss among thousands, if not millions, of insureds. - -Transfer
-An individual applied for auto insurance and obtained coverage from ABC
Insurance Company. Who is the first party in the contract? - -the insured
(customer)
-If a fire causes damage to a building, the fire is - -a peril
-Wearing a seat belt in a car is an example of which method of risk
management? - -reduce
-Tiffany leaves her car unlocked when she goes shopping. She figures her
care and its contents are insured, so there is no reason to worry. Which type
of hazard is this an example of? - -morale
-A flood is an example of - -a peril
-Law of large numbers - -principle that makes insurance possible
-Calculable - -premiums must be calculable based upon prior loss statistics
for that particular risk in order to predict future losses
-Affordable - -the premium for transferring the risk should be affordable for
the average consumer
-Non-catastrophic - -the risk must be this for the insurance company - if the
insurer were to cover these types of risks, the risk could be detrimental to
the insurer.
-Homogeneous - -The risk must be similar in nature so the same factors
affect the chance of loss
-Accidental - -the loss must have been caused due to chance
-Measurable - -a definite (time and place) and _______ loss means that the
proof of loss must be established with numbers and dollar amounts, not just
casual references.
-CANHAM - -Calculable, Afforable, Non-catastrophic, Homogeneous,
Accidental, Measurable
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