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RMIN 4000 Exam 1 Brown With Complete Solutions Latest Update
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RMIN 4000 Exam 1 Brown With Complete Solutions Latest Update
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RMIN 4000 Exam 1 Brown With CompleteSolutions Latest Update
Textbook definition of RISK - correct answers Uncertainty concerning the occurrence of a loss
Better definition of RISK - correct answers A calculated possibility of a negative outcome
Calculated Possibility - correct answers 0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome - correct answers Loss
Losses must be __________? - correct answers Quantifiable
Pure Risk States - correct answers Loss
or
No Loss
Examples of Pure Risks - correct answers Fire, Cancer, Dog bites a visitor
Speculative Risk States - correct answers Loss
No Loss/No Gain
,Gain
Examples of speculative risks - correct answers Investment, Gambling, Drinking
Frequency answers what question? - correct answers How often does a loss occur
The number of losses that occur in a specified time period
Probability of a loss - correct answers Frequency
Severity answers what question? - correct answers How much does it cost when a loss does occur?
The dollar amount for a loss of a specific peril
Peril - correct answers Cause of a loss
Hazard - correct answers Condition that creates or increases the frequency and/or severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril - correct answers Fire, Tornado, Collision, Burglary
Types of Hazard - correct answers Physical
Moral
Morale (Attitudinal)
Legal
, Physical Hazard - correct answers A physical condition that increases the frequency and/or severity of a loss
Book Definition of Moral Hazard - correct answers Dishonesty or character defects in an individual that increase the
frequency and/or severity of a loss
Better Definition of Moral Hazard - correct answers The presence of insurance changes the behavior of the insured
Examples of Moral Hazard - correct answers Using a hammer to create "hail" damage to a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard - correct answers Carelessness or indifference to a loss, which increases increases the
frequency and/or severity of a loss
Examples of Morale Hazard - correct answers Leaving car keys in an unlocked car
Neglecting a tree limb growing over your roof
Legal Hazard - correct answers Characteristics of a legal system or regulatory environment that increase the frequency
and/or severity of a loss
Examples of a Legal Hazard - correct answers Juries in some areas are more sympathetic than in other areas
Georgia now requiring Diminution in Value to be paid on property losses
Diversifiable Risk - correct answers Affects only individuals or small groups, not the entire economy
Can be reduced/eliminated through diversification
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