Personal Lines Insurance - Unit 1, Intro Questions and Verified Answers

Personal Lines Insurance - Unit 1, Intro Questions
and Verified Answers
Insurance Correct Answer: Transfer of risk from a person or business to an insurer


Risk Correct Answer: Uncertainty/possibility of loss


Types of Risk (2) Correct Answer: Speculative & Pure


Speculative Risk Correct Answer: Chance of loss or gain; not insurable


Pure Risk Correct Answer: Chance of loss only (no chance of gain); insurance companies will insure


What type of risk will companies insure? Correct Answer: Pure risk (NOT speculative)


Exposure Correct Answer: Possibility that a loss will occur.


Examples:


- auto accident


- luggage lost on a trip


- dog biting a mailman


- employee hurt on job


- house fire


What are some examples of loss? Correct Answer: - auto accident


- luggage lost on a trip


- dog biting a mailman


- employee hurt on job

, - house fire


Peril Correct Answer: A cause of loss


Example: if a house burned down, the peril is the fire


If a house burned down, what is the peril in that situation? Correct Answer: The fire (the fire is the cause
of loss)


Direct Correct Answer: Physical loss


Indirect Correct Answer: Consequence of direct loss


What is the difference between Direct and Indirect? Correct Answer: Direct: physical loss


Indirect: consequence of the direct loss


Example: A fire destroyed my house (house is the direct). I am now homeless (homelessness is the
Indirect).


Hazard Correct Answer: Increases the chance of loss


Types:


-Physical


-Moral


-Marale


Types of Hazard (3) Correct Answer: Physical


Moral


Morale


Physical Hazard Correct Answer: The hazard can be seen