ACC 356 - FINAL EXAM VERIFIED ACCURATE STUDY
GUIDE
personal risk management - Answers -a systematic process of identifying, evaluating,
and managing pure risk exposures faced by an individuals
pure risk - Answers -the chance of a loss or no loss occurring, but with no chance of
gain
personal risks - Answers -may cause the loss of income, or alternatively cause an
increase in the cost of living
property risks - Answers -may cause the loss of property
liability risks - Answers -may cause financial loss
loss frequency - Answers -the expected number of losses that will occur within a given
period of time
loss severity - Answers -the potential size or financial damage of a loss
probability of a loss - Answers -the chance that a loss will occur
perils - Answers -the proximate or actual cause of a loss
risk avoidance - Answers -avoiding an activity so that a financial loss cannot be
incurred
risk reduction - Answers -implementing activities that will result in the reduction of the
frequency and/or severity of losses
risk retention - Answers -the state of being exposed to a risk and personally retaining
the potential for losses
risk transfer - Answers -transferring or shifting the risk of loss through means such as
insurance or a warranty
risk management responses: high severity, low frequency - Answers -transfer and/or
share risk using insurance
risk management responses: high severity, high frequency - Answers -avoid risk
risk management responses: low severity, low frequency - Answers -retain risk
, risk management responses: low severity, high frequency - Answers -retain/reduce risk
peril policies - Answers -open-perils policy, named-perils policy
open-perils policy - Answers -cover all risks of loss that are not excluded from the
contract
named-perils policy - Answers -provides protection against losses caused by the perils
that are listed as covered
hazard - Answers -a condition that creates or increases the likelihood of a loss
occurring
types of hazards - Answers -physical, moral, morale
physical hazard - Answers -a tangible condition or circumstance that increases the
possibility of a peril occurring
moral hazard - Answers -a character flaw or level of dishonesty an individual
possesses that causes or increases the chance for loss
morale hazard - Answers -indifference to losses based on the existence of insurance
conditions for an insurable risk - Answers --a large number of homogenous exposure
units must exist
-insured losses must be accidental, measurable, and determinable
-the loss must not pose a catastrophic risk for the insurer
elements of a valid contract - Answers --offer and acceptance
-legal competency of all parties
-consideration
-lawful purpose
insurance contract unique characteristics - Answers --unilateral
-aleatory
-adhesive
-implies utmost good faith
-based on the principal of indemnity
-insured must have an insurable interest
-coverage is conditioned upon the payment of premiums
unilateral - Answers -only the insurer is making a promise
aleatory - Answers -what is paid in by the insured and paid out by the insurer may not
be equal amounts
GUIDE
personal risk management - Answers -a systematic process of identifying, evaluating,
and managing pure risk exposures faced by an individuals
pure risk - Answers -the chance of a loss or no loss occurring, but with no chance of
gain
personal risks - Answers -may cause the loss of income, or alternatively cause an
increase in the cost of living
property risks - Answers -may cause the loss of property
liability risks - Answers -may cause financial loss
loss frequency - Answers -the expected number of losses that will occur within a given
period of time
loss severity - Answers -the potential size or financial damage of a loss
probability of a loss - Answers -the chance that a loss will occur
perils - Answers -the proximate or actual cause of a loss
risk avoidance - Answers -avoiding an activity so that a financial loss cannot be
incurred
risk reduction - Answers -implementing activities that will result in the reduction of the
frequency and/or severity of losses
risk retention - Answers -the state of being exposed to a risk and personally retaining
the potential for losses
risk transfer - Answers -transferring or shifting the risk of loss through means such as
insurance or a warranty
risk management responses: high severity, low frequency - Answers -transfer and/or
share risk using insurance
risk management responses: high severity, high frequency - Answers -avoid risk
risk management responses: low severity, low frequency - Answers -retain risk
, risk management responses: low severity, high frequency - Answers -retain/reduce risk
peril policies - Answers -open-perils policy, named-perils policy
open-perils policy - Answers -cover all risks of loss that are not excluded from the
contract
named-perils policy - Answers -provides protection against losses caused by the perils
that are listed as covered
hazard - Answers -a condition that creates or increases the likelihood of a loss
occurring
types of hazards - Answers -physical, moral, morale
physical hazard - Answers -a tangible condition or circumstance that increases the
possibility of a peril occurring
moral hazard - Answers -a character flaw or level of dishonesty an individual
possesses that causes or increases the chance for loss
morale hazard - Answers -indifference to losses based on the existence of insurance
conditions for an insurable risk - Answers --a large number of homogenous exposure
units must exist
-insured losses must be accidental, measurable, and determinable
-the loss must not pose a catastrophic risk for the insurer
elements of a valid contract - Answers --offer and acceptance
-legal competency of all parties
-consideration
-lawful purpose
insurance contract unique characteristics - Answers --unilateral
-aleatory
-adhesive
-implies utmost good faith
-based on the principal of indemnity
-insured must have an insurable interest
-coverage is conditioned upon the payment of premiums
unilateral - Answers -only the insurer is making a promise
aleatory - Answers -what is paid in by the insured and paid out by the insurer may not
be equal amounts
