STATE FARM PROPERTY ACTUAL EXAM
QUESTIONS AND CORRECT ANSWERS
COMPLETE SOLUTION
●● Loss
Answer: unplanned reduction in economic value
●● Direct loss
Answer: Immediate result of an event caused by peril
●● Indirect loss
Answer: side effect of the direct loss
●● exposure
Answer: the state of being subject to possible loss
●● peril
Answer: cause of loss. the event that insurance protects against
●● examples of perils
Answer: fire, explosion, windstorm, flood, theft, collision
,●● hazard
Answer: a condition that increases the number of or the severity of
losses
●● Moral hazards
Answer: traits of an individual that increases loss: alcoholism, smoking,
bad credit
●● Morale hazards
Answer: individual tendencies from a state of mind or attitude or
indifference to loss. example: not locking a car door or driving
recklessly
●● Physical hazards
Answer: physical conditions that increase chance of loss. example:
diseases, slippery floors, congested traffic, unsanitary conditions
●● Risk Management (5 techniques)
Answer: 1. avoiding risk
2. controlling (reducing) the risk
3.sharing the risk
4.retaining the risk
,5.transferring the risk
●● Risk Avoidance
Answer: not always practical. example if you dont own a car you avoid
the risk of having a car be stolen or damaged
●● Risk Control
Answer: can be controllable through risk prevention or risk reduction
measures.
●● risk prevention
Answer: reduce likleyhood that a loss will occur
●● risk reduction
Answer: reduce the severity of any loss. for example a fire extinguishers
(does not keep fires from starting but when used they can limit fire
damage)
●● Risk Sharing
Answer: sharing the burden of a loss with others. (pooling tips)
●● Risk retention
, Answer: "doing nothing" choosing to use existing assets to pay for any
losses
●● Risk Transfer
Answer: transferring the risk of loss to a third party
●● "Only pure risks ...
Answer: are insurable"
●● To be covered by insurance, a risk must meet these rules:
Answer: The loss must be clear—when, where, and how it happened.
The item's value must be measurable so the company knows how much
to charge and pay.
The loss must be accidental, not something the insured caused on
purpose.
Huge disasters like wars or massive earthquakes usually aren't covered.
The risk must be common enough that the insurance company can
predict future losses.
QUESTIONS AND CORRECT ANSWERS
COMPLETE SOLUTION
●● Loss
Answer: unplanned reduction in economic value
●● Direct loss
Answer: Immediate result of an event caused by peril
●● Indirect loss
Answer: side effect of the direct loss
●● exposure
Answer: the state of being subject to possible loss
●● peril
Answer: cause of loss. the event that insurance protects against
●● examples of perils
Answer: fire, explosion, windstorm, flood, theft, collision
,●● hazard
Answer: a condition that increases the number of or the severity of
losses
●● Moral hazards
Answer: traits of an individual that increases loss: alcoholism, smoking,
bad credit
●● Morale hazards
Answer: individual tendencies from a state of mind or attitude or
indifference to loss. example: not locking a car door or driving
recklessly
●● Physical hazards
Answer: physical conditions that increase chance of loss. example:
diseases, slippery floors, congested traffic, unsanitary conditions
●● Risk Management (5 techniques)
Answer: 1. avoiding risk
2. controlling (reducing) the risk
3.sharing the risk
4.retaining the risk
,5.transferring the risk
●● Risk Avoidance
Answer: not always practical. example if you dont own a car you avoid
the risk of having a car be stolen or damaged
●● Risk Control
Answer: can be controllable through risk prevention or risk reduction
measures.
●● risk prevention
Answer: reduce likleyhood that a loss will occur
●● risk reduction
Answer: reduce the severity of any loss. for example a fire extinguishers
(does not keep fires from starting but when used they can limit fire
damage)
●● Risk Sharing
Answer: sharing the burden of a loss with others. (pooling tips)
●● Risk retention
, Answer: "doing nothing" choosing to use existing assets to pay for any
losses
●● Risk Transfer
Answer: transferring the risk of loss to a third party
●● "Only pure risks ...
Answer: are insurable"
●● To be covered by insurance, a risk must meet these rules:
Answer: The loss must be clear—when, where, and how it happened.
The item's value must be measurable so the company knows how much
to charge and pay.
The loss must be accidental, not something the insured caused on
purpose.
Huge disasters like wars or massive earthquakes usually aren't covered.
The risk must be common enough that the insurance company can
predict future losses.
