Exam Fx (PROPERTY & CASUALTY) | 117 Question and Answers (A+ guide solution)

Law of Large Numbers - The larger the number of people with a similar exposure to loss, the more predictable actual losses will be. Insurance - Transfers the risk of loss from an individual or business entity to an insurance company The three elements of insurable risk are - 1) Financial 2) Blood (relative) 3) Business Risk - The uncertainty or chance of a loss occurring Types of risks are - 1) Pure risk 2) Speculative risk What type of risk does insurance cover? - Pure risk What is pure risk? - It can only result in a loss or no change What type of risk is not insurable? - speculative risk What is speculative risk? - Opportunity for loss or gain. For example, gambling. What is a peril? - a specific cause of loss What is a hazard? - conditions or situations that increase the probability of a loss occurring What is a loss? - reduction, decrease or disappearance of value of the person or property insured.