Alabama Property and Casualty Insurance Exam Prep (A+ GUARANTEED)

Insurance correct answers The transfer of risk through a legal contract Property correct answers Covers real property and personal property against damage or loss resulting from covered causes of loss called perils. Casualty correct answers Covers non-property loss (by a 3rd party) Personal Lines correct answers Insurance coverages intended to protect individuals and their families. Commercial Lines correct answers Property and casualty coverages for business firms, nonprofit organizations, and government agencies Risk correct answers Uncertainty of financial loss Pure Risk correct answers A risk that presents the chance of loss but no opportunity for gain Speculative Risk correct answers Chance of loss or gain Law of Large Numbers correct answers A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. Perils correct answers Causes of loss insured against in an insurance policy Named Peril correct answers A specific cause of loss listed and described in an insurance policy. Also used to describe policies containing named perils. Open Perils correct answers Insurance that covers all perils except those specifically noted as excluded Hazard correct answers Things that are not cause of loss, but can increase the chance of a peril happening Physical Hazard correct answers A tangible characteristic of property, persons, or operations that tends to increase the frequency or severity of loss. Moral Hazard correct answers When the act of insuring an event increases the likelihood that the event will happen. Morale Hazard correct answers A condition of carelessness or indifference that increases the frequency or severity of loss.