RMIN 4000 EXAM 1 QUESTIONS AND ANSWERS 100% CORRECT!

Exposures - ANSWER-things of value (assets) that could be lost perils - ANSWER-things that could happen to these assets Risk management - ANSWER-what do you do to protect these assets and/or prevent/reduce losses? process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures Risk - ANSWER-a calculates possibility of a negative outcome Calculated possibility - ANSWER-a probabilistic outcome (chance of loss, the likelihood of loss) that is known or estimated; ranges from 0 to 1 Negative outcome - ANSWER-lost must be quantifiable frequency - ANSWER-how often does a loss occur; The number of losses that occur within a specified time period; Probability of a loss Severity - ANSWER-how much does it cost when a loss does occur; The dollar amount of loss for a specific peril Peril - ANSWER-Cause of loss ex: fire, tornado, collision, burglary etc Hazard - ANSWER-a condition that creates or increases the frequency and/or severity of a loss Moral hazard - ANSWER-The presence of insurance changes the behavior of the insured; Dishonesty or character defects in an individual that increases the frequency and/or severity of a loss examples→ using a hammer to create "hail" damage to a roof or exaggerating the value of insured property Morale (attitudinal) hazard - ANSWER-The carelessness of indifference to a loss, which increases the frequency and/or severity of a loss examples→ leaving car keys in an unlocked car; neglecting a tree limb growing over your roof