RMIN 4000 Test 1( Chapters 1-4) with Complete Solutions(Rated A+)
Traditional definition of risk - ANSWER-uncertainty
Definition of risk - ANSWER-uncertainty about chance, timing, or amount of loss
Chance of loss - ANSWER-the probability that an event will occur
Objective risk - ANSWER-the relative variation of actual loss from expected loss
Law of Large Numbers - ANSWER-Objective risk varies inversely with the square root of the number of cases E.X. car insurance
subjective risk - ANSWER-uncertainty based on a person's mental condition or state of mind
peril - ANSWER-the cause of the loss
hazard - ANSWER-a condition that increases the frequency or severity of the loss
types of hazards - ANSWER-physical, morale, moral, legal
pure risk - ANSWER-chance of loss or no loss and no chance of gain
speculative risk - ANSWER-chance of loss, no loss, or gain
particular risk - ANSWER-a risk that affects only individuals as individuals
fundamental or systematic risk - ANSWER-risk that affects a large number of individuals
or the entire economy
enterprise risk - ANSWER-a term that encompasses all major risks faced by a business firm.
-operational risk
-financial risk
-strategic risk
-reputation risk
personal risks - ANSWER-risk of premature death
risk of insuffiiciet income during retirement
risk of poor health risk of unemployment
property risks - ANSWER-direct loss
indirect loss
direct loss - ANSWER-financial loss that results from the physical damage, destruction, or theft of the property
indirect loss - ANSWER-financial loss arising from loss of use of property
liability risks - ANSWER-responsibility for actions that cause injury or property damage to another
burden of risk on society - ANSWER--requires emergency funds
-outlays to reduce risk
-expense of financing potential/actual losses
-worry and fear
-time
-losses for which we are not indemnified
cost of risk - ANSWER--outlays to reduce risk
-opportunity cost
-expenses from financing potential losses
-cost of losses not reimbursed
Definition of Insurance - ANSWER-insurance is the pooling of fortuitous losses by transfer of such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk
fortuitious - ANSWER-random (accidental losses)
indmenification - ANSWER-"to make whole" means that the insured is restored to the condition prior to the loss
pooling of losses - ANSWER-spreading losses of a few over an entire group
-risk reduction based on the law of large numbers
payment of fortuitous losses - ANSWER-pay for losses that are unexpected, unforeseen, or occur as a result of chance
risk transfer - ANSWER-pure risk transfer from the insured to insurer
indemnification - ANSWER-insured restored to approximate financial position prior to loss
Traditional definition of risk - ANSWER-uncertainty
Definition of risk - ANSWER-uncertainty about chance, timing, or amount of loss
Chance of loss - ANSWER-the probability that an event will occur
Objective risk - ANSWER-the relative variation of actual loss from expected loss
Law of Large Numbers - ANSWER-Objective risk varies inversely with the square root of the number of cases E.X. car insurance
subjective risk - ANSWER-uncertainty based on a person's mental condition or state of mind
peril - ANSWER-the cause of the loss
hazard - ANSWER-a condition that increases the frequency or severity of the loss
types of hazards - ANSWER-physical, morale, moral, legal
pure risk - ANSWER-chance of loss or no loss and no chance of gain
speculative risk - ANSWER-chance of loss, no loss, or gain
particular risk - ANSWER-a risk that affects only individuals as individuals
fundamental or systematic risk - ANSWER-risk that affects a large number of individuals
or the entire economy
enterprise risk - ANSWER-a term that encompasses all major risks faced by a business firm.
-operational risk
-financial risk
-strategic risk
-reputation risk
personal risks - ANSWER-risk of premature death
risk of insuffiiciet income during retirement
risk of poor health risk of unemployment
property risks - ANSWER-direct loss
indirect loss
direct loss - ANSWER-financial loss that results from the physical damage, destruction, or theft of the property
indirect loss - ANSWER-financial loss arising from loss of use of property
liability risks - ANSWER-responsibility for actions that cause injury or property damage to another
burden of risk on society - ANSWER--requires emergency funds
-outlays to reduce risk
-expense of financing potential/actual losses
-worry and fear
-time
-losses for which we are not indemnified
cost of risk - ANSWER--outlays to reduce risk
-opportunity cost
-expenses from financing potential losses
-cost of losses not reimbursed
Definition of Insurance - ANSWER-insurance is the pooling of fortuitous losses by transfer of such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk
fortuitious - ANSWER-random (accidental losses)
indmenification - ANSWER-"to make whole" means that the insured is restored to the condition prior to the loss
pooling of losses - ANSWER-spreading losses of a few over an entire group
-risk reduction based on the law of large numbers
payment of fortuitous losses - ANSWER-pay for losses that are unexpected, unforeseen, or occur as a result of chance
risk transfer - ANSWER-pure risk transfer from the insured to insurer
indemnification - ANSWER-insured restored to approximate financial position prior to loss
