INSURANCE - CH. 1 DEFINITIONS QUESTIONS WITH VERIFIED ANSWERS [ GRADED A+]

INSURANCE - CH. 1 DEFINITIONS

QUESTIONS WITH VERIFIED ANSWERS [

GRADED A+]




Insurance - ✔✔contract that transfers the risk of financial loss from an

individual or business to an insurer




Risk - ✔✔uncertainty about whether a loss will occur




Why does life insurance include risk even though death is absolute? -

✔✔the timing of that loss is uncertain




©morren2024/2025.Year published 2024.

,Types of risk - ✔✔1. speculative


2. pure




Speculative Risk - ✔✔loss or gain can occur - not insurable




examples of speculative loss - ✔✔gambling, investing




pure risk - ✔✔only loss can occur - insurable




examples of pure risk - ✔✔car accident




loss - ✔✔reduction in value of an asset




©morren2024/2025.Year published 2024.

, exposure - ✔✔risks for which the insurance company would be liable




peril - ✔✔cause of loss




hazard - ✔✔anything that increases the chance that a loss will occur




type of hazards - ✔✔1. Physical


2. Moral

3. Morale




physical hazard - ✔✔physically identifiable factors that increase chance

of loss




©morren2024/2025.Year published 2024.