CHAPTER 2 EXAM: NATURE OF
INSURANCE, RISK, PERILS AND
HAZARDS EXAM QUESTIONS AND
ANSWERS 100% CORRECT.
, Restoring an insured to the same condition as before a loss is known as
a. Law of large numbers
b. Fiduciary retention
c. Adverse selection
d. Principle of indemnity - ANSWERd. Principle of indemnity
The principle of indemnity involves making an insured whole by restoring them to he
same condition as before a loss.
Which of the following would NOT be accomplished with the purchase of an insurance
policy?
a. Greater peace of mind
b. Risk is eliminated
c. Payments made for covered losses
d. Uncertainty is reduced. - ANSWERb. Risk is eliminated
All of these would be accomplished with the purchase of an insurance policy except
"risk is eliminated."
A hazard can be best described as
a. the potential for loss
b. The tendency for poorer than average risks to seek out insurance
c. A condition that may increase the likelihood of a loss occurring
d. a risk that has the potential for both loss and gain. - ANSWERc. A condition that may
increase the likelihood of a loss occurring
A condition or situation that creates or increases a chance of loss is called a hazard.
Examples include icy roads, driving while intoxicated, and improperly stored toxic waste.
Which of the following describes the increase in the probability of a loss due to an
insured's dishonesty tendencies?
a. Morale hazard
b. Physical hazard
c. Moral hazard
d. Speculative hazard - ANSWERc. Moral hazard
The increase in the probability of a loss resulting from an insured's dishonest tendencies
is know as moral hazard.
Moral hazard is described as the
a. increased chance of loss because of an insured's recklessness
b. increased ability to predict loss because of a higher exposure to loss
c. increased risk of adverse selection
INSURANCE, RISK, PERILS AND
HAZARDS EXAM QUESTIONS AND
ANSWERS 100% CORRECT.
, Restoring an insured to the same condition as before a loss is known as
a. Law of large numbers
b. Fiduciary retention
c. Adverse selection
d. Principle of indemnity - ANSWERd. Principle of indemnity
The principle of indemnity involves making an insured whole by restoring them to he
same condition as before a loss.
Which of the following would NOT be accomplished with the purchase of an insurance
policy?
a. Greater peace of mind
b. Risk is eliminated
c. Payments made for covered losses
d. Uncertainty is reduced. - ANSWERb. Risk is eliminated
All of these would be accomplished with the purchase of an insurance policy except
"risk is eliminated."
A hazard can be best described as
a. the potential for loss
b. The tendency for poorer than average risks to seek out insurance
c. A condition that may increase the likelihood of a loss occurring
d. a risk that has the potential for both loss and gain. - ANSWERc. A condition that may
increase the likelihood of a loss occurring
A condition or situation that creates or increases a chance of loss is called a hazard.
Examples include icy roads, driving while intoxicated, and improperly stored toxic waste.
Which of the following describes the increase in the probability of a loss due to an
insured's dishonesty tendencies?
a. Morale hazard
b. Physical hazard
c. Moral hazard
d. Speculative hazard - ANSWERc. Moral hazard
The increase in the probability of a loss resulting from an insured's dishonest tendencies
is know as moral hazard.
Moral hazard is described as the
a. increased chance of loss because of an insured's recklessness
b. increased ability to predict loss because of a higher exposure to loss
c. increased risk of adverse selection
