LOMA 280 Ch 1-7 Exam 2025
Questions and Answers
Speculative Risk - ✔✔Loss, gain, or no change; cannot be insured
Pure risk - ✔✔Can be insured; the risk of loss w/o the possibility of a gain
Risk Management - ✔✔The process of eliminating reducing risk; includes: avoiding,
controlling, transferring, or accepting.
Insurer - ✔✔A company that accepts risk and makes a promise to pay a policy if loss
occurs.
Policy Benefit - ✔✔Amount of money insurer agrees to pay under policy.
Personal Risk - ✔✔Associated w/ economic loss of death, health, injury, outliving
resources
Property Damage Risk - ✔✔Benefit if insured items are damaged, destroyed, or lost
Liability Insurance - ✔✔Provides benefit payable on behalf of legally responsible party
Beneficiary - ✔✔Person the p/o names to receive policy benefit
By chance; definite; significant; be predictable; non-catastrophic to insurer. -
✔✔Characteristics of insurable risks - the loss must be [5 Things]:
Contract of indemnity - ✔✔Amt. of policy benefit payable for a covered loss is based on
the actual amount of financial loss resulting from a covered event, det. at time of event.
Morbidity Rate - ✔✔Incidence of sickness and accidents, by age in a given table
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Reinsurance - ✔✔One company (direct wright) purchases from another insurance
company (reinsurer) to transfer all/part of the risk on insurance policies the direct
writer issued.
Antiselection - ✔✔Individuals who believe they have a greater-than average likelihood
of loss seek insurance protection to a greater extent than other individuals
Underwriting - ✔✔(1) identifying risks that proposed insured presents, and
(2) classifying the degree of risk that a proposed insured represents.**
Physical Hazard - ✔✔Physical characteristics that may increase/decrease likelihood of
loss.
Moral Hazard - ✔✔Exists when reputation, financial position, or criminal record of an
applicant or proposed insured indicates the person may act dishonestly in transaction.
Risk Class - ✔✔Grouping of insured' s who represent similar level of risk.
Standard Risk - ✔✔Insured's who have a likelihood of loss that is not significantly >
avg.
Preferred Risk - ✔✔loss expectancy < avg. charged lower than standard typically
Substandard Risk - ✔✔Substandard Risk: Loss expectancy > avg. Also called special
class risk
Declined Risk - ✔✔Risk too great to cover; not considered for insurance.
Insurable Interest - ✔✔Owner must be likely to suffer a genuine loss/detriment in any
event.
* includes immediate family, and those who may suffer financial burden such as a bank
who is issuing a large sum of money in the form of a loan.
Voidable Contract - ✔✔One party has the right to avoid his obligations under the
contract; the other party, however, is bound by the terms of the contract.
Formal Contract - ✔✔(Contract under seal); enforceable b/c parties met certain
formalities concerning the form of agreement. Must be in writing & some form of seal.
(Ex. sale of land)
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
Questions and Answers
Speculative Risk - ✔✔Loss, gain, or no change; cannot be insured
Pure risk - ✔✔Can be insured; the risk of loss w/o the possibility of a gain
Risk Management - ✔✔The process of eliminating reducing risk; includes: avoiding,
controlling, transferring, or accepting.
Insurer - ✔✔A company that accepts risk and makes a promise to pay a policy if loss
occurs.
Policy Benefit - ✔✔Amount of money insurer agrees to pay under policy.
Personal Risk - ✔✔Associated w/ economic loss of death, health, injury, outliving
resources
Property Damage Risk - ✔✔Benefit if insured items are damaged, destroyed, or lost
Liability Insurance - ✔✔Provides benefit payable on behalf of legally responsible party
Beneficiary - ✔✔Person the p/o names to receive policy benefit
By chance; definite; significant; be predictable; non-catastrophic to insurer. -
✔✔Characteristics of insurable risks - the loss must be [5 Things]:
Contract of indemnity - ✔✔Amt. of policy benefit payable for a covered loss is based on
the actual amount of financial loss resulting from a covered event, det. at time of event.
Morbidity Rate - ✔✔Incidence of sickness and accidents, by age in a given table
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Reinsurance - ✔✔One company (direct wright) purchases from another insurance
company (reinsurer) to transfer all/part of the risk on insurance policies the direct
writer issued.
Antiselection - ✔✔Individuals who believe they have a greater-than average likelihood
of loss seek insurance protection to a greater extent than other individuals
Underwriting - ✔✔(1) identifying risks that proposed insured presents, and
(2) classifying the degree of risk that a proposed insured represents.**
Physical Hazard - ✔✔Physical characteristics that may increase/decrease likelihood of
loss.
Moral Hazard - ✔✔Exists when reputation, financial position, or criminal record of an
applicant or proposed insured indicates the person may act dishonestly in transaction.
Risk Class - ✔✔Grouping of insured' s who represent similar level of risk.
Standard Risk - ✔✔Insured's who have a likelihood of loss that is not significantly >
avg.
Preferred Risk - ✔✔loss expectancy < avg. charged lower than standard typically
Substandard Risk - ✔✔Substandard Risk: Loss expectancy > avg. Also called special
class risk
Declined Risk - ✔✔Risk too great to cover; not considered for insurance.
Insurable Interest - ✔✔Owner must be likely to suffer a genuine loss/detriment in any
event.
* includes immediate family, and those who may suffer financial burden such as a bank
who is issuing a large sum of money in the form of a loan.
Voidable Contract - ✔✔One party has the right to avoid his obligations under the
contract; the other party, however, is bound by the terms of the contract.
Formal Contract - ✔✔(Contract under seal); enforceable b/c parties met certain
formalities concerning the form of agreement. Must be in writing & some form of seal.
(Ex. sale of land)
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
