RMIN 4000 Final Exam questions and
answers graded A+
Peril - correct answer ✔✔Cause of loss
Risk - correct answer ✔✔Uncertainty about chance, timing, or amount of loss
Chance of Loss - correct answer ✔✔Probability that an event will occur
Objective Risk - correct answer ✔✔The relative variation of actual loss from expected loss;
(Actual-Expected)/Expected; higher variation means higher risk
Law of Large Numbers - correct answer ✔✔Objective risk varies inversely with the square root
of the number of cases
Subjective Risk - correct answer ✔✔Uncertainty based on a person's mental condition or state
of mind
Hazard - correct answer ✔✔A condition that increased the frequency or severity of the loss
Moral Hazard - correct answer ✔✔Arson
Morale Hazard - correct answer ✔✔Driving drunk
Pure risk - correct answer ✔✔Chance of loss or no loss (no gain)
, Speculative risk - correct answer ✔✔Chance of loss, no loss, or gain
Particular risk - correct answer ✔✔Risk that affects only affects individuals as individuals
Legal hazard - correct answer ✔✔Large damage awards in litigation
Fundamental/systematic risk - correct answer ✔✔Affects a large number of individuals or the
entire economy
Enterprise risk - correct answer ✔✔All major risks faced by a business
Direct loss (property) - correct answer ✔✔Financial loss that results from physical damage,
destruction, or theft
Indirect loss (property) - correct answer ✔✔Financial loss arising from loss of USE of property
Liability risk - correct answer ✔✔Responsibility for actions that cause injury or property damage
to another (no limit)
Fortuitous loss - correct answer ✔✔Unforeseen and unexpected by the insured and occurs as a
result of chance
Risk Transfer - correct answer ✔✔Pure risk is transferred from the insured to the insurer, who
typically is in a better financial position to pay the loss than the insured
Indemnification - correct answer ✔✔The injured is restored to his approximate financial
position prior to the occurrence of the loss
answers graded A+
Peril - correct answer ✔✔Cause of loss
Risk - correct answer ✔✔Uncertainty about chance, timing, or amount of loss
Chance of Loss - correct answer ✔✔Probability that an event will occur
Objective Risk - correct answer ✔✔The relative variation of actual loss from expected loss;
(Actual-Expected)/Expected; higher variation means higher risk
Law of Large Numbers - correct answer ✔✔Objective risk varies inversely with the square root
of the number of cases
Subjective Risk - correct answer ✔✔Uncertainty based on a person's mental condition or state
of mind
Hazard - correct answer ✔✔A condition that increased the frequency or severity of the loss
Moral Hazard - correct answer ✔✔Arson
Morale Hazard - correct answer ✔✔Driving drunk
Pure risk - correct answer ✔✔Chance of loss or no loss (no gain)
, Speculative risk - correct answer ✔✔Chance of loss, no loss, or gain
Particular risk - correct answer ✔✔Risk that affects only affects individuals as individuals
Legal hazard - correct answer ✔✔Large damage awards in litigation
Fundamental/systematic risk - correct answer ✔✔Affects a large number of individuals or the
entire economy
Enterprise risk - correct answer ✔✔All major risks faced by a business
Direct loss (property) - correct answer ✔✔Financial loss that results from physical damage,
destruction, or theft
Indirect loss (property) - correct answer ✔✔Financial loss arising from loss of USE of property
Liability risk - correct answer ✔✔Responsibility for actions that cause injury or property damage
to another (no limit)
Fortuitous loss - correct answer ✔✔Unforeseen and unexpected by the insured and occurs as a
result of chance
Risk Transfer - correct answer ✔✔Pure risk is transferred from the insured to the insurer, who
typically is in a better financial position to pay the loss than the insured
Indemnification - correct answer ✔✔The injured is restored to his approximate financial
position prior to the occurrence of the loss
