Final Study Set: RMIN 4000 - Daniel
Jeremy Brown Exam 2026 Questions and
Answers
Exposures - Correct answer-Things of value (assets) that could be lost (Any
situation/circumstance in which a loss is possible, regardless of whether a loss
actually occurs)
Perils - Correct answer-Things that could happen to your assets - cause of loss
Risk Management - Correct answer-What you do to protect these assets and/or
prevent/reduce losses (Identifies loss exposures faced by an organization and
selects the most appropriate techniques for treating such exposures)
Risk - Correct answer-The calculated possibility of a negative outcome
Loss - Correct answer-Negative outcome - must be quantifiable
Frequency - Correct answer-How often a loss occurs (number of losses that occur
within a specified time period)
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,Severity - Correct answer-How much a loss costs when it does occur (the dollar
amount of loss for a specific peril
Hazard - Correct answer-Condition that creates or increases frequency/severity of
loss
Physical Hazard - Correct answer-A physical condition that increases the
frequency/severity of a loss
Moral Hazard - Correct answer-Presence of insurance changes the behavior of the
insured
Morale (Attitudinal) Hazard - Correct answer-Carelessness/indifference to a loss
(increases frequency/severity of a loss)
Legal Hazard - Correct answer-Characteristics of legal system/regulatory
environment that increase the frequency and/or severity of a loss
Pure Risk - Correct answer-Two outcomes possible: loss or no loss (can purchase
insurance for this)
Speculative Risk - Correct answer-Three outcomes possible: loss, no loss/no gain,
or gain (cannot purchase insurance for this)
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,Diversifiable Risk - Correct answer-Affects only individuals/small groups, not
entire economy: can be reduced/eliminated thru diversification (ex: fire, theft,
collision)
Nondiversifiable Risk - Correct answer-Affects entire economy/large numbers of
groups/persons within the economy - can't be reduced thru diversification,
government assistance may be needed to insure (correlated risks, ex: hurricane)
Enterprise Risk - Correct answer-All major risks faced by a business firm (pure,
speculative, strategic, operational, financial)
Systemic Risk - Correct answer-Risk of collapse of an entire system/market due to
the failure of a single entity/group of entities
Instability in the financial system due to the interdependency between the players
in the market
Personal Risk - Correct answer-Directly affects an individual/family - involve the
possibility of loss of income, extra expenses, depletion of financial assets (ex. of
perils: death, unemployment, disability, etc.)
Property Risk - Correct answer-Possibility of losses associated with the destruction
or theft of property (Direct loss: cost to repair, Indirect loss: cost to live elsewhere
during repairs)
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, Liability Risk - Correct answer-Legal liability (financial consequences) resulting
from injuries/damages you caused - no upper limit
Loss of Business Income - Correct answer-Business having to shut down for a
period of time due to physical damage loss: unable to generate an income
Risk Control - Correct answer-Techniques to reduce the frequency/severity of
losses
Risk Financing - Correct answer-Techniques for funding losses
Loss Prevention - Correct answer-Reduces frequency (airport security, safety
training programs)
Loss Reduction - Correct answer-Reduces severity (fire sprinklers) - can occur pre
or post loss
Avoidance - Correct answer-Type of risk control in which a certain loss exposure is
never acquired (frequency = 0) - many downsides
Retention - Correct answer-Retaining part or all of losses that can occur from a
given risk (active: deliberate, passive: unknowing)
Good when a risk is difficult to insure, low severity, predictable loss
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
Jeremy Brown Exam 2026 Questions and
Answers
Exposures - Correct answer-Things of value (assets) that could be lost (Any
situation/circumstance in which a loss is possible, regardless of whether a loss
actually occurs)
Perils - Correct answer-Things that could happen to your assets - cause of loss
Risk Management - Correct answer-What you do to protect these assets and/or
prevent/reduce losses (Identifies loss exposures faced by an organization and
selects the most appropriate techniques for treating such exposures)
Risk - Correct answer-The calculated possibility of a negative outcome
Loss - Correct answer-Negative outcome - must be quantifiable
Frequency - Correct answer-How often a loss occurs (number of losses that occur
within a specified time period)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
,Severity - Correct answer-How much a loss costs when it does occur (the dollar
amount of loss for a specific peril
Hazard - Correct answer-Condition that creates or increases frequency/severity of
loss
Physical Hazard - Correct answer-A physical condition that increases the
frequency/severity of a loss
Moral Hazard - Correct answer-Presence of insurance changes the behavior of the
insured
Morale (Attitudinal) Hazard - Correct answer-Carelessness/indifference to a loss
(increases frequency/severity of a loss)
Legal Hazard - Correct answer-Characteristics of legal system/regulatory
environment that increase the frequency and/or severity of a loss
Pure Risk - Correct answer-Two outcomes possible: loss or no loss (can purchase
insurance for this)
Speculative Risk - Correct answer-Three outcomes possible: loss, no loss/no gain,
or gain (cannot purchase insurance for this)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
,Diversifiable Risk - Correct answer-Affects only individuals/small groups, not
entire economy: can be reduced/eliminated thru diversification (ex: fire, theft,
collision)
Nondiversifiable Risk - Correct answer-Affects entire economy/large numbers of
groups/persons within the economy - can't be reduced thru diversification,
government assistance may be needed to insure (correlated risks, ex: hurricane)
Enterprise Risk - Correct answer-All major risks faced by a business firm (pure,
speculative, strategic, operational, financial)
Systemic Risk - Correct answer-Risk of collapse of an entire system/market due to
the failure of a single entity/group of entities
Instability in the financial system due to the interdependency between the players
in the market
Personal Risk - Correct answer-Directly affects an individual/family - involve the
possibility of loss of income, extra expenses, depletion of financial assets (ex. of
perils: death, unemployment, disability, etc.)
Property Risk - Correct answer-Possibility of losses associated with the destruction
or theft of property (Direct loss: cost to repair, Indirect loss: cost to live elsewhere
during repairs)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 3
, Liability Risk - Correct answer-Legal liability (financial consequences) resulting
from injuries/damages you caused - no upper limit
Loss of Business Income - Correct answer-Business having to shut down for a
period of time due to physical damage loss: unable to generate an income
Risk Control - Correct answer-Techniques to reduce the frequency/severity of
losses
Risk Financing - Correct answer-Techniques for funding losses
Loss Prevention - Correct answer-Reduces frequency (airport security, safety
training programs)
Loss Reduction - Correct answer-Reduces severity (fire sprinklers) - can occur pre
or post loss
Avoidance - Correct answer-Type of risk control in which a certain loss exposure is
never acquired (frequency = 0) - many downsides
Retention - Correct answer-Retaining part or all of losses that can occur from a
given risk (active: deliberate, passive: unknowing)
Good when a risk is difficult to insure, low severity, predictable loss
©COPYRIGHT 2025, ALL RIGHTS RESERVED 4
