RMIN 4000 brown test 1 Questions and
Answers Graded A+
Moral hazard - Correct answer-Dishonesty or character defects in an individual
that increase the frequency and or severity of a loss.
Better definition: The presence of insurance changes the behavior of the insured.
Example- Using a hammer to create "hail" damage to a roof.
Morale hazard - Correct answer-When someone is very careless, and it increases
the probability of a loss.
Ex. Leaving keys in the car.
Physical Hazzard- - Correct answer-Such as electrical overload, bad pipes
Legal hazard - Correct answer-Characteristics of the legal system or regulatory
environment that increase the frequency and/or severity of a loss.
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, Example: States with legalized marijuana have a higher probability of people
getting injured using heavy machinery.
rule of 72 - Correct answer-72/rate = time to double money
Personal Risk - Correct answer-- Loss of income: Leads to an increase in expenses
and depletion of assets.
ExDeath, unemployment, disability, inadequate retirement income.
Property risk - Correct answer-refers to the potential for financial loss or damage to
a person's property due to various events or circumstances.
Diversifiable risk- - Correct answer-Affects only individuals or small groups, not
entire economy. Can be reduced/ eliminated through diversification. Risks arnt
correlated
Correlation - Correct answer-- Something that is connected with multiple variables
that move together or opposite
causation - Correct answer-One thing leads to another event.
non-diversifiable risk - Correct answer-Affects the entire community in large
numbers. Cannot be reduced/eliminated through diversification. Government
assistance may be needed to insure. Risks are correlated (inflation,Unemployment)
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Answers Graded A+
Moral hazard - Correct answer-Dishonesty or character defects in an individual
that increase the frequency and or severity of a loss.
Better definition: The presence of insurance changes the behavior of the insured.
Example- Using a hammer to create "hail" damage to a roof.
Morale hazard - Correct answer-When someone is very careless, and it increases
the probability of a loss.
Ex. Leaving keys in the car.
Physical Hazzard- - Correct answer-Such as electrical overload, bad pipes
Legal hazard - Correct answer-Characteristics of the legal system or regulatory
environment that increase the frequency and/or severity of a loss.
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, Example: States with legalized marijuana have a higher probability of people
getting injured using heavy machinery.
rule of 72 - Correct answer-72/rate = time to double money
Personal Risk - Correct answer-- Loss of income: Leads to an increase in expenses
and depletion of assets.
ExDeath, unemployment, disability, inadequate retirement income.
Property risk - Correct answer-refers to the potential for financial loss or damage to
a person's property due to various events or circumstances.
Diversifiable risk- - Correct answer-Affects only individuals or small groups, not
entire economy. Can be reduced/ eliminated through diversification. Risks arnt
correlated
Correlation - Correct answer-- Something that is connected with multiple variables
that move together or opposite
causation - Correct answer-One thing leads to another event.
non-diversifiable risk - Correct answer-Affects the entire community in large
numbers. Cannot be reduced/eliminated through diversification. Government
assistance may be needed to insure. Risks are correlated (inflation,Unemployment)
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
