RMIN 4000 Exam 1 Brown Questions and
Answers with Verified Solutions | Latest
Updated 2026
Textbook definition of RISK Uncertainty concerning the occurrence of a
loss
Better definition of RISK A calculated possibility of a negative
outcome
Calculated Possibility 0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome Loss
Losses must be __________? Quantifiable
Pure Risk States Loss
or
No Loss
Examples of Pure Risks Fire, Cancer, Dog bites a visitor
Speculative Risk States Loss
No Loss/No Gain
Gain
,Examples of speculative risks Investment, Gambling, Drinking
Frequency answers what How often does a loss occur
question? The number of losses that occur in a
specified time
period
Probability of a loss Frequency
Severity answers what question? How much does it cost when a loss does
occur?
The dollar amount for a loss of a specific
peril
Peril Cause of a loss
Hazard Condition that creates or increases the
frequency
and/or severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril Fire, Tornado, Collision, Burglary
Types of Hazard Physical
Moral
Morale (Attitudinal)
Legal
, Physical Hazard A physical condition that increases the
frequency
and/or severity of a loss
Book Definition of Moral Hazard Dishonesty or character defects in an
individual
that increase the frequency and/or severity
of a
loss
Better Definition of Moral Hazard The presence of insurance changes the
behavior of
the insured
Examples of Moral Hazard Using a hammer to create "hail" damage to
a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard Carelessness or indifference to a loss,
which
increases increases the frequency and/or
severity
of a loss
Examples of Morale Hazard Leaving car keys in an unlocked car
Neglecting a tree limb growing over your
roof
Answers with Verified Solutions | Latest
Updated 2026
Textbook definition of RISK Uncertainty concerning the occurrence of a
loss
Better definition of RISK A calculated possibility of a negative
outcome
Calculated Possibility 0 = Impossible event (NO RISK)
0.5 = Highest Risk (Most Uncertainty)
1 = 100% Certain Event (NO RISK
Negative Outcome Loss
Losses must be __________? Quantifiable
Pure Risk States Loss
or
No Loss
Examples of Pure Risks Fire, Cancer, Dog bites a visitor
Speculative Risk States Loss
No Loss/No Gain
Gain
,Examples of speculative risks Investment, Gambling, Drinking
Frequency answers what How often does a loss occur
question? The number of losses that occur in a
specified time
period
Probability of a loss Frequency
Severity answers what question? How much does it cost when a loss does
occur?
The dollar amount for a loss of a specific
peril
Peril Cause of a loss
Hazard Condition that creates or increases the
frequency
and/or severity of a loss
DOES NOT CAUSE A LOSS
Examples of Peril Fire, Tornado, Collision, Burglary
Types of Hazard Physical
Moral
Morale (Attitudinal)
Legal
, Physical Hazard A physical condition that increases the
frequency
and/or severity of a loss
Book Definition of Moral Hazard Dishonesty or character defects in an
individual
that increase the frequency and/or severity
of a
loss
Better Definition of Moral Hazard The presence of insurance changes the
behavior of
the insured
Examples of Moral Hazard Using a hammer to create "hail" damage to
a roof
Exaggerating the value of insured property
Morale (Attitudinal) Hazard Carelessness or indifference to a loss,
which
increases increases the frequency and/or
severity
of a loss
Examples of Morale Hazard Leaving car keys in an unlocked car
Neglecting a tree limb growing over your
roof
