Colorado Property and Casualty Insurance Exam 100%
Verified Questions & Answers
Q: Law of Large Numbers
Answer:
This states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
This law forms the basis for statistical prediction of loss upon which insurance rates are calculated
Q: Example of Law of Large Numbers
Answer:
When an insurance company issues a policy on a 35-year old male, the company has no way of knowing or accurately
predicting when he will die. But LOLN looks at a large group of similar risks-and makes some conclusions based on
statistics of past losses
Q: Insurable Interest
Answer:
a person or property with insurable interest, meaning the person or property would incur financial loss if the insured's
property or self were to be damaged
Q: Example of Insurable Interest
Answer:
Mortgagees and leaseholders may have insurable interest in their respective properties
Q: 3 Elements of Insurable Interest
Answer:
Financial (monetary), Blood (a relative), Business (a business partner)
Q: Extra Note
Answer:
Insurable interest must exist at the time of loss (person or property)
Q: Risk
Answer:
The uncertainty or chance of loss occurring
Q: Two types of Risk
Answer:
Pure and Speculative risk
Q: Pure Risk
, Answer:
Refers to situations that can only result in loss or no change. No opportunity for financial gain. This is the only risk that
insurance companies are willing to accept
Q: Speculative Risk
Answer:
This involves the opportunity for either loss or gain. an example would be gambling. This type of risk is not insurable
Q: Peril
Answer:
The causes of loss insured against in an insurance policy
Q: Life Insurance
Answer:
Insures against the financial loss caused by the premature death of the insured
Q: Health Insurance
Answer:
Insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury
Q: Property Insurance
Answer:
Insures against the loss of physical property or the loss of its' income producing abilities
Q: Casualty Insurance
Answer:
Insures against the loss and/or damage of property and resulting liabilities
Q: Hazards
Answer:
The conditions or situations that increase the probability of an insured loss occurring. (Slippery floors, congested traffic)
Q: Physical Hazards
Answer:
Are those arising from material, structural, or operational features of the risk. Apart from the persons owning/managing it
Q: Moral Hazards
Answer:
Refer to those applicants that may lie on an application for insurance, or have done so in the past, or have submitted
fraudulent claims against an insurer
Verified Questions & Answers
Q: Law of Large Numbers
Answer:
This states that the larger the number of people with a similar exposure to loss, the more predictable actual losses will be.
This law forms the basis for statistical prediction of loss upon which insurance rates are calculated
Q: Example of Law of Large Numbers
Answer:
When an insurance company issues a policy on a 35-year old male, the company has no way of knowing or accurately
predicting when he will die. But LOLN looks at a large group of similar risks-and makes some conclusions based on
statistics of past losses
Q: Insurable Interest
Answer:
a person or property with insurable interest, meaning the person or property would incur financial loss if the insured's
property or self were to be damaged
Q: Example of Insurable Interest
Answer:
Mortgagees and leaseholders may have insurable interest in their respective properties
Q: 3 Elements of Insurable Interest
Answer:
Financial (monetary), Blood (a relative), Business (a business partner)
Q: Extra Note
Answer:
Insurable interest must exist at the time of loss (person or property)
Q: Risk
Answer:
The uncertainty or chance of loss occurring
Q: Two types of Risk
Answer:
Pure and Speculative risk
Q: Pure Risk
, Answer:
Refers to situations that can only result in loss or no change. No opportunity for financial gain. This is the only risk that
insurance companies are willing to accept
Q: Speculative Risk
Answer:
This involves the opportunity for either loss or gain. an example would be gambling. This type of risk is not insurable
Q: Peril
Answer:
The causes of loss insured against in an insurance policy
Q: Life Insurance
Answer:
Insures against the financial loss caused by the premature death of the insured
Q: Health Insurance
Answer:
Insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injury
Q: Property Insurance
Answer:
Insures against the loss of physical property or the loss of its' income producing abilities
Q: Casualty Insurance
Answer:
Insures against the loss and/or damage of property and resulting liabilities
Q: Hazards
Answer:
The conditions or situations that increase the probability of an insured loss occurring. (Slippery floors, congested traffic)
Q: Physical Hazards
Answer:
Are those arising from material, structural, or operational features of the risk. Apart from the persons owning/managing it
Q: Moral Hazards
Answer:
Refer to those applicants that may lie on an application for insurance, or have done so in the past, or have submitted
fraudulent claims against an insurer
