Introduction to Property and Casualty Insurance: Key
Concepts and Policy Structure Exam 100% Verified
Questions & Answers
Q: What is the primary purpose of an insurance contract?
Answer:
To provide financial protection by transferring the risk of loss from the consumer to an insurance company.
Q: How is risk defined in the context of insurance?
Answer:
The uncertainty concerning a potential loss.
Q: What is a pure risk?
Answer:
A risk that results in either a loss or no change in status, with no possibility of gain.
Q: What is a speculative risk?
Answer:
A risk that may result in a loss, a gain, or no change in status.
Q: Why is insurance only designed to cover pure risks?
Answer:
Because insurance is intended to make up for a loss, not to provide benefits for potential gains.
Q: How is a loss defined in insurance?
Answer:
A reduction, decrease, or disappearance in value that serves as the basis for a claim.
Q: What is an exposure or loss exposure?
Answer:
The condition of being at risk for a loss, whether or not an actual loss occurs.
Q: What is a peril?
Answer:
The specific cause of a loss, such as fire, lightning, or wind.
Q: What is a hazard?
Answer:
, A condition that increases the probability or likelihood that a loss will occur from a peril.
Q: What is a physical hazard?
Answer:
A physical condition, such as flammable materials or icy sidewalks, that increases the probability of loss.
Q: What is a moral hazard?
Answer:
Dishonest tendencies or behaviors, such as lying or faking an injury, that increase the probability of loss.
Q: What is a morale hazard?
Answer:
An attitude of indifference toward the risk of loss, such as leaving a car unlocked with keys inside.
Q: What does the acronym STARR stand for in risk management?
Answer:
Sharing, Transfer, Avoidance, Reduction, and Retention.
Q: What is risk sharing?
Answer:
Distributing or pooling a risk among several parties with similar loss exposures.
Q: What is risk transfer?
Answer:
Shifting a risk to another party, most commonly through an insurance policy.
Q: What is risk avoidance?
Answer:
Eliminating a risk by choosing not to participate in activities that involve a chance of loss.
Q: What is risk reduction?
Answer:
Minimizing the risks that cannot be completely avoided.
Q: What is the role of an insurance carrier?
Answer:
To provide protection in the form of benefits or payment after a loss occurs based on policy terms.
Q: Are speculative risks insurable?
Answer:
Concepts and Policy Structure Exam 100% Verified
Questions & Answers
Q: What is the primary purpose of an insurance contract?
Answer:
To provide financial protection by transferring the risk of loss from the consumer to an insurance company.
Q: How is risk defined in the context of insurance?
Answer:
The uncertainty concerning a potential loss.
Q: What is a pure risk?
Answer:
A risk that results in either a loss or no change in status, with no possibility of gain.
Q: What is a speculative risk?
Answer:
A risk that may result in a loss, a gain, or no change in status.
Q: Why is insurance only designed to cover pure risks?
Answer:
Because insurance is intended to make up for a loss, not to provide benefits for potential gains.
Q: How is a loss defined in insurance?
Answer:
A reduction, decrease, or disappearance in value that serves as the basis for a claim.
Q: What is an exposure or loss exposure?
Answer:
The condition of being at risk for a loss, whether or not an actual loss occurs.
Q: What is a peril?
Answer:
The specific cause of a loss, such as fire, lightning, or wind.
Q: What is a hazard?
Answer:
, A condition that increases the probability or likelihood that a loss will occur from a peril.
Q: What is a physical hazard?
Answer:
A physical condition, such as flammable materials or icy sidewalks, that increases the probability of loss.
Q: What is a moral hazard?
Answer:
Dishonest tendencies or behaviors, such as lying or faking an injury, that increase the probability of loss.
Q: What is a morale hazard?
Answer:
An attitude of indifference toward the risk of loss, such as leaving a car unlocked with keys inside.
Q: What does the acronym STARR stand for in risk management?
Answer:
Sharing, Transfer, Avoidance, Reduction, and Retention.
Q: What is risk sharing?
Answer:
Distributing or pooling a risk among several parties with similar loss exposures.
Q: What is risk transfer?
Answer:
Shifting a risk to another party, most commonly through an insurance policy.
Q: What is risk avoidance?
Answer:
Eliminating a risk by choosing not to participate in activities that involve a chance of loss.
Q: What is risk reduction?
Answer:
Minimizing the risks that cannot be completely avoided.
Q: What is the role of an insurance carrier?
Answer:
To provide protection in the form of benefits or payment after a loss occurs based on policy terms.
Q: Are speculative risks insurable?
Answer:
