INSR 310 EXAM ONE DR. FERGUSON QUESTIONS AND ANSWERS |
INSR 310 EXAM 1 STUDY GUIDE & PRACTICE TEST 2026/2027
Risk - correct answer ✔✔any uncertainty regarding financial loss thus entity (personal) or enterprise
(business) wide in scope
Business Interruption - correct answer ✔✔Any event, whether anticipated (i.e., public service strike) or
unanticipated (i.e., blackout) which disrupts the normal course of business operations at an organization
location
example: can't sell sandwiches because the building needs to be fixed
pure vs speculative
static vs dynamic
objective vs subjective
diversifiable vs non-diversifiable vs systematic - correct answer ✔✔what are common risk
classifications?
Pure Risk - correct answer ✔✔loss or no loss
ex: you either wrecked car or didn't
Speculative Risk - correct answer ✔✔loss, no loss, or gain
example: you lost $20,000 but INSCO pays you $25,000 or buying stock
can be affected by market taste
Static Risk - correct answer ✔✔unchanging over time or don't change meaningfully enough over time
Dynamic Risk - correct answer ✔✔changes especially with technology
example: didn't have to worry about dying from car crash 200 years ago
Objective Risk - correct answer ✔✔statistical variation from expectation of risk
can put statistical probability/likelihood on you getting in car crash today
no human element
Subjective Risk - correct answer ✔✔individual perception/psychology of risk
people behave differently given risk
, example: being scared to fly
Diversifiable Risk - correct answer ✔✔uncorrelated (random) gains/losses affecting only one/few
individuals or groups
get rid of in portfolio
Non-Diversifiable Risk - correct answer ✔✔correlated (simultaneous) gains/losses affecting several
groups/segments
Systematic Risk - correct answer ✔✔Non-diversifiable risk that may impact an entire market or financial
system
No, it is a tool you can use to analyze risk - correct answer ✔✔Is risk the same as probability?
actual cost of losses
opportunity costs
mental anguish - correct answer ✔✔what are the primary burdens of risk?
individuals and society (losses in productivity)
current and future premiums (insurance rates go up after wreck)
loss control and compliance costs (added cost of installation/maintenance and compliance with
laws/rules/regulations) - correct answer ✔✔what/how do actual cost of losses affect concerning risk?
scarce resources (have to choose what is most important)
risk/return trade-offs (appear in everything we want to do) - correct answer ✔✔what/how do
opportunity costs affect concerning risk?
people worry about risk
general aggravation
behavior modification/motivation - correct answer ✔✔what/how does mental anguish affect concerning
risk?
Exposure - correct answer ✔✔thing of value subject to being lost
Maximum Probable/Possible Loss
These are NOT the same thing - correct answer ✔✔What does MPL stand for?
3.5 billion of coverage for each tower vs for one tower of Twin Towers
Probable: coverage for 5 floors of damage
INSR 310 EXAM 1 STUDY GUIDE & PRACTICE TEST 2026/2027
Risk - correct answer ✔✔any uncertainty regarding financial loss thus entity (personal) or enterprise
(business) wide in scope
Business Interruption - correct answer ✔✔Any event, whether anticipated (i.e., public service strike) or
unanticipated (i.e., blackout) which disrupts the normal course of business operations at an organization
location
example: can't sell sandwiches because the building needs to be fixed
pure vs speculative
static vs dynamic
objective vs subjective
diversifiable vs non-diversifiable vs systematic - correct answer ✔✔what are common risk
classifications?
Pure Risk - correct answer ✔✔loss or no loss
ex: you either wrecked car or didn't
Speculative Risk - correct answer ✔✔loss, no loss, or gain
example: you lost $20,000 but INSCO pays you $25,000 or buying stock
can be affected by market taste
Static Risk - correct answer ✔✔unchanging over time or don't change meaningfully enough over time
Dynamic Risk - correct answer ✔✔changes especially with technology
example: didn't have to worry about dying from car crash 200 years ago
Objective Risk - correct answer ✔✔statistical variation from expectation of risk
can put statistical probability/likelihood on you getting in car crash today
no human element
Subjective Risk - correct answer ✔✔individual perception/psychology of risk
people behave differently given risk
, example: being scared to fly
Diversifiable Risk - correct answer ✔✔uncorrelated (random) gains/losses affecting only one/few
individuals or groups
get rid of in portfolio
Non-Diversifiable Risk - correct answer ✔✔correlated (simultaneous) gains/losses affecting several
groups/segments
Systematic Risk - correct answer ✔✔Non-diversifiable risk that may impact an entire market or financial
system
No, it is a tool you can use to analyze risk - correct answer ✔✔Is risk the same as probability?
actual cost of losses
opportunity costs
mental anguish - correct answer ✔✔what are the primary burdens of risk?
individuals and society (losses in productivity)
current and future premiums (insurance rates go up after wreck)
loss control and compliance costs (added cost of installation/maintenance and compliance with
laws/rules/regulations) - correct answer ✔✔what/how do actual cost of losses affect concerning risk?
scarce resources (have to choose what is most important)
risk/return trade-offs (appear in everything we want to do) - correct answer ✔✔what/how do
opportunity costs affect concerning risk?
people worry about risk
general aggravation
behavior modification/motivation - correct answer ✔✔what/how does mental anguish affect concerning
risk?
Exposure - correct answer ✔✔thing of value subject to being lost
Maximum Probable/Possible Loss
These are NOT the same thing - correct answer ✔✔What does MPL stand for?
3.5 billion of coverage for each tower vs for one tower of Twin Towers
Probable: coverage for 5 floors of damage
