Fundamentals of Insurance Level 1 Practice Exam | 65 Questions with 100% Correct Answers | Verified | Latest Update 2024

Probably the best way to define risk is to say, "Risk is the chance of financial loss as a result of loss or damage to the object of insurance or some other happening." - True. Pure Risk: Provides only the potential for financial loss with no chance of gain or profit. Insurance is provided for pure risk only. - True. Risk Retention or Self-insurance may be a practical risk management technique when the chance of financial loss amounts to just a few hundred dollars. - True. There are different ways to deal with risk including risk control. Risk control involves taking whatever steps are needed to eliminate or reduce the frequency and severity of losses. - True. The insurance company is required to provide only as much insurance as is needed to indemnify the insured for their loss. On property insurance policies, that means that the insured is entitles to receive no more and no less than the value of the property as it existed immediately prior to the loss. - True. There are many secondary functions, benefits or spin-offs to the business of insurance including: Provides employment opportunities, peace of mind of insurance promotes investment and it helps to free up credit. - True. The main purpose of a true mutual insurance company is to prove insurance for their policyholders essentially at cost. Profit is of secondary importance. - True