RMIN 4000 Test 1 Brown UGA Study Guide 2024 with complete solution

RMIN 4000 Test 1 Brown UGA Study Guide 2024 with complete solution Exposures -Correct Answer-things of value (assets) that could be lost Perils -Correct Answer-things that cause injury or loss risk -Correct Answer-a calculated possibility of a negative outcome Frequency -Correct Answer-the number of losses (such as fire or theft) that occur within a specified time period. aka the probability of a loss Severity -Correct Answer-the dollar amount of a loss for a specific peril (fire, theft, collision) aka How much does it cost when the loss does occur? Hazard -Correct Answer-a condition that creates or increases the frequency or severity of loss but does NOT cause the loss. Physical Hazard -Correct Answer-a physical condition that increases the frequency or severity of loss Moral Hazard -Correct Answer-the presence of insurance changes the behavior of the insured. ex: making hail damage to get a check Morale hazard (attitudinal hazard) -Correct Answer-A condition of carelessness or indifference that increases the frequency or severity of loss. Legal Hazard -Correct Answer-characteristics of the legal system or regulatory environment that increase the frequency or severity of losses Georgia's Diminution in value is an example of a -Correct Answer-legal hazard because it increases the severity on property losses Pure Risk -Correct Answer-A chance of loss or no loss, but no chance of gain. Insurance can be bought for this Speculative Risk -Correct Answer-A chance of loss, no loss, or gain. Diversifiable risk -Correct Answer-a risk that affects only individuals or small groups and not the entire economy. It can be eliminated/ reduced through diversification. the risks are not correlated Developing cancer or your house being caught on fire are two examples of what kind of risk? - Correct Answer-Pure Risk diversifiable risk -Correct Answer-A risk that affects only some individuals, businesses, or small groups. they can be reduced/eliminated through diversification. the risks are not correlated Non-Diversifiable Risk -Correct Answer-affects the entire economy or large numbers of persons or groups within the economy (hurricane, flood), risks are correlated (inflation, unemployment) cannot be eliminated through diversification Enterprise Risk -Correct Answer-encompasses all major risks faced by a business firm, which include: pure risk, speculative risk, strategic risk, operational risk, and financial risk systemic risk -Correct Answer-the risk that the failure of one financial institution can bring down other institutions as well. instability in the financial system due to the interdependency between the players in the market Types of Pure Risk -Correct Answer-personal risks, property risks, liability risks, loss of business income, cyber-security risks Personal risk -Correct Answer-a risk that can directly affect an individual or a family; loss of income, extra expenses, and depletion of financial assets Property Risk -Correct Answer-a risk that can lead to destruction or theft and loss of personal or business property including money, vehicles, and buildings; 2 types (direct and indirect) Direct Loss -Correct Answer-cost to replace a loss that is a direct result of a peril, such as fire. Indirect Loss -Correct Answer-Loss that is a result or consequence of a direct loss Liability Risk -Correct Answer-a risk that relates to harm or injury to other people or their property because of your actions; no upper limit; Defense costs; liens may be placed on income or assets may be siezed Loss of business income -Correct Answer-Financial loss when the firm must shut down for some time after a physical damage loss Grease fire in the kitchen causes