Exam- ALABAMA PERSONAL LINES EXAM|108
QUESTIONS AND ANSWERS
insurance Correct Answer-transfer of risk from a person or business to an insurer
risk Correct Answer-uncertainty/possibility of a loss
Speculative Risk Correct Answer-A chance of loss, no loss, or gain.
Pure Risk Correct Answer-chance of loss only insurance companies will insure
exposure Correct Answer-possibility that a loss will occur
peril Correct Answer-The cause of a loss (Fire)
direct Correct Answer-physical loss
hazard Correct Answer-Increases the chance of loss
, Exam- ALABAMA PERSONAL LINES EXAM|108
QUESTIONS AND ANSWERS
Physical Hazard Correct Answer-The hazard can be seen
moral hazard Correct Answer-dishonesty
Morale Hazard Correct Answer-carelessness
Method of handling risk Correct Answer-STARR
Sharing
Transfer
Avoidance
Retention
Reduction
contract (policy) Correct Answer-an agreement between the insured and the insurer
1st party Correct Answer-Insured (customer)
, Exam- ALABAMA PERSONAL LINES EXAM|108
QUESTIONS AND ANSWERS
2nd party Correct Answer-insurer, insurance company
Law of Large Numbers Correct Answer-the large the group, the more accurately losses can
be predicted
Elements of an Insurable Risk Correct Answer-CANHAM: Calculable, affordable, Non-
catastrophic, Homogenous (similar exposures), Accidental, Measurable
Adverse Selection Correct Answer-risks that have a greater than average chance of loss
Reinsurance Correct Answer-an insurance company (the ceding company) paying another
insurance company (reinsurer) to take some of the companies risk of catastrophic loss
Stock Insurer Correct Answer-a corporation owned by stockholders
QUESTIONS AND ANSWERS
insurance Correct Answer-transfer of risk from a person or business to an insurer
risk Correct Answer-uncertainty/possibility of a loss
Speculative Risk Correct Answer-A chance of loss, no loss, or gain.
Pure Risk Correct Answer-chance of loss only insurance companies will insure
exposure Correct Answer-possibility that a loss will occur
peril Correct Answer-The cause of a loss (Fire)
direct Correct Answer-physical loss
hazard Correct Answer-Increases the chance of loss
, Exam- ALABAMA PERSONAL LINES EXAM|108
QUESTIONS AND ANSWERS
Physical Hazard Correct Answer-The hazard can be seen
moral hazard Correct Answer-dishonesty
Morale Hazard Correct Answer-carelessness
Method of handling risk Correct Answer-STARR
Sharing
Transfer
Avoidance
Retention
Reduction
contract (policy) Correct Answer-an agreement between the insured and the insurer
1st party Correct Answer-Insured (customer)
, Exam- ALABAMA PERSONAL LINES EXAM|108
QUESTIONS AND ANSWERS
2nd party Correct Answer-insurer, insurance company
Law of Large Numbers Correct Answer-the large the group, the more accurately losses can
be predicted
Elements of an Insurable Risk Correct Answer-CANHAM: Calculable, affordable, Non-
catastrophic, Homogenous (similar exposures), Accidental, Measurable
Adverse Selection Correct Answer-risks that have a greater than average chance of loss
Reinsurance Correct Answer-an insurance company (the ceding company) paying another
insurance company (reinsurer) to take some of the companies risk of catastrophic loss
Stock Insurer Correct Answer-a corporation owned by stockholders
