Exam Fx (PROPERTY & CASUALTY)|117 Exam
Questions with Correct Answers
Law of Large Numbers - - The larger the number of people with a similar
exposure to loss, the more predictable actual losses will be.
- Insurance - - Transfers the risk of loss from an individual or business entity
to an insurance company
- The three elements of insurable risk are - - 1) Financial 2) Blood (relative)
3) Business
- Risk - - The uncertainty or chance of a loss occurring
- Types of risks are - - 1) Pure risk 2) Speculative risk
- What type of risk does insurance cover? - - Pure risk
- What is pure risk? - - It can only result in a loss or no change
- What type of risk is not insurable? - - speculative risk
- What is speculative risk? - - Opportunity for loss or gain. For example,
gambling.
- What is a peril? - - a specific cause of loss
- What is a hazard? - - conditions or situations that increase the probability
of a loss occurring
- What is a loss? - - reduction, decrease or disappearance of value of the
person or property insured.
- What is indemnity? - - provision in an insurance policy that states that in
the event of loss, an insured can only collect to the extent of the financial
loss. The insured is not allowed to gain financially.
- Subrogation - - insurer's legal right to seek damages from third parties
after it has reimbursed the insured.
- Accident - - The sudden, unplanned and unexpected event not under the
control of the insured. Neither expected or intended.
- Occurrence - - losses caused by continuous or repeated exposure to
conditions neither intended or expected.
, - Direct loss - - direct, physical damage to buildings and/or personal
property
- Indirect Loss (consequential) - - results of a direct loss
- What is the most prevalent indirect loss for homeowners? - - Extra living
expense that may be incurred by the insured while the home is being
repaired.
- What is the primary type of indirect loss for commercial property? - - The
loss of profits a business may suffer from closing business while repaired.
- General damages - - compensates an injured person for pain & suffering,
mental anguish and disfigurement
- Open Peril - - ANY risk of loss not specifically excluded
- Named Peril - - Specific covered perils. There is no coverage for unlisted
perils
- Special damages - - specific out-of-pocket expenses for medical,
miscellaneous and loss of wages
- Property damage loss - - value of property and loss of use
- Punitive damages - - form of punishment for extreme, outrageous
behavior, gross negligence or willful intent
- Negligence - - failure to use the care that a reasonable, prudent person
would have taken under similar circumstances
- Burglary - - forced entry into or out of the premises of another with
felonious intent. *Must have visible signs of forced entry or exit*
- Robbery - - taking of property from care or custody of a person through
threatening or causing bodily harm.
- Mysterious disappearance - - disappearance of property without
knowledge of how it disappeared. *Excluded from most policies*
- Theft - - any act of stealing that encompasses both burglary and robbery
- Vacancy - - No people and no property stored for a period of time (usually
60 days)
Questions with Correct Answers
Law of Large Numbers - - The larger the number of people with a similar
exposure to loss, the more predictable actual losses will be.
- Insurance - - Transfers the risk of loss from an individual or business entity
to an insurance company
- The three elements of insurable risk are - - 1) Financial 2) Blood (relative)
3) Business
- Risk - - The uncertainty or chance of a loss occurring
- Types of risks are - - 1) Pure risk 2) Speculative risk
- What type of risk does insurance cover? - - Pure risk
- What is pure risk? - - It can only result in a loss or no change
- What type of risk is not insurable? - - speculative risk
- What is speculative risk? - - Opportunity for loss or gain. For example,
gambling.
- What is a peril? - - a specific cause of loss
- What is a hazard? - - conditions or situations that increase the probability
of a loss occurring
- What is a loss? - - reduction, decrease or disappearance of value of the
person or property insured.
- What is indemnity? - - provision in an insurance policy that states that in
the event of loss, an insured can only collect to the extent of the financial
loss. The insured is not allowed to gain financially.
- Subrogation - - insurer's legal right to seek damages from third parties
after it has reimbursed the insured.
- Accident - - The sudden, unplanned and unexpected event not under the
control of the insured. Neither expected or intended.
- Occurrence - - losses caused by continuous or repeated exposure to
conditions neither intended or expected.
, - Direct loss - - direct, physical damage to buildings and/or personal
property
- Indirect Loss (consequential) - - results of a direct loss
- What is the most prevalent indirect loss for homeowners? - - Extra living
expense that may be incurred by the insured while the home is being
repaired.
- What is the primary type of indirect loss for commercial property? - - The
loss of profits a business may suffer from closing business while repaired.
- General damages - - compensates an injured person for pain & suffering,
mental anguish and disfigurement
- Open Peril - - ANY risk of loss not specifically excluded
- Named Peril - - Specific covered perils. There is no coverage for unlisted
perils
- Special damages - - specific out-of-pocket expenses for medical,
miscellaneous and loss of wages
- Property damage loss - - value of property and loss of use
- Punitive damages - - form of punishment for extreme, outrageous
behavior, gross negligence or willful intent
- Negligence - - failure to use the care that a reasonable, prudent person
would have taken under similar circumstances
- Burglary - - forced entry into or out of the premises of another with
felonious intent. *Must have visible signs of forced entry or exit*
- Robbery - - taking of property from care or custody of a person through
threatening or causing bodily harm.
- Mysterious disappearance - - disappearance of property without
knowledge of how it disappeared. *Excluded from most policies*
- Theft - - any act of stealing that encompasses both burglary and robbery
- Vacancy - - No people and no property stored for a period of time (usually
60 days)
