Maryland Property & Casualty Insurance
Practice Questions with correct answers
Insurance Transfers - ...,.🔹VERIFIED ANSWER **✔✔the risk of
loss from an individual or business entity to an insurance company,
which in turn spreads the costs of unexpected losses to many
individuals
Risk - ...,.🔹VERIFIED ANSWER **✔✔the uncertainty or chance
of a loss occurring
Pure Risk - ...,.🔹VERIFIED ANSWER **✔✔refers to situations
that can only result in a loss or no change. No opportunity for
financial gain. Only type of risk insurance companies are willing to
to accept.
Exposure - ...,.🔹VERIFIED ANSWER **✔✔a unit of measure used
to determine rates charged for insurance coverage. (E.g. age of
insured, medical history, occupation, gender..etc)
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,Homogeneous exposure - ...,.🔹VERIFIED ANSWER **✔✔larger
number of units having similar exposure to loss. sharing risk
among members of that group.
Hazard - ...,.🔹VERIFIED ANSWER **✔✔conditions or situations
that increase the probability of an insured loss occurring. Classified
as physical, moral, and morale
Physical Hazard - ...,.🔹VERIFIED ANSWER **✔✔those arising
from the material, structural, or operational features of the risk,
apart from the persons owning or managing it
Moral Hazard - ...,.🔹VERIFIED ANSWER **✔✔those applicants
that may lie on an application for insurance, or in the past have
submitted fraudulent claims against the insurer
Morale Hazard - ...,.🔹VERIFIED ANSWER **✔✔an increase in
the hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of insurance. (E.g "I'm
not going to bother fixing this if it brakes. My insurance will pay to
replace it.")
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30
, Perils - ...,.🔹VERIFIED ANSWER **✔✔the causes of loss insured
against in a policy.
Loss - ...,.🔹VERIFIED ANSWER **✔✔defined as the reduction,
decrease, or disappearance of value of the person or property
insured in a policy, caused by a named peril. Insurance provides a
means to transfer this.
Avoidance - ...,.🔹VERIFIED ANSWER **✔✔eliminating exposure
to a loss (E.g. To avoid the risk of a plane crash, one chooses to
never fly.)
Retention
(3 Reasons) - ...,.🔹VERIFIED ANSWER **✔✔the planned
assumption of risk by an insured through the use of deductibles, co-
payments, or self insurance.
1) to reduce expenses and improve cash flow
2)to increase control of claim reserving and claim settlements
3)Fund for losses that cannot be insured
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30
Practice Questions with correct answers
Insurance Transfers - ...,.🔹VERIFIED ANSWER **✔✔the risk of
loss from an individual or business entity to an insurance company,
which in turn spreads the costs of unexpected losses to many
individuals
Risk - ...,.🔹VERIFIED ANSWER **✔✔the uncertainty or chance
of a loss occurring
Pure Risk - ...,.🔹VERIFIED ANSWER **✔✔refers to situations
that can only result in a loss or no change. No opportunity for
financial gain. Only type of risk insurance companies are willing to
to accept.
Exposure - ...,.🔹VERIFIED ANSWER **✔✔a unit of measure used
to determine rates charged for insurance coverage. (E.g. age of
insured, medical history, occupation, gender..etc)
1 \\\\\\/ \\\\\\
30
,Homogeneous exposure - ...,.🔹VERIFIED ANSWER **✔✔larger
number of units having similar exposure to loss. sharing risk
among members of that group.
Hazard - ...,.🔹VERIFIED ANSWER **✔✔conditions or situations
that increase the probability of an insured loss occurring. Classified
as physical, moral, and morale
Physical Hazard - ...,.🔹VERIFIED ANSWER **✔✔those arising
from the material, structural, or operational features of the risk,
apart from the persons owning or managing it
Moral Hazard - ...,.🔹VERIFIED ANSWER **✔✔those applicants
that may lie on an application for insurance, or in the past have
submitted fraudulent claims against the insurer
Morale Hazard - ...,.🔹VERIFIED ANSWER **✔✔an increase in
the hazard presented by a risk, arising from the insured's
indifference to loss because of the existence of insurance. (E.g "I'm
not going to bother fixing this if it brakes. My insurance will pay to
replace it.")
2 \\\\\\/ \\\\\\
30
, Perils - ...,.🔹VERIFIED ANSWER **✔✔the causes of loss insured
against in a policy.
Loss - ...,.🔹VERIFIED ANSWER **✔✔defined as the reduction,
decrease, or disappearance of value of the person or property
insured in a policy, caused by a named peril. Insurance provides a
means to transfer this.
Avoidance - ...,.🔹VERIFIED ANSWER **✔✔eliminating exposure
to a loss (E.g. To avoid the risk of a plane crash, one chooses to
never fly.)
Retention
(3 Reasons) - ...,.🔹VERIFIED ANSWER **✔✔the planned
assumption of risk by an insured through the use of deductibles, co-
payments, or self insurance.
1) to reduce expenses and improve cash flow
2)to increase control of claim reserving and claim settlements
3)Fund for losses that cannot be insured
3 \\\\\\/ \\\\\\
30
