Exam Fx (PROPERTY & CASUALTY) questions with correct answers

Law of Large Numbers CORRECT ANSWER The larger the number of people with a similar exposure to loss, the more predictable actual losses will be. Insurance CORRECT ANSWER Transfers the risk of loss from an individual or business entity to an insurance company The three elements of insurable risk are CORRECT ANSWER 1) Financial 2) Blood (relative) 3) Business Risk CORRECT ANSWER The uncertainty or chance of a loss occurring Types of risks are CORRECT ANSWER 1) Pure risk 2) Speculative risk What type of risk does insurance cover? CORRECT ANSWER Pure risk What is pure risk? CORRECT ANSWER It can only result in a loss or no change What type of risk is not insurable? CORRECT ANSWER speculative risk What is speculative risk? CORRECT ANSWER Opportunity for loss or gain. For example, gambling. What is a peril? CORRECT ANSWER a specific cause of loss