NATURE OF INSURANCE, RISK, PERILS AND HAZARDS TEST QUESTIONS AND ANSWERS 100% RATED A+

Which one of these is NOT considered to be an element of an insurable risk? Speculative risk Pure risk Loss cannot be catastrophic Loss must be due to chance - ANSWERSpeculative risk Risk Avoidance - ANSWERthe elimination of a hazard What is the type of contractual arrangement when an insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer? - ANSWERReinsurance contract Risk reduction - ANSWERWhen a company is attempting to minimize the severity of potential losses within its company Rates can be calculated to compensate for losses - ANSWERRates can be calculated to compensate for losses Which of these statements regarding insurance is false? One way insurers deal with catastrophic loss is through reinsurance As the number of insured units increases, the number of losses decreases Speculative risk cannot be insured - ANSWERthe act of insuring a risk against possible loss; A hold-harmless clause; Purchasing insurance;A business becoming incorporated According to the law of large numbers, how would losses be affected if the number of similar insured units increases? - ANSWER Homogeneous Exposure Units - ANSWERsimilar objects which are exposed to the same group of perils Risk Management - ANSWERthe process of analyzing exposures that create risk and designing programs to handle them. Risk – ANSWER The law of large numbers enables an insurer to - ANSWERpredict losses