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Insurance Concepts: Perils and Risks

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Questions and Answers

What is the primary function of insurance in relation to perils?

To eliminate the risk of loss

To compensate the owner or beneficiary of the asset for the loss

To reduce the financial loss on the owner or beneficiary of the asset (correct)

To prevent the occurrence of the peril

What is the correct classification of the risk of a flood?

Financial risk

Catastrophic risk

Speculative risk

Pure risk (correct)

What is the main difference between a peril and a hazard?

A peril is a type of risk, while a hazard is a type of loss

A peril is a type of loss, while a hazard is a type of risk

A peril is an event that may cause a loss, while a hazard is a condition that increases the chances of loss (correct)

A peril is a condition that increases the chances of loss, while a hazard accelerates the loss

What is an example of a physical hazard?

A building located in a flood-prone area (C) Signup and view all the answers

What is the primary goal of loss reduction techniques?

To minimize the impact of a loss (D) Signup and view all the answers

What is the term for the uncertainty of outcome?

Risk (C) Signup and view all the answers

What is the correct classification of the risk of a landslide?

Catastrophic risk (D) Signup and view all the answers

What is the term for the costs of repair, replacement, or reinstatement and consequential losses until repair, replacement, or reinstatement?

Actual loss (B) Signup and view all the answers

What is the correct way of managing risks?

Prevention, reduction, retention, and transfer (C) Signup and view all the answers