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?

    <p>A building located in a flood-prone area</p> Signup and view all the answers

    What is the primary goal of loss reduction techniques?

    <p>To minimize the impact of a loss</p> Signup and view all the answers

    What is the term for the uncertainty of outcome?

    <p>Risk</p> Signup and view all the answers

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

    <p>Catastrophic risk</p> 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?

    <p>Actual loss</p> Signup and view all the answers

    What is the correct way of managing risks?

    <p>Prevention, reduction, retention, and transfer</p> Signup and view all the answers

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