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Questions and Answers
What type of risks deals strictly with the potential for monetary loss?
What type of risks deals strictly with the potential for monetary loss?
What term refers to non-monetary situations that have a potential for loss?
What term refers to non-monetary situations that have a potential for loss?
Nonfinancial
What term describes risks that are independent of changes to the economy?
What term describes risks that are independent of changes to the economy?
Static
What type of risks are caused by a changing economy?
What type of risks are caused by a changing economy?
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What term describes risks involving an entire population or group?
What term describes risks involving an entire population or group?
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What term refers to risks that are specific to individuals and managed through insurance?
What term refers to risks that are specific to individuals and managed through insurance?
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What type of risks present a potential for loss or gain?
What type of risks present a potential for loss or gain?
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What is the type of risk that only presents a potential for loss?
What is the type of risk that only presents a potential for loss?
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What are the categories that pure risks are classified into?
What are the categories that pure risks are classified into?
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What are the categories of personal risks?
What are the categories of personal risks?
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What are two examples of insurance that protect against liability risks?
What are two examples of insurance that protect against liability risks?
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Study Notes
Insurance Risk Classifications
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Financial risks involve potential monetary loss and are the primary concern for insurance.
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Nonfinancial risks encompass situations that may result in loss but do not have a monetary element, e.g., personal experiences like a blind date.
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Static risks remain unaffected by economic changes, are consistent over time, and can include unintended ownership changes due to theft or human error.
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Dynamic risks arise from economic fluctuations, affecting product prices, purchasing trends, and technology advancements, often leading to societal gains.
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Fundamental risks affect entire populations or groups, such as natural disasters or unemployment. These risks are handled collectively by society or government, often resulting in public insurance programs.
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Particular risks are individual-focused and commonly managed through specific insurance policies tailored to personal circumstances.
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Speculative risks have the potential for both loss and gain, such as stock market investments and gambling, and are not covered by insurance.
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Pure risks are associated with loss potential only and are typically insurable, including risks from accidents, illness, or death; however, not all pure risks qualify for insurance coverage.
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Pure risks are further categorized into:
- Personal risks: related to individual well-being.
- Property risks: concern physical assets.
- Liability risks: involve legal responsibility to others.
- Risks due to the failure of others: include situations where third-party actions impact the insured.
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Personal risks can be classified based on the source of potential loss into:
- Premature death
- Sickness or accident
- Unemployment
- Dependent old age
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Liability risks can be protected against through specific insurance types such as:
- Casualty Insurance
- Errors and Omissions (E&O) Insurance
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Description
Explore the various types of insurance risks in this quiz dedicated to understanding financial and non-financial risks. Learn about how these risks can impact monetary loss and their implications in real-life situations. Test your knowledge with flashcards designed for clarity and understanding.
