Questions and Answers
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?
Nonfinancial
What term describes risks that are independent of changes to the economy?
Static
What type of risks are caused by a changing economy?
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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?
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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?
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What are the categories that pure risks are classified into?
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What are the categories of personal risks?
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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.
