Questions and Answers
A business becoming incorporated is an example of?
A hold-harmless clause is an example of what type of risk?
Which of the following can be defined as 'the potential for loss'?
Risk
A condition that increases the possibility of financial loss is called an?
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What type of risk involves the potential for loss with no possibility for gain?
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Which one of these is not considered to be an element of an insurable risk?
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Which one of these statements is not a characteristic of the law of large numbers?
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Which of the following types of risk is insurable?
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Which of the following describes the act of insuring a risk against possible loss?
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Which of the following is not an example of risk retention?
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What type of risk involves the potential for loss and the possibility for gain?
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Which term describes the elimination of a hazard?
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Which of the following can be defined as a cause of a loss?
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Purchasing insurance is an example of risk?
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Risk __ is the process of analyzing exposures that create risk and designing programs to handle?
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For insurance purposes, similar objects which are exposed to the same group of perils are referred to as?
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An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this?
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Study Notes
Key Concepts in Life and Health Insurance
- Transfer of Risk: Incorporation of a business and hold-harmless clauses exemplify risk transfer methods in insurance.
- Definition of Risk: Risk is defined as the potential for loss, essential for understanding insurance fundamentals.
Understanding Hazards and Risk Types
- Hazard: A condition that increases the likelihood of financial loss.
- Pure Risk: Represents opportunities for loss without the potential for gain; this is insurable.
- Speculative Risk: Involves potential for both loss and gain; not considered insurable.
Insurable Risks and Conditions
- Insurable Elements: Essential elements of insurable risk exclude speculative risks, which are not eligible for coverage.
- Law of Large Numbers: Key characteristic states that rates are calculated based on expected risks, not for compensation of specific losses.
Risk Management and Handling
- Risk Transfer: Act of insuring a risk against potential loss through policies or agreements.
- Risk Retention: Related to decisions made regarding business activities, specifically avoiding deals deemed too risky.
- Risk Management: Involves analyzing exposures and developing strategies to mitigate identified risks.
Perils and Risk Reduction Strategies
- Peril: Defined as a direct cause of a loss; essential in understanding insurance claims.
- Risk Avoidance: The strategy of eliminating potential hazards to reduce risk exposure.
Insurance Certifications and Agreements
- Homogeneous Exposure Units: Refers to similar objects facing the same perils, crucial for setting insurance rates.
- Reinsurance Contract: A contractual agreement that allows insurers to transfer part of their risk exposure to other insurers, promoting stability in underwriting.
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Description
This quiz explores fundamental concepts in life and health insurance, including risk transfer, definitions of risk, and the distinctions between pure and speculative risks. You will also learn about insurable elements and the importance of the law of large numbers in risk management.
