Understanding Fire Insurance and Compensation

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Which type of hazard refers to the characteristics and qualities of the subject-matter proposed for insurance?

Insurance hazard

Moral hazard

Physical hazard (correct)

Social hazard

What is an example of a physical hazard mentioned in the text?

Exercising daily

Eating unhealthy food

Smoking (correct)

Reading books

In the text, what accelerates the peril in the case of a fire in an explosives manufacturing unit?

Explosives (correct)

Sand

Air

Water

Which of the following is not classified as a physical hazard in the text?

Tidal waves near the sea-shore Signup and view all the answers

What type of hazards can be categorized as physical hazards or moral hazards?

Hazards Signup and view all the answers

How do physical hazards affect risks in insurance, as explained in the text?

They increase the risks involved Signup and view all the answers

What term is generally used when a condition causes, increases, or influences the risk, resulting in a loss?

Hazard Signup and view all the answers

Which of the following can help reduce potential damage from a peril like fire in the case of fire insurance?

Installing smoke-detectors, fire-extinguishers, and water-sprinklers Signup and view all the answers

What is measured by the loss that may happen if a peril strikes?

Risk Signup and view all the answers

What is referred to as the maximum possible loss that can happen?

Maximum possible loss (M.P.L.) Signup and view all the answers

What type of losses include expenses for cleaning-up, removal of debris, loss of rent, production, and profits?

Consequential losses Signup and view all the answers

What is necessary to understand the risk according to the text?

Identifying and analyzing risks Signup and view all the answers

What does the text emphasize about the role of insurance in the context of fire?

Insurance provides coverage only when there is financial loss due to fire. Signup and view all the answers

Why would insuring a very old building be considered more risky than insuring a new building in the context of fire, earthquake, or floods?

Old buildings have a higher likelihood of suffering significant damage. Signup and view all the answers

What is the relationship between insurance and risk based on the text?

Insurance covers risks where there is uncertainty about the possibility of loss or damage. Signup and view all the answers

In what situation will an insurance company pay compensation according to the text?

When there is accidental fire leading to financial loss. Signup and view all the answers

What does the example of insuring a tanker carrying petroleum products versus water illustrate?

Risk varies based on what the tanker is carrying. Signup and view all the answers

What does the text suggest about obtaining insurance?

Insurance should be obtained for risks with uncertain outcomes. Signup and view all the answers

What are the two main considerations mentioned in the text?

Costs and feasibility Signup and view all the answers

Why do makers of passenger aircrafts incur additional costs for safety measures?

Due to moral obligation Signup and view all the answers

In Scenario-1, why do passenger aircrafts carry enough fuel to reach their destination and further?

To prevent a crash Signup and view all the answers

Why do factories maintain inventories of essential spares according to the text?

To reduce delays in repairs Signup and view all the answers

What do the objectives influence when considering costs?

How much is 'too much' for prevention Signup and view all the answers

Why are prevention costs never considered 'too much' according to the text?

Because they are outweighed by the potential costs of crashes Signup and view all the answers

What risk management technique involves keeping 'Back-Up' copies to prevent interruptions in business operations?

Duplication Signup and view all the answers

Which risk management technique aims to spread risks across different areas that may not be affected equally or at the same time?

Diversification Signup and view all the answers

In risk management, what is the purpose of indemnity agreements?

To compensate for losses incurred by another party Signup and view all the answers

When is hedging used as a risk management technique?

When risks in the two transactions are reciprocal or moving in opposite directions Signup and view all the answers

What must personnel involved in implementing and monitoring risk-management techniques understand?

The technique decided upon and its objective Signup and view all the answers