How Can Insurance Company Minimize Exposure To Loss

Question: Insurance addresses what type of risk?

Pure

Speculative

None of these

All risks are insurable

Answer: Pure risk is the only type of risk that is insurable because there is only the chance of loss.

Question: The probability of loss becoming more predictable is attributed to

Law of Large Numbers

speculative risk

insurable interest

Law of Frequent Risks

Answer: The Law of Large Numbers allows the probability of loss to become more predictable.

Question: Which of the following is a requirement for a risk to be considered insurable?

Catastrophic

Speculative

Chance of both a loss and gain

Predictability of loss

Answer: One of the requirements for an insurable risk is the predictability of loss.

Question: How can an insurance company minimize exposure to loss?

Risk Avoidance

Reinsurance

Reissuance

Risk Assumption

Answer: Many insurers are able to minimize exposure to loss by re-insuring risks.

Question: What type of risk involves the potential for loss with no possibility for gain?

Speculative

Pure

Adversev

cAdverse

Answer: Pure risk involves the potential for loss with no possibility for gain.

Question: An insurable risk requires

that the chance for both a loss or gain exists

the loss must be catastrophic

that the chance of loss be measurable

that the loss must be incalculable

Answer: An insurable risk requires the loss to be calculable or predictable.

Question: For insurance purposes, similar objects which are exposed to the same perils are referred to as

Homogenous perils

Similar exposure units

Homogeneous exposure units

Common hazards

Answer: Similar objects of insurance that are exposed to the same group of perils are called homogeneous exposure units.