HS 311 Fundamentals of Insurance Planning Study Guide (394 Study Questions with 100% Correct Answers)

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What is the definition of "risk"? - ✔✔the possibility of loss. Types of hazards? - ✔✔Physical, attitudinal (carelessness), and moral. How do insurance companies measure probabilities? - ✔�... ��By observing large numbers (mass) of similar (homogeneous) exposures in the statistical group from which they make their estimate. What is the definition of "particular risk"? - ✔✔Loss possibilities that affect only individuals or small groups of individuals at the same time What is the definition of "fundamental risk"? - ✔✔Loss possibilities that can affect large segments of society at the same time. What is the definition of "pure risk"? - ✔✔Loss or no loss What is the definition of "speculative risk"? - ✔✔Possibility of loss, no loss, or gain Pure risk categories include? - ✔✔Risks involving the person, risks involving loss of or damage to property, and risks involving liability for injury or damage to persons or the property of others. 5 requirements that a risk must meet? - ✔✔Important, accidental nature, calculable, definite, and cannot be excessively catastrophic. What is an indirect loss? - ✔✔Lost profits following a direct loss.3 factors that add to the costs of risks? - ✔✔Fear and worry, inadequate preparation, and expenses of managing risks. Insurance can be defined from the following viewpoints? - ✔✔Economic, legal, business, social, and actuarial. Economic viewpoint of insurance? - ✔✔Insurance reduces risk by transferring risks to an insurer, who combines policy owners' potential losses Legal viewpoint of insurance? - ✔✔Insurance transfers risk by the terms of a contract Business viewpoint of insurance? - ✔✔Insurance is a financial institution specializing in the treatment of risk Social viewpoint of insurance? - ✔✔Insurance pools losses by using group members' contributions to pay losses suffered by some group members. Actuarial viewpoint of insurance? - ✔✔Insurance predicts and distributes losses using actuarial estimates based on principles of probability. Common elements of insurance? - ✔✔Risk transfer, Risk spreading, indemnification, ability to make reasonable estimates of future losses, ability to express losses in definite amounts, and possibility of adverse, random events occurring outside insured's control. The cost of insurance include? - ✔✔Operating costs, insurer profits, opportunity costs, possible increased losses, and adverse selection. Individual insurance underwriting typically requires the individual to show ...? - ✔✔Evidence of insurability. What is a peril? [Show More]

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