OTL 1 – Study Guide and Exam Preparation Material
Peril - correct answer ✔✔cause of loss
Risk - correct answer ✔✔chance of loss
Speculative Risk - correct answer ✔✔a situation in which either profit or loss is possible
-roll of dice
-uninsurable
Pure Risk - correct answer ✔✔a risk that presents the chance of loss but no opportunity for gain
-Insurable
-a car accident doesn't allow for gain (injury, damaged car etc.)
insurable risk - correct answer ✔✔When there is a chance of loss and no chance of profit
-Personal risk
-Property risk
-Liability risk
Personal risk - correct answer ✔✔chance of loss arising from a person's own bodily injury
-death
-physical disability
old age
-unemployment
,Property Risk - correct answer ✔✔chance of loss arising from the destruction or damage to
property.
1. Direct loss
2. Indirect loss
Direct loss - correct answer ✔✔-cost of repairing damaged car
-cost of replacing stolen goods
-cost of rebuilding a house that burned down
Indirect loss - correct answer ✔✔-House burns down that had a rental suite, the income from
the rental suite is lost. Loss of income
-Water damage to a store causes it to close, loss of sales during restoration
Liability Risks - correct answer ✔✔based on an individual's negligent acts or legal liability
-based on individual conduct
-operation of vehicles
-ownership or occupancy of property
-manufacture of products
-rendering of professional services
General insurance - correct answer ✔✔includes property and casualty insurance
-
casualty insurance - correct answer ✔✔blanket term describes everything other than life, fire or
auto
categories for general insurance - correct answer ✔✔Personal lines
,Commercial lines
Special risks
Personal lines - correct answer ✔✔relating to individuals in their private capacity
-dwelling
-dwelling contents
-auto
-seasonal dwellings
-boats
-jewellery
-furs
-vacation travel insurance
-major medical/surgery costs
Commercial lines - correct answer ✔✔relating to commercial operations
-stores
-professional offices
-trucking operations
-construction vehicles and contractors
Special risks - correct answer ✔✔relating to marine exposures, aviation, high risk industrial
operations
Perils - correct answer ✔✔an event that may cause a loss (Cause)
IE: house burns down from a cooking fire started in the kitchen. Peril is FIRE
-car window smashed from a riot. Peril is RIOT
, -person falls on icy driveway gets hurt -Peril is NEGLIGENCE (of the property owner)
Hazard - correct answer ✔✔condition that may cause a peril to occur
Physical hazard
Moral hazard
Physical Hazard - correct answer ✔✔a physical condition that increases the frequency or
severity of loss
-slippery floor
-poorly maintained plumbing
-dangerous manufacturing process
(you can touch it)
Moral Hazard - correct answer ✔✔When the act of insuring an event increases the likelihood
that the event will happen
-poor attitude by the insured
-dishonesty
-fraud
proximate cause - correct answer ✔✔Legal cause; exists when the connection between an act
and an injury is strong enough to justify imposing liability.
-immediate and effective cause of the loss, where a chain of events leads to that cause. Not
necessarily the last event before the loss.
IE: A neighbouring house catches fire and burns down, it also collapses the house. The Fire next
door is the peril and proximate cause.
Remote cause of loss - correct answer ✔✔last link in the chain of loss from the immediate
cause.
Peril - correct answer ✔✔cause of loss
Risk - correct answer ✔✔chance of loss
Speculative Risk - correct answer ✔✔a situation in which either profit or loss is possible
-roll of dice
-uninsurable
Pure Risk - correct answer ✔✔a risk that presents the chance of loss but no opportunity for gain
-Insurable
-a car accident doesn't allow for gain (injury, damaged car etc.)
insurable risk - correct answer ✔✔When there is a chance of loss and no chance of profit
-Personal risk
-Property risk
-Liability risk
Personal risk - correct answer ✔✔chance of loss arising from a person's own bodily injury
-death
-physical disability
old age
-unemployment
,Property Risk - correct answer ✔✔chance of loss arising from the destruction or damage to
property.
1. Direct loss
2. Indirect loss
Direct loss - correct answer ✔✔-cost of repairing damaged car
-cost of replacing stolen goods
-cost of rebuilding a house that burned down
Indirect loss - correct answer ✔✔-House burns down that had a rental suite, the income from
the rental suite is lost. Loss of income
-Water damage to a store causes it to close, loss of sales during restoration
Liability Risks - correct answer ✔✔based on an individual's negligent acts or legal liability
-based on individual conduct
-operation of vehicles
-ownership or occupancy of property
-manufacture of products
-rendering of professional services
General insurance - correct answer ✔✔includes property and casualty insurance
-
casualty insurance - correct answer ✔✔blanket term describes everything other than life, fire or
auto
categories for general insurance - correct answer ✔✔Personal lines
,Commercial lines
Special risks
Personal lines - correct answer ✔✔relating to individuals in their private capacity
-dwelling
-dwelling contents
-auto
-seasonal dwellings
-boats
-jewellery
-furs
-vacation travel insurance
-major medical/surgery costs
Commercial lines - correct answer ✔✔relating to commercial operations
-stores
-professional offices
-trucking operations
-construction vehicles and contractors
Special risks - correct answer ✔✔relating to marine exposures, aviation, high risk industrial
operations
Perils - correct answer ✔✔an event that may cause a loss (Cause)
IE: house burns down from a cooking fire started in the kitchen. Peril is FIRE
-car window smashed from a riot. Peril is RIOT
, -person falls on icy driveway gets hurt -Peril is NEGLIGENCE (of the property owner)
Hazard - correct answer ✔✔condition that may cause a peril to occur
Physical hazard
Moral hazard
Physical Hazard - correct answer ✔✔a physical condition that increases the frequency or
severity of loss
-slippery floor
-poorly maintained plumbing
-dangerous manufacturing process
(you can touch it)
Moral Hazard - correct answer ✔✔When the act of insuring an event increases the likelihood
that the event will happen
-poor attitude by the insured
-dishonesty
-fraud
proximate cause - correct answer ✔✔Legal cause; exists when the connection between an act
and an injury is strong enough to justify imposing liability.
-immediate and effective cause of the loss, where a chain of events leads to that cause. Not
necessarily the last event before the loss.
IE: A neighbouring house catches fire and burns down, it also collapses the house. The Fire next
door is the peril and proximate cause.
Remote cause of loss - correct answer ✔✔last link in the chain of loss from the immediate
cause.
