Introduction to Property and Casualty Insurance:
Key Concepts and Policy Structure Exam |
Questions with 100% Correct Answers | Verified |
Latest Update 2026
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Terms in this set (300)
What is the primary purpose of an To provide financial protection by transferring the
insurance contract? risk of loss from the consumer to an insurance
company.
How is risk defined in the context of The uncertainty concerning a potential loss.
insurance?
What is a pure risk? A risk that results in either a loss or no change in
status, with no possibility of gain.
What is a speculative risk? A risk that may result in a loss, a gain, or no change
in status.
Why is insurance only designed to Because insurance is intended to make up for a
cover pure risks? loss, not to provide benefits for potential gains.
How is a loss defined in insurance? A reduction, decrease, or disappearance in value
that serves as the basis for a claim.
What is an exposure or loss The condition of being at risk for a loss, whether or
exposure? not an actual loss occurs.
, What is a peril? The specific cause of a loss, such as fire, lightning,
or wind.
What is a hazard? A condition that increases the probability or
likelihood that a loss will occur from a peril.
What is a physical hazard? A physical condition, such as flammable materials
or icy sidewalks, that increases the probability of
loss.
What is a moral hazard? Dishonest tendencies or behaviors, such as lying or
faking an injury, that increase the probability of
loss.
What is a morale hazard? An attitude of indifference toward the risk of loss,
such as leaving a car unlocked with keys inside.
What does the acronym STARR stand Sharing, Transfer, Avoidance, Reduction, and
for in risk management? Retention.
What is risk sharing? Distributing or pooling a risk among several parties
with similar loss exposures.
What is risk transfer? Shifting a risk to another party, most commonly
through an insurance policy.
What is risk avoidance? Eliminating a risk by choosing not to participate in
activities that involve a chance of loss.
What is risk reduction? Minimizing the risks that cannot be completely
avoided.
Key Concepts and Policy Structure Exam |
Questions with 100% Correct Answers | Verified |
Latest Update 2026
Save
Terms in this set (300)
What is the primary purpose of an To provide financial protection by transferring the
insurance contract? risk of loss from the consumer to an insurance
company.
How is risk defined in the context of The uncertainty concerning a potential loss.
insurance?
What is a pure risk? A risk that results in either a loss or no change in
status, with no possibility of gain.
What is a speculative risk? A risk that may result in a loss, a gain, or no change
in status.
Why is insurance only designed to Because insurance is intended to make up for a
cover pure risks? loss, not to provide benefits for potential gains.
How is a loss defined in insurance? A reduction, decrease, or disappearance in value
that serves as the basis for a claim.
What is an exposure or loss The condition of being at risk for a loss, whether or
exposure? not an actual loss occurs.
, What is a peril? The specific cause of a loss, such as fire, lightning,
or wind.
What is a hazard? A condition that increases the probability or
likelihood that a loss will occur from a peril.
What is a physical hazard? A physical condition, such as flammable materials
or icy sidewalks, that increases the probability of
loss.
What is a moral hazard? Dishonest tendencies or behaviors, such as lying or
faking an injury, that increase the probability of
loss.
What is a morale hazard? An attitude of indifference toward the risk of loss,
such as leaving a car unlocked with keys inside.
What does the acronym STARR stand Sharing, Transfer, Avoidance, Reduction, and
for in risk management? Retention.
What is risk sharing? Distributing or pooling a risk among several parties
with similar loss exposures.
What is risk transfer? Shifting a risk to another party, most commonly
through an insurance policy.
What is risk avoidance? Eliminating a risk by choosing not to participate in
activities that involve a chance of loss.
What is risk reduction? Minimizing the risks that cannot be completely
avoided.
