Colorado Property and Casualty Insurance Exam
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Latest Update 2026
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Terms in this set (117)
Law of Large Numbers This states that the larger the number of people
with a similar exposure to loss, the more
predictable actual losses will be. This law forms the
basis for statistical prediction of loss upon which
insurance rates are calculated
Example of Law of Large Numbers When an insurance company issues a policy on a
35-year old male, the company has no way of
knowing or accurately predicting when he will die.
But LOLN looks at a large group of similar risks-and
makes some conclusions based on statistics of past
losses
Insurable Interest a person or property with insurable interest,
meaning the person or property would incur
financial loss if the insured's property or self were
to be damaged
Example of Insurable Interest Mortgagees and leaseholders may have insurable
interest in their respective properties
3 Elements of Insurable Interest Financial (monetary), Blood (a relative), Business (a
business partner)
,Extra Note Insurable interest must exist at the time of loss
(person or property)
Risk The uncertainty or chance of loss occurring
Two types of Risk Pure and Speculative risk
Pure Risk Refers to situations that can only result in loss or no
change. No opportunity for financial gain. This is
the only risk that insurance companies are willing to
accept
Speculative Risk This involves the opportunity for either loss or gain.
an example would be gambling. This type of risk is
not insurable
Peril The causes of loss insured against in an insurance
policy
Life Insurance Insures against the financial loss caused by the
premature death of the insured
Health Insurance Insures against the medical expenses and/or loss of
income caused by the insured's sickness or
accidental injury
Property Insurance Insures against the loss of physical property or the
loss of its' income producing abilities
Casualty Insurance Insures against the loss and/or damage of property
and resulting liabilities
, Hazards The conditions or situations that increase the
probability of an insured loss occurring. (Slippery
floors, congested traffic)
Physical Hazards Are those arising from material, structural, or
operational features of the risk. Apart from the
persons owning/managing it
Moral Hazards Refer to those applicants that may lie on an
application for insurance, or have done so in the
past, or have submitted fraudulent claims against
an insurer
Morale Hazards Refers to an increase in the hazard presented by a
risk, arising from the insured's indifference to loss
because of existing insurance (If it breaks my
insurance will pay to replace it)
Indemnity Sometimes referred to reimbursement. Is a
provision in an insurance policy that states that in
the event of loss, an insured or a beneficiary is
permitted to collect only to the extent of the
financial loss and is not allowed to gain financially
because of the existence of an insurance contract.
The purpose is to restore, but not allow the
insured/beneficiary to profit
Example of Indemnity Brenda has a homeowners insurance policy for
200k. Her home is destroyed and the expense to
rebuild only comes to 150K. Brenda would only be
given 150K (the amount of the loss) and the full
200K that her policy states that she may use
| Questions with 100% Correct Answers | Verified |
Latest Update 2026
Save
Terms in this set (117)
Law of Large Numbers This states that the larger the number of people
with a similar exposure to loss, the more
predictable actual losses will be. This law forms the
basis for statistical prediction of loss upon which
insurance rates are calculated
Example of Law of Large Numbers When an insurance company issues a policy on a
35-year old male, the company has no way of
knowing or accurately predicting when he will die.
But LOLN looks at a large group of similar risks-and
makes some conclusions based on statistics of past
losses
Insurable Interest a person or property with insurable interest,
meaning the person or property would incur
financial loss if the insured's property or self were
to be damaged
Example of Insurable Interest Mortgagees and leaseholders may have insurable
interest in their respective properties
3 Elements of Insurable Interest Financial (monetary), Blood (a relative), Business (a
business partner)
,Extra Note Insurable interest must exist at the time of loss
(person or property)
Risk The uncertainty or chance of loss occurring
Two types of Risk Pure and Speculative risk
Pure Risk Refers to situations that can only result in loss or no
change. No opportunity for financial gain. This is
the only risk that insurance companies are willing to
accept
Speculative Risk This involves the opportunity for either loss or gain.
an example would be gambling. This type of risk is
not insurable
Peril The causes of loss insured against in an insurance
policy
Life Insurance Insures against the financial loss caused by the
premature death of the insured
Health Insurance Insures against the medical expenses and/or loss of
income caused by the insured's sickness or
accidental injury
Property Insurance Insures against the loss of physical property or the
loss of its' income producing abilities
Casualty Insurance Insures against the loss and/or damage of property
and resulting liabilities
, Hazards The conditions or situations that increase the
probability of an insured loss occurring. (Slippery
floors, congested traffic)
Physical Hazards Are those arising from material, structural, or
operational features of the risk. Apart from the
persons owning/managing it
Moral Hazards Refer to those applicants that may lie on an
application for insurance, or have done so in the
past, or have submitted fraudulent claims against
an insurer
Morale Hazards Refers to an increase in the hazard presented by a
risk, arising from the insured's indifference to loss
because of existing insurance (If it breaks my
insurance will pay to replace it)
Indemnity Sometimes referred to reimbursement. Is a
provision in an insurance policy that states that in
the event of loss, an insured or a beneficiary is
permitted to collect only to the extent of the
financial loss and is not allowed to gain financially
because of the existence of an insurance contract.
The purpose is to restore, but not allow the
insured/beneficiary to profit
Example of Indemnity Brenda has a homeowners insurance policy for
200k. Her home is destroyed and the expense to
rebuild only comes to 150K. Brenda would only be
given 150K (the amount of the loss) and the full
200K that her policy states that she may use
