RMIN 4000 UGA EDMUNDS STUDY EXAMS GUIDE 2026
QUESTIONS AND ANSWERS SURE A+
✔✔premium must be economically feasible - ✔✔insured must be able to afford it
✔✔adverse selection - ✔✔the situation in which one party to a transaction takes
advantage of knowing more than the other party to the transaction
✔✔asymmetric information - ✔✔a situation in which one side of the market has more
reliable information than the other side
✔✔credit-based insurance scores - ✔✔The majority of insurers use the applicant's
credit record for purposes of underwriting and rating in auto and homeowners
insurance; used to predict the likelihood of future insurance losses
introduced in the early 1990s
not the same as the credit score
✔✔Types of Private Insurance - ✔✔Life
Health
Property
Liability
Casualty
✔✔life insurance - ✔✔pays death benefits to beneficiaries when the insured dies
✔✔health insurance - ✔✔Insurance that covers medical illness or injury.
✔✔Property Insurance - ✔✔indemnifies property owners against the loss or damage of
real or personal property
✔✔liability insurance - ✔✔covers the insured's legal liability arising out of property
damage or bodily injury to others
✔✔Casualty Insurance - ✔✔refers to insurance that covers whatever is not covered by
fire, marine, and life insurance
✔✔ Exposures - ✔✔things of value (assets) that could be lost
✔✔Perils - ✔✔things that cause injury or loss
✔✔risk - ✔✔a calculated possibility of a negative outcome
✔✔Frequency - ✔✔the number of losses (such as fire or theft) that occur within a
specified time period. aka the probability of a loss
, ✔✔Severity - ✔✔the dollar amount of a loss for a specific peril (fire, theft, collision) aka
How much does it cost when the loss does occur?
✔✔Hazard - ✔✔a condition that creates or increases the frequency or severity of loss
but does NOT cause the loss.
✔✔Physical Hazard - ✔✔a physical condition that increases the frequency or severity of
loss
✔✔Moral Hazard - ✔✔the presence of insurance changes the behavior of the insured.
ex: making hail damage to get a check
✔✔Morale hazard (attitudinal hazard) - ✔✔A condition of carelessness or indifference
that increases the frequency or severity of loss.
✔✔Legal Hazard - ✔✔characteristics of the legal system or regulatory environment that
increase the frequency or severity of losses
✔✔Georgia's Diminution in value is an example of a - ✔✔legal hazard because it
increases the severity on property losses
✔✔Pure Risk - ✔✔A chance of loss or no loss, but no chance of gain. Insurance can be
bought for this
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.
✔✔Diversifiable risk - ✔✔a risk that affects only individuals or small groups and not the
entire economy. It can be eliminated/ reduced through diversification. the risks are not
correlated
✔✔Developing cancer or your house being caught on fire are two examples of what
kind of risk? - ✔✔Pure Risk
✔✔diversifiable risk - ✔✔A risk that affects only some individuals, businesses, or small
groups. they can be reduced/eliminated through diversification. the risks are not
correlated
✔✔Non-Diversifiable Risk - ✔✔affects the entire economy or large numbers of persons
or groups within the economy (hurricane, flood), risks are correlated (inflation,
unemployment) cannot be eliminated through diversification
✔✔Enterprise Risk - ✔✔encompasses all major risks faced by a business firm, which
include: pure risk, speculative risk, strategic risk, operational risk, and financial risk
QUESTIONS AND ANSWERS SURE A+
✔✔premium must be economically feasible - ✔✔insured must be able to afford it
✔✔adverse selection - ✔✔the situation in which one party to a transaction takes
advantage of knowing more than the other party to the transaction
✔✔asymmetric information - ✔✔a situation in which one side of the market has more
reliable information than the other side
✔✔credit-based insurance scores - ✔✔The majority of insurers use the applicant's
credit record for purposes of underwriting and rating in auto and homeowners
insurance; used to predict the likelihood of future insurance losses
introduced in the early 1990s
not the same as the credit score
✔✔Types of Private Insurance - ✔✔Life
Health
Property
Liability
Casualty
✔✔life insurance - ✔✔pays death benefits to beneficiaries when the insured dies
✔✔health insurance - ✔✔Insurance that covers medical illness or injury.
✔✔Property Insurance - ✔✔indemnifies property owners against the loss or damage of
real or personal property
✔✔liability insurance - ✔✔covers the insured's legal liability arising out of property
damage or bodily injury to others
✔✔Casualty Insurance - ✔✔refers to insurance that covers whatever is not covered by
fire, marine, and life insurance
✔✔ Exposures - ✔✔things of value (assets) that could be lost
✔✔Perils - ✔✔things that cause injury or loss
✔✔risk - ✔✔a calculated possibility of a negative outcome
✔✔Frequency - ✔✔the number of losses (such as fire or theft) that occur within a
specified time period. aka the probability of a loss
, ✔✔Severity - ✔✔the dollar amount of a loss for a specific peril (fire, theft, collision) aka
How much does it cost when the loss does occur?
✔✔Hazard - ✔✔a condition that creates or increases the frequency or severity of loss
but does NOT cause the loss.
✔✔Physical Hazard - ✔✔a physical condition that increases the frequency or severity of
loss
✔✔Moral Hazard - ✔✔the presence of insurance changes the behavior of the insured.
ex: making hail damage to get a check
✔✔Morale hazard (attitudinal hazard) - ✔✔A condition of carelessness or indifference
that increases the frequency or severity of loss.
✔✔Legal Hazard - ✔✔characteristics of the legal system or regulatory environment that
increase the frequency or severity of losses
✔✔Georgia's Diminution in value is an example of a - ✔✔legal hazard because it
increases the severity on property losses
✔✔Pure Risk - ✔✔A chance of loss or no loss, but no chance of gain. Insurance can be
bought for this
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.
✔✔Diversifiable risk - ✔✔a risk that affects only individuals or small groups and not the
entire economy. It can be eliminated/ reduced through diversification. the risks are not
correlated
✔✔Developing cancer or your house being caught on fire are two examples of what
kind of risk? - ✔✔Pure Risk
✔✔diversifiable risk - ✔✔A risk that affects only some individuals, businesses, or small
groups. they can be reduced/eliminated through diversification. the risks are not
correlated
✔✔Non-Diversifiable Risk - ✔✔affects the entire economy or large numbers of persons
or groups within the economy (hurricane, flood), risks are correlated (inflation,
unemployment) cannot be eliminated through diversification
✔✔Enterprise Risk - ✔✔encompasses all major risks faced by a business firm, which
include: pure risk, speculative risk, strategic risk, operational risk, and financial risk
