©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Risk Management & Insurance Final
Exam Questions And Answers 100%
Guaranteed Pass.
Objective risk - Answer✔Objective Risks are measurable and can be improved by Loss
Prevention & Loss Control
Subjective risk - Answer✔Subjective Risk - A state of mind/worry. Improvement by discussion
and understanding
What are the principles of when you must show insurable interest for property and life
insurance? - Answer✔Property - At the time of Loss
Life - At the time of Purchase
Define pure and speculative risk - Answer✔Pure - Only Negative Results
Speculative - Positive or Negative Results
What are the reasons for internal policy Sub Limits? - Answer✔To provide limited coverage, and
require scheduling of higher limits or insuring elsewhere
What impact does an increased amount of exposure units have on the Expected Loss Value? -
Answer✔The larger the number of units, the closer the expected value will be to actual results,
and a Lower Variance and Standard deviation
Define a Peril, A Hazard, and an Exposure - Answer✔A Peril is what causes damage - Wind, Fire,
collision, hail
A Hazard is a physical condition that increases the chance of an accident/event - Icy roads, poor
maintenance, dying tree near your house
Exposure - The item subject to possible damage - House, car, people
What are the key elements to make risk insurable? - Answer✔Must be identifiable
Must be measurable
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, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Have a calculable chance of loss
Must be a large number of similar exposures
Losses must be Fortuitous - Unexpected and accidental
Not Catastrophic in nature
Have economically feasible premiums
Understand the difference between Maximum Possible and Maximum Probable Loss -
Answer✔Max Possible - Worst case possible - total of all assets destroyed - Not reduced by Loss
Cont.
Max Probable - Most likely max loss considering loss control measures
Why are there Deductibles in policies - Answer✔Provide incentive for insured to manage
exposures/claims
Reduce insurance premiums
To eliminate small and expensive losses to adjust/settle
Understand Objective, Subjective, Systemic Risks - Answer✔Objective Measurable &
manageable
Subjective - State of mind - Talk it out
Systemic - Failure of an entire system _ Economic system - Housing Market Crash
Explain the Scope of Enterprise Risk Management - Answer✔Enterprise Risk management
assess all Risks, Objective, Subjective, Systemic, Financial, Strategic etc.
Define Misrepresentations and Concealments & their implications in insurance claims -
Answer✔Misrepresentation is a statement written or oral that is not the truth and you know
better - May void policy & coverage
Concealment - Holding back information you know is important/material
What is Real Property? - Answer✔Buildings
Machinery
Carports
Detached Garages
What are the methods of Identifying Risks? - Answer✔Risk Analysis Check Lists
Physical Inspections
2|Page
Risk Management & Insurance Final
Exam Questions And Answers 100%
Guaranteed Pass.
Objective risk - Answer✔Objective Risks are measurable and can be improved by Loss
Prevention & Loss Control
Subjective risk - Answer✔Subjective Risk - A state of mind/worry. Improvement by discussion
and understanding
What are the principles of when you must show insurable interest for property and life
insurance? - Answer✔Property - At the time of Loss
Life - At the time of Purchase
Define pure and speculative risk - Answer✔Pure - Only Negative Results
Speculative - Positive or Negative Results
What are the reasons for internal policy Sub Limits? - Answer✔To provide limited coverage, and
require scheduling of higher limits or insuring elsewhere
What impact does an increased amount of exposure units have on the Expected Loss Value? -
Answer✔The larger the number of units, the closer the expected value will be to actual results,
and a Lower Variance and Standard deviation
Define a Peril, A Hazard, and an Exposure - Answer✔A Peril is what causes damage - Wind, Fire,
collision, hail
A Hazard is a physical condition that increases the chance of an accident/event - Icy roads, poor
maintenance, dying tree near your house
Exposure - The item subject to possible damage - House, car, people
What are the key elements to make risk insurable? - Answer✔Must be identifiable
Must be measurable
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
Have a calculable chance of loss
Must be a large number of similar exposures
Losses must be Fortuitous - Unexpected and accidental
Not Catastrophic in nature
Have economically feasible premiums
Understand the difference between Maximum Possible and Maximum Probable Loss -
Answer✔Max Possible - Worst case possible - total of all assets destroyed - Not reduced by Loss
Cont.
Max Probable - Most likely max loss considering loss control measures
Why are there Deductibles in policies - Answer✔Provide incentive for insured to manage
exposures/claims
Reduce insurance premiums
To eliminate small and expensive losses to adjust/settle
Understand Objective, Subjective, Systemic Risks - Answer✔Objective Measurable &
manageable
Subjective - State of mind - Talk it out
Systemic - Failure of an entire system _ Economic system - Housing Market Crash
Explain the Scope of Enterprise Risk Management - Answer✔Enterprise Risk management
assess all Risks, Objective, Subjective, Systemic, Financial, Strategic etc.
Define Misrepresentations and Concealments & their implications in insurance claims -
Answer✔Misrepresentation is a statement written or oral that is not the truth and you know
better - May void policy & coverage
Concealment - Holding back information you know is important/material
What is Real Property? - Answer✔Buildings
Machinery
Carports
Detached Garages
What are the methods of Identifying Risks? - Answer✔Risk Analysis Check Lists
Physical Inspections
2|Page
