UGA RMIN 4000 Edmunds Exam 1
Questions and Answers Graded A+
risk - Correct answer-uncertainty concerning the occurrence of a loss (or calculated
possibility of a negative outcome)
loss exposure - Correct answer-any situation where a loss is possible (does not
have to occur)
loss frequency - Correct answer-how often a loss occurs within a specific period
(probability)
formula to find frequency - Correct answer-# of losses/# of exposures
loss severity - Correct answer-how much does a loss cost when it occurs (a house
fire costs $x)
formula to find severity - Correct answer-total losses in dollars/# of losses
Peril - Correct answer-cause of loss (fire, windstorm, flood)
Hazard - Correct answer-an event that creates or increases the chance of a loss
without causing
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, At what probability is risk highest? - Correct answer-0.5
Do risk and chance of loss mean the same? - Correct answer-No, chance of loss is
the probability that an event will occur
What are the four types of hazards? - Correct answer-Physical, Moral, Morale, and
Legal
Physical hazard - Correct answer-a physical condition that increases the frequency
or severity of loss
moral hazard - Correct answer-dishonesty or character defects in an individual that
increase the frequency or severity of loss (using a hammer to create "hail" damage
to your roof to get a claim)
Morale (Attitudinal) Hazard - Correct answer-carelessness or indifference to a loss,
which increases the frequency or severity of a loss (leaving car unlocked leading to
theft)
Legal Hazard - Correct answer-characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses (a jury in one district
may be more sympathetic than others)
pure risk - Correct answer-a risk with a possibility of loss or no loss; no gain
occurs
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Questions and Answers Graded A+
risk - Correct answer-uncertainty concerning the occurrence of a loss (or calculated
possibility of a negative outcome)
loss exposure - Correct answer-any situation where a loss is possible (does not
have to occur)
loss frequency - Correct answer-how often a loss occurs within a specific period
(probability)
formula to find frequency - Correct answer-# of losses/# of exposures
loss severity - Correct answer-how much does a loss cost when it occurs (a house
fire costs $x)
formula to find severity - Correct answer-total losses in dollars/# of losses
Peril - Correct answer-cause of loss (fire, windstorm, flood)
Hazard - Correct answer-an event that creates or increases the chance of a loss
without causing
©COPYRIGHT 2025, ALL RIGHTS RESERVED 1
, At what probability is risk highest? - Correct answer-0.5
Do risk and chance of loss mean the same? - Correct answer-No, chance of loss is
the probability that an event will occur
What are the four types of hazards? - Correct answer-Physical, Moral, Morale, and
Legal
Physical hazard - Correct answer-a physical condition that increases the frequency
or severity of loss
moral hazard - Correct answer-dishonesty or character defects in an individual that
increase the frequency or severity of loss (using a hammer to create "hail" damage
to your roof to get a claim)
Morale (Attitudinal) Hazard - Correct answer-carelessness or indifference to a loss,
which increases the frequency or severity of a loss (leaving car unlocked leading to
theft)
Legal Hazard - Correct answer-characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses (a jury in one district
may be more sympathetic than others)
pure risk - Correct answer-a risk with a possibility of loss or no loss; no gain
occurs
©COPYRIGHT 2025, ALL RIGHTS RESERVED 2
