Chapter 1 Section 1 Part 1

Question 1

risk

Answer 1

chance of financial loss to which object of insurance is exposed

Question 2

three categories of risk

Answer 2

personal
property
liability

Question 3

four ways to deal with risk

Answer 3

avoidance
controlling
retention
transfer

Question 4

avoidance

Answer 4

eliminate all chance of financial loss (rent vs. buy)

Question 5

controlling (ex’s)

Answer 5

reducing frequency, severity of losses (intrusion detection equipment, fire detection alarms)

Question 6

retention (3)

Answer 6

1. deductibles
2. insuring only certain types of losses, retaining others (ex. insuring all losses except glass breakage)
3. self-insurance

Question 7

transfer (insurer, insured)

Answer 7

• insurer assumes financial responsibility for losses

- insured buys insurance in exchange for premium

Question 8

control measures taken to reduce frequency, severity of losses (2)

Answer 8

• intrusion detection equipment

- fire detection alarms

Question 9

reasons why loss control measures are not total solution in eliminating financial loss (2)

Answer 9

• equipment will not work 100% of the time

- certain types of losses (wind, hail, lightning) cannot be effectively controlled

Question 10

Which of the ways people can deal with risk is not effective?

Answer 10

avoidance