An exposure A peril A hazard A risk Fred has decided to store his fuel tanks inside his garage where he builds automobiles. To the insurer, the fuel tanks would be considered: An exposure A peril A hazard A risk

Fred has decided to store his fuel tanks inside his garage where he builds automobiles. To the insurer, the fuel tanks would be considered: An exposure - example, a house built on the Gulf coast has high exposure to hurricane damage. A peril - Peril is the actual cause of a loss. A hazard - storing explosives in a basement creates a hazard by increasing the chance of an explosion. A risk - the house is known as the risk an insurer is protecting.

An exposure A peril A hazard A risk Fred has decided to store his fuel tanks inside his garage where he builds automobiles. To the insurer, the fuel tanks would be considered: An exposure A peril A hazard A risk

During a violent winter storm in Atlanta, a bolt of lightning hits Sally’s house, damaging a large portion of the roof. In this case, the insurer would call the lightning bolt a: Loss Risk Hazard Peril

During a violent winter storm in Atlanta, a bolt of lightning hits Sally’s house, damaging a large portion of the roof. In this case, the insurer would call the lightning bolt a: Loss - Loss occurs when the value of an insured item is reduced by a covered peril, or when expenses have to be paid because of the incident. Risk - meaning as "the potential for financial loss." The second use of "risk" defines it as "the insured item Hazard - A hazard is any circumstance that increases the chance of loss. Peril - Examples of perils include lightning, fire, theft and flood: events you have no control over.

During a violent winter storm in Atlanta, a bolt of lightning hits Sally’s house, damaging a large portion of the roof. In this case, the insurer would call the lightning bolt a: Loss Risk Hazard Peril

Which of the following statements about a speculative risk is TRUE? A speculative risk involves a conscious choice A speculative risk can only result in a loss Insurance companies only insure speculative risks A speculative risk always results in a personal gain

Which of the following statements about a speculative risk is TRUE? A speculative risk can only result in a loss Insurance companies only insure speculative risks A speculative risk involves a conscious choice A speculative risk always results in a personal gain A speculative risk is one undertaken without any certainty of gain or certainty of loss-it could go either way. A person who takes a speculative risk makes a conscious choice to exchange money in return for a chance of gain, while knowing there could be loss instead. Ex. Buying a lottery ticket and investing in the stock market are speculative risks because there is no way to determine whether your financial outlay will pay off. Important! >> Insurers will not cover speculative risks

Which of the following statements about a speculative risk is TRUE? A speculative risk involves a conscious choice A speculative risk can only result in a loss Insurance companies only insure speculative risks A speculative risk always results in a personal gain

Nelson’s Driveway has a very steep grade with several sharp turns, and it gets very muddy when it rains. To an insurance company, Nelson’s driveway might be considered: A peril A loss A risk A hazard

Nelson’s Driveway has a very steep grade with several sharp turns, and it gets very muddy when it rains. To an insurance company, Nelson’s driveway might be considered: A peril - Perils are what people buy insurance to protect against. A loss - To an insurer, loss is also the amount paid out after a claim has been settled. A risk - be the probability of loss, damage, injury, or liability A hazard -Having a hot tub in your house could be a hazard that increases the exposure to damage or liability.

Nelson’s Driveway has a very steep grade with several sharp turns, and it gets very muddy when it rains. To an insurance company, Nelson’s driveway might be considered: A peril A risk A hazard A loss

A loss A hazard A risk An asset Ronald wants to buy an insurance policy for his cabin in Stone Mountain. His insurance company writes him a policy. To the insurance company, Ronald’s home is considered: A loss A hazard A risk An asset

Ronald wants to buy an insurance policy for his cabin in Stone Mountain. His insurance company writes him a policy. To the insurance company, Ronald’s home is considered: A loss - Loss occurs when the value of an insured item is reduced by a covered peril, or when expenses have to be paid because of the incident. A hazard - whatever might increase the exposure. A risk - A risk can also be the insured item, itself as in, "The insured risk is the house of a property owner." An asset - an insured asset is one for which an insurance company must compensate the owner if the asset is damaged or destroyed.

Ronald wants to buy an insurance policy for his cabin in Stone Mountain. His insurance company writes him a policy. To the insurance company, Ronald’s home is considered: A loss A hazard A risk An asset

Which of the following activities is considered a speculative risk? Driving a car Buying a lottery ticket Leaving your jewelry on a bed stand Flying in an airplane

Which of the following activities is considered a speculative risk? A speculative risk is one undertaken without any certainty of gain or certainty of loss-it could go either way. A person who takes a speculative risk makes a conscious choice to exchange money in return for a chance of gain, while knowing there could be loss instead. Buying a lottery ticket and investing in the stock market are speculative risks because there is no way to determine whether your financial outlay will pay off. Insurers will not cover speculative risks

Which of the following activities is considered a speculative risk? Driving a car Buying a lottery ticket Leaving your jewelry on a bed stand Flying in an airplane

Which of the following activities is considered a speculative risk? Driving a car Buying a lottery ticket Leaving your jewelry on a bed stand Flying in an airplane

From the point of view of an insurer, which of the following is a risk? A thunderstorm A large tree growing next to a house A hurricane An insured automobile

From the point of view of an insurer, which of the following is a risk? A risk can also be the insured item, itself as in, "The insured risk is the house of a property owner."

From the point of view of an insurer, which of the following is a risk? A thunderstorm – a peril A large tree growing next to a house – a hazard A hurricane – a peril An insured automobile – a (covered) risk

From the point of view of an insurer, which of the following is a risk? A thunderstorm – a peril A large tree growing next to a house – a hazard A hurricane – a peril An insured automobile – a (covered) risk

Viviene is driving carelessly through the streets of Macon when she loses control of her car and crashes into a fire hydrant and the car is completely wrecked. To her insurer, Viviene’s car is now considered a: Peril Risk Hazard Loss

Viviene is driving carelessly through the streets of Macon when she loses control of her car and crashes into a fire hydrant and the car is completely wrecked. To her insurer, Viviene’s car is now considered a: Peril - events or situations over which you have little or no control. Risk - "Risk" is used in two ways. It can be the probability of loss, damage, injury, or liability, as in the statement, "I am going to risk investing in that company." Hazard - storing explosives in a basement creates a hazard by increasing the chance of an explosion. Loss - Loss occurs when the value of an insured item is reduced by a covered peril, or when expenses have to be paid because of the incident.

Viviene is driving carelessly through the streets of Macon when she loses control of her car and crashes into a fire hydrant and the car is completely wrecked. To her insurer, Viviene’s car is now considered a: Risk Hazard Loss Peril

Which of the following best describes the insurance concept of “exposure”? The reduction in value of an insured item The possibility of damage or loss The cause of damage or loss A condition that increases the possibility of a loss

Which of the following best describes the insurance concept of “exposure”? Example: Steph wants to insure her house, which is built near a cliff. The underwriter would research the area to find out its history of mudslides before writing the policy. The insurer will find what the exposure has been for this area before issuing a policy and setting the premium.

Which of the following best describes the insurance concept of “exposure”? The reduction in value of an insured item The possibility of damage or loss The cause of damage or loss A condition that increases the possibility of a loss

A risk that carries no possibility of gain is called a __________ risk. Speculative Pure Monetary Slight

A risk that carries no possibility of gain is called a __________ risk. Speculative - A person who takes a speculative risk makes a conscious choice to exchange money in return for a chance of gain, while knowing there could be loss instead. Pure - Remember that the principle of indemnity states that the insured can be restored to his approximate financial condition before a claim, but cannot profit from it. Monetary – Not an insurance term Slight – not an insurance term

A risk that carries no possibility of gain is called a __________ risk. Speculative Pure Monetary Slight

Which of the following is NOT an insurable risk? A small town A collection of jewelry An airplane A forklift

Which of the following is NOT an insurable risk? A small town A collection of jewelry An airplane A forklift A risk must be definable and have a quantifiable value. A small town would be too hard to define and quantify.

Which of the following is NOT an insurable risk? An airplane A small town A collection of jewelry A forklift

Which of the following is NOT a qualification of an insurable risk? An insurable risk must have definable parameters An insurable risk must have guaranteed protection from damage An insurable risk must have a quantifiable value An insurer must be able to charge premium high enough to pay out claims

Which of the following is NOT a qualification of an insurable risk? In order to be insurable: a risk must be definable have a quantifiable value the insurer must be able to charge enough in premiums to be able to pay claims. Guaranteed protection from damage is impossible, not to mention the fact that this would negate the very purpose of insurance in the first place.

Which of the following is NOT a qualification of an insurable risk? An insurable risk must have definable parameters An insurable risk must have guaranteed protection from damage An insurable risk must have a quantifiable value An insurer must be able to charge premium high enough to pay out claims

Jen’s home in Marietta burns to the ground after a lightning strike Jen’s home in Marietta burns to the ground after a lightning strike. Jen’s has a homeowners policy that covers lightning damage. The insurance company now views Jen’s House as a: Peril Loss Risk Hazard

Jen’s home in Marietta burns to the ground after a lightning strike Jen’s home in Marietta burns to the ground after a lightning strike. Jen’s has a homeowners policy that covers lightning damage. The insurance company now views Jen’s House as a: Peril – the cause of a loss Loss – In property or casualty insurance, a structure may burn, or a commercial truck may be involved in an accident, causing a loss. Risk - “Risk” is the possibility (uncertainty) that a loss might occur and is the reason that people buy insurance. Hazard - A “hazard” is any condition that increases the possibility, or severity of a loss

Jen’s home in Marietta burns to the ground after a lightning strike Jen’s home in Marietta burns to the ground after a lightning strike. Jen’s has a homeowners policy that covers lightning damage. The insurance company now views Jen’s House as a: Peril Loss Risk Hazard

Which of the following statements best describes the Law of Large Numbers? The larger the number of units insured, the more accurately the insurer can predict the number of claims from that group The larger the number of insurance policies written, the higher the profit for the insurer The larger the amount an insurance polices written, the more an insurer will pay out. The larger the amount an insurance company can charge in premiums, the less likely a policyholder will file a claim

Which of the following statements best describes the Law of Large Numbers? Insurance is based on the Law of Large Numbers. This law shows us that we can predict, fairly accurately, what will happen to a large group of similar individuals in a given time period. When large groups of similar individuals are combined, we call them “risk pools”. Insurance companies hire “actuaries” who make mathematical predictions about things like, how many of the people in any given “risk pool” will have their home destroyed by a tornado, be diagnosed with cancer, or die in a given year. Using the law of large numbers, insurers are able to calculate their probable losses and to establish the rates for premiums that will cover losses and operating expenses.

Which of the following statements best describes the Law of Large Numbers? The larger the number of units insured, the more accurately the insurer can predict the number of claims from that group The larger the number of insurance policies written, the higher the profit for the insurer The larger the amount an insurance polices written, the more an insurer will pay out. The larger the amount an insurance company can charge in premiums, the less likely a policyholder will file a claim

The perils The hazards The risks The exposure Cliff wants to build a cabin in a heavily wooded area. He would like to buy insurance for this cabin, but the underwriter of his insurance company first wants to research the history of forest fires in the area in which Cliff wants to build. The underwriter is trying to determine: The perils The hazards The risks The exposure

Cliff wants to build a cabin in a heavily wooded area Cliff wants to build a cabin in a heavily wooded area. He would like to buy insurance for this cabin, but the underwriter of his insurance company first wants to research the history of forest fires in the area in which Cliff wants to build. The underwriter is trying to determine: The perils - the actual cause of a loss, for example, fire, windstorm or hail. The hazards - A “hazard” is any condition that increases the possibility, or severity of a loss. The risks - the possibility (uncertainty) that a loss might occur and is the reason that people buy insurance. If a certain event happens, - accident, sickness, or death – loss occurs. The exposure - The state of being subject to loss because of some type of hazard.

The perils The hazards The risks The exposure Cliff wants to build a cabin in a heavily wooded area. He would like to buy insurance for this cabin, but the underwriter of his insurance company first wants to research the history of forest fires in the area in which Cliff wants to build. The underwriter is trying to determine: The perils The hazards The risks The exposure

The perils The hazards The risks The exposure Cliff wants to build a cabin in a heavily wooded area. He would like to buy insurance for this cabin, but the underwriter of his insurance company first wants to research the history of forest fires in the area in which Cliff wants to build. The underwriter is trying to determine: The perils The hazards The risks The exposure

The exposure to loss is too great, based on where Chris lives Chris lives in a high crime rate. When he inherits a very valuable original painting by Rembrandt, he tries to buy an insurance policy on the painting, but has trouble finding an insurance company that will sell him a policy. Why might this be? The exposure to loss is too great, based on where Chris lives The peril is higher than the insurer is willing to take on by issuing a policy The painting is not an insurable risk Since Chris did not buy the painting, it does not have a quantifiable value

The exposure to loss is too great, based on where Chris lives Chris lives in a high crime rate. When he inherits a very valuable original painting by Rembrandt, he tries to buy an insurance policy on the painting, but has trouble finding an insurance company that will sell him a policy. Why might this be? The exposure to loss is too great, based on where Chris lives The peril is higher than the insurer is willing to take on by issuing a policy The painting is not an insurable risk Since Chris did not buy the painting, it does not have a quantifiable value