1. In the insurance business, risk can best be defined as:
A. sharing the possibility of a loss
B. uncertainty regarding the future
C. uncertainty
... [Show More] regarding financial loss
D. uncertainty regarding when death will oc- cur
2. Which of the following risks is insurable?
A. pure risks
B. gambling
C. speculative risks
D. investing
3. Buying insurance is one of the most effec- tive ways of
A. avoiding risk
B. transferring risk
C. reducing risk
D. retaining risk
4. Which of the following best describes the function of insurance?
A. it is a form of legalized gambling.
B. it spreads financial risk over a large group to minimize the loss to any one indi- vidual
C. it protects against living too long
D. it creates and protects risks
C. The concept of insurance developed from the need to minimize the adverse effects of risk associated with the probability of financial loss.
A. Only pure risks are insur- able because they involve only the chance of loss. They are pure in the sense that they do not mix both prof- its and losses. Insurance is concerned with the econom- ic problems created by pure risks.
B. Buying insurance is one of the most effective ways of transferring risk. Through the insurance contract, the burden of carrying the risk and indemnifying the finan- cial loss is transferred from the individual to the insur- ance company.
B. The function of insurance is to safeguard against finan- cial loss by having the loss- es of few paid by the con- tributions of many who are exposed to the same risk.
5. All of the following are elements of an insur- able risk EXCEPT
A. the loss must be due to chance
B. the loss must be predictable
C. the loss must be catastrophic
D. the loss must have a determinable value
6. The amount of money an insurer sets aside to pay future claims is called
A. a premium
B. a reserve
C. a dividend
D. an accumulated interest
7. Which of the following constitutes an insur- able interest?
A. the policyowner must expect to benefit from the [Show Less]