Which of the following risks is insurable?
A. pure risks
B. gambling
C. speculative risks
D. investing - <
loss. They are pure in the sense that they do not mix both profits and losses. Insurance is concerned
with the economic problems created by pure risks.
Buying insurance is one of the most effective ways of
A. avoiding risk
B. transferring risk
C. reducing risk
D. retaining risk - <
risk. Through the insurance contract, the burden of carrying the risk and indemnifying the financial
loss is transferred from the individual to the insurance company.
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 individual
C. it protects against living too long
D. it creates and protects risks - <
financial loss by having the losses of few paid by the contributions of many who are exposed to the
same risk.
All of the following are elements of an insurable 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 - <
risk is that it NOT be catastrophic. A principle of insurance holds that only a small portion of a given
group will experience loss at any one time. Risks that would adversely affect large numbers of
people or large amounts of property - wars or floods, for example - are typically not insurable.
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 - <
aside to fulfill the insurance company's obligation to pay future claims. The reserve is compiled from
past premium payments and interest
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