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FLORIDA 2-15 INSURANCE TEST WITH CORRECT DETAILED ANSWERS WITH RATIONALES (VERIFIED ANSWERS) |ALREADY GRADED A+||UPDATED MAY 2024!

FLORIDA 2-15 INSURANCE TEST  WITH CORRECT DETAILED  ANSWERS WITH RATIONALES  (VERIFIED ANSWERS) |ALREADY  GRADED A+||UPDATED MAY 2024!

Which of the following risks is insurable?
A. pure risks
B. gambling
C. speculative risks
D. investing - <>A. Only pure risks are insurable because they involve only the chance of
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 - <>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 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 - <>B. The function of insurance is to safeguard against
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 - <>C. One of the criteria for an insurable
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 - <>B. Reserves can be defined as the amounts that are set
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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