What Goes Into an Insurance Policy?

Which of the following is the first characteristic of an ideally insurable loss exposure?

• It should be associated with speculative risk

• It should be associated with pure risk

• It should be associated with catastrophic risk

• It should be associated with measurable risk

Pure risk entails a chance of ______ or no loss, but no chance of gain.

• loss

• profit

• investment

• growth

A speculative risk presents the possibility of:

• Loss only

• No loss only

• Loss, no loss, or gain

• Gain only

The second characteristic of an ideally insurable loss exposure is that the loss should be ______ from the insured’s standpoint.

• fortuitous

• intentional

• predictable

• avoidable

For a loss to be fortuitous, the insured cannot have control over whether or when a loss will occur.

• True

• False

The third characteristic of an ideally insurable loss exposure is that it is ______ and measurable.

• definite

• random

• avoidable

• subjective

Which of the following best describes the fourth characteristic of an ideally insurable loss exposure?

• It is catastrophic

• It is one of a large number of similar exposure units

• It is speculative

• It is not measurable

The fifth characteristic of an ideally insurable loss exposure is that it is ______ and not catastrophic.

• independent

• predictable

• frequent

• intentional

Mark wants to invest in the stock market. What kind of risk would he be taking?

• Market risk

• Credit risk

• Operational risk

• Liquidity risk

Samantha determined that flood exposure is a pure risk because:

• It only involves the possibility of loss and no gain.

• It can result in both profit and loss.

• It is a speculative risk involving investments.

• It is not insurable.