Insurance

Which type of risk is insurable?

• Speculative risk

• Pure risk

• Gambling risk

• Business investment risk

• N/A

A fire that destroys a house is an example of a:

• A) Hazard

• B) Peril

• C) Indemnity

• D) Moral risk

Leaving your car unlocked because “insurance will pay if it’s stolen” is what type of hazard?

• Physical hazard

• Moral hazard

• Morale hazard

• Pure risk

Exaggerating an injury to get a larger payout is an example of:

• Morale hazard

• Peril

• Moral hazard

• Insurable interest

The Law of Large Numbers means:

• Small groups are more predictable

• Insurance companies gamble on outcomes

• Premiums increase randomly

• Large groups make losses predictable

You cannot buy life insurance for your neighbor because:

• It’s too expensive

• No insurable interest

• The law of indemnity

• Lack of good faith

The Principle of Indemnity means:

• You can profit from insurance

• Insurers must always pay double

• Insurance only covers strangers

• Insurance restores you to your original position

The Principle of Utmost Good Faith requires:

• Only the insurer to be honest

• Both insurer and insured to be honest

• Hiding material facts if not asked

• Customers to pay more than losses