Unit 8 Quizs

Risk Transfer

• Shifting the financial consequences of a loss to another party, usually through insurance or a contract.

• Taking on the financial consequences of a loss without any external help.

• Minimizing the impact of a loss by avoiding risks altogether.

• Transferring assets to another party to avoid financial loss.

What is the definition of 'Risk' in business?

• The chance of a positive outcome in a business venture.

• The possibility that an outcome will be different from what is expected, often involving loss but sometimes involving gain.

• A guaranteed loss in financial investments.

• The likelihood of achieving all business goals without any setbacks.

Professional Liability (Errors & Omissions)

• Protects service-based businesses from financial loss caused by mistakes or negligence.

• Covers physical injuries caused by a business's products.

• Insures against theft of business assets.

• Provides coverage for natural disasters affecting business operations.

Declarations Page ('Dec Page')

• A page that lists the coverage details of a policy.

• The summary page of a policy listing the named insured, policy limits, deductible, and premium.

• A document that outlines the claims process for a policy.

• A page that provides the history of claims made under a policy.

Insuring Agreement

• The section of the policy that contains the insurer’s main promise to pay for covered losses.

• A clause that outlines the exclusions of the policy.

• The part of the policy that details the premium payment schedule.

• A section that describes the policyholder's responsibilities.

Unemployment Insurance

• Funded by employer taxes; provides temporary payments to workers who lose their jobs through no fault of their own.

• A government program that offers permanent financial support to unemployed individuals.

• A type of insurance that covers job-related injuries and illnesses.

• A financial aid program for students who are unemployed.

Economic Risk

• Risks caused by changes in the overall economy, such as inflation, interest rate hikes, or changes in consumer confidence.

• Risks associated with individual business decisions and management practices.

• Risks related to natural disasters and environmental changes.

• Risks stemming from technological advancements and innovations.

Subrogation

• The insurer’s right to seek repayment from the party that caused the loss after the insurer has paid the claim.

• The process of transferring ownership of an insurance policy to another party.

• The obligation of the insurer to pay claims regardless of the circumstances.

• The right of the insured to cancel their policy at any time.

Business Interruption Insurance

• Replaces lost income and pays fixed expenses (like rent) if a business is forced to close temporarily due to a covered event like a fire.

• Covers the cost of purchasing new equipment for a business after a disaster.

• Provides liability coverage for injuries that occur on business premises.

• Insures against loss of inventory due to theft or damage.

Pure Risk vs. Speculative Risk

• Pure Risk involves only two outcomes: loss or no loss, while Speculative Risk involves outcomes of loss, no change, or gain.

• Pure Risk can result in profit, while Speculative Risk can only result in loss.

• Pure Risk is associated with gambling, while Speculative Risk is related to insurance.

• Pure Risk has multiple outcomes, while Speculative Risk has only one outcome.