Fundamentals of Risk and Insurance Quiz
Explore essentials like risk, premiums, and insurance functions. Test your knowledge with 14 questions. Perfect for Actuarial Science enthusiasts!
#1
Which of the following best describes risk in insurance?
The certainty of loss
The uncertainty of loss
The occurrence of loss
The avoidance of loss
#2
What is the primary function of insurance?
To prevent all risks
To eliminate uncertainty
To transfer risk from the insured to the insurer
To predict future losses
#3
What is a deductible in insurance?
The maximum amount the insurer will pay for a covered loss
The initial amount the insured must pay before the insurer covers the loss
The percentage of the loss that the insured is responsible for paying
The minimum premium required for coverage
#4
What does 'exclusion' mean in insurance policies?
The act of including specific risks in the coverage
The act of excluding specific risks from the coverage
The process of evaluating policyholder eligibility
The process of adjusting premiums based on claims history
#5
Which of the following is NOT a type of life insurance?
Term life insurance
Whole life insurance
Variable life insurance
Property insurance
#6
What does the term 'premium' refer to in insurance?
The fee paid by the insured to the insurer
The amount of coverage provided
The total loss incurred by the insured
The deductible paid by the insured
#7
Which type of risk is insurable?
Speculative risk
Diversifiable risk
Systematic risk
Pure risk
#8
What is adverse selection in insurance?
The process of selecting high-risk individuals for insurance coverage
The process of selecting low-risk individuals for insurance coverage
The tendency for high-risk individuals to seek out insurance more than low-risk individuals
The tendency for low-risk individuals to seek out insurance more than high-risk individuals
#9
In insurance, what does 'underwriting' involve?
Calculating premiums based on risk factors
Issuing policies to insured individuals
Assessing and evaluating risks to determine insurability
Investigating claims made by policyholders
#10
What is moral hazard in insurance?
The increased risk-taking behavior by insured individuals or organizations
The decreased risk-taking behavior by insured individuals or organizations
The tendency for individuals or organizations to underestimate their risks
The tendency for individuals or organizations to overestimate their risks
#11
What is the 'law of large numbers' in insurance?
The more policies an insurer issues, the greater the likelihood of profit
The larger the pool of insured risks, the more accurately losses can be predicted
The probability of an event decreases as the number of occurrences increases
The insurer must compensate the insured for any loss, regardless of probability
#12
What is reinsurance in the insurance industry?
Insurance purchased by individuals or organizations
Insurance provided to insurance companies to help manage risk
Insurance policies with very high premiums
Insurance coverage for uninsurable risks
#13
What does 'residual risk' mean in insurance?
The remaining risk after insurance coverage
The risk retained by the insurer after reinsurance
The risk transferred to the policyholder
The risk borne by the insured before coverage
#14
What is 'catastrophe insurance'?
Insurance for rare and extreme events such as earthquakes or hurricanes
Insurance for minor accidents or incidents
Insurance for everyday risks like health or auto accidents
Insurance for business interruption due to natural disasters
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