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RMIN 4000 Test 1 Brown UGA Study Guide Solutions Exposures - ANSWER-things of value (assets) that could be lost Perils - ANSWER-things that cause injury or loss risk - ANSWER-a calculated possibility of a negative outcome Frequency - ANSWER-the number of losses (such as fire or theft) that occ...

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  • November 13, 2024
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EmilyCharlene
RMIN 4000 Test 1 Brown UGA Study
Guide Solutions

Exposures - ANSWER✔✔-things of value (assets) that could be lost


Perils - ANSWER✔✔-things that cause injury or loss


risk - ANSWER✔✔-a calculated possibility of a negative outcome


Frequency - ANSWER✔✔-the number of losses (such as fire or theft) that occur within a

specified time period. aka the probability of a loss


Severity - ANSWER✔✔-the dollar amount of a loss for a specific peril (fire, theft,

collision) aka How much does it cost when the loss does occur?


Hazard - ANSWER✔✔-a condition that creates or increases the frequency or severity of

loss but does NOT cause the loss.


Physical Hazard - ANSWER✔✔-a physical condition that increases the frequency or

severity of loss


Moral Hazard - ANSWER✔✔-the presence of insurance changes the behavior of the

insured. ex: making hail damage to get a check




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, Morale hazard (attitudinal hazard) - ANSWER✔✔-A condition of carelessness or

indifference that increases the frequency or severity of loss.


Legal Hazard - ANSWER✔✔-characteristics of the legal system or regulatory

environment that increase the frequency or severity of losses


Georgia's Diminution in value is an example of a - ANSWER✔✔-legal hazard because it

increases the severity on property losses


Pure Risk - ANSWER✔✔-A chance of loss or no loss, but no chance of gain. Insurance

can be bought for this


Speculative Risk - ANSWER✔✔-A chance of loss, no loss, or gain.


Diversifiable risk - ANSWER✔✔-a risk that affects only individuals or small groups and

not the entire economy. It can be eliminated/ reduced through diversification. the risks

are not correlated


Developing cancer or your house being caught on fire are two examples of what kind of

risk? - ANSWER✔✔-Pure Risk


diversifiable risk - ANSWER✔✔-A risk that affects only some individuals, businesses,

or small groups. they can be reduced/eliminated through diversification. the risks are

not correlated




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