1. Pure
2. Speculative

1. A situation that can only result in a loss or no change.
2. There is NO financial gain.
3. This is the only type of risk that an insurance company will cover.

1. A situation that could involve either a financial gain or loss.
2. This type of risk is not insured.

1. Avoidance
2. Sharing
3. Retention
4. Reduction

What is the method of dealing with risk for a group of individual people or businesses with the same or similiar exposure to loss to share the losses that occur within the group?

1. To reduce expenses and improve cash flow.
2. To increase control of claim reserving and claim settlements.
3. To fund for losses that cannot be insured.

1. Must be due to chance or outside the insured's control
2. Must be definite and measurable
3. Must be statistically predictable
4. Must not be catastrophic
5. Must be randomly selected and have a large loss exposure

A single property insurance policy that provides coverage for

1. A multiple of classes of property at one location
2. One or more classes of property at multiple locations

$25K for injury of a single person

$50K for bodily injury to two or more people

$25K for damage of property to others

1. Has control over the policy.
2. Is the only one who can cancel the policy or request changes to the policy.
3. Is the one who is responsible for paying the premium and reporting losses.

1. Direct loss
2. Indirect loss

Indirect losses

Example of a indirect or consequential loss: Extra living expense because an insured's home is being repaired or loss of profits for a business if the business has to close for repairs.

An act or event that is the immediate or actual cause of a loss.

Example: Building catchs on fire. Firemen use water to put out flames causing water damage to the walls and floor coverings.  Although water damage is not an insured peril, the damage is paid for because fire was the proximate cause of loss.

A latent defect or fault in the property that leads to the destruction of the property.  

Example: Fruit destroyed by a fire would be covered, but spoilage would not because fruit will rot over a period of time.

1. Government insurers are funded by taxes and serve national and state social purposes. Example of government insurance: Medicare, Social Security, National Flood, and Federal Crop.
2. Private insurers are funded by premium from the policyholder and their investments.

Insurance company that is incorporated in the state