Module 10
Objectives
Upon completion of this module, you will be able to:
1. describe the following terms of risk management: speculative risk, pure risk,
exposures, perils, loss frequency, loss severity, policy limits, deductibles, and
coinsurance
2. state the recommended action for different levels of frequency and severity for
losses
3. list and explain ways to handle risk
4. define the large-loss principle and the principle of indemnity
Define the following:
Speculative risk
Pure risk
Exposures
Perils
Explain loss frequency and loss severity.
Describe the following methods of handling risk:
Risk avoidance
Risk retention
Loss control
Risk transfer
Risk reduction
What is a hazard?
Define the following:
Large-loss principle
Law of large numbers
Principle of indemnity
What four areas do people need to cover?
What the five main insurances to address?
What does renter’s insurance cover?
What are the two parts of homeowner’s insurance?
Explain actual cash value and replacement cost coverage.
List losses that are usually not covered under a basic homeowner’s insurance policy.
What is the purpose of an umbrella policy?