Washington State Insurance Practice Exam

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Prepare for the Washington State Insurance Exam. Study with interactive flashcards and multiple-choice questions. Each question offers hints and explanations to help you succeed.

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Which of the following describes a requirement for an insurable risk?

Catastrophic Loss
Due to chance
Partially Measurable
Profitable

The correct answer is: Catastrophic Loss

A catastrophic loss refers to a significant event or disaster that results in a high amount of damage, such as natural disasters like hurricanes, earthquakes, or wildfires. In insurance terms, an insurable risk must involve the possibility of a catastrophic loss where the financial impact is severe enough to justify the need for insurance coverage. Therefore, the presence of a catastrophic loss is a key requirement for an insurable risk. The other options: - "Due to chance" is an essential characteristic of an insurable risk since it means the outcome is uncertain and beyond the control of the insured. - "Partially measurable" is not a requirement for an insurable risk; risks need to be definite and quantifiable to be insurable. - "Profitable" is not a requirement for an insurable risk; in fact, insurance companies aim to manage risks to avoid excessive losses and remain profitable in the long term.