1. Which of the following is a speculative risk that is generally not insurable?

Investing in a new business venture

Speculative risk involves a chance of gain or loss (e.g., starting a business) and is not insurable; only pure risk is insurable.

2. A physical hazard is best described as:

A tangible condition that increases the chance of loss

A physical hazard is a tangible condition (such as icy steps or a heart condition) that increases the likelihood or severity of a loss.

3. A morale hazard refers to:

Carelessness or indifference to loss because one has insurance

Morale hazard is an attitude of carelessness or indifference toward loss arising from the existence of insurance.

4. An insurance policy is a unilateral contract because:

Only the insurer makes a legally enforceable promise

In a unilateral contract only one party (the insurer) makes a legally enforceable promise; the insured is not legally compelled to pay premiums.