Alberta General Insurance Level 1 Practice Exam

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What is severity of loss?

  1. The time it takes to recover from a loss

  2. The average size of losses

  3. A measure of insurance policy effectiveness

  4. The impact of loss on company reputation

The correct answer is: The average size of losses

The severity of loss refers to the average size or amount of losses incurred. Option A is incorrect because it refers to the time it takes to recover from a loss, not the actual size of the loss itself. Option C is also incorrect because it refers to the effectiveness of an insurance policy, not the size of the loss. Option D is incorrect because it refers to the impact of a loss on a company's reputation, not the actual size or amount of the loss. Thus, option B is the most accurate explanation for the severity of loss.

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