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IIQE Paper 1 Risk and Insurance question: tenant causes to the premises

IIQE Paper 1Risk and Insurance

A landlord's lease requires the tenant to pay for any damage the tenant causes to the premises. For the landlord, this is:

A risk transfer
B risk avoidance
C self-insurance
D loss prevention

Show the answer and explanation

Answer: A. risk transfer

Answer: risk transfer. Contractual terms that shift a financial loss to another party are a form of risk transfer.Why not the others:• risk avoidance: The landlord still lets the premises, so the exposure has not been avoided.• self-insurance: Self-insurance means the landlord funds its own losses; here the tenant pays.• loss prevention: The clause does not lower how often damage happens; it shifts who pays.Watch out: Thinking only insurance can transfer risk; contract terms can too.Rule: Risk transfer shifts a risk of loss to another party, e.g. by insurance or by contractual terms.Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 1.1.3(c), p. 1/3

Common mistake

Thinking only insurance can transfer risk; contract terms can too.

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Related IIQE Paper 1 questions

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Original study material written to the public IIQE Paper 1 syllabus. Independent, not endorsed by the Insurance Authority or the VTC. Verify figures and rules against current guidance before relying on them.