Ch. 23 Managing Risk Flashcards
An insurance term that refers to the depreciated value of property.
actual cash value (ACV)
Stating in a property insurance policy that all direct damages are covered except those caused by perils specifically excluded.
all-risk approach
Coverage that reimburses a business for the loss of anticipated income following the interruption of business operations.
business interruption insurance
The possibility of losses associated with the assets and earnings potential of a firm.
business risk
A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property.
coinsurance clause
Coverage for general liability loss exposure, including premises liability, operations liability, product liability, and completed operations liability.
commercial general liability (CGL) insurance
Economic or noneconomic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action.
compensatory damages
Coverage primarily against employee dishonesty.
crime insurance
A defect resulting from a dangerous design, even though the product was made according to specifications.
design defect
A loss in which physical damage to property reduces its value to the property owner.
direct loss
Coverage that guarantees a healthy partner enough cash to buy out a partner who becomes disabled.
disability buyout insurance
Coverage that provides benefits to a key employee upon his or her disability.
disability insurance
Compensatory damages that relate to economic loss, such as medical expenses and loss of income
economic damages
The unauthorized transfer of funds from a bank account.
funds transfer fraud
A managed-care network providing health insurance that is less expensive than that of a PPO but more limiting in choices of medical care providers.
health maintenance organization (HMO)
A contractual clause that requires one party to assume the financial consequences of another party’s legal liabilities.
indemnification clause
A loss arising from an inability to carry on normal operations due to a direct loss of property.
indirect loss
Coverage that provides benefits to a firm upon the death of key personnel.
key-person life insurance
Choosing not to engage in hazardous activities.
loss avoidance
Keeping a loss from happening.
loss prevention
Lessening the frequency, severity, or unpredictability of potential losses.
loss reduction
A defect resulting from a problem that occurs during the manufacturing process, causing the product to subsequently not be made according to specification.
manufacturing defect
A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use.
marketing defect
The uncertainty associated with an investment decision.
market risk
Identifying the specific perils covered in a property insurance policy.
named-peril approach
Compensatory damages for such losses as pain and suffering, mental anguish, and loss of physical abilities.
noneconomic damages
A form of punishment beyond compensatory damages that intends to punish wrongdoers for gross negligence or callous disregard and to have a deterrent effect.
punitive damages
The pure risks that any business faces can be categorized as:
property, liability, and personnel
The uncertainty associated with a situation where only loss or no loss can occur.
pure risk
