Chapter 1 Flashcards
What is Risk ?
The chance or uncertainty of loss
What are the two types of Risk?
Pure risk and Speculative Risk
What is Pure Risk?
Only a chance for loss with no possibility of a gain, such as an accident. Only pure risks are insurable
What is Speculative Risk?
Involves both the uncertainty of loss or gain. These risks are not insurable.
What is Loss?
Any reduction in the quantity, quality, or value of something.
What is Exposure?
Used to determine Rates charged for insurance coverage. Exposure is based on the number of insured in the risk pool.
What is Peril?
The cause or event that leads to a loss.
What is a Hazard?
A factor that increases the likelihood of a loss.
What are the three types of Hazards?
Physical, Moral, and Morale
What is a Physical Hazard?
Physical situations that give a rise to a risk.
What is a Moral Hazard?
A situation that arises from a persons habits and values.
What is a Morale Hazard?
A situation that arises out of a person’s carelessness or irresponsibility.
What are the 5 methods of handling Risk?
Sharing, Transferring, Avoidance, Reduction, Retention
What is the Sharing method of handling Risks?
Sharing potential risk with others in order to reduce exposure
What is the Transferring method of handling Risk
Transferring the risk to another party who is more able to bear the risk.
