Chapter 1: intro to general insurance Flashcards
Define Risk
Chance of financial loss to which object of insurance is exposed to
General Categories of Risk
-personal risk
-property risk
-liability risk
4 options to deal with risk
-Risk avoidance
-Risk retention
-Risk Control
-Risk Transfer
Define Risk Avoidance
All chance of financial loss eliminated. Generally one exposure is replaced with another (ex rent rather than own a building)
Define Risk Retention
Self insuring: good for large corporations, more cost effective than other options available
Define Risk Control
Taking measures to reduce the frequency &severity of loss (ex. alarm systems, fire sprinklers)
Define Risk Transfer
transfer of risk through insurance is the most popular & practical means of dealing with risk
Why loss control measures are not a total solution to eliminating financial loss
i) equipment may not work 100% of the time
ii) losses such as wind/hail and lightning can not be controlled
Examples of loss control measures for reducing a loss
i) intrusion detection alarms
ii) fire detection alarms
Which of the 4 options of dealing with risk is generally NOT an effective way to deal with risk
Risk Avoidance
Which of the 4 options of dealing with risk the most popular way of dealing with risk
Transfer of risk (insurance)
Define Speculative Risk
The chance of financial loss & gain (not insurable)
Define pure risk
The chance of financial loss without the chance of financial gain
What are the five elements of all contracts
A.C.L.L.G
1. Agreement
2.Consideration
3.Legality of object
4. Legal capacity of the parties to contract
5.Genuine Intention
Agreement must have:
an offer made and unconditional acceptance of terms of the offer
A meeting of minds
