Chapter 2 Vocab (Notes) Flashcards
Insurance
The pooling of fortuitous losses by transfer or such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk
Pooling
involves spreading losses incurred by the few over the entire group
Law of Large Numbers
states that the greater number of exposures, the more closely actual results will approach the probable results that are expected from an infinite number of exposures
Fortuitous Loss
a loss that is unforeseen, unexpected, and occurs as a result of chance
Reinsurance
An arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance
Adverse Selection
the tendency of persons with a higher than average chance of loss to seek insurance at standard rates
Underwriting
selection and classification of applicants for insurance
Life Insurance
pays death benefits to beneficiaries when the insured dies
Health Insurance
covers medical expenses because of sickness or injury
Disability Plans
pay income benefits
Property Insurance
indemnifies property owners against the loss or damage of real or personal property
Liability Insurance
covers the insured’s legal liability arising out of property damage or bodily injury to others
Casualty Insurance
refers to insurance that covers whatever is not covered by fire, marine, and life insurance
Personal lines
coverages that insure the real estate and personal property of individuals and families r provide protection against legal liability
Commercial Lines
coverages for business firms, nonprofit organizations, and gov’t agencies
