Chpter 1 Gen Flashcards
What kinda of risk is insurable?
Pure
What are the 2 type of risk?
Speculative & Pure
Define Insurance & what it’s based on.
A device for transferring the chance of a financial loss among a large # of people.
Based on the Principle of Risk Transferring.
Define Pure Risk
Possibility of a loss with no chance for gain.
A Pure risk is the only type of risk that insurance companies will insure.
Define a Loss
A loss is the reason for a claim against an insurance policy.
Define Exposure
Exposure is a measure of the vulnerability of a loss.
How is exposure measured?
Exposure is measured in units.
Determining rates are medical history, sex, age & occupation of insd
Define Hazards
Circumstances or conditions that increase the possibility that a loss will take place.
What are the 3 types of Hazards?
Physical, Moral, Morale
Define Physical Hazard
Ones physically stressed
Example: Lifestyle
Define Moral Hazard
Someone’s behavior
Example: Dishonesty
Define Morale Hazard
Ones state of mind
Example: doesn’t lock the door, repair leaks
What is a Peril?
Perils are the cause of a possible loss
Define Avoidance
Ending specific exposure to remove a hazard
How is avoidance handled?
Avoidance is not a practical way to handle risk. It is a way to handle a risk, by not being exposed to an activity.
