Insurance & Benefits Flashcards
What is risk?
Uncertainty about financial loss
What are the two types of risk?
- Speculative Risk:
2. Pure risk:
Speculative Risk:
Taken on by choice, not usually covered
Pure risk:
Events beyond ones control, covered by insurance. Protection against loss, but doesn’t allow for gain
What are the risk mgmt techniques?
- Risk avoidance
- loss control
- risk retention
- risk transfer
Risk Avoidance is:
Elimination of source of risk
Substitution or separation of things
Loss control is:
Reduce the possibility of a loss’s scale/size
Loss prevention - before the act
loss reduction - after the fact
Risk Retention is:
Self-insure against:
high frequency/low severity losses
losses that are so unlikely to occur it’s not worth insuring
Risk transfer is:
Non-insure ie. waver
insurance transfer
Risk pooling
Group sharing of losses where loss transfers from individual to everyone in the group
Law of Large numbers
Using probability and large numbers of ppl, that which is unpredictable for an individual becomes predictable in a group
Insurance (def)
Undertaking of one party to protect another party against loss or liability. In the event of loss, one party promises to pay the other party.
Characteristics of insurable risk
- must be chance occurrence
- Loss must be definite
- Contract of indemnity: covers actual amount of loss
- Valued Contract: amount payable is fixed and known
- loss must be significant
- rate of loss must be predictable
- loss must not be more than insurer can bear
Types of group insurance benefits:
- Life
- AD&D
- Short term disability
- long-term disability
- Critical illness
- WCB
- EI
- Dental, extended health
- Travel
- MSP
Death benefit
could be for amounts for last expenses, mortgage, spousal (all non-taxable)
Could be in any payment forms (flat amount, 2x annual earnings, etc.)
Can be optional
