Lesson 1 Flashcards
any condition or situation that presents a possibility of loss, whether or not an actual loss occurs
loss exposure
the process of making and implementing decisions that will minimize the adverse effects of accidental losses on an organization.
risk management
a risk control technique that reduces the frequency of a particular loss.
loss prevention
a risk control technique that reduces the severity of a particular loss
loss reduction
a fundamental measure of the loss exposure assumed by an insurer
exposure unit
one of the two main sectors of the insurance industry, encompassing numerous types of insurance, most of which cover the financial consequences of damage to one’s own property or legal liability to others
property-casualty insurance
one of the two main sectors of the insurance industry, encompassing numerous types of insurance that cover the financial consequences of death, injury, or sickness
life-health insurance
an obligation to act in complete honesty and to disclose all relevant facts
utmost good faith
any contract in which one party must either accept the agreement as written by the other party or reject it
contract of adhesion
a contract in which the insurer agrees, in the event of a covered loss, to pay an amount directly related to the amount of the loss
contract of indemnity
a single document that contains all the agreements b/w the insured and the insurer and that forms a complete insurance policy
self-contained policy
an insurance policy that consists of several different documents, none of which by itself forms a complete policy
modular policy
any type of insurance that indemnifies an insured who suffers a financial loss b/c property has been lost, stolen, damaged, or destroyed
property insurance
insurance that covers losses resulting from the insured’s liability to others
liability insurance
policy that covers most of the property and liability loss exposures that arise out of residential property ownership and occupancy, as well as property and liability loss exposures that individuals and families may have while they are away from their residences
homeowners policy
coverage for damages, plus costs of any defense, related to a claim or suit brought against the insured that resulted from bodily injury or property damage caused by an occurrence covered under the policy
personal liability coverage
an insurance policy that covers an individual or a family against loss exposures arising out of the ownership, maintenance, or use of automobiles
personal auto policy (PAP)
coverage for direct and accidental loss or damage to a covered auto by any peril except collision or overturn or a peril specifically excluded
comprehensive coverage
an insurance policy that covers an individual’s or a family’s loss exposures arising out of the ownership, maintenance, or use of watercraft used principally for recreational or personal transportation purposes
personal watercraft policy
a liability policy that provides excess coverage above underlying policies and may also provide coverage not available in the underlying policies, subject to a self-insured retention
umbrella liability policy
coverage that protects the insured from damages owed b/c of legal liability to another party. For auto policies, it protects insureds against liability arising out of the ownership or operation of automobiles
liability coverage
life insurance that provides coverage for a specified period, such as ten or twenty years, with no cash value
term life insurance
life insurance designed to remain in force for an insured’s entire life and provide a death benefit at death, characterized by the presence of a cash value
permanent life insurance
insurance that pays for extended medical care or custodial care received in a nursing home, hospital, or home
long-term care insurance
a type of life insurance policy or contract that makes periodic payments to the recipient for a fixed period or for life in exchange for a specified premium
annuity
policy that covers two or more lines of business by combining ISO’s commercial lines coverage parts
commercial package policy (CPP)
insurance that covers a business or a not-for-profit organization against loss exposures arising out of the ownership, maintenance, or use of automobiles
commercial auto insurance
a package policy that combines most of the property and liability coverages needed by small and medium-size businesses
businessowners policy (BOP)
coverage for damage to or theft of a covered auto that can include both collision coverage and other than collision (comprehensive) coverage
auto physical damage coverage
insurance that covers commercial buildings and their contents against various types of property loss
commercial property insurance
insurance that covers vessels and their cargoes, including various vessel-related liability exposures
ocean marine insurance
insurance that covers many different classes of property that typically involve an element of transportation
inland marine insurance
insurance that covers (1) money and securities against numerous perils (not limited to crime perils) and (2) property other than money and securities against crime perils, such as employee theft, robbery, theft by outsiders, and extortion
commercial crime insurance
insurance that covers many of the common liability loss exposures faced by an organization, including its premises, operations, and products
commercial general liability (CGL) insurance
insurance that covers persons engaged in various occupations against liability resulting from their rendering or failing to render professional services
professional liability insurance
insurance that provides coverage for benefits an employer is obligated to pay under workers compensation laws
workers compensation insurance
- Pure risk - involves pure risk, not speculative
- Fortuitous losses - subject to fortuitous loss from the insured’s standpoint
- Definite and measurable - subject to losses that are definite in time, cause, and location and that are measurable
- Large number of similar exposure units - one of a large number of similar exposure units
- Independent and not catastrophic - not subject to a loss that would simultaneously affect many other similar loss exposures; not catastrophic
- Affordable - premiums are economically feasible
Characteristics of an ideally Insurable Loss Exposure
