MIDTERM Flashcards
MIDTERM
premium
The price of insurance protection for a specified risk for a specified period of time.
hold-harmless agreement
An agreement that allows one party to protect another party against any future losses or claims that may result from a particular activity. Also known as an indemnity agreement.
avoidance
A risk management technique whereby the risk of loss is prevented by not engaging in activities that present the risk.
fire
Combustion manifested in light, flame, and heat for useful purposes (friendly fire) or destructive purposes (hostile fire).
hazard
(1) A risk or probability that the event insured against might occur. (2) A condition that engenders or increases the chances of a loss.
captive insurance company
An insurance company that provides insurance to, and is controlled by, its owners.
morale hazard
A hazard that is based on the insured’s attitude toward the insured belongings. This hazard exists when the insured no longer cares about the possessions because they are insured.
physical hazard
A hazard arising from the physical condition or characteristics of the object that is insured.
pure risk
Change of loss
moral hazard
A hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned.
self-insurance
A means of assuming and managing risk by setting aside a pool of money that will be used for compensation in the event of a loss occurring.
insurance
Pooling the premiums of the many to pay the losses of the few. Spreading the risk.
remote cause
A cause that is not the proximate cause of loss and is separate from the proximate cause in a chain of events leading to a loss.
risk transfer
For a non-insurance company, the risk insured. For an insurance company, the risk reinsured.
theft
The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, holdup, robbery, and pickpocketing.
life insurance
A contract between an insurer and a policyholder whereby a death benefit is paid to named beneficiaries, provided the premiums have been paid by the policyholder at the time of death.
robbery
Unlawfully taking another’s property, in the person’s presence, by violence or the threat of violence.
immediate cause
A cause that is not the proximate cause of loss but is the last link in a chain of events leading to a loss.
speculative risk
An insurance term for a situation where the possibility of either a financial loss or a financial gain exists, such as in purchasing shares, or betting on horses. Speculative risk is usually not insurable, unlike pure risk.
risk retention
For a non-insurance company, the risk not insured or self-insured. For an insurance company, the risk not reinsured.
risk
The chance of loss. Specifically, the possible loss or destruction of property or the possible incurring of a liability. Sometimes referred to as the subject of an insurance contract.
pure risk
A situation involving a chance of loss with no chance of gain
3 Types of insurable risk
Personal risks
Property risks
Liability risks
3 Types of insurable risk
Personal risks
Property risks
Liability risks
direct loss
Loss involving damage to or destruction of the property insured.
indirect loss
Loss that occurs because of a direct loss (ex. Loss of use, loss of rental income, etc)
indirect loss
Loss that occurs because of a direct loss (ex. Loss of use, loss of rental income, etc)
life insurance
A contract between insurer and policyholder whereby a death benefit is paid to a named beneficiary, provided the premiums have been paid by the policyholder at time of death.
The 3 classes of general insurance
Personal lines
Commercial lines
Specialty risks
The 3 classes of general insurance
Personal lines
Commercial lines
Specialty risks
insurer
The insurance company that undertakes to indemnify for losses and perform other insurance related operations
peril
The event that caused a loss covered by the policy
burglary
Unlawful removal of property from premises involving visible forced entry
paid-up capital
Represents that part of subscribed capital that has been paid in full by shareholders
outstanding loss reserves
Funds set aside to pay for losses that have been incurred but not yet paid
mutual insurance company
An insurance company that is owned and operated by its policyholders, who assume the risks of profit and loss and establish a corporation for the purpose of insuring one another against the possibility of fortuitous loss. Each policyholder pays a premium for their own insurance policy. If at the end of the fiscal year the mutual insurance company declares a profit, the profit is shared among all policyholders. If the company declares a loss, there is also a provision for the policyholders to assessed a levy to make up for the shortfall.
factory mutuals
Insurance companies of the mutual type (as distinct from stock companies) that specialize in industrial risks and loss and prevention
What is Lloyd’s
A London-based insurance and reinsurance market, structured as a corporation, that provides the facilities, including physical location, policy issuance, and accounting, for multiple financial backers grouped in syndicates to pool and spread risk.
Capacity
The measure of an insurer’s ability to issue contracts of insurance. Measured usually by the largest amount it will accept on a given risk, or, in certain situations, by the maximum volume of business that the company is prepared to accept
syndicates
A group of companies or underwriters organized to insure risk in the Lloyd’s market
coverholder
An individual or company that has the authority to bind coverage for a specific line of business as outlined in a contract with an insurer.
Subscribed capital
The amount of stock sold by a corporation
