Study 1 Flashcards
Insurance
A contract in which one party, the insurer, for monetary consideration agrees to reimburce another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils
Risk
The chance of loss. Sometimes referred to as the subject of an insurance contract
Speculative risk
Where the possibility of either a financial loss or gain exists, such as in purchasing shares, or betting on horses. Speculative risk is not insurable.
Pure risk
A situation involving a chance of a loss, or no loss but no chance of gain. Pure risk is insurable.
Three broad categories of insurance
Personal risks, property risks and liability risks
What does general insurance include
Property and casualty insurance
What is casualty insurance
A blanket term used to describe insurance for subjects other than life, fire, or automobile
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; for example, fire, windstorm
Burglary
Unlawful removal of property from premises involving visible forcible entry
Robbery
Unlawfully taking another’s property, in the person’s presence, by violence or the threat of violence
Theft
The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, holdup, robbery, and pickpocketing
Negligence
Failure to use the degree of care expected from a reasonable and prudent person. Negligence is the peril insured in liability insurance.
Hazard
- A risk or probability that the event insured against might occur
- A condition that engenders or increases the chances of a loss
Physical hazard
a hazard arising from the physical condition or characteristics of the object that is insured
Moral hazard
A hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned
Underwriter
- The insurance company or group that underwrites or insures a particular risk
- The individual within an insurance company whose responsibility it is to accept or reject business in the particular line in which she specializes, and, in this way, chooses the risks her principals are prepared to underwrite. They explore the signals of the presence of moral hazards.
Morale hazard
A hazard that is based on the insured’s attitude toward the insured’s belongings. This hazard exists when the insured no longer cares about the possessions because they are insured
Proximate cause
A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened
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
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
