Study 3 - Perils and Hazards: Key Terms

Question 1

Risk

Answer 1

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.

Question 2

Named-perils policy

Answer 2

A policy in which the perils insured against are listed, as opposed to one that insures against “all risks.”

Question 3

All-risks policy

Answer 3

A name given to an insurance policy that covers each and every loss except for those that are specifically excluded. If the insurer does not exclude it, then it is automatically covered. This is the broadest type of policy that can be purchased.

Question 4

Specified perils

Answer 4

Perils insured against that are specifically named in a policy; losses resulting from the perils listed are covered under the policy. This is the flip side of all-risks coverage, where losses resulting from the perils listed are excluded.

Question 5

Fire

Answer 5

Combustion manifested in light, flame, and heat for useful purposes (friendly fire) or destructive purposes (hostile fire).

Question 6

Personal property

Answer 6

Legally, any property of an insured other than real property. More often used to refer to the personal property of family members insured under a homeowners policy.

Question 7

Real property

Answer 7

Land and any property that is tangible and usually fixed or attached to the land.

Question 8

Theft

Answer 8

The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, holdup, robbery, and pickpocketing.

Question 9

Earth movement

Answer 9

A general term that includes earthquake, landslide, snowslide, and volcanic eruption, among other phenomena.

Question 10

Fluvial flooding

Answer 10

The overflow of a river

Question 11

Pluvial flooding

Answer 11

Flooding caused by rain

Question 12

Hazard

Answer 12

(1) A risk or probability that the event insured against might occur. (2) A condition that engenders or increases the chances of a loss.

Question 13

Physical hazard

Answer 13

A hazard arising from the physical condition or characteristics of the object that is insured.

Question 14

Moral hazard

Answer 14

A hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned.

Question 15

Conflagration

Answer 15

(1) A fire involving two or more risks or extending over a wide area. (2) Any unusually large fire.

Question 16

Sublimit

Answer 16

A limitation in an insurance policy on the amount of coverage available to cover a specific type of loss.