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9 Cards in this Set

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What is a "hazard"?
Circumstance (situation) that increases the likelihood or severity of a loss due to peril.
List 4 main categories of hazards.
1. Physical: tangible, physical, structural or operational features of a risk situation.

2. Moral: dishonest or exagerrated claims.

3. Morale: arise from state of mind causing indifference or apathy (i.e. alcohol and drug abuse, tobacco, etc.)

4. Legal: situations that result in legal entanglements.
What is a "peril"?
The immediate specific event or danger causing the loss.
List 3 principle types of losses.
1. Loss of property
2. Financial loss associated w/ death or disability.
3. Loss associated w/ legal liablity claims.
What is a "loss reserve"?
Money that is set aside to pay for future losses and claims.
What is a "transfer of risk"?
In the event of a loss, a payment is made from the fund (loss reserve)transferring the potential financial hardship from the individual to the entire group.
What is a "risk"?
Uncertainty of loss.
What type(s) of risk are there?
1. Pure Risk: involves on the chance of loss. Pure Risks are INSURABLE.

2. Speculative Risk: involves both the chance of loss as well as the possibility of gain or profit. Speculative Risk in NOT insurable.
How can risk be managed?
S.T.A.R.R.

1. Sharing: insurers will work together to share the risk (e.g., reinsurance).

2. Transferring: risk of loss is moved from individual to group. Relieves insured of financial losses.

3. Avoidance (loss prevention): avoid situations or events that create the risk or possibility of a loss.

4. Reduction: action is taken to reduce the chance of occurance.

5. Retention (self-insuring): taking responsibilty of loss (e.g. co-payments, deductible, etc.).