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30 Cards in this Set
- Front
- Back
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PURE RISK
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involve only the possibility of loss.
(ex: a person can buy insurance to protect against loss if a fur coat is stolen) |
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SPECULATIVE RISK
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risks in which there exists both the possibility of gain and the possibility of loss.
(ex: a poker game would be a speculative risk) |
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INSURABLE INTEREST
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a basic rule concerning who can be insured states that before you can benefit from insurance, you must have a chance of financial loss or a financial interest in the property.
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DEFINITE
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The risk of loss must be definite as to time and place and difficult to counterfeit or falsity.
Death is probably the best example of a definite loss. |
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UNEXPECTED
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The risk must be unexpected. If results are expected, it will not qualify as a risk.
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FINANCIAL
hardship |
The risk must be large enough to create a financial hardship for the individual involved. A financially insignificant risk such as the chance that you might lose a pair of inexpensive sunglasses is NOT insurable.
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CALCULABLE
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The loss must be calculable. In addition to requiring adequately large risks, only risks for which the cost of loss is calculable may be insured. Risks that involve loss that can't be assigned a financial value are uninsurable.
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AFFORDABLE
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The cost of the insurance must be affordable to the insured. If the risk is so severe that it requires the insurance company to charge prohibitively high premiums to accumulate enough money to pay losses.
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LOSSES ARE
predicable |
There must be a large number of persons with a similar potential loss available for the insurance so that overall, losses become predictable.
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ADEQUATE SPREAD OF
risk |
The loss must not happen to a large number of insureds at the same time. Although insurance companies do want to insure a large number of persons, if a great number of these insureds were to suffer a loss at the same time, it would be catastrophic for the ins. company.
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What must a RISK meet to be insurable?
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* Risk of loss is expected
* Cost of Insurance is affordable * Loss is calculable * Loss could happen to a large number of people all at once. |
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PERIL
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Is the cause of LOSS...
ex: fire, collision, theft |
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HAZARD
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Is anything that increases the chance of loss...
ex: an unlocked door |
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PHYSICAL HAZARD
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is a hazard that arises from a condition, occupancy or use of the property itself.
ex: a skateboard left on the porch. |
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MORALE HAZARD
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is a hazard in which a person is careless or irresponsible by their actions and can increase the possibility for loss.
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MORAL HAZARD
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it means that a person might create a loss situation on purpose just to collect insurance money. It is a pre arranged or faked theft...
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The Law at Large Numbers is....
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states that the more examples used to develop a statistic, the more reliable the statistic will be...
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A Risk that involves both the possibility of loss and gain...
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a SPECULATIVE RISK
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Installing an automatic sprinkler systems is...
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a REDUCTION risk management
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a company that manufactures a new drug that has potentially bad side effects....
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a AVOIDANCE risk management
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a person that decides to cancel her health insurance policy is an example of....
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a RETENTION risk management
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a PURE RISK is...
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an owner that knows of a problems (as in a dog that bites) to potentially can harm someone...
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The Elements of a VALID CONTRACT are...
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* competent parties
* legal purpose * offer & acceptance (agreement) * consideration |
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a COMPETENT PARTY is...
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a contract between TWO parties who are considered competent under the law..
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a LEGAL PURPOSE...
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the second requirement for a valid contract, that is formed for legal purpose. It's against public policy to the best interests of the public.
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OFFER and ACCEPTANCE
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the third requirement for a valid contract is two parties... one making the offer and the other accepting it.
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CONSIDERATION
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the fourth requirement for a valid contract is a thing of value exchanged for the performance promised in the contract. The insured gives the premium payment. Promise to pay for certain losses suffered by the insured.
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PRINCIPLE OF INDEMNITY
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is related to both the requirement of an insurable interest and the exclusion of speculative risks. The insured may only be returned to the approximate financial condition he occupied before the loss occurred.
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PERSONAL Contract
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An insurance contract does not insure property. it insures the person who owns the property.
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ALEATORY
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this means it is contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties. Often insured who suffer a loss often get a great deal more than the ins. company then their premiums paid.
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