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11 Cards in this Set
- Front
- Back
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Risk |
Risk is the chance or uncertainty of loss. |
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Exposure |
An exposure is a condition or situation that presents a possibility of loss. Synonymous to Risk |
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Methods of Managing Risk |
1. Avoid risk Ex. You can avoid the risk of being in an auto collision by never getting into a car. 2. Control Risk Ex. Training workers in safe use of welding tools can curtail the frequency of fires on the job. Aka loss prevention. 3. Retain a Risk Ex. Pay for loss out of pocket. 4. Transfer Risk (insurnce) Ex. A hold harmless agreement may shift liability from an owner or contractor to a tenant or subcontractor. - A hold harmless agreement is a contractual arrangement where one party assumes the liability of a situation and relieves the other party of responsibility. |
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Insurance |
A contract or device for transferring risk from a person, business, or organization to an insurance company that agrees, in exchange for a premium, to pay for losses through an accumulation of premiums. |
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Law of Large Numbers |
The more examples used to develop any statistic, the more reliable the statistic will be. |
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Pure Risk |
Only the possibility of loss. (Insurable) |
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Speculative Risk |
A risk in which there exists both the possibility of gain and the possibility of loss. (Not Insurable) |
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Elements of Insurable Risks |
Risk of loss must be: - Definite - Unexpected - Large enough to create a financial hardship. - Calculable - Affordable to the insured - There must be a large number of persons with a similar potential loss available. - The loss must not happen to a large number of insureds at the same time. |
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Spread of Risk |
Ex. A rapidly spreading fire could destroy an entire town. So instead of insuring every person in a single town, a company will want to insure several people in many towns. The greater the spread of risk, the less likely that there will be a catastrophic loss. |
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Peril |
A peril is the cause of loss. Ex. Fire, collision. |
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Hazard |
A hazard is anything that increases the chance of loss. |
