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16 Cards in this Set
- Front
- Back
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Risk |
Possibility of loss Lack of knowledge Uncertainty about outcome of situation |
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Difference between risk and chance? |
Risk is the possibility of loss with no gain. Chance implies doubt about the outcome, but the outcome is usually favorable. |
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Peril |
An event which could result in a loss |
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Hazard |
A factor which may influence the outcome of a loss Increases severity & frequency |
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Types of risks individuals are exposed to |
Personal: relating to loss of life or income arising from death, disability or unemployment Property: possessions or property of own Liability: arises out of our obligations to others |
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Types of risks businesses are are exposed to |
Personal: Property: Liability: arise out of the ownership, use or occupancy of a premises. May also be a risk as a result of the product themselves |
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Risk management |
Minimization (at minimal cost) of the detrimental effects of a loss by identifying, measuring and controlling the risk |
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How is risk identified? |
Determining which peril (event) could occur and result in a loss |
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How is risk measured? |
Determine likelihood of frequency and severity of any resulting loss |
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Methods of controlling risk |
- reduce or illiminate it by preventive measures - assume or retaining - transferring by means of insurance |
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3 ways of assuming or retaining risk |
- ignore - set up insurance fund - set up insurance company |
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How does purchasing insurance enables an individual or business to control a risk? |
Purchasing insurance enables an individual/business to control a risk by transferring the responsibility to someone who has better financial resources and thus a better way to withstand a loss |
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Insurance |
Sharing the losses of a few individuals in a group who suffers among the many members of a group who don't |
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Indemnify |
To be put back in the same financial position as just prior to the loss |
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What must insurance cover? |
Payment of losses suffered by those who have a claim Reserve for losses that have occurred by not yet reported Reserve for returns of partial premiums not yet earned Cost of managing the pot |
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Reserves |
Funds required by law to be set aside for losses reported but not yet paid, not yet reported losses and to cover unearned premium |
