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17 Cards in this Set
- Front
- Back
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Peril vs Hazard
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Peril- the actual cause of a loss (fire, windstorm, hail)
Hazard- any condition that increases the possibility of a loss |
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Physical Hazard
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any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it
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Moral Hazard
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A condition of morals or habits that increases the probability of a loss from a peril
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Morale Hazard
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Hazard arising out of an insured's indifference to loss because of the existence of insurance
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Categories of Risk
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Pure Risk
Speculative Risk Static Risk Dynamic Risk Fundamental Risk Particular Risk |
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Pure Risk
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Situation where there is only the possibility of loss. (i.e. Catastrophic medical expenses, liability loss suit, damage by fire, lightning, etc.)
Insurable |
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Speculative Risk
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Situation where either profit or loss is possible. (i.e. betting on horse racing, investing in real estate)
Usually not insurable |
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Static Risk
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Connected with the losses caused by the irregular action of nature by the mistakes and misdeeds of human beings. Similar to pure risk.
Insurable |
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Dynamic Risk
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Associated with a changing economy. (changes in tastes of consumers, technological changes, etc)
Insurable |
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Fundamental Risk
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affects the entire economy or large number or persons or groups within the economy. double digit inflation, foreign competition
Not inurable |
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Particular Risk
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Affects only the individual and not the entire community or country
Insurable |
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Risk Management 5 Methods
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Avoidance
Sharing a Risk Transfer of Risk Assumption of Risk Risk Reduction or Risk Control |
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Avoidance
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simply means avoiding the hazard
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Sharing a Risk
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common method of risk management by members of insurance pools
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Transfer of Risk
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Most common method. Transferring the risk to an insurance company in return for a premium charge
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Assumption of Risk
(Risk Retention) |
(Risk Retention) An individual decided to do what creates a risk (buys home or car) and retain the uncertainty of loss
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Risk Reduction
(Risk Control) |
Risk may be reduced via loss prevention methods. installation of a sprinkler system, person stopping smoking
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